sony analysis

8/9/2019 SONY analysis

1/32

COURSE NAME – ACCOUNTING FOR DECISIONMAKING

FACULTY – DR. ANUPAM

FINAL PROJECT – SONY INC.

SUBMITTED ON – 04 -12-2014

ANALYZED AND PRESENTED BY

SECTION A – GROUP 6

MEMBERS:-

Bhavna Shrikumar – SMBA 14023

Divya Shanmugam – SMBA 14025

Sanjana Ramaseshan – SMBA 14054

Dilna Sudhir – SMBA 14077

M nalisa ! "a – SMBA 14037

1


2/32

Table of contents

2

S.NO Topic Page No.

1. Summary of analysis3

2. Sony at a glance4

3. Industry competitors5

4. Segment analysis

5. S!are prices1"

#. $inancial statement analysis11

%. &atio analysis13

. Trend analysis1

'. S(OT analysis25

1". $uture prediction ) &ecommendation2#

11. *onclusion2%

12. &eferences2


3/32

Summary of t!e analysis

“Sorry that we failed to meet shareholders’ expectations,” Hirai said at the company’s annual

meeting in Tokyo. “We will ear responsi ility to complete restructuring in fiscal !"#$, witha strong sense of crisis and without further delay.” %#&

'one are the times of Sony Walkman, now Sony is struggling to pay di(idends to itsshareholders. The company announced a second )uarter loss of *#.! illion for the yearended !"#$. The main pro lem that Sony faces is its di(ersification of products, they ha(e a(ariety of products in almost all the entertainment sectors and clearly this is reducing theirefficiency. +part from this internal pro lem of Sony, it faces a tough competition from itscompetitors in (arious sectors. Sony howe(er is known for its technological ad(ancementsand inno(ation ut gradually it has lost this ad(antage as a rand due to the increasingcompetitors and now e(en the in(estors are (ery disappointed with non payment of di(idend.

+fter in depth analysis of Sony’s history, model, its financial statements using ratios, trendanalysis, -orter’s i(e orces +nalysis and a SW/T analysis, the following were fewfindings0

Sony has een incurring a continuous loss since !""1, currently it is facing a loss ofapprox * !.# illion.Sony must make proper use of their increased le(erage and other asset items in orderto generate more sales.2t is (ery e(ident from the stock price analysis that the current share holders ha(e nofaith or confidence in Sony anymore, and since they are so disappointed it would e(ery hard for Sony to win them ack.Sony has a way too di(erse line and must try and stick to a few product lines so thatthey can allocate their resources appropriately and increase their efficiency.

We therefore recommend Sony to do the following 0

3sta lish a key area of focus and de(elop and impro(e only that aspect.2mpro(e their pricing and marketing strategies to ensure fair competition with theircompetitors.

4ost of 'oods sold can e reduced y impro(ing their argaining power as well asimpro(ing supplier (olume discounts.5anagement must e encouraged to take )uick strategic decisions without eing tooreser(ed as it has definitely een seen that a drastic change is re)uired withimmediate effect to sa(e the company from further loss.

3


4/32

SON+ *O&PO&,TION ,T , - ,N*/

Sony 4orporation is a 6apanese 5ultinational company that has its head)uarters in 7onan5inato, Tokyo, 6apan. 2t was founded y 5asaru 2 uka in #8$9, under the name TokyoTsushin 7ogyo :Tokyo Telecommunications 3ngineering 4orporation;, ut the name of thecompany was later changed to Sony 4orporation in 6anuary #8


5/32

Rivalry

S !!"#$%!&'$%

T(%$)*&+

, -,*#**$,

B .$%!&'$%

T(%$)* &+/$'

$/*%)/*,

*ompetitor0s analysis

Porter0s fi e forces odel of industry analysis uic6mba.com7

=sing porter’s model for analysing Sony’s competitors0

INT/&N, &I8, &+ 0

Sony’s main market segments include 3lectronics, 'ame, -ictures, and inancial Ser(icesand 6oint Fentures :wiki in(est;, as Sony has many segments it faces a lot of competition andit’s main competitors are +pple, Samsung, G', 5icrosoft and 4annon. The following is theincome summary of its competitors.: As n 2# "h $ vem%er 2014&'

5


6/32

(3)

rom the comparati(e analysis of the main competitors of Sony 2nc. the following were thefindings0

>et income0 The industry a(erage till >o(em er, !"#$ is *


7/32

re)uires is )uite high as Sony products are high end and luxury goods. Howe(er if newentries do occur in the market then Sony will not e a le to withstand the competition as itlacks consumer loyalty ut are sur(i(ing in the market due to their inno(ation strategies.

