Sony Ericsson - How to gain market shares on the sector of mobile phones?
In the context of globalization and global competition in which companies operate today, the merger transactions, whatever their nature, are drivers of competitiveness for businesses. The telecommunications sector is particularly conducive to the development of alliances. Indeed, the emergence of increasingly complex technology products and services that very few companies are capable of, now control the whole value chain. In addition, shorter product life cycles require more R & D efforts and therefore higher costs.
Thus, alliances are established to share risks and investment. We will discuss the alliance between manufacturers Sony and Ericsson - supported by the creation of the joint venture Sony Ericsson TM - to regain market share and become the leader in mobile phones. This is an interesting case study since it is rare to see both companies in a joint venture, as the stakes are high in terms of understanding strategic and financial flows.
We begin by presenting the reasons for the alliance of Sony-Ericsson, and then look at the context and conditions of the alliance. Finally, we will highlight the key developments in the alliance since its inception, allowing us to draw conclusions regarding its success.
Major differences between the two companies are noteworthy: first, they have different product lines and portfolio techniques, so their target customers do not necessarily have the same profile. In addition, their global market shares are not of the same order of magnitude: 10% for Ericsson against 2% for Sony in 2001.
Finally, the two companies have radically different organizational structure and corporate culture: on one hand, Swedish culture, oriented toward the independence and well-being of employees and the other, Japanese culture, oriented towards performance and submission to authority. Finally, in terms of skills and know-how, the expertise of Sony lies in the design and marketing, however, the company does not exert much control over telecommunications. In contrast, Ericsson, is adept at this technology and has remained one of the domain giants since 1918.
Sony and Ericsson agreed to merge, creating a joint venture to carry out joint activities to reduce costs. The choice of a joint venture is relevant because the costs of R & D, which is very high in the field of new technologies, can be significantly reduced by sharing them, and thus adds on to the competitive factor. Moreover, as noted by the marketing director of Ericsson "This combination of the two companies will generate a strong brand, and there are millions that we do not have to pay to get to know and grow ".
The stated goal of the alliance between the two manufacturers is perfect to reduce costs, both in terms of production and R & D, to improve and disseminate knowledge regarding their brand outside France. Sony-Ericsson aims to be profitable in its first year and compete for, ultimately, to be among the top manufacturers of mobile phones and portable multimedia communications products. This challenge seems difficult to overcome, since it would mean dethroning Nokia, which in 2000 held more than 35% of the global shares.
Tags: Sony Ericsson merger, telecommunications sector, Nokia market shares