Sony Opzet Rapport

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Consultancy report

THE ULTIMATE EMERGING

MARKET FOR SONY CORP.Ria van der Veen JANUARY 2016


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THE ULTIMATE EMERING MARKET

THE ULTIMATE EMERGING

MARKET FOR SONY CORP.Consultancy report

Ria van der Veen

Commercial Economics, Class X

Studentnumber: 500663797

Department New Business Part of Sony Corporation

Amsterdam, 21st January 2016

msterdam University of

pplied Sciences


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ACKNOWLEDGEMENTIn your living room, bedroom, and office or perhaps in your

hand right now – there’s a good chance that you are in

possession of a Sony smart device. And if you don’t own a

Sony item right now, probably you have ever owned one – for

example one of the first Walkman’s. Although many peopleown a Sony product, the company has been through some

tough years. The consultancy report is the result of extensive

research and is written by Ria van der Veen, a second year

student at the Amsterdam University of Applied Sciences.

The reason for writing this consultancy report is to find the

ultimate new export market for Sony Corporation. The

objective is to discover the most interesting emerging market,

which earns the strategic focus of Sony in the coming five

years. A prosperous market where people have the wealth

that they can buy luxury items. A market where people can

work on self-development by purchasing product that express

their identity. Ultimately, the corporate objective is of great

importance: “Profit generation and investment for growth”.

This report is written with the intention to contribute to this

goal.

Writing this report is a great opportunity that allows me to

continue to develop as a future marketer. I have taken efforts

in this project. However, it would not have been possible

without the kind support and help of many individuals. I would

like to extend my sincere thanks to all of them. I would like to

express my special gratitude towards Mr Zouhair ben

Abdelkarim and Mrs Ria van Kempen for their supervision and

kind co-operation when needed. I also want to thank my

partner for his keen insights and support when I didn’t know

how to proceed. With this help, I have managed to complete

this consultancy report.

Enjoy reading this consultancy report!

With kind regards,

Ria van der Veen


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Executive Summary 9

Pre face 11

1. ABOUT SONY 13

2. PRE-FILTER ANALYSIS 21

3. ROUGH SCAN 29

4. DETAILED SURVEY 37

5. MALAYSIA [ DESTEP / 6D MODEL / MABA ] 45

6. MEXICO [ DESTEP / 6D MODEL / MABA ] 53

7. BRAZIL [ DESTEP / 6D MODEL / MABA ] 61

8. MALAYSIA [ DESTEP / 6D MODEL / MABA ] 69

9. ADVICE & STRATEGY 79

Conclusion 85

References 87

Appendices 91

I. COUNTRY SELECTION MODEL 93

II. PRE-FILTER CRITERIA 94

III. COUNTRY PROFILES: PRE-FILTER 97

IV. PRE-FILTER EXCEL 108

V. OVERALL RANKINGS PRE-FILTER 109VI. ROUGH SCAN CRITERIA 110

VII. COUNTRY PROFILES: ROUGH SCAN 113

VIII. ROUGH SCAN EXCEL 119

IX. OVERALL RANKINGS ROUGH SCAN 120

X. DETAILED SURVEY CRITERIA 121

XI. COUNTRY PROFILE: DETAILED SURVEY 124

XII. DETAILED SURVEY EXCEL 130

XIII. DESTEP MALAYSIA 131

XIV. DESTEP MEXICO 140

XV. DESTEP BRAZIL 148

XVI. DESTEP CHINA 159

XVII. 6D MODEL & CULTURAL HABITS 170

XVIII. MABA FILTER CRITERIA 182

XIX. MABA COMPLETE EXCEL 184

XX. SUBQUESTIONS & RESEARCH QUESTIONS CONSULTANCY REPORT 185


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EXECUTIVE SUMMARYOne of Sony Corporation’s objectives is “expand the business in the

emerging markets”. Therefore Sony asked us to gain insight into the

main emerging markets and to provide an advice concerning in

which main emerging markets Sony Corporation should concentrate

their sales efforts in the next five years.

The first chapter contains a brief introduction into Sony Corporation.

In addition to the financial corporate objectives, the company

attaches great value to the environment and has special objectives to

support the environment. Secondly, we gained more insight in the

productrange of Sony by investigating the marketing mix of Sony. We

learned that Sony definitely earned its innovative character, with the

development of the Walkman, SmartWatch, BRAVIA TVs, Xperia

Tablets and smartphones and Cybershot camera’s.

Although Sony is a very innovative company, it has been through

some tough years. Therefore they asked us to write this consultancy

report. This report provides an analysis of 23 emerging markets and

eliminates the countries which doesn’t form an interesting market to

entry for Sony Corporation. The evaluation of multiple macro-

economic market details has made it possible to clearly distinguish

the countries from each other. In the first phase – the pre-filter

analysis – the first thirteen countries were eliminated. High taxes and

import duties and restrictive measurments are for example filter

criteria in this first phase of the model.

The top ten remaining countries are furtherly elaborated in the rough

scan – the second phase of the Country Selection Model. Multiple

economic and govermental criterions are used to survey the

countries background to determine if it might be an interesting new

market for Sony Corporation. A destabalized government of a low

prosperity level might indicate that this isn’t the case. In this stage we

bid farewell too Poland, Hungary, Turkey, Uruguay, Russia and

Belarus. The countries China, Mexico, Brazil and Malaysia move on to

the final stage of the Country Selection Model: the Detailed Survey.


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In the detailed survey the attention is focussed on

the consumer electronics market within the

country. Secondly we consider the environmental

performance of the country and possible trade

promotions which could make it more attractive to

expand the Sony market for smart devices to this

country. A dropping economy for Brazil or a low

score on the Environment Performance Index for

China – it could imply that the country isn’t that

interesting for Sony. But before we can make such

a statement, each of the four remaining countries

is examined individually with a DESTEP analysis, a

cultural analysis with the Six Dimension Model

and a MABA analysis.

