Live Issue... Sony eyes China and India for growth

Three years after Sir Howard Stringer controversially took over  at Sony, he has revealed plans to double the company’s revenues in the BRIC markets to more than US$18 billion within the next three years.
It is growth that Stringer says is necessary if the firm is to maintain its minimum annual operating margin of five per cent.

The rationale is understandable, but is this a realistic proposal for a company that no longer has a clear identity amid a sea of high quality consumer electronics brands all vying for a share of the critical India and China markets?

“It’s not like a blank sheet of paper any more,” says Matthew Godfrey, chief executive of Publicis Asia, pointing out that although a brand like Sony can reasonably expect to grow at the market rate of 20 per cent per year, the presence of strong local brands as well as international contenders means there are no guarantees of success, particularly in China.

In what Godfrey describes as “the two most competitive markets on the planet”, a strong brand proposition is perhaps more important than ever. But another agency observer says that where Sony was once clearly recognisable for its “extraordinary technology”, there is now “no real definition as to what the brand stands for”.

Martin Roll, CEO of Venture Republic, adds that the once iconic brand, despite still having a certain amount of equity to work with, has become complacent, and, having lost momentum, has found itself being caught off-guard in emerging markets by rivals such as Samsung, which have been quicker to adapt to the digital revolution.

“They haven’t really delivered on their promise,” he says, stating that in order to stand a chance of attaining the desired growth rates, the company has to offer innovation, as well as aspirational status.

Roll says  to succeed in China and India, Sony should revert to concentrating on its heritage of small, personal devices. “TVs will be a challenge,” he says adding that flat-screen technology was not new to the middle classes. They have an array of similar brands to choose from when buying a TV - something that, in cultures where home entertaining is rare, will be unlikely to function as a status symbol. “Now people want products with more emotional value.”

Emotional value may indeed carry more weight than the company’s traditional premium positioning in markets where, in spite of a sizeable middle class, cost remains a serious issue. Gregory Birge, MD of F5 Digital Consulting, who claims close involvement with the launch of the iPod in Europe, suggests that to cement a presence in India, the brand should follow in Nokia’s footsteps and release less expensive products exclusively for that market, along with strategic placement of high-end products.

Birge says that in China, where consumers are understandably reluctant to pay the 40 per cent extra for a prestige brand if the value is not immediately apparent, Sony should shift focus from its Bravia range to its main asset, the PSP.

“It’s the iPod of Sony,” he says, suggesting that Sony use its gaming systems as a Trojan horse to break into the market. But he cautions that in both countries, the company should be prepared to invest for the long-term, focus on a single distinctive product, relax its hierarchical management style and avoid trying to control its audience.

“Sony has everything in its hands,” he says. “But it has to give control of its brand to consumers and let them engage it.”