Sony Ericsson was a joint venture between Sony Corporation and Ericsson, established in 2001, with the aim of combining Sony’s consumer electronics expertise with Ericsson’s telecommunications technology. However, the joint venture faced various challenges and ultimately struggled to compete in the rapidly evolving mobile phone market.
Let’s dive into the various reasons that contributed to the Sony Ericsson failure case study and the lessons business leaders can learn from it.
Unveiling the case study of Sony Ericsson’s failure
Sony Ericsson was considered a pioneer in the mobile phone industry due to its innovative designs and features, such as high-quality camera capabilities and music playback.
As a result, Sony Ericsson was able to establish a strong brand presence in 2001.
But soon the Sony-Ericsson joint venture confronted challenges, and their target profit deadline was moved from 2002 to 2003.
Here are some key factors contributing to Sony Ericsson’s failure.
1. They failed to innovate
There are countless companies that went out of business because of their lack of innovation. And the ones that top the list do not understand the changing customer’s preferences.
The primary reason why Sony phones failed was the market misrepresentation of their product.
Sony Ericsson failed to keep pace with rapid technological advancements and innovations in the mobile industry. The company struggled to introduce groundbreaking features and attractive smartphones that could compete with rivals like Apple’s iPhone and Samsung’s Galaxy series.
2. Industry shifts and economic downturn
New innovations keep emerging in the world. Once, shifting from a dial keypad to digital seemed a farfetched idea, and look at the mobile industry now!
Business leaders must be well aware of the constant industry shifts and act accordingly.
For example: In 2003, mobile phone prices began to decline, but Sony Ericsson continued to produce expensive cell phones, resulting in lower-than-expected profits. Additionally, Sony Ericsson made significant investments without an in-depth knowledge of present market conditions.
The mobile industry experienced significant shifts during the time Sony Ericsson was in operation. The rise of smartphones and the decline of traditional feature phones caught Sony Ericsson off guard, and the company struggled to adapt quickly to these market changes.
3. Misjudging R&D’s importance
Bad leadership can ruin even the best teams. Sony, at that time, prioritized cost-cutting initiatives and job losses.
The company had 12,000 employees in June 2008, and after launching this cost-cutting initiative, it reduced its global workforce by approximately 5,000 people.
R&D is like the oil of an innovation engine and people its enablers.
Still, Sony Ericsson perceived them as a financial burden and closed R&D departments across regions.
As a result of this change, Sony Ericsson was unable to produce innovative products for customers, which was the primary reason for the joint venture’s failure.
Maybe it’s time to give those R&D people applause for the work they do!
It’s important that companies employ effective R&D tools and techniques to provide consumers with novel and individual mobiles.
However, Sony Ericsson’s research and development were out of date.
4. Poor marketing and product positioning
Another major issue that Sony Ericsson faced was their inability to cater successfully to different markets.
After forming a joint venture, the business began operations without a comprehensive understanding of its customers’ requirements.
As a result of this lack of knowledge, their products begin to suffer losses, and they are forced to withdraw their product line from the market.
For instance, in 2002, Sony Ericsson discontinued production of Code Division Multiple Access (CDMA) mobile phones for the US market and began concentrating on GSM as the dominant technology.
The company’s product lineup was often criticized for being too diverse and lacking a clear focus. Sony Ericsson released numerous models, but the lack of a cohesive product strategy led to confusion among consumers and made it difficult for the brand to establish a strong identity in the market.
5. They were slow at changing
Sony’s Walkman series and Ericsson phones had numerous innovations, such as a colored screen and a digital camera.
However, their innovation began to slow down when they started manufacturing Android phones.
The Xperia X10, for example, received positive reviews for its design. The disadvantage was that it used Android 1.6 during a period when competitors were using 1.
Because of the highly skinned OS, the firmware update took a long time.
Sony Ericsson faced challenges with its software platform. The joint venture initially relied on its proprietary platform, but the market was moving towards more open and versatile operating systems like Android and iOS. The delay in adopting a popular and widely supported operating system hindered the competitiveness of Sony Ericsson’s smartphones.
6. The tough competition
Moreover, other businesses gradually began to offer similar features to Sony at a lower cost.
Sony Ericsson attempted to add new features, such as a 4K screen, but it was pointless since a 6-inch screen doesn’t need a 4K screen.
Sony continued to produce expensive phones but missed a significant differentiating component. As a result, they progressively faded from the market.
Additionally, the expensive price tag was a significant weakness in Sony’s phones. Sony attempted to compete directly against Apple.
However, since Apple was the market leader, it had a competitive edge over other manufacturers. No other phone provided a better user experience than Apple’s iPhones.
The mobile manufacturers at the time were focused on inexpensive phones.
Their strategy was to obtain as many customers as possible, even if it required sacrificing features. But Sony went in the reverse direction. They began producing high-end phones.
Intense competition from established players like Apple, Samsung, and later Chinese manufacturers like Huawei and Xiaomi put Sony Ericsson at a disadvantage. These competitors were able to offer more appealing and feature-rich smartphones that captured a larger market share.
Sony Ericsson Failure: From the horse’s mouth
In 2012, Sony Mobile’s CEO said, “That is where the value is, that is where the money is,” referring to the top segment and explaining that the objective was to “play to our strengths – the premium brand that Sony stands for.”
Hideki Komiyama, the Chief Executive of Sony Ericsson, said in 2009, “We just happened to be number three in the third quarter. I’d like to be No. 3 by ourselves by 2011.”
“Right now it is not clear how the industry will be shaping up in 2009 or 2010. We know it is challenging.” he said, adding that the company was “preparing accordingly.”
He added, “We have to start analyzing products where we generate higher margins and eliminate the models where we have lower margins.” He also stated, “At this moment we’re under heavy rain. You have to look for shelter. But when you’re in the shelter you start preparing.”
In 2011, Sony acquired Ericsson’s stake in the joint venture. In the end, the result: Sony Ericsson Failure.