Changing Times at Circuit, Sony
By Steve Smith -- TWICE, 3/21/2005
Within the space of three weeks Sony named Howard Stringer its first non-Japanese chairman, hoping to get back on track and get the hardware and content sides of its operation to work together after years of effort. At the same time, Circuit City was approached to go private and, after a few changes and some deliberation, decided to stay the course and remain a public company.
In 2000 it would have been inconceivable to predict that both CE icons would seemingly lose their edge in five years. While not in danger of collapse, their luster has eroded. It didn't just happen overnight. In both cases Sony and Circuit City seemed to stray from their core company values in changing times. Now they are trying to regain their edge before all is lost.
In the case of Sony, outgoing chairman/CEO Nobuyki Idei clearly saw that his company had a great opportunity to coordinate its electronics and entertainment operations when he took power a decade ago, but he couldn't merge Sony's businesses.
One of the results was that Apple's iPod became this generation's Walkman, a brand that now reminds one of tape and MiniDisc, not MP3 players. Sony was slow in getting involved in HDTV, now partnering with Samsung for LCD production. And Sony, which practically invented the digital camera market, was recently replaced in the United States by Kodak as the top market leader.
According to surveys, such as those from NPD Techworld, Sony still retains leading brand shares in many CE categories. In the past decade Sony's PlayStation game line was one of its true cutting-edge successes, both in sales volume and profitability.
But while the name Sony still has magic with U.S. consumers, and in some categories have high market share, profits are scant. In the words of many retailers, Sony used to command a higher price due to unique features or performance. With a wealth of new, low-cost Far East suppliers and a lack of typical Sony product innovation, the company has had to cut prices to maintain market share, such as recent aggressive price cutting with LCD displays.
Many think that Circuit City began to lose its way when its management began the ill-fated DiVX movie disc investment during the late 1990s. Circuit City dropped major appliances and got rid of its commissioned sales force, which were two moves, among several, that many questioned, as it tried to bolster its stock price and market position.
Still, many observers welcomed the $3.25 billion offer from Boston hedge fund Highfields Capital Management LP to take it private, the hiring of former Best Buy executive Phil Schoonover as president, and the closing of some unprofitable stores as steps in the right direction. While many are disappointed that Circuit City rejected Highfields' offer, they think that, finally, Circuit City is getting refocused again.
Like Sony, Circuit City continues to have a brand name with great equity with CE consumers in the United States. It is not too late for these two icons to turn things around and become cutting-edge leaders again. In speaking with competitors of both companies over the past few weeks, the further demise of either company would hurt the industry as a whole. Many will watch will interest to see how management at Sony and Circuit City will try to turn the tide.
No related content found.
Featured Company
-
Brightpoint
BrightPoint is a global leader in mobile device lifecycle services. We provide a full suite of end-to-end supply chain and customization solutions to manufacturers, retailers and carriers in the mobile device industry. In a world that is increasingly connected with ever-evolving ..more
VIEW ALL GALLERIES