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March 30, 2000
Accelerating Reform to Meet the Needs of the Broadband Era
Sony Corporation's Business Strategy for FY 2000
On the eve of the broadband era, Sony Corporation strives to create the "Sony Dream World" where individuals can enjoy an entirely new lifestyle of entertainment and convenience
In March 1999, Sony embarked on a series of corporate reforms to achieve this vision, including the reorganization and strengthening of its electronics business. Building on a year of achievement, Sony will now mobilize its entire group strength to increase corporate value in FY 2000. The theme for FY 2000 will be "Accelerating Corporate Reform - Phase 2" and the company will move simultaneously on three fronts: "Enhancing efficiency in existing business", "Improving business processes through the application of IT technology", and "Aggressively developing new net business".
1. Accelerating Corporate Reform: The Group Headquarters
Until now Headquarters has mixed the functions of a Group HQ coordinating the company's varied sectors (electronics, entertainment, finance and insurance) with the functions of a HQ purely devoted to the electronics business. As of April 1, the Group Headquarters' role and responsibilities will be clarified to strengthen the "unified dispersed" management model.
(1) Strengthening the Headquarters Management Team
The existing management team will be joined by Corporate Senior Executive Vice President Kunitake Ando who will become Executive Deputy President and Chief Operating Officer. Mr. Ando's main focus will be the supervision of the electronics business. Senior Managing Director and Chief Financial Officer Teruhisa Tokunaka will assume the posts of Executive Deputy President, Representative Director and Chief Financial Officer.
(2) Group Headquarters positioned as "eHQ"
The Group Headquarters will be positioned as an eHQ, coordinating the Sony Group's entire business for the internet era, and with the prospect of a possible transition to a holding company. While formulating overall strategy, the eHQ will aggressively promote the Sony Group's development of net business.
(3) Establishment of an "e Management Committee" (eMC)
An "e Management Committee" (eMC) will be established as the executive body of Group Headquarters to manage total Group business and set strategy for net business. The Chief Executive Officer will chair this Committee. An Electronics Management Committee will be established as the executive body for the electronics business. This will be chaired by the Chief Operating Officer.
(4) Establishment of eSony Development Group
The eSony Development Group will be established in the newly positioned eHQ to support the eMC and implement business decisions. It will report directly to the CEO and will formulate the Sony Group's internet business strategy, plan and construct common internet platforms (payment, verification systems and customer databases) and consider new human resources and compensation systems for the internet era.
2. Accelerating Net Business
(1) Promoting a Strategic Platform for Net Business
So-net and PlayStation.com will be the focus with full support from the Sony Group in developing a strategic platform for the promotion of net business.
Sony Communication Network Corporation (SCN)
SCN was established as an internet service provider in 1995, under the service name So-net.
It is envisaged that SCN will develop its business globally through high added value services resulting from a fusion of broadcasting and internet contents.
To achieve this, the company will emphasize speedy and flexible management, and actively pursue acquisitions and partnerships, and investment opportunities. SCN will secure outstanding personnel resources and nurture an entrepreneurial spirit. Sony will also consider an IPO for SCN in the future.
PlayStation.com will be positioned as the driving force in developing an effective broadband network business platform and will thus accelerate Sony's broadband network strategy.
In addition, Sony launched an e-commerce site "Sony Style.com" on February 1, 2000 which will create new consumer lifestyles through a networked combination of Sony products, contents and services.
(2) Creating Net Business and Enhancing Contents and Value for Entertainment
As entertainment assumes ever greater importance in the networked society, Sony is strengthening its business in this area. Specifically, Sony will establish Sony Broadband Entertainment Inc. (SBE) a U.S. holding company designed to serve as a strong unified business entity to enhance the value of Sony's music, motion picture, television and related entertainment assets in the broadband era. Sony Music Entertainment Inc. and Sony Pictures Entertainment Inc. will form the core of SBE as the company pursues content creation and the strengthening of network distribution business both independently and in potential strategic alliances.
(3) Developing Net Financial Businesses
Sony has now positioned its financial businesses (Sony Finance International, Inc. Sony Life Insurance Co., Ltd., Sony Assurance Inc. and its planned Net Bank) as a main business pillar alongside such sectors as electronics and entertainment. It is planned to develop an array of attractive financial services in a network environment.
3. Strengthening Group Core Business
(1) Strategy for Broadband Era
Sony seeks to offer a new lifestyle in the Net age based upon the digital consumer electronic products that have always been its strength, in conjunction with new fast-developing IT/Commmunications products. This means positioning Sony's Net gateways (Digital TV/Set Top Boxes, VAIO Personal Computers, Mobile Terminals and Play Station2) and then connecting applications and services in order to augment the value of hardware products.
Key devices for differentiation, such as display devices and semiconductors will be strengthened, and cooperation and tieups with Contents and Internet businesses both inside and outside the Sony Group will be pursued.
(2) Restructuring of the Electronics Business
The reorganization plans announced last year such as focusing on key businesses, consolidation of manufacturing plants and reduction in staff levels are being implemented steadily. At the same time Sony will create a new "Engineering Manufacturing and Customer Services" system (EMCS) more directly linked to the market. This will assist in redefining the role of the Network Companies as Business Creation Units, improving productivity in the manufacturing units, and building an effective Supply Chain Management system. In the new system, the Network Companies will concentrate on business planning, research & development, product planning and some areas of basic design. From the second half of FY 2000, new Production Platform Companies will gradually take responsibility for manufacturing management covering areas such as product design, product testing, materials, parts procurement, production technology, mass production, quality control, orders, manufacture, inventory management, logistics and customer service.