The consumer electronics major may be losing its brand halo in Europe and America but it continues to grow its business in India centred around TVs, laptops and smartphones
Just a couple of months after taking charge as President and CEO of Sony Corp, Kazuo Hirai visited New Delhi and Mumbai to strategise on new growth opportunities in India. The troubled global consumer electronics major saw its operating profit slid 77% to $80 million and it suffered a net loss of $314 million for the first quarter of the current fiscal ended June, results for which were announced in August. The figures, which incorporate Sony’s entire operation, represent a fourth consecutive year of losses for the struggling Japanese firm. With the company suffering losses globally due to adverse conditions in its major markets such as Europe and the US, Sony has set its sights on emerging markets like India to assuage the gravity of its losses. In line with this game plan, Hirai announced that Sony is targeting to treble its India revenue to Rs.200 billion by 2015. Sony India had clocked a turnover of about Rs. 63 billion in 2011-12 and is expecting a 35-40% growth in the current fiscal.
At first blush, Sony India’s revenue target looks too good to be true. But the company’s confidence in India is bolstered by the fact that unlike its American and European markets where consumer confidence has crashed dramatically, India still comes across as a country with strong economic fundamentals and where demand for consumer electronics among its youth and middle class still holds good. Also, compared to the revenue targets set by its competitors like LG and Samsung (both aiming around $10 billion by 2015) and even Panasonic, which is aiming to reach Rs.250 billion in the same period, Sony’s figures appear remarkably modest. But making good on one’s target could be a slippery goal to achieve, especially in the times of economic downturn. One only needs to look at how miserably LG failed in achieving its stated FY 2011-12 revenue target of Rs.200 billion, closing the fiscal just above Rs.160 billion. The main reasons for the debacle were the failure of its smartphone category, and increased competition in the ACs and flat panel TV space. The danger for Sony is that it might fall into a similar trap, in its blind dash to reach its 2015 target.
There are other speed bumps on the way too. One major wrinkle in Sony’s India plan is that the company has a limited product line. As competition in the consumer electronics domain is ruthless, competitors like Samsung, Apple, LG and others can be counted on to give no quarter without a good fight. Moreover, competition will intensify even further, especially in Sony’s flagship product category of flat panel TVs. Currently, the flat panel Bravia range contributes the lion’s share of Sony’s revenue at 35%, followed by consumer PC range Vaio at 20%, and the digital camera range Cyber-shot at 15%. Its other divisions like Mobile, PlayStation gaming et al contribute the rest.
The company has hitched its hopes high as it believes that unlike other consumer durable players, it is not a category player. “We are more of a brand player. So we don’t sell televisions, we sell Bravia. We don’t sell laptops but Vaio, and we don’t sell cameras but Cyber-shots,” avers Sony India Managing Director Kenichiro Hibi, who took over the reins of the Indian operations in July this year. So unlike other leading consumer electronics players, who build their category portfolio around a slew of product lines, Sony believes in keeping a simple and narrow focus: pick up a hero brand from a category and build onto it, rather than aim to spread thin in a category.
Just a couple of months after taking charge as President and CEO of Sony Corp, Kazuo Hirai visited New Delhi and Mumbai to strategise on new growth opportunities in India. The troubled global consumer electronics major saw its operating profit slid 77% to $80 million and it suffered a net loss of $314 million for the first quarter of the current fiscal ended June, results for which were announced in August. The figures, which incorporate Sony’s entire operation, represent a fourth consecutive year of losses for the struggling Japanese firm. With the company suffering losses globally due to adverse conditions in its major markets such as Europe and the US, Sony has set its sights on emerging markets like India to assuage the gravity of its losses. In line with this game plan, Hirai announced that Sony is targeting to treble its India revenue to Rs.200 billion by 2015. Sony India had clocked a turnover of about Rs. 63 billion in 2011-12 and is expecting a 35-40% growth in the current fiscal.
At first blush, Sony India’s revenue target looks too good to be true. But the company’s confidence in India is bolstered by the fact that unlike its American and European markets where consumer confidence has crashed dramatically, India still comes across as a country with strong economic fundamentals and where demand for consumer electronics among its youth and middle class still holds good. Also, compared to the revenue targets set by its competitors like LG and Samsung (both aiming around $10 billion by 2015) and even Panasonic, which is aiming to reach Rs.250 billion in the same period, Sony’s figures appear remarkably modest. But making good on one’s target could be a slippery goal to achieve, especially in the times of economic downturn. One only needs to look at how miserably LG failed in achieving its stated FY 2011-12 revenue target of Rs.200 billion, closing the fiscal just above Rs.160 billion. The main reasons for the debacle were the failure of its smartphone category, and increased competition in the ACs and flat panel TV space. The danger for Sony is that it might fall into a similar trap, in its blind dash to reach its 2015 target.
There are other speed bumps on the way too. One major wrinkle in Sony’s India plan is that the company has a limited product line. As competition in the consumer electronics domain is ruthless, competitors like Samsung, Apple, LG and others can be counted on to give no quarter without a good fight. Moreover, competition will intensify even further, especially in Sony’s flagship product category of flat panel TVs. Currently, the flat panel Bravia range contributes the lion’s share of Sony’s revenue at 35%, followed by consumer PC range Vaio at 20%, and the digital camera range Cyber-shot at 15%. Its other divisions like Mobile, PlayStation gaming et al contribute the rest.
The company has hitched its hopes high as it believes that unlike other consumer durable players, it is not a category player. “We are more of a brand player. So we don’t sell televisions, we sell Bravia. We don’t sell laptops but Vaio, and we don’t sell cameras but Cyber-shots,” avers Sony India Managing Director Kenichiro Hibi, who took over the reins of the Indian operations in July this year. So unlike other leading consumer electronics players, who build their category portfolio around a slew of product lines, Sony believes in keeping a simple and narrow focus: pick up a hero brand from a category and build onto it, rather than aim to spread thin in a category.
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