In the first quarter the Japanese-Swedish joint-venture mobile brand reported a 43 per cent fall in profits. Sales were down eight per cent. Come the second quarter, things went from bad to worse. The handset maker issued a profit warning following a 97 per cent drop in profits and operating losses of US$3.2 million.
This has meant a slip in market share, from 9.4 to 7.9 per cent, making the firm the fifth-largest handset brand behind Nokia, Samsung, Motorola and LG, which replaces it as the fourth biggest in the sector.
Analysts promptly predicted that the third quarter would be no different because of gloomy economic conditions.
It is struggling in particular in its home market of Japan. The mobile brand has called for a review of its communications in an attempt to boost its market share, which has fallen to 6.3 per cent. It trails competitors such as Sharp, the sector leader with over 20 per cent of the market, plus Panasonic, NEC, Fujitsu and Toshiba.
More generally, the company is struggling to make ground in emerging markets (Asia included) as competition grows in the mid- to high-end mobile phone sector. Apple’s much-heralded iPhone has become the model of choice for the discerning phone user. However, a shift by Sony Ericsson toward cheaper models has led to a fall in average selling price.
Sony Ericsson’s product range is under scrutiny as Sony-branded features including Walkman, Cyber-shot and more recently the Bravia, continue to attract a young, loyal - but small - demographic.
Over-reliance on a unique product range also places the mobile brand in the same marketing quandary as Motorola, as both companies fail to strike up new innovations regularly enough to tickle tech fans’ fancies.
With competition hotting up, it is in danger of being dragged into a price war. Nokia has announced it will slash prices on its new products to steamroll its competitor’s profits further, with its latest Supernova range set to compete directly with Sony Ericsson’s bestselling Walkman line.
This has meant a slip in market share, from 9.4 to 7.9 per cent, making the firm the fifth-largest handset brand behind Nokia, Samsung, Motorola and LG, which replaces it as the fourth biggest in the sector.
Analysts promptly predicted that the third quarter would be no different because of gloomy economic conditions.
It is struggling in particular in its home market of Japan. The mobile brand has called for a review of its communications in an attempt to boost its market share, which has fallen to 6.3 per cent. It trails competitors such as Sharp, the sector leader with over 20 per cent of the market, plus Panasonic, NEC, Fujitsu and Toshiba.
More generally, the company is struggling to make ground in emerging markets (Asia included) as competition grows in the mid- to high-end mobile phone sector. Apple’s much-heralded iPhone has become the model of choice for the discerning phone user. However, a shift by Sony Ericsson toward cheaper models has led to a fall in average selling price.
Sony Ericsson’s product range is under scrutiny as Sony-branded features including Walkman, Cyber-shot and more recently the Bravia, continue to attract a young, loyal - but small - demographic.
Over-reliance on a unique product range also places the mobile brand in the same marketing quandary as Motorola, as both companies fail to strike up new innovations regularly enough to tickle tech fans’ fancies.
With competition hotting up, it is in danger of being dragged into a price war. Nokia has announced it will slash prices on its new products to steamroll its competitor’s profits further, with its latest Supernova range set to compete directly with Sony Ericsson’s bestselling Walkman line.
| FACT BOX |
| - Due to its losses for the second quarter of 2008, Sony Ericsson is preparing to slash 2,000 jobs worldwide to reduce operational costs by US$470 million. - In 2006, it was the fourth-largest mobile brand with a nine per cent global market share after Nokia, Motorola and Samsung. - The mobile firm sold 60 million music-enabled phones in 2006, with 17 million coming from its Walkman range, to outpace even Apple’s iPod, which sold 46 million units that year. |
Gregory Birge, managing director, F5 digital consulting
In the new world where consumers are in control, Sony Ericsson is still doing things the same way as it was five years ago, when it was a ‘cool’ brand that made innovative phones.
The brand continues to push product features and invest in massive communication campaigns. Unfortunately, consumers no longer care about features or technology. Nor do they respond positively to push messages, simply because consumers are not captivated by them anymore.
The company’s strategy was to push its strong music and pictures features. But it underestimated two critical success factors: to continue to invest in research and development, such as touch-screen and contextual menus, and to focus on design. As a result, sales have dropped. Sony Ericsson should re-focus not on pushing product features, but on the brand.
Sony Ericsson should engage the consumer in a genuine discussion. User-generated content platforms, such as Eyeka, combined with word-of-mouth triggers - both implemented with a strong strategic consumer engagement programme - would help re-ignite brand values. It must invest in R&D and design, backed up by strong customer service.
Pete Heskett, regional planning director, Southeast Asia, JWT
Nicholas Taleb’s book Fooled by Randomness says that success or failure in human endeavour often has more to do with randomness than with people getting it right or wrong. So, is Sony Ericsson’s implosion simply a case of randomness, or random strategy?
For me, strategy is the villain. This is a case of multiple-brand-personality-disorder - is this phone a Sony? Is it an Ericsson? Is it a Walkman? While the boardroom might care about the ego-sensitivity of mergers and acquisitions, the people who buy the phones do not.
Sony Ericsson’s terminally corporate vanilla take on music culture was never going to stand a chance against Apple. The final crime is poor design and innovation. The style-conscious masses don’t want to be seen toting what looks like a child’s Lego construction unless it packs serious tech punch or they’re being ironic.
So what is the way ahead? Ditch the corporate merger brand name for one that excites your audience. Write an ambitious vision and rebellious positioning. Ensure that these are in touch with the emergent future of culture and technology, not vainglorious past. Get back to what Sony excels at - iconic, customer-centred design which houses innovative technology.