Although all countries are located in the “green”

area of the MABA analysis, there are considerable

differences. The Chinese market is enourmous,

but we also learned that there is more demand for

domestic products and there is a strong mutual

hatred between Japan and China. The Mexican

strategy following the Country Selection Model is

the “protect position” strategy, but it is also a

country with a major corruption problem. The

relatively small Malaysian market scored

predominantly positive – also in the different

stages of the Country Selection Model – but

investment is necessary to realise growth

(strategy: build selectively). Brazil is characterized

with a dropping, but tremendous market.

Although the country seems to be very interesting

on first sight with for example the Olympics 2016

coming up, it isn’t an interesting market

economically seen.

In the last chapter one of the four above-

mentioned countries is selected for furtherelaboration. We provide Sony with an strategic

advice for how to expand their market in the last

remaining emerging market. Which country

should it be? Malaysia, Brazil, China or Mexico?

You’ll find out in chapter nine, starting at page 79.


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PREFACEOn April 1, 2012 Kazuo Hirai became President and CEO of Sony Corporation, succeeding

Sir Howard Stringer. In the years before Sony’s operating results, particularly in the

electronics business, were negatively affected by the Great East Japan Earthquake and the

2011 Thailand floods. Conditions were exacerbated by the economic downturn across the

developed world, which caused other currencies to fall in comparison with the persistently

strong yen. Owing to reduced sales in the consolidated sales and operating revenue for

the period declined 9,6%. Sony recorded an operating loss of 67,3 billion yen, compared

to the 199,8 billion yen of operation come recorded in previous fiscal year. In order to

swiftly rebuild and restore the Sony Group, Sony introduced in 2012 a new top

management structure aimed at accelerating decision-making and strategic executing1.

Sony Corporation, commonly referred to as Sony, is a Japanese corporation

headquartered in K!nan Minato, Tokyo, Japan11 . Its diversified business is primarily

focused on the Consumer and Professional electronics with divisions Gaming,

Entertainment and Financial services sectors 1 . The company is one of the leading

manufacturers of electronic products for the consumer and professional markets1. Sony is

ranked 116th on the 2015 list of Fortune Global 5001.

Sony Corporation is the electronics business unit and the parent company of the Sony

Group, which is engaged in business through its four operating segments – Imaging

Products & Solutions Sector, Pictures Entertainment, Music Entertainment and Financial

Holding Group 1 1 . These make Sony one of the most comprehensive entertainment

companies in the world.

Problem definition

This report contains an analysis from 23 to 10 countries and finally an advice with four

potential emerging and thereby lucrative markets. The final chapter concentrates on the

strategic focus of Sony and positioning in the selected country. Unless the changes in

previous years, the 2014 forecast is significantly below the financial targets we announced

in April 2012. After a net loss of 170 billion yen for fiscal year 2014 and eliminating

dividends for this year, Sony couldn’t meet shareholders expectations. Financial targets

Sony established may not have been suitable, and that they likely did not implement

sufficient cost reduction measures. Sony recognized these missteps and has worked toaddress the issues that hinder Sony’s fundamental transformation1.

Progress is necessary, however, in order to rediscover growth and discover emerging

markets. To achieve growth in the next five years, Sony invited us to update their country

analysis of the main emerging markets. With the economy becoming more and more

competitive with each passing day, having appropriate knowledge about the concerns and

preferences of your customers and become integral for any business, is essential. Business

market research not only identifies new business opportunities and changing market

trends, it also recognizes new areas for expansion, and increases your customer base. This

report contains recommendations concerning markets Sony should concentrate their salesefforts in the next five years.


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Main research objective

Gain insight into the main emerging markets (four countries) for Sony Corporation and to

provide our advice concerning in which main emerging markets Sony Corporation should

concentrate their sales efforts for smart devices on in the next five years.

Problem Statement

“Which country forms the most interesting emerging market for Sony Corporation and

where should Sony concentrate their sales efforts for smart devices in the next five years?”

Sub-questions

1. What is Sony’s business profile?

2. Which 13 countries will be eliminated of the list of potential interesting markets?

3. Which ten countries will be comprehensively researched and form an interesting

market?

4. In which four countries should Sony concentrate their sales efforts in the next five

years?

5. Which country should have the strategic focus of Sony and how should they

prioritize the strategic focus of Sony over the key industries?

To answer the main question and the sub-questions, we used the country selection model.

We did a lot of desk research to gain insight into the possible emerging markets for Sony

Corporation. After the pre-filter analysis, were another ten countries left. The rough scan

includes a more extensive form of desk research and eliminated another six countries of the

list. With four interesting emerging markets left, the detailed survey is the last step to be

taken. With this finished, a recommendation for most interesting emerging market for Sony

Corporation follows. Exclusively for this country the last sub-question will be answered. The

result: a specified recommendation regarding one country regarding the recommended

strategic focus for Sony Corporation.

This advisory report is submitted on the 21st of January 2016 to the board of directors of

Sony Corporation and the Hogeschool van Amsterdam.

Sources:1 "Letter to Stakeholders, Annual Report 2012." (PDF). Retrieved 22 November 2015.

1 "Access & Map." Sony Global. “1-7-1 Konan Minato-ku, Tokyo 108-0075, Japan”. Retrieved 22 November 2015.

1

"Sony Global - Corporate Information." Retrieved 22 Novemer 2015.1 "Consolidated financial results for FY2014, Sony Corporation." (PDF).

1 "Sony Corporate History." Retrieved 22 November 2015.

1 "Global 500 - Fortune" Fortune. Retrieved 22 November 2015.

1 "Organization Data." Retrieved on 22 November 2015.

1 "Business Overview, Annual Report 2013." PDF). Retrieved 22 November 2015.

1 "Sony Mid-Term Corporate Strategy for FY2015 - FY2017." Corporate Info News Releases. Retrieved on 22 November 2015.


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1 ABOUT SONY


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1. ABOUT SONY

Sony Corporation , commonly referred to as Sony, is a Japanese corporation headquartered in K!nan

Minato, Tokyo, Japan12. Its diversified business is primarily focused on the Consumer and Professional

electronics with divisions Gaming, Entertainment and Financial services sectors3. The company is one of

the leading manufacturers of electronic products for the consumer and professional markets 4. Sony is

ranked 116th on the 2015 list of Fortune Global 5005

. In this chapter, the following sub-question will beelaborated: “What is Sony’s business profile?”.

1.1 Mission Statement, Vision, Corporate Objectives

Mission statement6

At Sony, our mission is to be a company that

inspires and fulfils your curiosity. Our

unlimited passion for technology, content and

services, and relentless pursuit of innovation,

drives us to deliver ground breaking new

excitement and entertainment in ways that

only Sony can. Creating new cultures and

experiences.

Everything we do is to move you emotionally.

Be Moved.

Vision7

Sony is striving to achieve a zero environmental footprint throughout the entire product life cycle. The

ultimate goal of “Road to Zero” inspires our imagination, innovative technology and also your curiosity.

Our unique environmental initiatives are expanding around the world as we continue down the Road to

Zero.

Corporate objectives8

Sony is setting “profit generation and investment for growth” as the theme of its mid-range corporate

plan from fiscal year 2015 through fiscal year 2017. Therefore, the corporates objective is to transform

the Sony Group into a highly profitable enterprise with a growing market share.

Long-term objectives

Sony’s first long-term goal is to achieve zero carbon by 2015. For example: the BRAVIA range of TV’s

introduced by 2010 had a strong focus on eco credentials.

1 "Access & Map." Sony Global. “1-7-1 Konan Minato-ku, Tokyo 108-0075, Japan”. Retrieved 22 November 2015.

2 "Sony Global - Corporate Information." Retrieved 22 Novemer 2015.

3 "Consolidated financial results for FY2014, Sony Corporation." (PDF).

4

"Sony Corporate History." Retrieved 22 November 2015.5 "Global 500 - Fortune" Fortune. Retrieved 22 November 2015.

6 "Mission Statement." About Sony. Retrieved 22 November 2015.

7 "Vision." Sony and the Environment. Retrieved 23 November 2015.

8 "Objectives." “Profit generation and investment for growth”. Retrieved on 23 November 2015.


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The second long-term objective of Sony Corporation is to be the leading provider in the electronics

industry and to maintain its core market segment by developing ground breaking products, services

and technologies.

Short-term objectives

The corporate strategy of Sony announced by NEW CEO Kazuo Hirari as of 2012 is “One Sony” – an

integrated new management approach to accelerate all the decision-making in the entire company. The

new approach marks the beginning of a transformation aimed at driving growth and creating newvalue9.

This includes five initiatives:

1. To strengthen the core business areas in the market;

2. Target to rebuild the television segment to the growing and ever changing technology market;

3. To expand the business in the emerging markets;

4. Creating the new business and accelerating innovation;

5. Realizing the business portfolio and optimizing resources.

Corporate Social Responsibility (CSR) at Sony 10 It is the core corporate responsibility of Sony Group to the

society to pursue its corporate value enhancement through

and sound business practice.

Sony’s corporate social responsibility (CSR) activities reflect its

philosophy of implementing sound business practices;

innovating to realize products, services and content that

inspire and excite; assisting the communities in which we

operate; and helping to shape a better, more sustainable

society. Sony believes that these activities both benefit societyand enhance corporate value.

1.2 The Marketing Mix

Product

Sony’s product portfolio exists of eight different product groups: Consumer Electronics, Mobile, Game,

Movie, Music, Network Services, Financial Services and Professional Services. In this sub chapter a short

summary of the consumer electronic products Sony produces, such as smartphones, tablets, smart TV’s

and other smart devices. Sony’s electronic products and services are marketed throughout the world

under the trademark “Sony”.

Sony is a renowned multinational company and known for its quality products. This report is about

finding a lucrative emerging market for the product category ‘Smart devices’. It is all about creating

inspirational, innovative and high quality products with unimaginable possibilities. A consumer used to

need at least 50 devices to do the same things as what they can do with their smart device: phone, mail,

map, alarm, camera, radio, CD-player, television, video store, games, newspapers, computer, watch,

clock, pen, notebook, pedometer, sport instructor, calculator, thermometer, mobile banking… and the

list goes on and on. Everything is possible with a smart device.

9 "Corporate Strategy." Sony Corporation. Retrieved on 4 January 2016.

10 "CSR at Sony." Annual Report 2013. Retrieved on 23 November 2015.


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Consumer Electronics11: Mobile, Tablets & Smart Devices12

Sony developed the iconic Walkman and they gave us the freedom to enjoy music easily whenever and

wherever we pleased. In current age Sony Walkman Series has evolved in not only a wireless but also a

waterproof music sensation.

As one of the first companies in the world – innovative they are – Sony developed a SmartWatch for an

affordable price and compatible with all Android devices. Currently their third edition is on the market:

you can talk to it, fill it with music, track your movements and customise it to suit your personal style.

The Sony BRAVIA TVs and matching home theatre systems have been a single-minded quest for picture

quality that captivates and audio with truly realistic presence. The outstanding performance

distinguishes Sony from their competitors.

In the ever-innovative Xperia line, there’s a new Xperia Z smartphone and tablet . Shaped like a simple,

exquisite bar and slate, they reflect a future of greater freedom.

“Cyber-shot” T series is a follow up on the innovative first edition Cyber-shot camera. The idea: a

compact and slim body, stylish device with the ultimate high-resolution camera with the unique Cyber-shot technology of Sony.

Next to above-mentioned products offers Sony a wide range of camera’s and lenses, digital paper (such

as eBooks), projectors, Blu-ray Disk & DVD players, audio systems, wireless speakers & speaker docs,

headphones, multiple digital music players, voice recorders, radios & portable CD players. The broad

assortment of Sony exists of video cameras, in-car receivers & players, speakers & amplifiers, portable

chargers, batteries, memory cards & flash drivers, cables and probably much more.

Price

Being a company that emphasizes product quality, it tends to sell its products with price range frommoderately high to high-prices, depending on the use and targeted customers. Their prices most often

match the price ranges their competitors have. We may speak of a competition-oriented price-strategy

but we rather choose the market-oriented price-strategy above that. It is quite possible that Sony keeps

the prices of competitors in mind while determining their prices, but it seems largely a market-oriented

situation, while customers eventually buy the products. It is already hard enough to distinguish the Sony

brand within the wide range of competitive products, so the price should match what the consumer is

willing to pay (market-oriented strategy). The other facets of the marketing mix will have to make the

distinction for the customer.

In the Sony assortment there are multiple cheaper products, but these are almost always related

products. Think of new or better headphones for a new smartphone or lenses for a camera and

videogames for the PlayStation.

Place

Sony has an online presence in several formats, for example their own website provides information on

products and their prices. The products are registered in 204 countries and territories around the globe.

Sony Corporation itself has more then 30 subsidiaries companies in Japan itself and more than 50

affiliated companies outside of Japan. Most of the sales come from third party stores and websites, such

as Amazon, Best Buy and Saturn.

11 "Consumer Electronics." Retrieved on 23 November 2015.

12 "Sony new product releases." Sony Corporation. Retrieved on 4 January 2016.


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Wholesale distributors of Sony Products include but are not limited to: Best Wholesale co. Ltd,

Dongsheng International Trade Co. Ltd, Denzuke Network Sdn. Bhd., Front-Page Trade Co., Ltd.

Promotion

Sony employs an umbrella branding strategy by placing the product name along with corporate name.

This strategy lets the product to assume its own identity and positioning, but also draws strength of the

corporate brand. The goal is to bolster consumer confidence in the product. Sony has used this strategy

to launch new products.

In February 2013, Sony has introduced a new strapline, ‘Be Moved’, as it seeks to align its marketing into

the group’s overall communications strategy. The new ‘Be Moved’ line will be used as a “long-term

campaign platform” to better fit with the company’s wider ‘One Sony’ strategy, which is centred around

three core pillars of mobile, gaming and digital imaging13.

Sony actually outspends their competitor’s big time in advertising and it appears to be working to some

degree. Promotion usually empowers the viewers and shows them what Sony products will feel this way.

Advertising14 Advertising is any paid form of non-personal mass communication through various media to present

and promote products, services and ideas by an identified sponsor. So far, SONY has advertised its

products through many different ways and media. Through TV we have seen multiple advertisements of

its products such as BRAVIA televisions. Sony also advertises its products by targeting those favourable

television programs, like sports, series and movies. For example, Sony products are used in the latest

James Bond movie ‘Spectre’. This is called product-placement.

Sony used direct response advertising. This is a type of advertising that encourages the consumer to

response either by telephone, mail or the Internet. Such advertising is done through direct mail of

catalogues / physical advertisements in magazines.

Sales Promotion

An other strategy of Sony is Sales Promotion: a marketing discipline that utilizes a variety of incentives

techniques to structure sales related programs targeted to customers, trade and/or sales levels that

generate a specific, measurable action or response for a product or service. For example after the

release of the Sony BRAVIA television sets, Sony promoted them by early bird prizes by saying that all

BRAVIA full HD LCDTV’s purchased during July 2008 and registered within two weeks of purchase

qualify for a Bonus PlayStation 3 as long as the customer claims one of the first 35,000 received and

validated by Sony.

Public Relations and Publicity

Public relations is a broad set of communication activities employed to create and maintain favourable

relationship with employees, shareholders, suppliers, media, educators, potential investors, financial

institutions government agencies and officials and society in general. Through its website, Sony

Corporation has its provided contacts for those customers who will be in need of any information from

the company. In this way Sony can create a mutual relationship with its customers and ensure that it

serves the wished and demand of its customers.

13 "Introducing Be Moved as the new companies strapline." MarketingMagazine.co.uk. Retrieved on 4 January 2016.

14 "Promotion." Sony Group. Retrieved on 4 January 2016.


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Sponsoring

Sony was sponsoring huge sport-events, such as the World cup in Brazil in 2014 and other FIFA related

football events, as Sony is a FIFA-partner. At the end of 2014 Sony stopped sponsoring FIFA in response

to growing concerns about the transparency of the bid procedure around the World Cups of 2018 and

2022.

Sony has a partnership with The Olympic Games. The next event will take place in Brazil in 2016.

Process15

The company’s focus on tis research and development (R&D) activities is evident in its expenditure of

over $5 billion in 2009. The strong focus on R&D helped the company to launch technologically

innovative product in the market. The strong focus on R&D would thus enable the group to revive its

product base as needs are indicated by customers. Examples of this strategy include the introduction of

BRAVIA, Cyber-shot cameras and the Xperia smartphone and tablet series.

Sony operates from a philosophy it labels “uniquely Sony”. The company seeks to facilitate the

development of its staff but spurs employees to manage their own career and but to avoid

pigeonholing. This is a microcosm of the company’s desire to foster adaptability. The company’s broadoutlook extends to its corporate responsibility.

The desire to make its hardware and interfaces that are easy to use was a catalyst behind recent

reorganization of electronics into “Personal” and “Home” category user-friendlier. Sony has adopted a

“Company of Committees” governance system in order to go beyond minimum compliance with legal

requirements and to add additional transparency. To accomplish this, the company has revised some

Directors’ functions to facilitate the proper functions of statutory committees.

Sony has recently reorganized in order to further improve responsiveness and Customer Services, Inc.

and has initiated special employee training to enhance its ability to respond to customer’s inquiries andrequest. Sony seeks to in still corporate social responsibility policies throughout its supply chain.

People

Kazuo Hirai is the Chairman, CEO and President of Sony Corporation. He stands at the head of a more

than 130.000 employees-company.

In 2008, the company created 13 global talent directors who are assigned to identify promising

individuals in all businesses and regions and develop them into future business leaders. This initiative

also includes a schedule of job assignments designed to give them exposure to a variety of businesses

and regions16.

15 "Process" Marketingteacher.co.uk. Retrieved on 4 January 2016.

16 "People" Marketingteacher.co.uk. Retrieved on 4 January 2016.


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2PRE-FILTER

ANALYSIS


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2. PRE-FILTER ANALYSIS

On April 1, 2012, under the leadership of President and CEO Kazuo Hirai, Sony announced “One Sony”:

an integrated new management approach designed to accelerate decision making across the entire

Sony Group. The new approach marks the beginning of a transformation aimed at driving growth and

creating new value. This section provides an overview of the five key initiatives Sony is undertaking to

revitalize and faster growth in the electronics business.

Alongside internal changes, Sony asked us to update their country selection to discover new main

emerging markets. In this first chapter 13 countries are eliminated from the list of 23 possible markets

with help of the Country Selection Model. In this section the following question will be answered: “Which

13 countries will be eliminated of the list of potential interesting markets?” The applied filter criteria are:

Import Restrictions, Distance in KM, World Risk Index, Travel Advice, Import Duties, Sales Tax and the

Gross Domestic Product, Purchasing Power Parity.

We start this chapter with a brief explanation of the Country Selection Model. This elucidation won’t be

repeated in the following two chapters.

2.1 The Country Selection Model

The Country Selection Model is a three-phase filter-model. In every phase of the model, a number of

countries are eliminated from the list of potential emerging markets. Finally four potential lucrative and

thereby emerging markets are left over. In this chapter the first stage of this model will be worked out.

To create a new ranking in the list of 23 countries and eliminate 10 countries in the first phase and

another nine in the second, a weight is provided to every filter criteria. The weight determines in what

degree the found data will count. Do this for all the criteria and multiply this with the ranking number to

create a weighted score. For every filter criteria the interval borders of the rankings have to be defined:

from one (lowest score possible) to five (highest score possible). The weighted score and the new

ranking are a result of the weight multiplied with the score awarded to the filter criterion. The overall,

weighted scores of the countries could be compared now. The comprehensive list of criteria with

corresponding weights and rankings can be found in Annex I “The country selection model explained”

on page 93.

2.2 The Pre-filter analysis

Pre-filter Analysis: the criteria

To separate the wheat from the chaff, this first phase of the Country Selection Model is carried out. The

detailed elaboration can be found in Annex II “Pre-filter analysis: the criteria” on page 94. In this

paragraph short description and motivation of the chosen filter criteria:

• Import restrictions (weight 0,15)

• Distance in KM (weight 0,05)

• World Risk Index (weight 0,25)

• Travel advice (weight 0,20)

• Import duties & Sales tax (weight 0,20)

• Gross Domestic Product, Purchasing Power Parity (weight 0,15)


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Restrictions on imports generally take two forms: tariffs and quantitative (non-tariff) barriers. These

restrictive measures are imposed by – for example the European Union – and with a lot of measurements

a country might acquire the “sanction country” or “high-risk-country” status. The consequence of

violating the rules by doing business with a sanction country could result in high amount fines. In

addition, it is still questionable whether you as a company want to do business with a country where

human rights are infringed. Secondly, the World Risk Index is a list of countries, ranked on the risk of

becoming a victim of a disaster as a result of vulnerability and natural hazards such as earthquakes,

storms and floods. A high risk also means an increased risk of higher costs due to damage. This is alsoapplicable to the travel advice: the Dutch government provides for every country a travel advice for its

residents. An unfavourable recommendation may have to do with the political situation in the country,

but also with the risk of natural disasters.

Thirdly, sales tax and import taxes are important because it indirectly increases the cost of each product,

or reduce the margin on a product. At a higher selling price it’s likely that there are fewer candidates for

the product. In both cases, high taxes will thus go at the expense of the Sony’s profits. The same applies

for the distance to be covered between the production location and potential sale location. The bigger

the distance, the higher the costs will be.

Last but not least an economic factor: the Gross Domestic Product, Purchasing Power Parity. The GDP

PPP conversion factor is the number of units of a country’s currency required to buy the same amounts

of goods and services in the domestic market as US Dollar would buy in the United States. A higher GDP

PPP might indicate greater spending power.

Pre-filter Analysis: the elaboration

This section summarizes the findings from the first phase of the Country Selection Model, the Pre-filter

analysis. Full data from the study and a complete overview per country can be found in Annex III “Pre-

filter analysis: full data” starting on page 97. This section mainly includes interesting facts and figures

plus supporting graphs and tables. As explained previously, the final ranking is calculated according tothe scores given in the Country Selection Model.

Import restrictions

China is a sanction country, but nevertheless this

doesn’t form a threat for Sony since it concerns an

embargo on arms. In Russia, on the other hand, a

whole lot import restrictions are in force, including

an embargo on dual-use goods and technology (if

intended for military use and certain persons,

entities and technology). This measurement will

probably apply to Sony Corporation, as Sony offers

a wide range of technology products. The same

thing goes up for Belarus, which is also a sanction

country. Another country in which it applies is

Ukraine, where there is an embargo on dual-use

goods and technology, telecommunications and

more in force.

Indonesia is considered a high-risk country in

connection with the possible violation of human

rights. The same goes for India and Pakistan. In addition to the violation of human rights, a less well-

regulated legislation may occur. Therefore doing business in this country entails a greater risk.


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Egypt is a sanction country and a high-risk country. An important restrictive measure that is applied to

Egypt is the freezing of funds and economic resources. This import restriction won’t probably apply to

Sony products, but it might form a restriction because it influences the overall welfare of the country.

Countries like Iran and Iraq are in state of war. These countries are both are a sanction country and a

high-risk country. Powerful measurements are the freezing of funds and economic resources – which

might lead to sober times – and the embargo on telecommunications and other technological

equipment.

Distance in KM

Hindsight the distance in kilometres has proved to be a less good research factor. True enough this

factor affects the final costs of transportation, but since Sony has an efficient global distribution network

the actual distance in kilometres requires – at most – an increase in the quantities shipped. After all, the

extension of the market share in the concerning country doesn’t call for a specific extension of the

distribution network for this country. Therefore, a low weight is assigned to the degree of importance of

this research factor. Countries that have the lowest score within the country selection model (score one)

are the following: Argentina, Brazil, Chile and Uruguay. Countries for which just a small distance

should be covered are China, Russia, India, Indonesia, Malaysia, Pakistan and Vietnam.

World Risk Index

Countries where the risk is at its highest to become a victim of a disaster as a result of vulnerability and

natural hazards are Chile with 11,20% and Vietnam with 12,89%. Other countries in which there is also a

high risk of becoming a victim are Nigeria with 8,12% and South Africa with 7,43%.

Ironically enough, countries, which are determined as ‘the safest’, following the WRI are almost all

countries where other compelling factors were discovered: Belarus, Poland, Ukraine and Egypt.

Import duties & Sales tax

A high percentage of taxes mean high fixed costs for Sony Corporation. This affects the profit of thecompany. Countries, which charge a high amount of taxes, are Argentina with 16% import duties and

21% sales tax and its practically neighbouring country Brazil also likes to charge taxes. Unfortunately we

only know they charge 16% import duties and a varying amount of sales tax. Nevertheless, Brazil is

assessed with an average score in contrast to Argentina, which is assessed with the lowest score

possible. Also Uruguay is being reviewed as one of the least attractive countries in regarding taxes to

be paid.

Pakistan is ranked on the second level. This country charges a considerable amount to import duties as

well as a varying amount for each imported product. This therefore ensures higher fixed costs per

product and reduces the margin on it. Iran is also ranked on the second level. This country is charging

both import duties and sales tax. The same goes for Nigeria, in where for both sales- and import duties

a 5% fee is charged.

Iraq and Egypt are assessed with the lowest ranking possible. Of these two countries, the charges tax

amounts are unknown. This doesn’t allow Sony Corporation to estimate final costs and therefore isn’t an

interesting country to do business with.

Despite the fact that paying taxes is never nice, there is one country that has received the highest score

(rank five): Malaysia. In this country only 6% sales tax is charges and no import duties.


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Gross Domestic Product, Purchasing Power Parity

In order to obtain a good impression of the level of prosperity in a country you can look at the GDP PPP.

India is ranked as one of the four lowest scoring countries, with $5.800. The same goes for Pakistan

with only $4.700 and Vietnam with $5.700. Nigeria also doesn’t form an interesting market with a GDP

PPP of only $6.100.

Countries with a low GDP PPP that are ranked on level two are Egypt ($10.900), Indonesia ($10.700)

and Ukraine ($8.700).

The highest scoring countries – in other words with a high GDP PPP – are Argentina with $23.100, Chile

with also $23.100, Poland with $25.200 and Russia with $24.400. Hungary has a GDP PPP of $25.000

and Malaysia $25.100.

Pre-filter Analysis: “to proceed or not to proceed”

The last section of this chapter focuses on the conclusion of the pre-filter analysis. The complete pre-

filter analysis in Excel format can be found in Annex IV “Pre-filter analysis Excel” on page 108.

The table below shows the total scores in the pre-filter analysis of the country selection model. As statedin the legend, each colour stands for a separate filter criteria. The size of this area reflects the degree of

impact on the final score. The rods also show the individual scores for each criterion in each country.

This table can also be found in Annex V “Overall rankings pre-filter analysis” on page 109.


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The ten highest-scores nations go through to the next stage: the rough scan. This partition is also

displayed in the table above. The most decisive factors for this review have to do with the following

points:

1. Poland: low score on the World Risk Index, only 3,27% risk & and high GDP PPP of $25.200. The

absence of import restrictions is also benefit the country.

2. Hungary: the country with a positive score of three or higher on all criteria. Remarkably is the

relatively high sales tax of 27%, while the country doesn’t charge import taxes. There is no

question of import restrictions and its high GDP PPP of $25.000 characterizes this country in apositive way.

3. Malaysia: One on almost all criteria, high-scoring country is Malaysia. For example, the relatively

short distance from the production location is positive and the fact that the country only charges

6% sales tax. There are no import duties charged because of the Free Trade Agreement (FTA)

with Japan since 2006. The country also has a significant high GDP PPP in comparison to other

surveyed Asian countries. Also, there doesn’t apply import restrictions to this country.

