Sony Mobile banks on brand appeal for growth

Japanese phonemaker won't engage in "zero sum game" to grow handsets sales at expense of revenue, but will cultivate stronger brand presence in Asia's emerging markets such as Indonesia and Philippines.
Written by Kevin Kwang on

Sony Mobile Communications, the wholly-owned subsidiary of Japanese electronics giant Sony, has its eyes set on growing its business in Asia's emerging markets. It will not, however, compete with other regional Android-based manufacturers on shipment volumes, choosing instead to preserve the strength of its brand in these markets.

Speaking to ZDNet Asia in an interview this week in Singapore, Matthew Lang, corporate vice president for Southeast Asia and Oceania at Sony Mobile Communications, noted that in the mobile phone business, the majority of revenue is earned by just one or two major players. According to Gartner, Samsung and Apple took the top two positions in smartphone sales in the first quarter of 2012.

"So if you give up on pricing [and focus on growing sales volume], then it's a zero-sum game with all the other [Android-based] handset makers, particularly from China and South Korea," Lang explained.

In order to prevent "brand erosion", the executive said he subscribes to the business strategy of Sony's India operations in maintaining high prices even as other vendors continue to slash prices of electronics products.

A report by Indian news site, Business Standard, stated that while Sony similarly competes with Korean phonemakers Samsung and LG Electronics, the difference is that the Japanese company continues to command a premium in the marketplace. It charges customers an estimated 10 percent to 15 percent higher for its consumer electronics products compared to its rivals, with no detriment to its business.

With that in mind, Lang said Sony Mobile will be looking to capitalize on the strength of its brand appeal in emerging markets such as Indonesia and Malaysia. Cambodia, the Philippines and Thailand were also identified as key markets for the company.

"Consumers are looking for trusted brands [when hunting for smartphones], and this is the same for mature markets such as Singapore and Australia," he said, adding that more tech-savvy customers tend not to think too much about the price if the device offers the latest technology.

Unlike in India, though, Lang said he will not compel its channel distributors to maintain a certain pricing level for Sony products. Instead, he believes they will be able to find a price that ensures both parties can profit from the business.

The Business Standard report noted that other electronics manufacturers typically do not determine the market operating price in India, leaving it in the hands of individual dealers. However, Sony routinely sets the standard by telling dealers they cannot go beyond a base price. Should they flout the rule, their dealership license will be revoked, it added.

More than just an Android player
Lang also stressed Sony Mobile Communications is more than just another handset maker riding on the Android popularity wave, which reflects why he is "not as interested" in what Google is doing with regard to its acquisition of handset maker, Motorola Mobility.

More important to him would be what customers are demanding--and this currently is the Android mobile operating system, he said. Should they opt for another platform in the future, Sony Mobile would adjust accordingly, he added.

It reported a 65 percent year-on-year increase in Android-based Xperia smartphone sales in the company's January financial statement, with a total of 28 million Xperia smartphones shipped since it was introduced.

Lang suggested people should view the mobile business as central to Sony's overall four-screen strategy which links mobile phones with its other platforms, namely, notebooks, tablets, and televisions instead, he said.

After all, its ecosystem proposition goes beyond Android to include the PlayStation Network (PSN) via which the company can deliver top game titles, music, and "50 percent of all movie titles ever made", he pointed out.

He acknowledged the company made a mistake when not securing the PSN which resulted in the system being hacked and brought down for several weeks by hacktivist group, Anonymous, last year. However, the "silver lining" was the company started paying serious attention to rebuilding the platform from scratch, he said.

PSN has since been "stress-tested for destruction", and is robust enough to withstand similar attacks in the future, he added. The executive noted there "wasn't any noticeable drop" in PSN subscribers since the attack.

Lang also said "all the pieces are in place" for Sony to finally work its way out from the red. The challenge now is in the execution, but he believes with recently-installed CEO Kazuo Hirai at the helm, the company is moving in the right direction.

Sony in May released its full 2011 financial results, revealing a 9.6 percent on-year drop in sales to 6.5 trillion yen (US$79.2 billion) while operating loss reached 67.3 billion yen (US$820 million) compared to an operating income of 199.8 billion yen (US$2.5 billion) in the previous fiscal year.

Sony Mobile Communications' sales, ended Mar. 31, 2012, decreased 12.4 percent year-on-year to 5.3 billion euros (US$6.7 billion) due to component shortages from Japan's earthquake and floods in Thailand, and lower number of feature phones shipped due to the company's transition to becoming a smartphone vendor.


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