T!reat of substitutes :

Sony faces high threat of su stitutes as it has a lot competitors who sell the similar productfor a comparati(ely lesser cost and especially ecause Sony doesn’t enEoy much of randloyalty it is (ery easy for the consumers to switch to other rands. +lthough Sony tries todifferentiate their product through lot of inno(ati(e ideas and designs it still faces a lot ofcompetition.

Supplier po9er:

The supplier power for Sony is )uite low ecause they try their est to argain with theirsuppliers in order to e cost efficient .Sony’s main moti(e is to produce high end products for the minimal cost to withstand the competition faced y them in the industry. Therefore, theydo e(erything they can to make the input cost as less as possi le.

;uyer po9er:

Iuyer power for Sony is high e(en if they try to differentiate their product with etterinno(ation and technology, the close su stitutes are easily a(aila le and hence the uying

power of consumers is relati(ely high. +nother important factor to note here is that as Sonyoperates glo ally it can ecome a stepping mat for currency exchange rate. Since ?en goes onappreciating it can lead to a decrease in the profits of the company as this appreciation ofcurrency in turn leads to increase the price. %$&

7


8/32

Segment analysis

+ccording to the latest:!"#J; segment analysis, the following are the (arious sectors0

5o ile productsHome entertainment2maging productsBe(ices-ictures5usic

inancial ser(ices'ame/thers

%


9/32

The least sales contri ution is made y the music sector of Sony, it contri utes only9.J .

T!e contribution of t!e different segments to sales and t!e operating income?loss are:

%


10/32

T!ereforeA 9e conclude by saying t!at mobile p!ones segment is ma


11/32

has steadily grown from *#@.8 illion in 5arch !""! to *J


12/32

;alance s!eet analysis

*as! and cas! e ui alents **/7 4ompanies with high amounts of cash and cashe)ui(alents are etter a le to get through hard times when sales are low or expenses are

particularly high.The alance sheet shows that at the end of 5arch !""1, Sony had a cash e)ui(alent of#",

pay off these current lia ilities.

The total liability has een constantly increasing and stands at #!@,9#8 in !"#J. Thisagain does not show a good picture for the company and shows that the company isactually struggling to pay off its shareholders.

Total e uity is the total of common stock, preferred stock, retained earnings and treasurystock. 2n !""1, the total e)uity was JJ,@$@. 2t fell to !8,8@" in !""8 ut again increased toJ#,@J@ in !"#". 2n the year !"#$, it decreased to !!,"$". This decrease could also e

ecause of the net loss the company has incurred during the year. The total e)uity to totalasset ratio is ".#


13/32

*O P,&,TI8/ ,N@ *O ON SID/ ST,T/ /NTS

rom the common siLe and comparati(e statements, we can see that the 4ost of 'oods Sold:4/'S; has een decreasing. There is a fall of $.@J from !""1 to !"#$. With the fall inre(enue, the 4/'S also has een reducing. This explains that the num er of goods actually

eing sold has een reducing o(er the years.

The /perating 2ncome shows a decrease of a out et2ncome also shows a negati(e alance and has not een ha(ing enough income.

The Ialance Sheet shows that there has een a decline in the current assets y #!.$1 . 3(enthough there has een a decline of @.@# in the 4urrent Gia ilities, the amount of Gia ilitiesis much more than the assets. This clearly shows that the company does not ha(e enoughli)uidity to pay off their lia ilities. The in(entory le(el has also een reducing o(er the years.

&,TIO ,N, +SIS %1&

1. &ecei ables Turno er &atio:E

+n accounting measure used to )uantify a firmNs effecti(eness in extending credit aswell as collecting de ts.

