India to be fifth largest market for Sony globally: Hirai

Kazuo Hirai possibly holds one of the most challenging jobs in the world. When Hirai took over as CEO of Sony in April, the company had reported four straight years of losses. Today, his task is to transform the iconic company.

Hirai is of the opinion that Sony needs to approach change from different directions. Also, the company needs to be faster in terms of decision making and execution. It also needs to focus on what will be its core business in the future, he said.
Commenting on the company's turnaround plans in India, Hirai said, "From a market perspective, India continues to be a very important market for us. This year, we believe that India will be the fifth largest market for Sony on a global basis. It was sixth last fiscal year, so it is still moving up. We see y-o-y sales to increase upwards of 30%, which is a great growth for business overall. So, it is a very important market for us."
Furthermore, Hirai felt that the company needs to review its business portfolio. “For those businesses that are not additive or supportive to the core business or the turnaround of the television business, we need to take a hard look to ask whether this is something that we want to continue or does it have the potential to thrive even more under a different situation." Here is the edited transcript of the interview on CNBC-TV18. Q: You talk about transforming Sony. What does 'change' mean in your book?
A: I think that we need to approach change at Sony from a multitude of different directions. We need to be faster at decision making and at execution. We also need to focus on what is the core business for Sony going into the future.
I have identified those as being the video game and network services, our mobile space including our smartphones, tablets and PCs, and also our digital imaging space where we have a very advanced technology in the image sensor field. It manifests itself into a lot of differentiated digital imaging products both on the still camera side as well as the handy-cam, the video side and of course, in our professional equipment as well. Q: One of Sony's earlier successes was the mainstreaming of gaming when you advertised gaming consoles in NFL, in the NASCAR that was an expensive decision but suddenly it opened up gaming consoles to a whole new audience. What made you take a decision and will we see something like that in any of the fields you have mentioned?
A: When we started the Playstation business back in the mid '90s, we made a commitment internally that video gaming can be a third pillar of entertainment; that is to say, many people enjoy music, movies and television motion pictures, and we believe that video gaming could be the third pillar. For us to be able to do that, we need to go into the mainstream in terms of marketing messaging, in terms of product placement and it turned out to be a very successful business for us. Q: You have identified digital imaging, mobile and games as your core so where does that leave television?
A: Television, as a business, is a very important for Sony. One of the main reasons for that is the fact that because Sony does not invent goods, we don't manufacture refrigerators or rice cookers, appliances. So, in a house, the major touch point that Sony has with the consumers is actually through the television. It's also the gateway to all the beautiful content that people enjoy and we need to make sure that we have that solid connection with the customers.
_PAGEBREAK_ Q: Apart from marketing it, how are you cutting cost? You are now opening plants in Malaysia to make your own components, you’ve changed your supply chain. Does India fit in as a sourcing base for Sony to lower cost rate?
A: One of the biggest changes we made in the television business over the last six months or so was the fact that we dissolved our LCD panel manufacturing joint venture with Samsung. We also did the same with our joint venture with Sharp, which allowed us to free ourselves of the fixed costs of running half of an LCD panel manufacturing business. Therefore, we are now able to source the panels in the open market at competitive pricing and that probably is the biggest component in terms of cost savings. There are other smaller logistics cost, operation costs that we are looking into as well. Q: Is that step enough for you to turn the business around?
A: I think that we need to do two things, one is the defensive move where we need to cut costs as much as possible. But at the same time, we need to make sure that even in this commoditised LCD TV business, we continue to innovate and bring quality to our customers. Q: You have had a presence in the computer business with VIAO for over 10 years. There is a general sense that it’s not a priority business for you because competition is intense. What's your vision for the computer business?
A: Quite a contrary actually. When I mentioned that the mobile space is a core business for Sony going forward, it includes smartphones, tablets, and of course, our VIAO line of PCs as well. I think there again, we do use an operating system, the Windows-based operating system that the vast majority of other PC makers use as well and it then depends on the features and functionality of the VIAO as a hardware device as well as form, factor and design. I think those are the areas where Sony excels vis-à-vis some of our competitors. Q: What went wrong because Sony Ericsson used to be number two phone in India?
A: I think that one of the major developments for the smart phone business for Sony was the fact that we actually dissolved our joint venture with Ericsson. In some instances, joint ventures take a little bit more time in terms of decision making when you have two parents to report to. Now that it is a fully owned subsidiary of Sony, it is focused in what it needs to accomplish in terms of making a contribution to the Sony group. Also, decision making within the organisation has become a lot faster, and that obviously manifests itself in making sure that we have products that come out to the market a lot faster than before. So, it’s all about focus, speed, and again, execution. Q: Will you continue to bet big on Android or will you look at Windows 8? Will Sony be looking to invest in its own operating system?
A: In the mobile space, we have predominantly worked with Google on their Android platform both on our smart phones as well as our tablets. Of course, we work extensively with Microsoft as well. At IFA this week, we announced our lineup of Windows 8-based touch-based PCs in the VAIO line-up. As far as our own operating system is concerned, a lot of people actually don’t notice this, but we actually have a great and robust operating system called the PlayStation Operating System. That powers the PlayStation 3 and PlayStation Vita - that is something that’s proprietary to Sony. Q: You make fantastic cameras, the perception is that you make great camera for point-and-shoot. So, you make cameras for – can I call it the ‘prosumer’ market, the professional consumer market. When it comes to the professionals, Cannon and Nikon seem to have a huge head start over you. So, how do you intend catching up?
