Introduction: Industrial Background
Sony Ericsson Mobile Communication: It is a joint venture between Sony Corporation, the Japan based consumer electrics company and Ericsson, the Swedish Telecommunication company. As the companies put, it is a beneficial venture that will put together the electronic expertise of Sony and Ericsson’s technical knowledge in the communication sector. They now manufacture mobile phone together and the brand is widely popular through out the World (Schreiner 2009).
Through out a long time Sony Ericsson has enjoyed a healthy growth in worldwide sales and along with the mobile phone, Sony Ericsson walkmans and Cyber-Shot camera series are also very popular among the consumers. In recent times, due to the rise of its close South Korean rival LG Electronics, the profit of the company significantly fell in the year 2008 by 43%, which is close to US$ 180 million. To make matters worse, the sales of the company dropped to 8% and incidentally the market share dropped to 7.9% from an initial 9.4% (Wassmer 2011).
There were rumors that along with Motorola, another very close competitor it will wind up its business, as many jobs were cut in the process. But slowly the company got back and some of tits product in the later parts of the year 2008, became top selling products in United Kingdom and other markets. The company released different new brands to carry out the good name (Boyd & Spekman 2010).
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The management sector of the company is based in London and it has offices through out the World. As per the statistics of 2009, Sony Ericsson is the fourth largest mobile-phone manufacture of the world and placed behind brands like Nokia, Samsung and LG Electronics (Boyd & Spekman 2010).
Vodafone Group Plc: Vodafone is a global telecommunications company and it is the World’s largest telecommunications company, if looked from the angle of revenues and the second largest if the number is measured by subscribers. The Vodafone Network directly operates in over 30 countries Worldwide and its partner cellular service provider provide connection to an additional 40 countries. In the United States, Vodafone owns 45% of the shares of Verizon Wireless, the largest telecommunication company in the United States (Hoffmann 2007).
As per the listing the London Stock Exchange, the company has a market capitalization of around 92 billion pounds, at the end of November 2010. As per the market it is considered as the third largest company listed in the London Stock Exchange, and also Vodafone has a secondary listing in the NASDAQ (Xia 2011).
Value Chain and Value Creation: As per the definition of value chain, it is the chain of activities for a firm operating in a certain industry. If we look at both Sony Ericsson and Vodafone we will understand that both the two companies have certain edges in the industry and every activity of the companies have some specific value in them. And as the alliance of the two companies has been done they will look forward to the aspect of value creation, which will enable the products to have additional value to the customers through new methods. This is very important in the process of the business.
The alliance will have several advantages, and the most important thing will be focusing more and more on the customers’ basic needs and to understand the needs. This will enable the two companies to be more and more profitable in the market.
Alliance design analysis
As per the definition, a strategic alliance is a general relationship between two or more companies, and they have to agree upon some mutual goals to meet some business needs ultimately. Here is the case, Sony Ericsson and Vodafone have joined together to form a strategic alliance. There are several aspects of strategic alliance. And below we will discuss about the aspects and how these aspects will help these two companies to grow in the market (Walter 2008). In accordance to James D. Bamford, Benjamin Gomes-Casseres and Michael S. Robinson (2003), “the success of external alliances often depends on having a supportive internal infrastructure” (p.8).
In the strategic alliance, it will involve equity investments by each of the two partners, that is Sony Ericsson and Vodafone Inc. When two or more firms join hands for these types of alliances they both have certain targets to fulfill from the alliances. Along with that Vodafone, a leading telecommunications company through out the World and Sony Ericsson, a widely popular electronics brand has joined hands for a true global venture. Actually the mobile phone business is an ever changing business that can be compared with a wind storm, if the companies do not change in a regular basis; they will be out of business pretty soon (Agarwal & Croson 2009).
The two companies will have a “non-equity strategic alliance” in which both of them will form an alliance which will develop a contractual relationship to share their unique resources and other different capabilities only to create a certain competitive advantage in the market. A cell phone manufacture and a cell phone connection company can surely make a team together and this is exactly what is done in this strategic alliance.
Generally speaking, the alliance between Sony Ericsson and Vodafone can be termed as global strategic alliance, and here the working partnership between these two companies will across national boundaries and they can operate through out the World. These two companies have come together to create product that will provide free mobile connection if the customer buys the handset and he or she will offer certain privileges from both the companies. Along with that they have also launched an offer when the customer can buy a Sony Ericson handset with a Vodafone connection inside the phone, and the connection will provide several new offers to the customers. Like the connections will be GPRS activated and internet surfing will be free for a certain amount for every day (Dacin 2011).
Along with that the customer can be able to download unlimited songs and music from the database of the Vodafone Company without any charge. The alliance strategy is very important, and in this case the two companies involved will act as the filler of each other in the market. James D. Bamford, Benjamin Gomes-Casseres and Michael S. Robinson (2003) noted that “An alliance strategy represents much more than the deal-it is an intent, a dynamic process, and a logic that guides alliance decisions. A strategic alliance without an alliance strategy is doomed to fail” (p.2).
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As per a general survey conducted jointly by the two companies they have come up with these unique promotional strategies. There are several new promotional activities that these two companies have been launched. Actually if we look at the promotional activities closely we will see that there are basically three types of customers that these companies are targeting for:
- The Students.
- General people who live in a city and do not require traveling much.
