Analysis Into the Vertical Integration Across the Value Chain of Sony

Vertical integration is a concept in which a company develops or acquires production units for outputs which are

Japan is the home to of the top companies in the world. One of the companies, which has helped Japan’s economy to be one of the top, is Sony. Modern day Sony is a high profit high output company, which is manly due to its marketing strategies and decision to its customers.

Vertical integration – when you choose to produce raw materials and/or distribute finished goods themselves rather than rely on independent suppliers, factors and agents for these tasks

Vertical integration is a business growth strategy for economics of scale. It is typified by one firm engaged in different parts of production example; growing raw materials, manufacturing, transporting, marketing, and/or retailing to expand business in existing market for the firm. It can function in two directions both forward integration and backward integration.

Effective value chain as a competitive advantage can contribute significantly to the prosperity of a firm in the competitive arena, but it can cause dire situations if not operated properly (Guy, 2011). However, there are conflicts among companies as to how stakeholders think they gain competitive advantage. Porter (1996) suggests: A company can outperform rivals only if it can establish a difference that it can preserve. It must deliver greater value to customers or create comparable value at lower cost or do both.

Integration Business-Level: Hewlett Packard (“HP”) is an example of an organization that is using the integration business-level strategy, which is a combination of the differentiation and cost-leadership strategies (Rothaermel, 2013). HP utilizes this strategy because Apple holds the differentiation position while Dell holds the cost-leader position in the mobile devices market (Rothaermel, 2013). For this reason, HP must seek to implement both the cost-saving strategies in supply chain management, like Walmart, and the differentiation strategies in product design, like Apple (Rothaermel, 2013). There are differences, however, in the value chain between HP and the two companies above. HP

The value chain is one of the critical elements of a company’s strategy in today’s competitive world, because company’s profit depends on how the successful and efficient it runs its operations and how the end product appeals to the customers at a price that covers all the expenses of the company.

activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers

The process of system of vertical integration is when a business attempts to gain control of the upstream and downstream steps or firms in the supply chain (Zhou & Wan, 2016). This strategy can offer a business control over quality and create avenues to additional resources (Zhou & Wan, 2016). With the growing cost of content licensing and the increased capabilities for original cable television programming to draw new viewers, Netflix has expanded into the original programming market and added to its service (Ferrell and Hartline, 2014). This expansion of its services demonstrates the company’s readiness to seek new market opportunities (Ferrell & Hartline, 2014).

The function of the value chain is to contribute with cost- efficient activities and simplify the purchase process (Coughlan et al., 2006). But if the chain consists of many actors the ones far back could have limited or no contact with customers resulting in lost of valuable information (REF).

In a competitive market to which Johnson and Johnson operates, the smallest of errors can lead to consequences which can cut revenue. When large mistakes occur, millions of dollars are lost, and even worse, there is a loss of customer confidence. Johnson and Johnson has had numerous recalls in their consumer healthcare division recently, which rocked the organization’s once sound image, and diminished its profits. These recalls have hurt Johnson and Johnson’s stocks and cost the company about $900 million in sales last year (Rockoff, 2011).

According to the article, Sony 's semi biz to pivot from vertical to horizontal, Sony plans to keep its research and development teams running strong, but will outsource key manufacturing processes. Even if outsourced, game processors will continue to be one of Sony 's main semiconductor products. The company intends to boost all the investment on Cell processor from the game business. Sony has invested a total of 460 billion yen (about $3.8 billion) on semiconductors over a three-year period. Of this amount, 200 billion yen ($1.7 billion) was spent on the Cell processor.

Sony has many products and started to branch out. Sony has mostly started to manufacture appliances and electronics. Even thou many new different products may arise, Sony can manage and maintain their quality.

“…But Sony’s culture is a mix of very Japanese thinking and not very Japanese thinking.  In a sense we are very free.  We are not forced to do anything as long as we are doing a good job.  You really have freedom in Sony.  If you’re innovative, you are given new opportunities.  Some people who may not really be suited for anything in other companies can still survive in Sony.  They will be given an opportunity to try to realize their dream. … (Beamish 2000)”

In addition, both companies gain access to foreign markets. Joint ventures allow Sony to get back to global business by