4. Turkey: Yet another average positive scoring country is Turkey. There are no outstanding issues.

5. Belarus: The assessment of Belarus is negatively influenced by the fact that this country is a

sanction country. By contrast, it does have al low score on the World Risk Index with only 3,07%.

In this country a ban on technology products is applied, which makes it directly a non-interestingcountry to do business with.

6. Brazil: This moderately high scoring country – except one: the distance that must be covered – is

characterized by an on the product depending sales tax. This makes it treacherous difficult to

estimate the final costs per product. Also, there doesn’t apply import restrictions to this country.

7. Uruguay: Firstly, the distance of Japan negatively impacts the final score of this country. Secondly

this country charges both moderately high import duties and sales tax.

8. China: The assessment of China is negatively influenced by the fact that this country is a sanction

country. By contrast, the country charges only 17% sales tax and no import duties. In addition,

this country is very close to Japan and a lot of the products are manufactured in China – which

reduces the distribution costs.9. Mexico: Another moderately high scoring country is Mexico. With a ranking of three or higher,

especially the relatively low sales tax of 16% and no import taxes is noticeable. Unfortunately the

distance to be covered, affects the ranking negatively.

10. Russia: The assessment of Russia is negatively influenced by the fact that this country is a sanction

country. In this country a ban on technology products is applied, which makes it directly a non-

interesting country to do business with.

Based on these scores the following top ten with accompanying final score is created:


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3ROUGH SCAN


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3. ROUGH SCAN

The second phase of the Country Selection Model elaborates on the remaining ten countries. For an

explanation of the Country Selection Model, please read the first paragraph of chapter two on page 23.

In this section the countries Poland, Hungary, Malaysia, Turkey, Belarus, Brazil, Uruguay, China, Mexico

and Russia are subjected to in-depth research.

3.1 The Rough Scan

Rough Scan: the criteria

In order to obtain more depth in the

investigation this phase of the country selection

model is conducted. The detailed elaboration

can be found in Annex VI “Rough Scan Criteria”

on P110. In this paragraph short description

and motivation of the chosen filter criteria:

• Political Stability Index (weight 0,15)

• Trade relations (weight 0,20)

• Gross National Income, Purchasing

Power Parity per capita in USD

(weight 0,10)

• Inflation rate (weight 0,20)

• Size of the population (weight 0,20)

• Exports in million USD (weight 0,05)

• Exchange rates yearly in percentages

(weight 0,10)

A destabilized government, poor quality of public and civil formulation and implementation is

something you want to avoid in a time of market expansion for exactly that country. The Political Stability

Index is a sub pillar of the Global Innovation Index and represents the chance one of the above

mentioned risks might occur. Another reason why a politically stable environment is important is the

relation between Japan and the other country. A good relationship means basically a stronger bond

between the two countries and it can also imply other favourable conditions - such as a Free Trade

Agreement - which increases mutual trade. Exports play an important role in the economy, influencing

the level of economic growth, employment and the balance of payments. For example, globalisation

and reduced tariff barriers have all helped exports become a bigger share of the national income.

Secondly, the GNI PPP per Capita in USD is the GNI converted to national dollars using purchasing

power parity rates. It is a suitable criterion to determine whether there is sufficient capital available in the

emerging market you are about to enter. Nevertheless there are many ways to measure the size and

performance of an economy, including the growth or contraction of exchange rates and the inflation

rate of a country. Many governments have a target for a low but positive rate of inflation: a high inflation

could have damaging economic and social consequences, such as a tough financial situation for

businesses. Aside from factors as the GNI PPP and inflation, the exchange rate is one of the most

important determinants of a country’s relative level of economic health which, in turn, is important in

determining whether it is an interesting market or not.


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The last criteria chosen is the size of the population. This is in fact equal to the size of the market and

thus potential buyers of the Sony Products. The smaller the population, the smaller the new market is.

Rough Scan: the elaboration

This section summarizes the findings from the second phase of the Country Selection Model, the Rough

Scan. Full data from the study and a complete overview per country can be found in Annex VII “Rough

Scan: full data” on page 113. This section predominantly includes interesting facts and figures plus

supporting graphs and tables. As explained previously, the final ranking is calculated according to thescores given in the Country Selection Model.

Political Stability Index

Countries that are rated lowest (level two) are Belarus (29%), Russia (26%) and Turkey (38%). Countries

– such as dropped out countries Iran and Iraq – would be assessed on level one because these countries

are in state of war. Since we are just looking for a new emerging market, it was expected that none of the

countries would receive the highest score (level five). This is the case for among others Japan, Sweden

and the USA. The highest scoring countries are Uruguay (70%), Poland (76%), Hungary (74%) and

Malaysia (71%).

Trade relations

Earlier in this chapter is explained that a good relationship between countries entails meaningful mutual

benefits. The only country that is assessed on level one is Russia. The countries haven’t been able to

sign a peace treaty after WWII due to the Kuril Islands dispute. As of 2015 matters remain unsolved and

these disputes have effectively soured relations between the two countries. This allows us to say that

Russia is by definition not a suitable new market for expansion.

On the other hand, some countries have a very tight relationship. For instance, Japan has a very strong

relationship with Brazil and Mexico. The relationship between Japan and Brazil goes back to 1895

when the first diplomatic relations were established. More Japanese immigrants are found in Brazil thanin any other country, which is in favour of Sony. This enables a Japanese brand to be more easily

accepted. Sony has also sponsored several major events in Brazil, causing that the estimated brand

recognition will be high. The Free Trade Agreement between Japan and Mexico is in favour of this

country. Since then the trade between the two nations increased dramatically up to $20 billion USD.

