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Assignment About Sony Company Information

Sony Corporation (Japan)

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During the 1990s, Sony transformed itself from electronics manufacturer to global entertainment company, establishing a leading position in music, movies and computer gaming. But those new ventures distracted attention from the company's core business, which is now struggling to maintain its position in the rapidly changing marketplace. Sony invented the concept of portable personal music players and dominated that sector for almost 20 years before its lead was snatched away, virtually overnight, by Apple's iPod. At the same time Samsung and LG usurped Sony's position in televisions and home entertainment appliances, myriad mobile phone manufacturers eviscerated Sony's digital cameras and camcorders, and Microsoft's Xbox and Nintendo's Wii slashed the profitability of PlayStation. A series of restructurings have failed to restore Sony's lead, although at least the broad spread of operating businesses allows the company to offset poor performance in one division, usually a different business each year, with gains in another. For the past few years, the group's strongest division has not in fact been any of its electronics or content subsidiaries, but its financial services arm. But even that business has not been able to offset woes elsewhere and in 2015 the group reported its sixth net loss in seven years. It was finally back in profit for ye 2016.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 8th Feb 2018: Sony CEO Kazuo Hirai announced that he will step down at the end of the company's current financial year in April, following a successful six-year turnaround that is expected to end with a record profit projected to top $4bn. "I have been running during the past six years with full force," he said, "and as Sony is going into the next stage, I thought it would be best for me and the company that I pass the baton now." He will be succeeded from April by Kenichiro Yoshida, currently CFO.

Adbrands Weekly Update 5th May 2016: Sony reported an annual profit for virtually the first time since 2008, helped by exceptional performance from its PlayStation gaming division, as well as improved profitability from cameras and other imaging products and even Sony Music. There was also a strong recovery from the hitherto ailing TV and home entertainment business. However, the smartphone business and Sony's components division both reported operating losses. The latter was hit hard by a plunge in demand and prices for smartphone image sensors, of which Sony is the leading global supplier. Full year revenues were down around 1% to Y8.1 trillion - around $68bn at annual exchange rates for the year - but the prior year's Y126bn loss turned into a Y148bn ($1.2bn) net profit. Playstation became Sony's single biggest business, accounting for revenues of around $12.3bn, overtaking mobile communications on around $10bn and home entertainment & sound on $9.6bn. However Sony's most profitable division by far remains financial services, which still contributes close to 40% of the group's combined operating profits.

Adbrands Weekly Update 4th Feb 2016: Mediacom is the big winner, and Carat the main loser, in the global Sony media review, currently drawing to a close. Precise details have yet to be formally confirmed but initial reports indicate that Mediacom has captured consolidated global duties for Sony Mobile and Sony Playstation, as well as Sony Electronics outside North America. It's unconfirmed yet whether UM will keep the account inside North America. However the Interpublic agency has retained Sony Pictures in the Americas. OMD has won Asia Pacific, to add to its existing EMEA role, and is also keeping Sony Music internationally. The Playstation account was previously shared globally with OMD and Carat. So far, Carat has come away empty handed from the review.

Adbrands Weekly Update 17th Sep 2015: Ads of the Week: "Made For Bond". Sony gets the party started in anticipation of SPECTRE - the new Bond movie - with a cool spot for its cameras and smartphones, featuring the movie's co-star Naomie "Moneypenny" Harris. Which agency? "The name is DDB... Adam&Eve DDB."

Adbrands Weekly Update 6th Aug 2015: Struggling Sony reported much better than expected results for 1Q of its new fiscal year as a result of booming compnent sales. The group supplies image sensors for the camera units used in both the iPhone 6 and Galaxy S6 as well as other high-end smartphones. Sales of these soared by more than 60%, offsetting a slump at the group's own handset business and at Sony Pictures. PlayStation was another a bright spot in the latest results. As a result, the group's CFO Kenichiro Yoshida told the FT it will now consider acquisitions to speed up the turnaround. “Until now, we rarely turned to mergers and acquisitions for our research and development, but we will be looking for those opportunities to take on new challenges."