Cecei(a lesTurno(er Catio

!"#" !"## !"#! !"#J !"#$

9$.!1 J1.1$ [email protected]

• Sony 4orp. has an almost consistently high recei(a les turno(er ratio o(er thelast three years.

• This implies that Sony’s extension of credit to its de tors and collection of itsrecei(a les is efficient.

13


14/32

2. Total ,sset Turno er &atio:E

The amount of sales or re(enues generated per dollar of assets.

,sset Turno er F Sales or &e enues?Total ,ssets

Total +ssetTurno(er Catio

!"#" !"## !"#! !"#J !"#$

".


15/32

Ouick Catio!"#" !"## !"#! !"#J !"#$

".99 ".


16/32

2t indicates what proportion of e)uity and de t the company is using to finance its

assets.

Be t 3)uity Catio P Total Gia ilities K Shareholders 3)uity

Be t 3)uityCatio

!"#" !"## !"#! !"#J !"#$

".J# ".J! ".J1 ".$J ".$#

• Sony 4orp. has an accepta le de t e)uity ratio o(er the last fi(e years.

• This indicates that they ha(e een a le to finance their growth or increased

operation re)uirements mostly using the company’s funds without relying too

much on outside financing.

%. Operating *as! $lo9 &atio:E

+ measure of how well current lia ilities are co(ered y the cash flow generated from

a companyNs operations.

x #""

/perating 4ashlow Catio

!"#" !"## !"#! !"#J !"#$

#!$.!! J!.


17/32

sales re(enue, it is losing money. 2t would ha(e had to orrow money throughin(estors in order to keep on operating.

. Net Profit argin &atio:E

The ratio of net profits to re(enues for a company or usiness segment typicallyexpressed as a percentage.

>et -rofit5argin Catio

!"#" !"## !"#! !"#J !"#$

".


18/32

• This indicates that Sony is una le to con(ert its in(estment in its assets into

profit successfully. This shows the managements ina ility to make strategic

decisions that would ena le them to make good profit with little in(estment. 2t

can also portray a negati(e impression to the in(estors. synergy

1". &eturn on / uity:E

The amount of net income returned as a percentage of shareholders e)uity. 2t is expressed

as a percentage,

&eturn on / uity F Net Income?S!are!olderHs / uity

Ceturn on3)uity Catio

!"#" !"## !"#! !"#J !"#$

#.J1 8.$! #8.89 !."$


19/32

4o(erage Catio ".$< ".J$ ".!9 ".!@ ".JJ

• S ny , r ' has an e "remely l . ash . verage ra"i.hi h has %een m re r less nsis"en" ver "he las" 6veyears'

• A l . ash . verage ra"i indi a"es "ha" "he m any hasr ash genera"i n r very high de%"' hey urgen"ly need "

im r ve "heir 6nan ial si"i n i8 "hey .an" " n"inueera"ing'

2' -ree ,ash -l .s 9 : era"ing ,ash -l .s Ra"i

Free cash flows to a firm is a measure of potential cash flows that can be distributed tocapital providers without affecting the production capacity of the firm. t is e!pressed as apercentage.

FCF/OCF Ratio = Free Cash Flows / Operating Cash Flows ! "##$

4 K/4 Catio!"#" !"## !"#! !"#J !"#$

9!


20/32

Catio

• S ny , r has a nsis"en"ly un8av ura%le ,-R:/ ra"i ;es e ially in "he years 2011 2013 .here "he ra"i is nega"ive'

• his indi a"es "ha" "he re"urns re eived 8r m "he inves"men"s"ha" "he m any has made is e "remely l . and in "he years2011 2013; "he re"urns have %een nega"ive'

4'


21/32

3+50*3+*73

4023*40#03

40+#+41334

41#++

0'00

20'00

40'00

#0'00

*0'00100'00

120'00

R$ $/ $ T%$/ 3

Revenue rend >?&

The Gine chart for Trend +nalysis of Ce(enue shows an irregular cur(eo(er the years !""1 t" !"#$. 2t decreased till !"#" and then increased for the year !"##, ut again decreased for year !"#! and !"#J. 2n !"#$, itshowed partial increase in the Ce(enue, i.e. less than what it was six years

ack.

