Unlike Samsung, Sony has always excelled in developing original new products backed by its founding creed of ôFreedom and Open-mindednessö. ôIts liberal, vibrant culture made Sony an engineersÆ heaven,ö says Chang, and it was a paradise nurtured by its god-like founder-manager Akio Morita.
Of course, there were cock-ups. Sony got it wrong by pressing ahead for too long with the Betamax format for videos tapes, when it was outnumbered by the rival VHS (Video Home System) developed by JVC and Matsuchita and, crucially, favoured by Hollywood because of its longer running time. Yet, Sony gave the world transistor radios, Trinitron TVs, CDs, DVDs, 8mm camcorders, digital cameras and Playstation. And its biggest success was the Walkman, a compact cassette tape player, introduced in 1979.
But Samsung was quick to exploit the opportunities of digital technology. It was able to catch up with market leaders even though it was a late entrant and was technologically inferior in the analog world, because, as Chang points out, ôthere is no difference in the quality of digital products so long as each uses the same chip setö.
It then allocated its marketing resources in order to improve its brand image and focused most of these resources in mobile phones, which was the product for which it could get the highest return on its investment. ôWhat differentiated Samsung ElectronicsÆ marketing activities from those of Sony is that Samsung actively invested in marketing, and Sony did not,ö argues Chang. Whereas SonyÆs brand value came mainly from the companyÆs capabilities in new product development, Samsung ôerected its brand out of nothing, despite the poor quality of its products, by strategically investing marketing and distributionö, adopting a high-price, high margin approach.
However, Chang concludes that the ôdifferences in performance between Sony and Samsung Electronics are not the results of their strategiesö. Instead, organisational processes and executivesÆ leadership seemed to have determined their performances. SonyÆs ôdigital dream kidsÆö strategies, where engineers were encouraged to invent and innovate, ôcould have worked if they had been executed properlyö.
In contrast, the fit between SamsungÆs strategy in responding to commoditisation with speed and its almost militaristic organisation, whereby once the chief executive makes a decision, all efforts are concentrated on enacting it immediately, ômay have contributed to its stellar performanceö.
SamsungÆs relative lack of a creative culture may well hurt it in the future, unless it can transform itself. As the world looks set to slide into recession, SamsungÆs reliance for two thirds of its sales on memory chips (DRAM) and liquid crystal displays, where overcapacity in both sectors is forcing prices down, could threaten the companyÆs newly dominant position.
Meanwhile, according to Chang, Sony still needs to make a successful transition from the foundersÆ generation where MoritaÆs charisma solved any conflicts which arose among independent business units, to a new generation of professional managers.
The book is a rarity among business case-studies: itÆs a good read, full of anecdote, a coherent view point and not too much jargon.
¬ Haymarket Media Limited. All rights reserved.