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Background

Free for all users | see full profile for current activities: The Sony Corporation was founded in 1946 as Tokyo Tsushin Kogyo (or Tokyo Telecommunications Engineering Corporation). Founder Masaru Ibuka (who died in 1997) was an engineer who had worked in film processing plants before the war. With partner Akio Morita, he began to experiment with several chemical processes, one of which led to the development of magnetic recording tape in 1949 (made from paper coated with magnetic powder). The company launched its first tape recorder the following year. Ibuka oversaw research and development while Morita took care of sales.

Unlike its Japanese competitors, Sony set out to develop new technologies rather than simply adapt Western ideas. The company also irritated domestic rivals because it chose to work alone or in partnership with non-Japanese firms, rather than as part of the traditional local cartels. In 1953 Sony bought the rights to use Western Electric's miniaturised transistors for $25,000. The US company thought it had made a killing on the deal, believing the device was so limited in its power that it could only be used for hearing aids. But Ibuka set out to use the components as the basis for a portable radio, and he succeeded two years later. Billed as a "pocket" radio, it was actually too big for any normal pocket. Master salesman Morita redesigned the shirts worn by the sales force with extra-large breast pockets to accommodate the device. 

To capitalize on its rapid growth the company changed its name to Sony Corporation in 1958. The name was chosen to suggest connections to sound, but also the derivative "sonny" or little son. (In fact, the company name was originally pronounced as "sunny" rather than the current "soany"). In 1960, a US office was established and Ibuka developed a portable transistorized television, followed by the first VCR in 1963 and the Trinitron colour system in 1967. The latter bypassed US patents on the colour television process by firing the three electronic beams needed to produce a colour picture through a single gun, focusing them with a single shared lens. Not only did this mechanism take up less space, allowing for smaller sets, but it gave a sharper, brighter picture. In 1969, the company acquired a large shareholding in rival developer Aiwa, which was experimenting with a form of cassette tape. (The standard format used today was actually introduced by Philips in 1972). 

Sony quickly moved on to develop a system for recording video images, developing a special form of tape for this in 1971. This 3/4-inch format, named U-matic, was subsequently compressed to form the first home video recording system in 1975, under the name Betamax. However, this was to lead to Sony's first major error of judgment. The company was already in fierce competition with Matsushita, owner of the Panasonic brand. Matsushita had launched its own video recording technology, VTR, a year after Sony, based on a different form of tape. In 1976, Matsushita launched the VHS system and the two companies went head-to-head for domination of the home video market.

It was an expensive war. Sony quickly lost the battle in Europe but fought long and hard to maintain its foothold in the American market. One key factor gave VHS the lead. Matsushita had cleverly anticipated that consumers would use their tapes to record films and sport, so it concentrated on developing cassettes with a 90-minute running time. Sony's more compact Betamax tape had an optimal one-hour running time. Popular legend has it that Americans finally ditched the system in favour of VHS when they realised they couldn't record the Superbowl on a single Betamax tape. 

Despite the bloody nose it received over Betamax, Sony had two further aces up its sleeve. The first was the launch of the Walkman portable cassette player in 1979, a massive worldwide success. In the years preceding its launch, Philips' cassette tapes had been used primarily for live recording and playback. Sony engineers spent some time in the 1970s trying to develop a compact cassette recorder, but found it hard to combine both recording and playback heads in a small unit. Instead they developed a unit that was capable of excellent playback and was also completely portable. Initial feedback from retailers was very poor - most felt that a tape recorder that couldn't record would never sell. However Akio Morita was convinced of the product's value, promising to resign as chairman if it was a flop. In fact quite the opposite was true. The company sold out its first Japanese production run of 30,000 units in under three months. On the back of this success the product launched in other countries under a variety of different names - the Sony Stowaway in the UK, Soundabout in the US and Freestyle in Australia. The Walkman brandname was adopted in all territories in 1980, by which time Sony had sold more than 1.5m units. Its success ushered in a new boom period for the music industry, which managed to persuade consumers to swap their existing vinyl records for this new ultra-portable format. With sales now approaching 300m units, the Walkman remains the single most successful consumer electronics product ever made. 

