Sony FranceBest in France Case Study

September - December 2004

Gabriela Gaut

Philippe de Montenon

Marguerite Lassalle

Stanley Chan

Yoshitomo Shinji

SONY’S CORPORATE INFORMATION

Foundation: May 7, 1946Headquarters: Shinagawa-ku, Tokyo, JapanMajor Products:

ElectronicsGameMusicPicturesFinancial servicesOthers

Employees (Consolidated): 162,000 persons (as of March 31,2004) Consolidated Sales and Operating revenue (2003): 7,496,400 million yen (aprox. 55,000 million euros)

WORLWIDE MANUFACTURING ACTIVITIES

SONY – EUROPEAN PRESENCE

Armenia

Austria

Belgium

Bulgaria

Croatia

Czech Republic

Denmark

Estonia

Finland

France

Georgia

Germany

Greece

Hungary

Ireland

Italy

Kazakhstan

Kyrgyzstan

Latvia

Lithuania

Macedonia

Moldova

Netherlands

Norway

Poland

Portugal

Romania

Russia

Serbia and Montenegro

Slovak Republic

Slovenia

Spain

Sweden

Switzerland

Tajikistan

Turkey

Turkmenistan

Ukraine

United Kingdom

Uzbekistan

Sony has presence in 40 European countries

Sony Europe HQ(Berlin)

Marketing SalesFactory

UK (Others)

Belgium (Vaio)

France (RME)UK x 2 (TV, others)

Spain (TV, others)

Hungary (TV, car audio)

Slovakia (TV, car audio)

France DAX (RME)

France Ribeauvillé(Mobile, Vaio, Repair)

Total 40 countriesArmeniaAustriaBelgiumBulgariaCroatiaCzech RepublicDenmarkEstoniaFinlandFrance

France

Sony Europe HQ(Berlin)

Marketing SalesFactory

UK (Others)

Belgium (Vaio)

France (RME)UK x 2 (TV, others)

Spain (TV, others)

Hungary (TV, car audio)

Slovakia (TV, car audio)

France DAX (RME)

France Ribeauvillé(Mobile, Vaio, Repair)

Total 40 countriesArmeniaAustriaBelgiumBulgariaCroatiaCzech RepublicDenmarkEstoniaFinlandFrance

France

SONY EUROPE STRUCTURE

Source: Sony France

RME

(Record Media & Energy)

Operation

Ribeauvillé

Factory

Sales

(Domestic)

Sales

Marketing

Business

DAX

Factory

Sony France S.A.

RME

(Record Media & Energy)

Operation

Ribeauvillé

Factory

Sales

(Domestic)

Sales

Marketing

Business

DAX

Factory

Sony France S.A.

SONY FRANCE STRUCTURE

Source: Sony France

SONY FRANCE – SALES

Sales in Billion EurosSony Worldwide 55Sony Europe 13.5Sony France 2.4

Sony Europe20%

Sony France4%

Rest of the World76%

WHY FRANCE?

Since he founded Sony, Mr. Morita has been advocating the Global Localization policy which states that business

should be deeply rooted in the local society

Therefore, sales companies within Sony have to be established near the customers

There is no other specific reason apart from the Global Localization Policy that explains why Sony

started a business in France

PLANT LOCATION

As Sony France S.A. was established in 1973 Sony received from the French government –both at a country and at a local level– some economic incentives such as reductions in “taxe professionelle”, custom duty deductions, etc.

Such incentives had an important impact on the location selection.

MANAGEMENT AND CORPORATE CULTUREIn the RME business unit, the hierarchical positions are filled in both by French and Japanese managers, being

the management style predominantly European.

PDG

Operation Director

Sales

Director

Marketing Director

Business Director

French

Japanese

PERSONNEL COMPOSITION BY ORIGIN

RME Sales DivisionFrench/European 92 548

Japanese 8 2

• Sony France employs 2,600 people in its different offices and plants

• Since Sony established its activities in France, the number of Japanese people at the Sales Division was always lower than 10

• Japanese employees are regularly rotated (2-5 years) based on their career development, their position and their performance

• Most French employees are transferred within Europe.