- People who frequently travels from one place to another and also go for international tours (Adegbesan & Higgins 2011).
After the classification it is very important to understand the basic needs of the three classes. A student is a young person and there are several things that attract the young people. It is for these customers the two companies have launched a handset which has a pre loaded connection. Here the connection gives the user access to social networking sites and it also provides them with the opportunity to download as many songs as they wish for free. Actually social networking is one of the most popular things among the students right now and it is very important for any telecommunication service provider to tap the potential market so that it ensures the huge amount of revenue that can come from it (Schreiner 2009).
After that there is also a factor of downloading songs. Most of the service providers charge money for songs downloading, but as Vodafone is the biggest telecommunications company has a huge collection, they can give the users an added advantage to download songs for free. It will be a huge business attraction and surely the young people will notice the offer and grab it quickly. And after that Sony Ericsson is world famous for their picture quality and sound, so it can be an unmatched combination in the market (Xia 2011).
After the students and the young people we come to the next part, the general people. If we look at the call list of a general person, we will see that in a single day a person makes most of his calls to some particular numbers, and most of these calls are made to people who are close to him or her. So, Vodafone and Sony Ericsson decided to launch a service that will focus on selling connections, and if a person takes up a certain number of connections he or she will be given a mobile phone for free. Again all these connections will have several features and they will have quite a number of free calls among themselves. This is a type of family plan and it is aimed to the general people who have a closely knitted family and it will help them to spend less on mobile bills (Walter 2008).
The third type of customers is who travel frequently for different purposes. And many of these customers have to travel to different parts of the World and in those cases they have to use different mobile numbers in different parts of the World. This poses a very different kind of problem, and it is hard for them to keep in touch with every one they know (Adegbesan & Higgins 2011). So Vodafone and Sony Ericsson have launched a package in which the customers will get a handset and a connection and in the connection ISD calls are much lesser than the original market rate, and as Vodafone has an unmatched network in more than 30 countries. This will be a great life saver for corporate leaders and other professionals (DiMatteo 2010).
Along with the three new promotional offers, Vodafone is also offering new packages for their existing customers. The customers who cross a certain limit in their usage for five consecutive months will get a free Sony Ericsson handset from the Vodafone Company free of any cost. This will be very attractive offer for the customers who use their mobile phones frequently and help them to stick with the subscriber for a long time (Dacin 2011).
In recent times general business researches have find out several key factors for stability in the businesses. Some of the key factors are the management style of the business leaders and the organizations related, concentration on the core business factors, controlling the different costs of the business and other resources, service profitability and control of the working capital. Along with all these aspects the organization has to look after its sales and devise new strategies to increase the sales through out the Globe which will keep them ahead of their competitors. In the collaboration between Sony Ericsson and Vodafone, the focus is entirely on the market and the basic needs of the customers, and so the strategic alliance is so much important factor in the case (Mudambi & Tallman 2010). It is very important that the strategic alliance changes to global strategic alliance and this can be the most important key to the success of the project. And as far the market analysis says, the alliance is doing well in the market and it will surely be one of the most important business alliances in recent times.
In the management process of the alliance, the strongest link is the alliance design and the management of both the two firms that are involved in the alliance process. As per the general market research, both the two companies, Sony Ericsson and Vodafone have done considerably well in the international market as well as in domestic markets of Europe and the United States of America. The best thing is that in the Asian market, like in the countries of South East Asia, the promotional offer for the youngsters has been hugely popular and this has really given the alliance a well deserved boost (Wassmer 2011).
From an outside point of view, the alliance between Sony Ericsson and Vodafone looks something very promising. After a long time, in the case we have a partnership between two leading companies of the World, one is a telecommunications company and the other is a electronics giant, and both are trying to serve the customers of the mobile phone market with both connections and handsets. And if they go on to create these types of promotional ventures as they have recently launched, it will be very tough to challenge their popularity in the market. And this will be very good news for the general consumers and the management of both the two companies (Hoffmann 2007).
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For any strategic alliance, it is very important to have two things. First are the commitments of the two companies, and second is the general performance of the two companies on an individual level. Both Vodafone and Sony Ericsson have done quite well in a general market for quite some times now, and it is very important in the aspect. As it is said that there can not be any alliance between two companies whose market shares differ much. Both the companies are market leaders in their spheres and so the alliance will be quite profitable. Initially the plans will have to be implemented on a small customers circle for a limited amount of time. And after the results of the plan implementation is out, the companies will surely be able to promote these plans through out the world on a commercial basis.
In the recent business world, markets are being dominated by tough competitions and every company is trying to come out with a new idea only to promote the products of the company. This is really very testing times for any company. And in this point of time, the strategic alliance between Sony Ericson and Vodafone has really helped in the causes of both the two companies, and it has become an example of how two closely related companies can join their hands and operate in a strategic alliance to increase the market shares of their respective companies. In the phase of economical slowdown, Sony Ericsson was one of the companies that were hit hard, and once it was also rumored that they were going to sell all their stocks, and close their worldwide operations (Agarwal & Croson 2009). But they stayed on, and later they had recovered some of their market. But after the strategic alliance, the company will be back on their old grounds and from here on they can take certain steps which will aim to take the company a notch higher. This will also increase the customer base of Vodafone throughout the World. So we can say that both Vodafone and Sony Ericsson will be beneficial in the strategic alliance.