Even more significant was another new concept Sony began designing in partnership with Dutch electronics company Philips:the Compact Disc. That system was launched in 1982, with Sony responsible for designing and manufacturing players for the storage medium developed by Philips. The success of the format was unprecedented. Even now, the two companies continue to divide a royalty of 5 US cents on every CD sold. Later, Sony took a huge leap into the unknown by negotiating the purchase of CBS Records in 1988 followed by Columbia Studios a year later. This marked a key turning point in the group's history as it set out to own the entertainment content for its hardware. [See Sony Music and Sony Pictures profiles for more]. The purchase of Columbia was one of the last deals under the management of Akio Morita, who more or less retired from the group in 1989. (He died in October 1999).

Subsequent technological innovations met with varied degrees of success. DAT (1987) entirely failed to take the industry by storm and MiniDiscs (launched 1992) struggled for several years to capture consumer interest before also fading away. Another major investment in the late 1990s was Super Audio CD (or SA-CD), a format designed to succeed CD, based on similar principles to the DVD video format which had been introduced by a consortium of manufacturers in 1995. The audio DVD concept had been conceived by the Sony-Philips partnership back in 1992 as a successor to the CD, but the two companies quickly found themselves in a race with another joint venture between Time Warner and Toshiba, who were developing their own SD format. During the mid-1990s, Sony attempted to join forces with Matsushita to avoid another embarrassing and costly VHS-Betamax war, but in the end the market was split between numerous different but largely compatible DVD formats from different manufacturers, each specialising in a different area - video, audio, data, recordable, rewritable and so on. After seven years of development, Sony and Philips launched Super Audio CD in 1999, but like MiniDiscs and DAT before it, the format failed to appeal to consumers. A foray into mobile phones also struggled to set the market alight, and was eventually merged with another struggling manufacturer, Ericsson, to form Sony Ericsson. Sony's move into computer entertainment, however, proved far more successful. Its PlayStation games machine single-handedly revived the console market after the decline of Nintendo and Sega. (See separate profile).

Reflecting the restructuring of several of its underperforming subsidiaries, Sony's financial performance for fiscal 2003 disappointed investors, coming in below the group's own mid-year forecasts. Although net profits rose dramatically, the increase was still well below the level anticipated. Adding to concern were a further 6.5% fall in sales at the group's core electronics business, increased losses within the Sony Ericsson mobile phone business, and continuing over-dependence on its games business, which contributed a disproportionate percentage of group operating profits. Sony's results for the first quarter of fiscal 2004 were even more disappointing, briefly rocking the Japanese stock market in what became known as the "Sony shock". Second and third quarter figures were only marginally improved, and full year performance remained poor. There was no noticeable upturn from the electronics division during 2004, and if anything the company fell even further behind in areas such as MP3 audio. As a result, the group's board reached a historic decision at the beginning of 2005 to appoint a foreigner, albeit one well-schooled in Japanese business practices, as its new head. Nobuyuki Idei retired as chairman and CEO of Sony Corporation in June 2005, and was replaced by Sir Howard Stringer, formerly chairman of Sony Americas. Later that year, Stringer unveiled a major corporate restructuring designed to cut around 10,000 jobs worldwide by 2008. The group announced plans to close or sell 11 of its 65 manufacturing plants in a bid to save around $1.8bn of annual costs.

