The following information is true and accurate at the time of publication.
May 28, 2003
Sony Group Corporate Strategy for Fiscal Year 2003
(April 2003 - March 2004)
Confirming Sony's Position as a Leading Global Brand
Tokyo, Japan - Sony Corporation will celebrate its 60th anniversary
in FY2006. As the company moves toward this milestone, it will renew
its efforts to enhance group competitiveness and will aim to achieve
a business structure securing a consolidated operating profit margin
of at least 10% (excluding financial business). Reaching this target
will firmly establish Sony's position as a global media and technology
company with one of the strongest brands in the world. To achieve
these goals Sony will pursue a strategy founded on the following:
In addition to the measures above, corporate governance will be
strengthened and the personnel and recruitment system reformed as
Sony strives to transform itself into a company which can meet the
needs of the 21st century.
- Implementation of a second phase of structural reforms (first phase implemented April 1999-March 2003).
- Strengthened product development and growth strategy for electronics and game
Measures for FY03
1. New Business and Operation Management Structure
1) On April 1 2003, Sony announced changes in its business structure
designed to maximize the effectiveness of investment in each core
business category and to realize sustained profitability. With the
Group HQ Global Hub at the center, eight key business units were
defined, comprising 4 network companies (NCs), 3 business groups
and Sony Ericsson Mobile Communications. Further authority will
be delegated to each business unit allowing them to manage autonomously
on the basis of mid to long-term strategy.
2) In addition to the Group CFO, a CFO position has been established
in each NC, responsible for closely monitoring its business operation.
NC CFOs will ensure that NCs operate with a considerable degree
of autonomy while maintaining strategic linkages to the Global Hub.
The result should be an establishment of an overall monitoring system
which allows Sony Group top management to swiftly and accurately
analyze the Group's entire business situation.
3) In order to allow top management to make timely strategic decisions,
group operational performance will be monitored and evaluated on
a weekly basis.
2. Strengthening Product Development for the Electronics Business
Sony will introduce a series of attractive new products in the following
categories, whose strength will be based on the company's unique
technology assets and key devices. The aim is for these products
to regain and maintain market leadership.
1) Flat Panel Displays/Televisions
Sony's lineup in PDP and LCD televisions will be strengthened in
the runup to the end-of-year holiday shopping season. We aim for
the number 1 position in this market based on the superb image quality
created by the "Wega Engine" system.
We aim for a leadership position in the rapidly growing Japanese
market for DVD and Hard Disk Recorders. Our line up in DVD±RW
Recorders and CoCoon will be enhanced as we move into the end-of-year
holiday shopping season.
3) Camcorders and Digital Still Cameras
A series of models will be introduced aiming at number 1 position
in the market. The product range will develop to meet the rapidly
diversifying tastes of customers.
Building on the AV/IT concept, attractive new models, all equipped
with DVD drives, will be introduced. With an enhanced supply chain
management system, profit recovery is targeted.
Sony plans to introduce a new product "PSX" within this
year in the domestic market. This will integrate elements from game
and electronics, uniting advanced semiconductor process technology
and real time OS from the game sector with extremely fast DVD/HDD
6) Mobile Phones
Sony Ericsson Mobile Communications will continue to introduce a
variety of attractive new models to the market. The business base
of the company will be reinforced through strengthened supply chain
management and concentration of resources into GSM/CDMA.
Mid-term Strategy toward FY06
Sony's current operating profit margin stands at about 4% (excluding
structural reform costs). Sony plans to implement a second phase
of structural reform which will increase the operating profit margin
by 3%. Furthermore we project that the growth strategy envisioned
for electronics and game will contribute a 3% increase. This should
allow Sony to reach its target of 10% consolidated operating profit
by Fiscal Year 2006 (excluding finance.)
1. Phase 2 of Structural Reform (April 2003-March 2006)
Sony will implement a second phase of structural reform designed
to secure an appropriate level of profitability for a leading company
in the global business field. In the next three years Sony will
spend approximately ¥300 billion for restructuring measures centered
on the Electronics business. For FY03, expenditures will be ¥140
billion (¥130 billion in Electronics) and this is projected to result
in annual cost savings of about ¥75 billion from FY04.
1) Sony will further integrate its engineering and development resources
to create a more efficient manufacturing platform for horizontal
support (enhancing engineering base, reducing fixed and variable
2) Increased selection and focus mainly in the electronics business
in order to convert to a high-profit structure (exiting from unprofitable
business lines, disposal and sale of non-strategic assets).
3) Further rationalization of production facilities, expansion of
"multi-category" production, strengthening of module (key
device block) production and conversion to "multi-functional"
operation (design, call center, service center etc.)
