Showing posts with label Europe. Show all posts
Showing posts with label Europe. Show all posts

Sunday, May 5, 2013

India shining for sony?

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.


Source : IIPM Editorial, 2013.
An Initiative of IIPM, Malay Chaudhuri
 
For More IIPM Info, Visit below mentioned IIPM articles

Friday, April 19, 2013

Incorrigibly cognizant!

Cognizant’s ability to consistently achieve astronomical revenue growth has surprised many. Will it’s new strategic outlook be able to keep the ‘shock & awe’ coming?
 

While debating on a particular strategy related to employee & customer orientation in a technology company with a top CEO, I gave the logic that works best when you are trying to escape an argument – the proof of the pudding is in the eating, and the particular company was doing well. The CEO smiled at me and nodded his head, saying that even the most unconventional strategy looks great when someone successfully applies it. The whole world then analyses why the strategy worked for that unique organisation and we feel we have got collectively smarter. The fact is, perhaps next time too, we will only identify the merits of an unconventional strategy when it has met the benchmarks of success.

Though Cognizant is not the company I was discussing, there is no doubt that the successful rise of this company has become the flavour of the season in the IT space. Cognizant, which beat Wipro in terms of revenues to reach the number 3 position among Indian IT players in the quarter, saw revenue rise by 34.4% yoy to reach $1.48 billion and net income reach $208 million, a growth of 20.78% yoy. And the surprising part is that IT experts weren’t really counting on the company delivering these numbers, as it still got 77.8% of its revenues from North America, a region that the IT world is looking to slowly derisk from. Annually, the company is showing a growth of 40% on an average over the past five years. It makes sense to understand what makes the company stand amidst this environment, and whether the growth is indeed sustainable.

There were a number of things that Cognizant, a relatively young upstart did since it commenced operations in 1994 as the IT development and maintenance services arm of Dun & Bradstreet. The first was its initiative to shift headquarters to the US within two years of commencement of operations and ensure that its top management was where its clients were. It also pioneered and trademarked the ‘Two-in-a-box model’, which combined the global delivery model with the relationship manager onsite to give clients a differentiated experience.

Cognizant is extremely dependent on employees in India, which account for over 75% of the workforce. In that sense, it ensured an effective utilisation of both worlds, and other Indian companies, even though their business is also largely driven by US and Europe, developed a global positioning much later. In fact, Cognizant is also lobbying for change in H1B visa norms, and CEO Francisco said at the CEO Council recently on outdated immigration laws, “Millions of foreign skilled professionals are in legal limbo due to a massive backlog for permanent resident visas, hampering their ability to fully contribute to the US economy...”

One critical decision that Cognizant took in 1998 when it went public was to retain lower margins in favour of stronger growth and differentiation in organic terms as compared to its peers. However, it does have a cash reserve of around $2.2 billion and no debt on its balance sheet. Even when you look at net profit for the quarter ending June, Cognizant lags Wipro, whose net income was $295 million for the quarter. But the reinvestment approach has done a lot for the company, which has developed an extensive portfolio of offerings in areas like ERP, testing, IT infrastructure services, et al.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles