Corporate: Sony dreams up a flat future

TURNAROUND
Sony dreams up a flat future

The consumer electronics giant shuns the beaten path, and narrows its focus to becoming India's top flat TV player.

By Jaya Basu

All CEOs have goals. Some wish to double their turnover in five years. Others hope to triple their marketshare in three years. Seen in that context, the articulated goal of Teruo Ishii, Sony India's newest CEO-''My mission is to host a board of directors meeting in India within the next five years...''-may appear easily within grasp. But the stern-faced 52-year-old's objective is not as simple as that.

In Sony, the location of the board of directors meeting is a sort of recognition of the achievement of the local Sony operation. Thus, in 1999, to laud the achievements of Sony's Chinese subsidiary, the meeting, which had never travelled outside Europe, US, and Japan, was hosted at Beijing. That Ishii is aware this will take some doing is evident on the other side of the ellipsis, in the second half of his goal-articulation: ''...and (my mission is to) put Sony India among the top three players in the local industry.'' Put plainly, that will be tough.

A flat future

It was a long time coming, but Sony India finally seems to have realised that there are two things it cannot be: a volumes player; and a small-town sultan. The message Ishii has sent out, within the company, and without, is essentially a back-to-basics call.

No longer do queries about Sony's far-from-enthralling performance generate the same sanitised answers about focusing on market penetration and coming out with more products for the lower-end of the market. Today, if there is a refrain to the company's strategy, it seems to be WEGA, the range of flat-screen sets that Sony had launched in India in April-May, 1999.

At Rs 21,990 for the 21" model, the WEGA is competitively-priced as far as flat screen TVS go. But in terms of its contribution to the company's CTV sales in 1999-2000 in both value (50 per cent) and volumes (35 per cent), Sony's range of WEGA models (three 21", two 25", two 29", and one 34") are winners. Concurs Ishii: ''Our focus is on increasing the sales of CTVs through the WEGA.'' There's more: Sony hopes to stop producing the normal curved-screen TV sets in India within a year. Indeed, the only TV models the company proposes to launch this year are the flat-screen WEGAs, including a 14'' one.

Sony's born-again high-end strategy does make sense: in 1995, when the company entered the Indian market, the premium end of the television market (sets priced above Rs 20,000) accounted for a mere 12-15 per cent of the overall market. Today, the corresponding proportion is 20 per cent. The reason? Consumers have become more value- and brand-conscious. Explains Sujata Rakhra, 44, Managing Director, ORG-GFK: ''Today, with a maturing market and consumers who are willing to pay for a better viewing experience, a company can hope to succeed by simply focusing on the high-end of the market. This wasn't the case five years ago.''

That could explain why Sony is pinning its Indian hopes on the WEGA although, at prices ranging from Rs 21,000 to Rs 90,000, such an idea would have been considered foolhardy a few years ago. Explains a bullish Takashi Itagaki, 48, General Manager (Marketing), Sony India: ''WEGA is an expensive product, but we are going to push it strongly. Eventually, we anticipate that flat-screen sets will take over the entire Indian CTV market.'' Seconds Ajay Kapila, 36, Vice-President (Sales & Marketing), LG Electronics: ''People have begun to appreciate the importance of viewing quality, and the flat TV segment is showing healthy growth.'' Bottomline: the WEGA will probably bring the sheen back to Sony's bottomline, but with the flat segment accounting for less than 1 per cent of the 4.5 million sets sold in the country in 1999-2000-a proportion that is slated to increase to just around 2.5 per cent of the expected five million unit CTV market in 2000-01-the company will have to wait a long time before achieving its ambition of seeing a flat TV in every home.

The Indian context

Sony just doesn't have the numbers to show for a global consumer electronics major that has been in India for the past five years. Thus, while the company's turnover in 1999-2000, at Rs 613 crore, was 21.38 per cent more than the Rs 505.32- crore turnover it registered in 1998-99, its net profits are expected to show a significant increase last year over the Rs 6 crore it posted in 1998-99. In volume terms, Sony's share in the CTV market is a mere 5 per cent which, according to the ORG-GFK retail audit, places the company at the sixth position after BPL, Videocon, Onida, Samsung, and LG.

Even a die-hard Sony fan will have to admit that the South Korean consumer electronics companies like Samsung and LG have stolen a march on the Japanese major. Explains Anand Narasimha, 36, Head (Corporate Brand Management), BPL: ''Sony is a global brand in the true sense of the term. It has a significant presence in the American and European markets. As a result, it isn't dependent on the Indian market. That isn't the case with LG or Samsung for whom India is a rich hunting ground.'' Seconds Gurdeep Singh, 40, Director (Sales & Marketing), National Panasonic India: ''Sony is a great brand, but they do not invest in just one country. Their approach, as far as India is concerned, is likely to be based on a prioritisation in terms of the investment versus the return.''

The company itself blames its inability to crack the Indian market on the country's import policies. They point out that in countries like Thailand, Malaysia, and Singapore, which place no restrictions on the import of consumer electronics products, Sony has emerged the market-leader.

The logic? The company's performance in the Indian market is currently impaired by its inability to offer a broader range of television sets which would require a regime of unrestricted imports, as the setting up of a local manufacturing base is still seen as a long-term proposition. Details Ishii: ''Our business will grow more once the imports are liberalised.''

Imports, it is evident, will form a part of Sony's strategy. The company is all set to leverage the removal of quantitative restrictions by importing high-value products like the VAIO laptop computer, the playStation game machine, and its latest range of Walkmans. And imports, at another level (raw materials), will ensure that Sony doesn't become a volumes player in the Indian market. While other global players like LG and Samsung have managed to achieve localisation levels of 70 per cent and 50 per cent, respectively, for their CTVs, Sony's lags at a paltry 30 per cent. The reason? It imports its patented Trinitron picture tubes which account for more than half the cost of the television set. This situation, however, might change if Sony sets up its own colour picture tube manufacturing facility-something the company does not currently plan to do.

Despite the efforts to strengthen its distribution channels by beefing up its dealer and service network, Sony India's new strategy is still seen as being skewed towards value-which is an approach the company should have identified itself with much earlier. In the Rs 70.70 crore audio systems (in market (for March, 2000), Sony currently has a share of a mere 13 per cent; but in the Rs 31 crore segment for high-end audio systems, it commands a healthy 31 per cent. Still, even the most level-headed of companies can be expected to lose their heads when faced with a market as vast as India. But, as Sony has now realised, there is no strength in numbers.

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