3+50*3+*73

4023*40#03

40+#+41334

41#++

0'00

20'00

40'00

#0'00

*0'00

100'00

120'00

G%&,, P%&5* T%$/ 3

@r ss


22/32

shows decreasing trend till !"#J. 2n !"#$, the gross profit increased to ale(el Eust nearly same as of ase year.

3+50*3+*73

4023*40#03

40+#+41334

41#++

#0'00

40'00

20'00

0'00

20'00

40'00

#0'00

*0'00

100'00

120'00

O!$%)*#/ I/7&8$ T%$/ 3

: era"ing /n me rend >?&

The Gine chart for Trend +nalysis of /perating 2ncome follow sametrend as /perating margin, that is highly irregular decrease and increaseo(er the years.

3+50*3+*73

4023*40#03

40+#+41334

41#++

200'00

150'00

100'00

50'00

0'00

50'00

100'00

150'00

N$* I/7&8$ T%$/ 3

$e" /n me rend >?&

The Gine chart for Trend +nalysis of >et 2ncome shows that the >et2ncome decreased irregularly o(er the years. >et income hit all time low

in !"#!, and then increased for the year !"#J, ut again decreased for

22


23/32

!"#$. The le(el of net income is (ery low in !"#$ as compared to aseyear !""1.

;alance s!eet trend analysis

3+50*3+*73

4023*40#03

40+#+41334

41#++

0'00

20'00

40'00#0'00

*0'00

100'00

120'00

140'00

C),( )/1 C),( E9 #0)"$/* T%$/1 234

,ash and ,ashBuivalen" rends >?&

The Gine chart for Trend +nalysis of 4ash and 4ash 3)ui(alent shows a (ery2rregular Trend, i.e. decreasing, and then suddenly increasing and then graduallydecreasing from year !"#" till !"#J. 2t then increases to the le(el as it was sixyears efore in !""1.

3+50* 3+*73 4023* 40#03 40+#+ 41334

0'00

20'00

40'00

#0'00

*0'00

100'00

120'00

C %%$/* A,,$*, T%$/ 3

,urren" Asse"s rends>?&

23


24/32

The Gine chart for Trend +nalysis of 4urrent assets is an irregular cur(e, from!""1 till !""8, it showed a sharp fall i.e. !" less than year !""1, and then thetrend increased gradually till !"#! and then again decreased for the year !"#!

#J.

3+50*3+*73

4023*40#03

40+#+41334

41#++

0'00

20'00

40'00#0'00

*0'00

100'00

120'00

T&*)" I/ $/*&%#$, T%$/ , 3

"al /nven" ries

rends >?&

The Gine chart for Trend +nalysis Total 2n(entories decreased from !""1 till !"#",and then increased till !"#!. +fter !"#!, a decreasing trend is plotted.

3+50*3+*73

4023*40#03

40+#+41334

41#++

0'00

20'00

40'00

#0'00

*0'00

100'00120'00

140'00

1#0'00

T&*)" C %%$/* L#) #"#*#$, T%$/ 3

"al ,urren" Cia%ili"ies>?&

24


25/32

The Gine chart for Trend +nalysis of Total 4urrent lia ilities is unsta le andshows increase in the trend till !"#! and then decrease for the year !"#J and the

partial increase till !"#$ .

3+50*3+*73

4023*40#03

40+#+41334

41#++

0'0020'0040'00#0'00*0'00

100'00120'00140'001#0'001*0'00

T&*)" L#) #"#*$, T%$/ 3

"al Cia%ili"es rend>?&

The Gine chart for Trend +nalysis of Total Gia ilities is nearly same as that of totalcurrent lia ilities, and it shows increasing trend till !"#! and then graduallydecreasing for the year !"#J and partially increasing in !"#$.

3+50*3+*73

4023*40#03

40+#+41334

41#++

0'00

20'00

40'00

#0'00

*0'00

100'00

120'00

T&*)" E9 #* T%$/ 3

"al ui"y rend >?&

The Gine chart for Trend +nalysis of Total 3)uity shows unsteady decrease in thetotal e)uity o(er the year !""1 to !"#$.

