Introduction
Change is constant. Every organization has and continue to experience change. As economies, markets and industries continue to evolve organizations must change. Macro-and micro-environment factors continue to influence the operations of different organizations around the world. A company must be able to successfully implement change in order for it to grow. This paper focuses on management of change as applied in Sony Ericsson. The said company presents a different case as it was created out of the partnership between two large multinational firms – Sony and Ericsson. The paper focuses on the changes that took place in the company from being merely a small business entity that was controlled by two large companies to a separate and independent firm.
The paper gives emphasis to cultural changes that occurred in Sony Ericsson and how the people at the company managed these changes.
Sony Ericsson
In October 2001, Sony Corporation and Ericsson began a joint venture to create a new company that incorporates their respective mobile phone businesses worldwide. The new company, Sony Ericsson Mobile Communications, is equally owned by Ericsson and Sony, utilizing Ericsson’s leading expertise in telecommunications and Sony’s leading expertise in consumers electronics products. Sony Ericsson Mobile Communications is responsible for product research, design and development, as well as marketing, sales, distribution and customer services. Ericsson and Sony, parents of the joint venture, provide support to the new company and foster closer co-operation among all three. By combining the complementary strengths of Ericsson and Sony, the new company is uniquely positioned to become a world leader in telecommunications, as the industry moves rapidly toward Mobile Internet. The partnership has yielded large benefits for Sony Ericsson, with Sony providing its vast experience in consumer electronics and entertainment, and Ericsson, its mobile technology and the world’s largest customer base among operations.
Challenges
The strategic alliance between Sony and Ericsson was not without challenges. Both companies are experiencing turmoil in their handset businesses before they enter into a strategic alliance. The strategic alliance was seen as a way for both companies to create an independent unit that will produce handsets that will attract the consumers and uplift the position of Sony and Ericsson in the market. Because of both companies extensive knowledge and expertise in different areas and because of their strong backgrounds in the business, several problems and challenges were encountered. Three of those challenges were design, technology transfer and cultural gaps.
1. Design – The initial stage of the alliance was challenging and both companies endeavored to come up with a distinct design that will attract consumers. Sony designers proposed Ericsson designers, to create a round-shape cellular phone rather than straight line ones. It was hard to explain this to Ericsson people logically. At Sony, design philosophy is not clearly written in a document, and Sony and Ericsson did not understand each other due to their internal terms (in-house words).
2. Technology Transfer – The initial stage of the alliance was also faced with challenges in the transfer of technology know-how. Sony has its headquarter in Japan while Ericsson is in Sweden. In order for the alliance to work, both companies must combine their capabilities. Sony is known for its technological capabilities.
3. Cultural Gaps – The joint venture required considerable time to handle cultural gaps including differences in corporate values and differences in business orientation.
Management of Change
Perhaps one of the biggest changes that Sony Ericsson implemented as a joint-venture is the creation of a separate entity from its parent companies. Both Sony and Ericsson have different and at times conflicting organizational culture. Managing change at Sony Ericsson focused on organizational culture.
Organizational culture is to a company what is personality for a human being – it can be compared to the social glue, binding individuals together in organizational contexts (Cartwright and Cooper 1993). Organizational culture is similar to an individual’s personality – an intangible, yet ever-present theme that provides meaning, direction, and the basis for action. Culture is shared values, beliefs, expectations, and norms learned by becoming a part of and working a company over time. organizational culture is an organization’s basic values, beliefs, and assumptions about what the organization is all about, how its members should behave, and how it defined itself in relation to its external environment (Oden 1997).
Change according to Jick (1993); Buelens and Devos (2004) is a planned or unplanned response to pressures and forces. Change is inevitable and organizations undergo change. Technological, economic, social, regulatory, political and competitive forces push organizations to change. Because of the ever changing business and industry situation and environment, change has become a requirement for organizations to remain strong and to succeed. Globalization has also made the pressures more intense. Organizations today operate in a fast changing environment. In order to survive organization must be adaptive and they must adjust to new demands and opportunities (Sims 2002; Stickland 1998).
The joint venture between Sony and Ericsson was not considered hostile considering the 50-50 arrangement between the two companies, instead it was task oriented and equal. The goal for venture was to create synergies between the two companies, and become market leaders within their field of action (Boultwood 2004). By utilizing each other’s assets, knowledge and possibilities, they focused on creating new technological solutions for a global market, and developing products combined by fun and function.
The difference in managerial styles and accounting practices between Sony and Ericsson contributed to tension in the integration process. The differences in managerial styles could be considered ethno-cultural in the case of Sony Ericsson due to significant cultural differences between Swedish and Japanese employees.
First Change: Adoption of Global Thinking
Rather than focusing on the cultural backgrounds of its parent companies, Sony being Japanese and Ericsson being Swedish, the management adopted a global thinking. The strategies that were created by the Sony Ericsson management aims toward the future of the company as an independent body rather than existing differences between its parents’ countries of origin. In order to communicate its commitment to global thinking, the headquarter of Sony Ericsson was established in the United Kingdom. The global environment in the organization helps in the adoption of global thinking as it resembles more of a ‘born global’ company than a Swedish or Japanese one. The conviction is using the best strategies from both cultures, and integrating all collected knowledge form all countries around the world, with leaders from many different countries. The collected knowledge creates a foundation for organizational growth (Boultwood 2004). The company has achieved cultural diversity and different cultures are well represented in different offices of Sony Ericsson around the world. This spirit is a shared basic assumption demonstrating underlying values for the organization as a whole. Global thinking is supported by the though that the location of a company’s operation is of greater importance than the nationality of company ownership, meaning that their specific culture is applicable in every office of their worldwide activity, and not dominated by its parent companies.