By refocusing on core strengths from 2004 onwards, Stringer was able to deliver a considerable improvement in the performance of the electronics division, despite the impact of a costly and embarrassing product recall in 2006 of laptop computer batteries supplied by Sony's components division to Dell, Apple and Lenovo. Those three companies issued recalls of around 7m battery packs following reports that they could spontaneously burst into flames. Sony eventually made a provision of Y51.2bn to cover the cost of the recall. Nevertheless, combined sales for the year to 2007 increased, and the division reported an operating profit after three straight years of losses. Performance continued to improve in the year ending March 2008, before plummeting once more in the following period as a result of currency fluctuation and economic uncertainty. 

Among Howard Stringer's other important initiatives following his appointment was an attempt to negotiate a truce in another potentially damaging war over technology formats. Since 2002 Sony had been busy with the development of a high-definition successor to the existing DVD standard. Sony's system, known as Blu-ray, had won the endorsement of electronics manufacturers including Panasonic and Samsung, as well as the home entertainment units of Sony Pictures, Disney and Fox. Unfortunately Toshiba had developed a competing and incompatible format of its own, called HD-DVD, and had secured the backing of Paramount, Universal and Warner Bros home entertainment as well as NEC and Sanyo. Each side had spent the last three years trying to establish its own format as the industry standard, but without success. Another Betamax-VHS situation seemed inevitable. But in April 2005, common sense finally appeared to prevail, and the two sides agreed to negotiate some form of compromise. A month later, though, the two sides had still not agreed on which format was to be adopted, and negotiations stalled shortly afterwards, with both companies vowing to continue with their existing plans. Sony's position was weakened further later that year when Intel and Microsoft both added their support to the Toshiba technology. 

Sony and Toshiba both launched their rival systems in 2006, creating confusion among consumers. Gradually however, Blu-Ray gained the edge, helped by its inclusion in the group's PS3 consoles. By the end of 2007, Sony's Blu-Ray system was seen as the more widely supported system, with Blu-Ray players outselling HD DVD players in the key US market by three-to-one. In early 2008, Warner Bros shifted allegiance to Blu-Ray, and was followed by several retailers, who announced plans to stop selling HD DVD disks and players. Toshiba responded by making steep cuts in the price HD DVD players, but sales remained slow. The crunch came in February when Wal-Mart also shifted its allegiance to Blu-Ray. Toshiba announced plans to suspend production of the system a few days later. See full profile for current activities


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Chapter16 The Extended Family of Sony Corporation of America

The Extended Family of Sony Corporation of America

Six months after Tamiya returned from Latin America, Morita gave him a new assignment. The assignment was to establish a subsidiary company in Hawaii that operated independently of SONAM.

At the time, Sony's business in Hawaii was being conducted through a dealership, which in turn was handled by SONAM's office in Los Angeles. In May 1968, Tamiya landed alone at Honolulu Airport with $50,000 in operation funds. In approximately one month, Tamiya found office space and a warehouse and hired the minimum number of employees necessary to start the operation. Tamiya founded the company with six employees, including two Japanese staff. This is how Sony Hawaii Inc. was born.

The $50,000 was spent quickly, and Tamiya began to use his salary to pay utility bills and employees' salaries for the first two or three months. The products had not yet arrived, so money was spent while none was coming in.

Sony Hawaii's opening ceremony in 1968 (Morita is
second from left)

Products finally arrived in August. Sony Hawaii had already established agreements with a number of dealers, and once the products were distributed, revenues began to come in. At the time, "products" meant only transistor radios. Sony Hawaii could not sell tape recorders due to an exclusive dealership agreement Sony had with Super Scope, which covered the U.S. mainland and Hawaii, and color television sets were not yet available. The first order Sony Hawaii received was for two radios and two stereos.

In 1969, a year after Sony Hawaii was founded, Sony of Canada Ltd. joined the Sony family. Established in Toronto, Sony Canada originally dealt in professional-use VTRs and other equipment. Shigeru Inagaki was appointed its president and Tsunoda appointed its vice president. After tireless negotiations with Morita and lawyer Edward Rosiny, Sony Canada expanded in the mid 70s through a merger with Gendis Inc., a dealer with a long history of selling Sony's home-use audio products. The new Sony Canada (50% Sony-owned and 50% Gendis-owned) was established under president Albert Cohen. In 1995, Sony Canada became a wholly-owned Sony subsidiary.