25


26/32

*as! flo9 trend analysis

3+50*3+*734023*40#0340+#+4133441#++0

20

40

#0

*0

100

120

140

C),( F"&' +%&8 I/0$,*#/6 A7*#0#*$, T%$/1 234

,ash -l . 8r m/nves"ing A "ivi"es rend

The Gine chart for Trend +nalysis of 4ash flow from 2n(esting +cti(itiesshows a irregular cur(e, it increased for the year !""8, ut again decreasedfor !"#". inally in !"#$, the 4ash flow is at a lower le(el than that of aseyear.

2#


27/32

3+50*

3+*73

4023*

40#03

40+#+

41334

41#++20

0

20

40

#0

*0

100

120

C),( F"&' +%&8 F#/)/7#/6 A7*#0#*#$, 234

,ash -l . 8r m-inan ing A "ivi"ies >?&

The Gine chart for Trend +nalysis of 4ash low from inancing +cti(ities showsa (ery irregular trend, i.e. decreasing and increasing for the years !""1 to !"#$.The all time low in cash flow from financing was in !"## when it went morethan #""percent elow the ase year.

3+50*3+*73

4023*40#03

40+#+41334

41#++

0

20

40

#0

*0

100

120C)!#*)" E !$/ #* %$ T%$/ 3

,a i"al endi"ure rend

The Gine chart for Trend +nalysis of 4apital 3xpenditure shows little increase inthe 4apital expenditure in !""8, and then less expenditure for the years !"#"and !"##. The expenditure increased again in !"#!, further decreasing to alltime low in the year !"#$.

27


28/32

3+50*3+*73

4023*40#03

40+#+41334

41#++50

0

50

100

150

200

250

F%$$ C),( F"&' T%$/ 3

-ree ,ash -l . rend>?&

The Gine chart for Trend +nalysis of ree 4ash flow decreased in the year !""8,and then increased for the year !"#". +nd then it gradually decreased till !"#J.2n !"#$, it increased ut that is Eust little more than that of the ase year.

S(OT ,N, +SIS

ST&/N-T=S (/,BN/SS/S

2*


29/32

• 'ood Irand >ame• Iroad Sales >etwork • 2nno(ation• Small ut loyal customer ase.

• 3xtremely wide range of products• =na le to specialiLe in one or few

products.• 4omparati(ely expensi(e.

OPPO&T NITI/S T=&/,TS

• 5ight e a le to reco(er aftermarket economic crisis.

• Should focus on a profit makingrange of products

• 2ntense 4ompetition.

$uture prediction

2n order to predict Sony’s position in !"#


30/32

:kindly refer to the excel sheet for further calculations;

+fter calculating the future figures, the following are our recommendations0

&e enueA *ost of -oods Sold ) -P 4ompared to last year the re(enue isdecreased y ! ,cost of goods sold increased y ! and the '- is reduced y ! . Salescould ha(e eenincreased y analysing competitor prices and strong marketing. 4ost of goodssold could ereduced y strong argain power as well as asking supplier(olume discount etc.

Net Income : 3(en though the company was a le to contain all otherexpenses, the company isstill running in loss. The management could take appropriate step to minimisethe loss andto help the company to get profit y introducingcorrecti(e actions.

*ON* SION

+fter the detailed analysis of the financial statements and position conducted in this report for Sony 4orporation we can come to the conclusion that Sony needs to do something significantand immediately to impro(e their current financial position. This constant loss that they ha(e

een incurring since !""1 can ha(e serious implications to the health of the company if it

continues any longer in this direction. Hence the management needs to take a strategicdecision to ensure their speedy reco(ery.

30


31/32

The fact that they ha(e een una le to reward their shareholders and the fall of their stock price o(er a period of time has caused the shareholders to lose faith in the management andwould also discourage further in(estment in this company.

+nother maEor focus of Sony should e their pricing and marketing strategy to ensure that

they can compete with their fierce competitors :Samsung, G'; who offer the same products ata lower cost under a trusted rand name.

Gastly, Sony must e a le to find a segment focus. Their wide range of electronic andentertainment products ha(e caused them to focus too much on widening their empire insteadof specialiLing on a couple of areas and ensuring )uality as well as price effecti(eness in their chosen area.

&/$/&/N*/S

J1K


32/32

sony analysis

Documents