4) Cutting fixed costs (including Sony Corp.) to rectify the current
unbalanced group revenue/cost structure where yen-denominated revenue
totals about 30%, while yen-denominated costs total about 50%.
5) Reforming Sony's domestic (Japanese) personnel system through
stringent implementation of performance-based compensation and a
renewed employment structure including further deployment of human
resources from overseas.
2. Growth Strategy for Electronics and Game
In four key areas detailed below, the business base will be strengthened
and a growth strategy promoted.
1) Solidifying No. 1 Position in Audio-Visual Categories
Audio-Visual is a core business category, and here we will create
a vertically integrated structure through the application of mechatronics
and Sony key devices which will result in high added value and product
differentiation. This will in turn realize high and sustained profitability.
The shift of resources to growth areas like Flat Panel Displays,
Optical Disk/HDD Recorders and digital imaging equipment will be
accelerated. At the same time added value will be promoted through
the application of broadband capability and key devices will increasingly
be produced within Sony.
2) Creating New Product Categories through Integration of Game and
PSX and PSP (due to debut at the end of Calendar 2004) will mark
the beginning of a new series of products that will unite the most
advanced Electronics devices with the leading-edge semiconductor
technology associated with the Game sector. These products will
create a new market based on a massive integrated platform where
customers can enjoy the latest content (game, pictures,music etc.)
3) Eliciting the Growth Potential in IT/Telecommunications Sectors
In its role as a home network gateway, VAIO's functions will be
strengthened and its links to peripherals and network services promoted
in order to create a total business model that increases profit.
Sony Ericsson Mobile Communications will strengthen product development
in the mobile phone business, while reconfiguring their USA and
China operations and focusing resources in strategic areas.
4) Enhancing Semiconductor Business
Semiconductors are key devices for adding value in order to differentiate
products. Sony will continue to apply its unique and leading-edge
technologies in this field to enhance the competitiveness of its
products. R&D for system LSIs and imaging devices key to electronics
products will be energetically promoted. Advanced semiconductor
process technology and DRAM-embedding technology will be pursued
and the development and investment in
processors will continue. In CCDs, where Sony maintains a high
market share, efforts will be made to balance external and internal
sales, thus reinforcing competitiveness and securing profitability.
To support a growth strategy for electronics, R&D efforts will
focus on the following:
1) Development of competitive key devices to maximize added value
* Imaging devices and peripheral devices
* Devices for next-generation Flat Panel Displays (OEL and FED)
2) Development of next-generation processors, centering on CELL.
Potential applications include:
* Home Server
* Broadband-capable Television
3) Core technology and components (architecture, OS, middleware,
chipsets) to be standardized to create a strengthened, speedier
development and engineering environment.
4) Develop IT technology related to content distribution
The Sony group plans to spend a total of ¥1 trillion on semiconductor
investment and R&D in the three years starting from FY03. Approximately
¥500 billion will be spent on capital investment for semiconductors
like CELL and imaging devices where major growth prospects are envisaged
(¥175 billion in FY03). Approximately ¥500 billion will be spent
on R&D* for key devices for product enhancement (¥150 billion
* excludes R&D for prototypes
Under the new management structure, Sony Music Entertainment (SME)
implemented a series of organizational changes designed to further
intensify its focus on artist development, streamline operations,
and position the organization for future growth. The company continues
to focus its energy and resources on identifying and developing
talent, as well as on developing new A&R sources in virtually
every territory across the globe. As part of these changes, SME
has created Sony Urban Music, a new division that is dedicated to
identifying and developing the best urban talent.
Sony Pictures Entertainment (SPE) will energetically promote new
releases and develop its franchise strategy to reinforce its market
position. Core programming for television will be strengthened and
the rich library of assets leveraged to pursue new programming and
business opportunities. At the same time, digital initiatives will
help advance the broadband distribution of SPE content directly
to consumers. Initiatives to promote maximum efficiencies and ensure
sustained profitability will continue.
2. Personal Solutions Business Group (PSBG) and Network Application
and Content Service Sector (NACS)
PSBG: PSBG will focus on the development of new services centered
on individual customers. Cross-marketing opportunities with other
Sony divisions will be explored with the aim of creating new customer-bases
and business chances. In the longer-term, alliances may be created
both within and outside the Sony group, based on proximity to the
customer base, to provide integrated services to customers.
NACS: NACS is responsible for leading the Sony Group to the early
realization of its business model to integrate hardware and content.
Through this Sony will be able to provide network services which
offer customers new value for the broadband era. At the same time
NACS provides horizontal support to NCs and Business Groups through
its linkage with the Platform Technology Center.