On the other side of the Atlantic Ocean, preparations to establish sales companies in Europe were underway. Sony Overseas S.A. (SOSA), established in Zurich in December 1960, oversaw all European accounts as well as European finance and foreign exchange related operations. Komatsu, Koriyama and Suzuki founded SOSA. While Nobuyuki Idei, Masakazu Namiki, Yasumasa Mizushima, and Suehiro Nakamura were stationed in cities throughout Europe as sales representatives. Namiki was in the UK, Mizushima in Germany, and Idei in France. The three had a friendly competition among themselves when selling transistor radios and Trinitron TVs. Their shared goal was to counteract the traditionally negative image that Japanese products held at the time. They emphasized to customers that Sony products were of high quality and worth the higher average prices. Sony products were 10% more expensive than European brands and 20% more expensive in Germany.

They were also seeking to establish local sales companies in Europe. Sony was preparing to sever ties with its distributors and establish companies that would function as wholesale companies and sell directly to retail outlets in major European countries. Sony's aspirations were high: to increase direct sales, boost brand-image, and build a servicing network.

Morita always said, "Sales is a form of communication. To persuade consumers that Sony products improve their lives, we must have our own sales channels." Morita wanted to get as close to consumers as possible, whether in Japan or abroad.

Three New Sales Companies

In 1967, the European Community (EC) was formed among six countries and this union has continued to expand ever since.

Namiki, Mizushima, and Idei were not yet quite 30 years of age when they were given assignments to establish local companies in Europe. When they were chosen, there were voices within Sony advocating older, more experienced businessmen for the assignments. But one of Sony's policies is to give young and inexperienced employees a chance if they are promising. Rising stars are given great responsibilities and a degree of freedom. The three men were entrepreneurs and full of energy. Once abroad, they struggled with new business practices, laws, and rules which were totally different from what they were accustomed to, but they made steady progress. They received the full support of Tetsuro Yotsumoto back at the International Division in Japan. In May 1968, Namiki was the first to dissolve a relationship with local distributor Debenhams, founding Sony (UK) Ltd. under Haruo Fukatsu.

Debenhams at that time had only three sales representatives dedicated to selling Sony products. These three handled the accounts of 600 dealers. When Namiki learned of this, he was in utter shock. "We'll never be able to expand in large strides with this kind of sales infrastructure," he said to himself. Fortunately, Debenhams had a well-earned reputation, and the dissolution of Sony's distribution agreement occurred on amicable terms. The president of Debenhams even gave Sony (UK) a "gift" to congratulate the company on its new beginning. Debenhams allowed Sony (UK) to hire several of its employees who had been working on the Sony account and sold Sony a large desk for Namiki and two delivery trucks at a very low price. Debenhams even agreed to be the guarantor for Sony (UK) to rent its first office space. Because the Japanese government had imposed a strict limitation on foreign exchange transactions, the support Debenhams provided Sony (UK) was invaluable to the new company.

Due to the strong support and encouragement from Debenhams, Namiki and his team were extremely motivated to succeed. Business in the UK therefore grew at a rapid pace. In its first month of business, sales were double what Debenhams had recorded in the previous month. In six months, Sony was selling three times what Debenhams had sold in the same month of the previous year.
In June 1970, Mizushima founded Sony G.m.b.H. in Cologne, home to Grundig, Nordmende, Telefunken, and other electronics giants. In terms of hierarchy at Sony G.m.b.H., Akio Morita served as president, Haruo Fukatsu as director, and Yasumasa Mizushima as company secretary. As the Germans were proud and confident that their domestic electronics manufacturers were the world leaders, it was an uphill battle for a little-known Japanese company like Sony to sell in Germany.

