Sony, More Retrenchment and the Boston Matrix

Sony’s embattled CEO Kazou Hirai and his Board have been reviewing their product portfolio in recent months and the result is a strategic choice to remove two “dogs”.

Sony has decided to sell its Vaio laptop computer division and also separate the loss-making Bravia television business. A consequence of these decisions is a further 5,000 job losses which follow from a reduction of 10,000 jobs when Hirai announced the first part of his turnaround strategy for Sony back in April 2012.

The latest announcement comes after credit rating agency Moody's downgraded Sony's credit rating (in effect, its credit worthiness) to "junk" status. The analysts at Moody's had expressed significant reservations about Sony's TV and personal computer (PC) business, both of which face "intense" global competition. Perhaps not surprisingly, then, Hirai has moved to take action on these parts of Sony's product portfolio.

The strategic choices being made by Hirai are a classic example of product portfolio management at the strategic level. Sony has a pretty diverse product portfolio which includes games console manufacture, feature film production, smartphone and table production and televisions, amongst others. The process of product portfolio management is undertaken at strategic (i.e. Board) level and a key outcome is deciding which parts of the portfolio require and/or merit investment.

The Boston Matrix is the best-known model of product portfolio analysis. It groups business units, brands or product groups into four categories based on their positioning defined by two dimensions - market share (a measure of competitive strength) and market growth rate (a measure of market attractiveness).

For Sony, high-performing products like the PlayStation games consoles remain "stars" in which the Board have continued to invest heavily in the competitive battle with Nintendo and Microsoft. You might argue that Sony's range of smartphones and tablets are closer to "question mark products" or "problem children" since they have a relatively low market share but in fast-growing markets.

However, Sony's Vaio laptop business was pretty clearly turning into a "dog". Global sales of desktops and laptops are now firmly in the decline stage of their product life cycle and Sony's low market share made it very unlikely that it would be able to compete effectively against the likes of China's Lenovo - now the world leader in laptop and desktop manufacture.

Televisions too have proved a major headache for Sony. The television business has incurred substantial losses in recent years and it only seems a matter of time before it too is sold. Hence the decision to separate the television business from the rest of the group.