Second Change: Integrating a Distinct Corporate Culture
Successful consolidations, considering people and relationships to be important, call for more thoughtful creative and differentiated approach to integration. In contrast, a fast, decisive and highly directive approach works best in situations where two entities make similar products or share several customer segments. In the process of creating a new corporate identity, Sony Ericsson put special focus on the cultural aspects. After studying current knowledge presented in reports of earlier mergers and joint venture, they decided to use a self-made change program without interference from consultants operating from the outside (Lind and Stevens 2004).
The change program consisted of a process divided into three stages:
1. Cultural Awareness
2. Culture Change
3. Managing the New Culture
The first stage ‘cultural awareness’ focused on creating an understanding of where the company came from. The management made it a point that they understand the cultures and backgrounds of the parent companies. In order to make cultural awareness successful, employees who were made up of different nationalities were asked to describe their cultures and how they wanted to see the new culture. As cultural awareness was taking place, then president Katsumi Ihara met with the management personnel with mission to discuss strategies, visions, values and culture type. Their goal was to implement ‘culture change’. Discussing cultural aspects and values, they used input from employee enquiries as a foundation for further discussion. In this manner, the employees’ opinions provided underlying conditions for choosing strategy and creating a vision. Visions, goals and values were therefore introduced for both employees and management, who once again were offered the possibility of adding inputs and supplements to the discussion. The process developed in this sense combining top-down and bottom-up management, and the result of the agreement concerning goals, visions, values and ambitions was communicated to all employees on the first day of the joint venture (Boultwood 2004).
Currently, Sony Ericsson finds itself in a phase referred to as ‘managing the new culture’. This phase summons the significant qualities evolving from the company. New knowledge is gained, new values are to considered and a new CEO, Miles Flint started in the summer of 2004, resulting in somewhat new impressions for the corporation.
I can say that both changes were successful and that there were little resistance that occurred. The accelerated growth of Sony Ericsson and its current position in the marketplace, the quality of its products and the number of Sony Ericsson users all are evidences that the company was able to successfully integrate the changes. The resources that I have consulted regarding management of change discussed the possible sources of resistance in implementing change. As the information I gathered about the case of Sony Ericsson are limited, I am inclined to present my assumption regarding the sources of resistance in the change process that occurred in the company.
One of the reasons why employees resist change is because they fear that they will not able to adapt to the changes. People usually are suspicious about the unfamiliar. Another source of resistance is the employee’s low tolerance of change. An employee who has a low tolerance of change resists change because he or she is not comfortable with doing his or her job differently. Employees may understand the importance of change but may have difficulties adapting to it. Another source of resistance is when the employees experience mistreatment during the change process. Employees who experience mistreatment often do not cooperate or even sabotage the entire process. The change process can also be seen as a treat to the ‘personal compacts’ between the employees and the managers (Bolognese 2002). There are different dimensions that make up personal compacts. These dimensions can be formal, psychological and social. The formal dimension is the most recognizable. The formal dimension includes job descriptions, employee contracts and performance agreements. The formal dimension establishes what is expected of both the employee and the management. The psychological dimension deals with the relationship that is established between the management and the employee. The psychological dimension entails the establishment of a relationship that is built on trust, loyalty and commitment. Lastly, the social dimension involves the culture within the organization. The organization’s mission statement, values, ethics and business practices are crucial in the social dimension. It has been argued that any disruption in the personal compacts will lead to employee resistance. Strebel (1996) points out that when these personal compacts are disrupted it upsets the balance, and increases the likelihood of resistance. People are said to exhibit resistance to change when:
- Change is seen as superfluous or when change is perceived to worsen the current situation
- Change is seen as a threat to security, finances, status etc.
- The employees are not involved in the decision-making process
- The plans for change are kept hidden from the employees
- The employees believe that the organization’s resources are not enough to facilitate the change (Wynn 2005)
Critical Evaluation
The top management, with the help and cooperation of all employees managed change successfully. There was a clear change leadership. The leaders were credible and they were able to bring the rest of the management team to consensus. The motivation that the top management showed also paid off. The employees participated in the decision-making and they were aware of the company’s goals and objectives. Implementation was also excellent as the top management was able to allocate resources and communicate with the employees.
Conclusion
Sony Ericsson presents a different case, far more different from the pattern that were discussed in several management books. From the information that I have gathered so far, I can say that Sony Ericsson was able to promote changes that shaped the company into what it is today. From a small company, Sony Ericsson has grown into a big company with market presence in different parts of the world. The clashing cultures of its parent companies was a major issue. The management realized that in order for the company to succeed it is important for them to create a distinct culture, that integrates not only the culture of its parent companies but also the cultures of the countries where Sony Ericsson operates. The company managed to acquire and pass on to the employees a global mindset.
References
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Fourth Quarter Report 2007, Sony Ericsson, viewed 11 November, 2008, from < http://www.ericsson.com/ericsson/investors/financial_reports/2007/12month07-en.pdf>.
Strebel, P 1996, Why do Employees Resist Change?, Harvard Business Review, pp. 86-92.
Stickland, F 1998, The Dynamics of Change: Insights into Organisational Transition from the Natural World, Routledge, London.
Wynn, G 2005, Managing Resistance to Change, Change Management, viewed 11 November, 2008, <http://managingchange.biz/manage_change_resistance.html>.
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