Sony G.m.b.H. began with only slightly more than 20 local and 5 Japanese employees. When Sony products were sold through distributors, sales floundered. But once Sony began selling to dealerships directly, Mizushima's policy of promoting the superior quality of Sony products boosted sales. By the end of 1970, Sony G.m.b.H was affluent enough to provide Mizushima with a Mercedes-Benz as a company car.

The Sony UK sales office around 1970

Establishing a Brand Name

France proved to be the country where it was most difficult to set up a new business. Idei began preparations to establish a sales company there in 1971. At the time, France had effectively sealed its borders to direct investments from abroad. Idei paid many visits to the Ministry of Finance in the Elysées Palace, seeking permission to establish Sony France. France's Ministry of Finance emphasized the protection of homegrown industries and thus was not amenable to the idea of Sony France. Furthermore, the owner of Tranchant Electronique, then Sony's exclusive distributor, and Minister of Finance Giscard d' Estang were close personal friends. Accordingly, Sony's request to terminate the distributor agreement as a premise to the founding of a 100% Sony-owned subsidiary was not warmly received.

After Idei spent much time negotiating through lawyers, a three-year contract to form a quasi-joint venture with the Suez Bank was finalized. In February 1973, Sony France was founded with Jacques Dontot, former chairman of the French Electronics Industry Association as its president, and Yasuhiko Ohga of Sony as its vice president. The two years of negotiations were a nightmare for Idei, but the solid relationship that was formed during this period later enabled Sony to buy out its partner with relative ease.

In September 1971, a showroom was completed on the busy and fashionable Champs Elysées, just as Morita had requested. Idei was gradually awakening to the realization of what it takes to establish a brand name in a market. Brand name goods are those goods which are not easily attainable, but yet are in constant demand. He was beginning to understand that in Europe, and especially in France, brand name goods were desirable. Thus, it was very important for Sony, virtually unknown in France at the time, to quickly establish its brand name. The Sony showroom on the Champs Elysées played a crucial role in measuring the improvement of the Sony image among those who visited Paris.

The success of these sales efforts effectively ended an era when Sony sales staff worked from a rented office belonging to an exclusive distributor. With its own sales operations, Sony was now ready to directly promote its high quality products and establish a brand name both in Europe and the US. Each Sony pioneer went through many hardships. Yet to have been given such a large task at such a young age, and to have experienced the building of a business in a foreign country, was enriching and satisfying to both Sony and the pioneers. Once the new companies were established, local staff members were sought. The fact that Sony was an unknown foreign firm worked to its advantage because the people who came to work for Sony in those days were ambitious risk-takers.

Idei in front of the Tranchant Electronique building
in Paris. In the background is a Sony van painted
with a Japanese red rising sun motif.

Raising Capital in Foreign Markets

Raising capital became a major concern as Sony continued to pursue its goal of establishing its own sales channels around the world. Sony was the first Japanese firm to issue American Depository Receipts (ADRs) to raise funds in the US market (see Part I, Chapter 12). The issuance of ADRs marked the beginning of Sony's ambitious efforts to raise foreign capital, which in turn led to the internationalization of its capital. Sony raised approximately 4 billion yen through the issuance of a total of 5 million ADRs over two occasions in 1961 and 1963.

On September 17, 1970, the chairman of New York Stock Exchange (NYSE) welcomed Morita and Noboru Yoshii of Sony onto the trading floor 30 minutes prior to opening with a warm "Congratulations." At the time, the NYSE was the world's largest exchange and handled 75% of the world's stocks in terms of value. Sony had finally fulfilled all qualifications for listing and became the 1,305th firm, as well as the 30th non-US and first Japanese firm traded. Ten long years had passed since Sony first issued ADRs and it was the day that Sony management had long awaited.

