Question

Sony is considered by some to be one of the most bureaucratic organizations in the world. Sony grew into a complex conglomerate consisting of multiple, diverse business units that, for the most part, operated independently and without regard for one another. As a result, Sony's performance slipped dramatically in both profits and market share. After years of restructuring efforts to consolidate management of the diverse businesses, the “One Sony” strategy appears to be working.

In this exercise, please read the mini-case and answer the questions that follow.

In six of the last seven fiscal years, Sony has reported a net loss. At last, Sony is experiencing gains and expects a large net profit for its next fiscal year ending March 2016. The years of loss are attributed to long-term restructuring efforts aimed at reducing redundancies and focusing on the most profitable product lines.

Redundancies became a major cost to the company due to “silos” that divided the many businesses. Many of these silos were created by separating workers according to the type of work that they performed. In Sony's past, one of the biggest problems originated from separating hardware engineers from software developers. This strategy worked very well for a long time as Sony developed hardware, like the Sony Walkman, that was smaller and lighter than that offered by its competitors. However, significant environmental changes required better integration between the hardware engineers and software developers. Specifically, consumers began to want their various electronic devices to "talk to one another" and be easier to use than ever before. Hardware engineers and software developers needed to collaborate—something that Sony's “silo” approach had inadvertently discouraged.

Sony grew and developed an incredibly complex organizational structure. Entertainment units were split by geographic regions and operated completely independently of one another. Consumer electronics divisions each had their own marketing departments that often competed for the same customer. These complex structures did allow Sony to finish producing the most advanced gaming system in the world, the PlayStation. However, Sony's annual losses highlighted the company's growing need to synergize its movie, game, music, and consumer electronics divisions.

Sony termed its most recent restructuring efforts the “One Sony” plan. This multi-year restructuring effort sought to consolidate the management of a company with many separated divisions. In the past, conglomerates like Sony allowed its many businesses to operate independently, such as the battery division treated as its own organization and the gaming division treated as a completely separate organization. Much like the separation of software engineers from hardware engineers in Sony's past, the company has found that it had little control over strategies and was unable to benefit from economies of scale.

Many global conglomerates have a highly diversified structure of “silo” businesses, but the trend appears to be toward more consolidation. PepsiCo recently adopted a similar strategy in announcing its “Power of One” strategy to bring together its food and beverage businesses. The cost savings in efficiency and focus are compelling, projected at up to $1 billion in annual savings.

1.

Sony's past separation of software employees from hardware employees created a division based on the functions the employees performed, which is called what type of organizational structure?

Functional

Geographic

Multi-divisional

Matrix

Client-based

2.

Which of the following is a main weakness of a “silo” approach such as the one Sony used in the past?

Goals of employees are merged and not kept within departments.

Software engineers did not communicate with hardware engineers across functions.

Communication overload hampers efficiency.

Rules and procedures are oppressive.

Employees must deal with the complexities of having two bosses.

3.

In the past, Sony's entertainment divisions were separated by geographic region, suggesting what organizational structure?

Functional

Multi-divisional

Simple

Matrix

Client-based

4.

Sony's consolidation approach to gain control over the decision making and strategies of the different divisions suggests

high diversification.

low formalization.

high centralization.

high flow.

low specialization.

Answer 1

1.

Sony's past separation of software employees from hardware employees created a division based on the functions the employees performed, which is called what type of organizational structure?

Functional

Functional organization structure is the one which creates a division based on the functionalities of various departments.

2.

Which of the following is a main weakness of a “silo” approach such as the one Sony used in the past?

Silo mentality refers to the non-sharing of information between different divisions of an organization.

Software engineers did not communicate with hardware engineers across functions.

3.

In the past, Sony's entertainment divisions were separated by geographic region, suggesting what organizational structure?

Multi-divisional

In a multidivisional structure one parent company consists of different divisions which operate separate businesses.

Though the parent company owns all of the divisions, but each separate entity has significant autonomy to act independently.

4.

Sony's consolidation approach to gain control over the decision making and strategies of the different divisions suggests

high centralization.

Centralization is the process in which planning, and decision making is specific to a particular person/location.