Business skills

Thursday, October 30, 2003

Personal opinion on corporate downsizing and the impact

Morning today hear from the local radio new and know that Sony is announce for downsizing and plan to cut 13% of it workforce (about 20,000 staff) to improve the "bottom line figure", and will re-deployment generic appliances production facilities into low manpower cost production countries (eg, china, and others Asian nations). And for high value added production like on semi-conductor will be still maintain to be produce in Japan.

For western world, downsizing is absolute no a new things, and already adapt to it as a "quick" way to see the improvement on the "bottom line" figure (especially for those on the top management). But for Asian countries like Japan which value staff contribution to organization growth, mass downsizing is really have big impact, especially on those who get layoff and the impact on the Japan's society.

Corporation like Sony which has built up Sony brand and sell slight high in price to match it brand value which work on the past, does not work now? It will shank those who practice "high brand, high price". See Samsung brand as well, it maintain high above the line promotion for promoting the brand, and sell in competitive price (for better consumer perceived value). When compare two brands together what you perceive more "value for your money"? Desire for one thing; take action on "real need" is another, most of the consumer is strong to be "money expert" in this science.

As a well know fact, generic appliances price is keep push down by "world production factory" China. As a normal consumer, when give you choose 2 product, one from the generic china producer and one from the branded let say Sony, which you pick? For me, I pick generic appliance produce at China, first it is really value for money - cheap. Even no so quality as "high price producer" mention, but it is still worth for the money, just throw it away after it out of service and buy the new one, it is still better than buy from "high price producer". Off course above example is using personal money, not other money like company money.

Ask from the mass public, how their opinion on the so-called high quality product let said 'made in Japan' home appliances which is highly trust from mass consumer in the past, they will say not so good quality compare with the previous, as they (producer) already learn to make their product "less quality" then previous, so mass consumer need to re-entry the buying cycle after 3-5 years. So, as normal consumer after few purchases you learn from the 'lesson' as well. What you expect people buy next time? off course they will pick those provide "value for their money".

I think what the problem right now facing most of the brand established producer is the treat from the china low cost production power, which make "brand established producer" more expensive, especially compare with China made product. And now day consumer is more educate than before, you can't expect them to paid "premium" price for nothing really value for them. Except you are selling for those very rich segment, which they can pay any price you ask for (to project their status and income), but as at consumer market which is depend on volume sales those buyers support still can not bring in high ratio and contribute to the company revenue. So, the issue is referring back to the "value" perceive by the buyer. If they think it is "worth" the price producer asked for, they will pay. And in the consideration that no other substitute product can be compare. So producer relative offer value compare with each others, it is no the concern for the end consumer and buyers. It is about competitive of the producer versus producer. If A can produce cheaper, you should ask why can't we? Now day no more producer hold the power, it is consumer who hold the power, as too many substitute "offering" is around.

For what I thinking of, established brand should try to do things differently. Do something you can be better than your competitor do. For example, can be using the Sony brand to venture into other high value added industry - like Sony market the play station series of the entertainment machine for the home is a success. Play your strength and avoid your weaknesses. So a simple truth, but how many can really practice it, especially on those who are market leader of the past, you want them to leave the market they are previously strong for and go for the new industry or new area they are not have any experience before? They are not just feel 'defeat or shame' personally or company-wide. They just can't take it we are not more value by the market. Market is still there, if they don't buy with you, consumer must be buying with someone else, isn't it? So, they buy with your competitors. Then ask why? It is because company growth along the year, over staff and over expensive to maintain no productivity workforce? It is because company-wide stop learning to really open mind and heart to listen to what consumer really want and their expectation? I personally think it is all about relative 'offering' you and your competitors. Market is still the same, the market is still pick the one who offer the most value for their money this is the principle of the marketing. The company from top to frontline really need to review and find out the cause and corrective actions should be put in action. Once again the market is teaching us on the "marketing" lesson again.

I growth up along with the Sony brand, I loved it before, and I know it is pain for those who needed to accepted the market fact, not your own 'illusion'. Accept it and turn to the new direction for the early start to reap the market. I waiting to see how Sony will turn around to become profitable again to beat the so called 20 years cycle and make me fall in love with the brand again.


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