Morita (left) and Yoshii (right) rejoicing over
the listing of Sony on the New York Stock
Exchange (NYSE)

At exactly 10:00 am, bells rang announcing the opening of trade. Morita immediately bought 100 Sony ADRs in his name in accordance with NYSE tradition. As soon as this order was sent to the back office, the letters "SNE" for Sony flashed across the electronic bulletin board with the opening price of "$15 5/8". Morita and Yoshii joyfully held up the ticker tape to display the price.

What did listing on the NYSE mean? It meant that Sony had finally become a truly international company worthy to share the floor and be traded with giants like General Motors Corp., whose sales exceeded Japan's entire national budget at the time. Moreover, once a company was listed on the NYSE, the Canadian and European exchanges would list it with virtually no questions asked.

Sony stocks were traded nonstop that day closing at $15 1/4. Trading volume was 120,300 shares and Sony ranked 13th among the 1,305 companies listed. Sony stocks had made a stunning debut.

At the press briefing that followed, Morita announced enthusiastically, that Sony had "taken its first step toward becoming a global company" and stated his intention to also gain listings on the European markets and turn Sony into "an international company built on a global foundation."

In the early 1960s, aside from SOSA and SONAM, Sony's two other overseas operations consisted of the Hong Kong Office, established in 1958 and a production plant in Ireland, established in 1959. Members of the International Division took turns taking two to three month business trips to establish local distribution channels and conduct market research.

By 1977, Sony was listed on 18 major exchanges in 10 countries and Sony stocks were being traded somewhere in the world virtually 24 hours a day. Sony had become a truly world class company for both its products and its stock.

Building Plants Close to Markets

In June 1971, Iwama, who had already spearheaded R&D efforts on the world's first FM transistor radio, transistor television, Trinitron color television and home-use VCR, went to the US to take the chair of president of SONAM. Iwama spent three years searching for the ideal location for a plant in the US.

While he was promoting the establishment of direct sales channels abroad, Morita was also putting forward plans to construct production facilities near the markets Sony served. However, Morita remained cautious, as he did not wish to rush into anything. He firmly believed that the first order of business should be the construction of a suitable distribution system to establish market share. He felt that the construction of production facilities without a full understanding of the market would be a mistake. His priority was to gain the trust of the market by providing adequate service to customers, while developing his knowledge and a sense of how to behave.

The ground-breaking ceremony to mark the beginning
of construction at the San Diego site (Iwama holds a
shovel at center)

By 1970, sales in the US had grown considerably and Japanese shipments of large televisions had increased. Morita decided that the time was ripe to build a color television plant on US soil. It did not make financial sense to endure the high costs of shipping televisions with bulky picture tubes across the Atlantic. As an additional benefit, if a plant were built close to the US market, products could easily be tailored to the market through adjustments in production volume and product design. Iwama agreed to oversee the development process.

At the time, an anti-dumping lawsuit, which included Japanese color TVs, was in the courts. The US was not pleased with the growing trade deficit with Japan, and Morita was quick to pick up on this. He believed that they could not allow such an "emotional outcry to escalate and hinder the Japan-U.S. relationship." He felt that the establishment of a domestic production facility would alter the export-focussed business pattern and contribute to the growth of US industries, thereby furthering development in both countries.

With a strong US dollar, wages in the US were so high that many of Sony's competitors such as RCA, Zenith Electronics and Admiral, were switching to overseas production. At an exchange rate of 360 yen to the dollar, US wage rates towered over those in Japan.

Masakazu Jinno and Junichi Kodera accompanied Iwama on his search for potential plant sites. Based on the exchange rate, Kodera submitted a pessimistic cost estimate indicating that the new plant would be in the red for the first several years of operation. But Ibuka and Morita were undeterred and decided that the plan had to be executed as soon as possible. Kodera prepared alternative, more economical plans for plants in Japan and in the Republic of Korea, but Morita believed that the exchange rate would not last forever and the plan would eventually succeed. Kodera was then instructed by Morita to go to their TV plant in Ichinomiya and learn about the latest production systems. He was surprised with this sudden request but soon discovered that he had been earmarked to become Sony's first US plant manager.

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