A: One of the key products in that space for content creation in the professional side is our new F65 4K camera and that has received great reviews from the content creators in Hollywood and Bollywood as well. I think that will be our first foray into that space to increase market share, but also start to really bring the 4K, 4 times the resolution of high definition into the discussion as well. Q: How difficult is it to move the Indian consumer emotionally?
A: We have a lot of great products for the Indian market. We have a great market share in the television business in India. I think it resonates from a feature and functionality standpoint with the consumers. Sony, as a brand, has huge equity with the Indian consumers. We certainly want to make sure that we continue to have that leadership position in terms of brand equity, and of course, our relationship with all of the retailers in India is a very important part of our success as well. Q: Where does the Indian market come in, in your turnaround plans? Is it also going to be a manufacturing base, sourcing base, research base, where does India fit in, in your turn around or transformation of Sony?
A: From a market perspective, India continues to be a very important market for us. This year, we believe that India will be the fifth largest market for Sony on a global basis. It was sixth last fiscal year, so it is still moving up. We see y-o-y sales to increase upwards of 30%, which is a great growth for business overall. So, it is a very important market for us.
As far as our presence here, we obviously have a huge presence in electronics business. But as you know, we also have a majority stake in MSM the TV broadcaster. We also have a software research and development center here. Overall, we employ about 7000 people in the Indian market. So, from that perspective as well, it is a very important market for us. Q: What are your plans for the future of content and entertainment in India?
A: I think that it’s very important that we work aggressively in the Indian market to bring localized content and create local content as much as possible. I think we have done that in the past as well. I think more can be done to ensure including the production of motion pictures through Sony Pictures Entertainment, there’s a lot to be done there. Q: Will there be new investments here or will there be milking of existing investments?
A: I think that as we increase our presence in the Indian market especially on the entertainment side, I think there will continue to be investments for various entertainment properties as well as production of local content. Q: The global movie market is seen to be recession proof; is it really recession proof?
A: I think that entertainment, in general, which is motion pictures, music and, to a certain extent, video games the biggest driver whether you have hit content or not. For example, this year, we have been very fortunate with titles like The Amazing Spider Man, which was number one hit for us here in India, Men In Black-3 and Total Recall and also the James Bond film that’s coming out. So I think that from a Sony Pictures perspective, we have a very strong line-up and we are very confident that we will have a successful year certainly in Indian market but also worldwide as well. Q: One of the components of you turning around or transforming Sony is that you will be cutting jobs. How difficult has it been to get the Japanese society to accept the fact that you have to cut jobs?
A: Over the years, the perception has come to change. I think it’s more to do with how the restructuring is done in Japan as opposed to whether you can or cannot do. For example, in the small LCD display business, employees did not lose jobs but now they are working for somebody else and that’s what we try to do as much as possible. We also want to make sure that we are aggressive in retiring people, of course, voluntarily so again it’s how as opposed to whether we can or cannot do it. Q: You gave an example the LCD business, you also shared your chemicals business. Is that what is the problem with Sony - you diversified into too many things too fast in the past?
A: We need to review our business portfolio, and for those businesses that are not additive or supportive to the core business or the turnaround of the television business, we need to take a hard look to ask whether this is something that, as a business, we want to continue or does it have the potential to thrive even more under a different situation. I think the chemicals business certainly was a decision we made from that perspective, as we did with the other small LCD business as well. Q: Which are the companies or people you look for inspiration when you think of Sony and we need to now turn it around?
A: I think that there are a lot of companies; Apple is a great example where about 10 years ago, they were in different situation than they are in today and they were able to really turn their company around. I also think that completely different industry, but I think a lot of the folks looked at the US automotive industry and thought that, that industry is no longer be a driving force; no pun intended, going forward, but in fact, they are back in a big way.
So, I do look at a lot of these turnaround stories or how companies have transformed themselves. IBM being another great story, not all the principles apply to Sony, but it certainly is an inspiration for me. This means if you are focused from the management perspective of what needs to get done; if you analyse what the issues are and make some hard decisions then execute them with speed. Q: How do you stay ahead because you need to take expensive bets; one big bet goes wrong you will have some small company come and go past you like it has happened to Nokia?
A: I think it is, first of all, making sure that the entire company has a sense of urgency and that we cannot be in auto pilot mode if you will. Q: Can large companies have a sense of urgency or do you need to break them down into smaller business units?
A: The way Sony is run, we have, in the electronics business, what we call the business units that are in charge of various product categories. We, obviously, have a mechanism to make sure that they link horizontally as well. The people that are running each of these business units report directly to me and they have a huge sense of urgency as to what needs to get done. Also, I have taken it upon myself over the past five months to personally visit as many of our sales and manufacturing facilities as possible. I have trekked a lot of miles. I have been down to Brazil, Thailand, Malaysia, China two weeks ago. So, going out and making sure that I personally deliver the message of the sense of urgency is also a very important aspect from my perspective