• Strong dependence in terms of product development (all R&D function are located in Japan)

• Except OEM products, Sony Europe is not able to develop European customer oriented products but merely to sell products that Sony Japan prepares

RELATIONS WITH WORLD HEADQUARTERS

CLIENTS IN FRANCE – RME division

Clients expect that Sony will keep providing products that they can easily sell and that consumers demand

Main RME products

• Memory Sticks

• USB storage media

• DVD tapes

• VHS tapes

• CD-Roms

• Batteries

Main Clients

• Supermarkets (Carrefour, Auchan, Monoprix, etc.)

• Department Stores (Printemps)

• Specialists (Darty, FNAC, etc)

The presence in France is undoubtedly indispensable to satisfy clients’ demands.

From an internal point of view, the form of the organization might be a possible drawback.

Generally speaking, once a company is established, it has to trade with other Sony’s business units. Such trade could sometimes require considerable efforts and be inefficient.

For instance, to carry out the business in France Sony could have only a representative office in France instead of the current sales company.

INTERNAL CLIENTS

• In France, Sony contributes to the local society by adapting to the French culture and generating job opportunities.  

•Internally, Sony considers that values should not be installed, but created. In this aspect, Sony is completely different from other Japanese firms such as Toyota.

COMPANY VALUES

Sony contributes to the local society by making it richer both in material and spiritual terms through its products,

which clients expect at an appropriate price.

CONSTRAINTS IN FRANCE

•While establishing itself in a foreign country Sony always considers cross-cultural communication such as language, sense of values, habits, religion etc. to be constraints.

•In France, the pride of local people for their country and national products is considerably high compared to other European countries and it could be consider as a constraint.

KEY CONSTRAINT COSTS

The key costs of operating in France are higher than operating in other European countries, specifically in the following areas:

- Tax: Corporate tax is relatively high (35.4% in France vs. 19% in USA)

- Labor cost: As annual working hours are relatively low, the unit labor cost (salary/working hours) is consequently high. Labor-intensive industries could not ensure competitiveness in France. Social Security costs are also significantly high (45% vs. 18.7% in NY, USA)

- Dismissal: Dismissal requires long processes in France compared with countries such as the UK. In France, it is impossible to dismiss employees without economic reasons or breach of duty.

- Infrastructure: Information infrastructure was weak when Sony France was established, but has been improved after significant investment

HR PRACTICES IN FRANCE

-Recruitment/Selection: When Sony France started business, a French HR manager might have had a major role to recruit French employees

-Management Development: Job rotation is carried out in Europe, but the HR of the original country that recruited an employee has stronger authority over his personnel issues.

-Promotion: In France, promotion is mainly requested by employees themselves.

-Performance Appraisal: Sony France uses yearly contract system for all employees; at the beginning of a year, all employees determine their target mainly based on the result of the previous year consisting of five-grade evaluation after careful discussion with their superior.

- Compensation: Salary range is fixed, based on job grade (e.g. marketing: junior manager, junior product manager, product manager, senior product manager, general manager). In each range, salary consists of fixed part and performance-based part.

-Motivation: As an incentive scheme, once a year director gives an award to the employees that achieve remarkable results. Each director nominates candidates and then the assessments of all candidates are discussed and adjusted in the board meeting.

-Communication Policies: There are no special communication policies. As for meetings, the Board and managements meet on a regular basis. Other meetings are scheduled on a project basis.

-Training: Training is mainly carried out as on the job training (OJT) in Sony.

-       etc.

HR PRACTICES IN FRANCE

“When establishing itself in another country every firm should try to understand the local culture and at

the same time make the most use of local talents”

Mr. Yamaguchi RME Sony Europe

Sources of information:

• Mr. Masayoshi Yamaguchi Director – Recording Media and Energy Sony Europe

• Sony Europe Financial Statements – Fiscal year 2003

• Sony Corporation – Annual Report 2004