Friday, July 11, 2008

Strategies for a New World

Sony’s chief executive Howard Stringer seems to have seen the emerging-markets light. In an article in last week’s Telegraph, Stringer highlights Sony’s new focus on emerging markets, particularly the BRIC countries. He also suggests, however, that the company’s reliance on brand and sophisticated features and functionality will continue; he is aiming for 90% of Sony’s electronics products to have wireless Internet connectivity by 2011.

While emerging-market consumers have shown that they are brand and quality conscious, they also become more price sensitive at lower income levels, and have demonstrated an appetite for devices with relevant or “just-enough” functionality. Sony might borrow some ideas for rethinking business strategies for emerging markets from Dell. Although Dell has a different product set (and Sony has the advantage of media content), Dell has made some smart adjustments in the past years that are leading to big gains in emerging markets. The company's BRIC revenues jumped 58 percent in the first quarter, thanks largely to strong internal executive buy-in, consumer credit partnerships with local companies, and tailored country-specific strategies. Ultimately, in emerging markets, Dell has had to migrate away from the one thing that defined them in mature markets – their direct-to-consumer distribution method.

To realize the full opportunity in emerging markets, Sony may need to undertake a similar revision of their own defining characteristics (i.e., branding and sophisticated products). Wireless connectivity would make Sony’s products attractive in top-tier emerging-market cities, but it’s not necessary or usable for millions of emerging-market users without Internet connectivity. Sony (and other tech companies that play in the high-end consumer market) would benefit from a broad range of product features that match the purchasing power and unique needs of emerging-market users. With solid data, deft management and good decision-making, these companies can develop the right products for the new world without losing their edge in the old.

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