Gross National Income, Purchasing Power Parity per capita in USD

Basically all the countries scored three or higher out of five. This means a minimum GNI PPP per capita

of $10.001 per citizen. This reflects to the level of welfare in a country. The two lowest scoring countries

are China with only $11.850 and Brazil with $14.750 GNI PPP per capita in USD. Highest scoring

countries are Malaysia with $22.530, Hungary with $22.800, Russia with $23.190 and Poland with

$22.790 GNI PPP per capita in USD.

Inflation rate

Practically each country left over in this part of the Country Selection Model scores a four or five out of

five. Only Belarus is ranked on level three with dramatically high inflation rate of 18,10%. Such a high

inflation rate has as a damaging economic and social effect on the economy. In contrast, some countries

stand out positively, including Mexico with 4%, Poland with 0%, Hungary with minus 0,20%, China with

2% and Malaysia with 3,10%. Only the inflation rate of Hungary should be monitored. Whether it further

decreases or remains negative for a long time, it is also not favourable for the economy. In that case

Hungary’s score would drop dramatically with minus 0,80. In that case the he country would drop three

spots to the ninth place.


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Size of the population

The size of the population actually represents the potential market. Therefore, the larger the potential

market, the greater the chances of success in the market. Countries with a relatively small population

and which are therewith negatively evaluated are Uruguay with 3,34 million, Belarus with 9,58 million

and Hungary with 9,89 million residents. The biggest potentials markets that have been assessed with

the highest score is – what else – China with 1 billion 367 million inhabitants and Brazil with 204,25

million citizens. These two countries are – based on the size of the population – the most interesting new

markets to entry.

Exports in million USD

Despite this is the least influential factor in the Rough Scan, export is important to estimate the extent in

which countries trade with other countries. Countries, which score lowest, are Uruguay with only an

actual amount of $10,38 million USD yearly and Belarus with $35,74 million USD yearly. The third lowest

performing country within this filter criterion is Hungary with $100 million. This is already a clear

difference with the aforementioned countries. Countries that export a high amount of products every

year have been rewarded with the highest score. These countries are China by as much as $2 billion and

$343 million and Russia with $497,8 million.

Replenishment

An important caveat here is that this is the total amount and the size of the population of that country

hasn’t taken into account. A simple calculation took place: the total amount of export divided by the size

of the population. How much USD per citizen is exported every year? This calculation is only shown in

the Excel overview of the Country Selection Model and is not used as selection criterion in the model

because all calculations were already made. Luckily this factor is not heavily counted.

It is striking that after these calculations were done, Hungary – which originally placed second lowest of

the three, now becomes first with $10.103 USD per resident. Malaysia, which was assessed moderately,

now scores on the second place with $7.370 USD per resident. On the other hand, number one scoringcountry China turns out to be not that special because the export for only $1.713 per citizen. In this

calculation, Brazil scores lowest with only $1.100 per inhabitant.

Again, this calculation is therefore not included in the final assessment in the Country Selection Model. It

will only be kept in mind when there must be made a definite choice for the new export market.

Exchange rates yearly in percentages

Seen the fact that exchange rates play a vital role in country’s level of trade – which is critical to almost

every free market economy in the world – exchange rates are among the most watched, analysed and

governmentally manipulated economic measures. Volatile exchange rates (which changes dramatically

in the previous year) can have a serious impact on operating profit. In general we can say that the more

stable the exchange rate, the better it is for profitability. The highest scoring country of all ten is China

with a discrepancy of only 5,2%. Belarus, with a whopping exchange rate volatility of 67%, scored as

only country a score of one out of five. Brazil with also high exchange rate volatility scored three out of

five, with 44,1%. Every other country scores four out of five, so moderately good with an exchange rate

between 15 and 30%.

Rough Scan: “to proceed or not to proceed”

The last section of this chapter focuses on the conclusion of the rough scan. The complete rough scan in

Excel format can be found in Annex VIII “Rough Scan Excel” on page 119.


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The table on the next page shows the total scores in the Rough Scan of the country selection model. As

stated in the legend, each colour stands for a separate filter criteria. The size of this area reflects the

degree of impact on the final score. The rods also show the individual scores for each criterion in each

country. This table can also be found in Annex IX “Overall rankings Rough Scan” on page 120.

The four highest-scores nations go through to the final stage: the detailed survey. This partition is also

shown in the table above. The most decisive factors for this survey have to do with the following points:

1. China

With a tremendously large population of 1 billion and 367 million people this is one of the largest

countries in the world. Despite that this country exports for over $2 billion $343 million of

products every year, this means only $1.713 per resident of China. This country has also a

relatively low GNI PPP per capita in USD, in fact its solely $11.850 per citizen. Something, which is

in favour for this country, is the very low inflation rate of 2%.

2. Mexico

A high-performing country, with no particular remarks: Mexico. Something very positive has been

the age-old strong relationship with Japan and the low inflation rate of 4%.


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3. Brazil

A country that seems very promising at first sight. Nevertheless the Gross National Income,

Purchasing Power Parity is only $14.750 per resident and the country exports for only $1100 per

person. Although the population size of Brazil is in favour of the country, this country suffers from

an extremely high exchange rate volatility of 44,1%.

4. Malaysia

For the second time in a row the country with only positive remarks. The political stability isassessed with 71% and the GNI PPP per Capita is very high, with $22.530. This is the highest

amount of all surveyed countries in Asia. Another fact which is in favour of the country is the low

inflation rate of only 3,1%. Despite that Malaysia scores average on the country selection model

when it comes to export, we must keep in mind that Malaysia exports for more than five times

more than China in USD every year! Malaysia exports for $10.103 per resident every year to other

countries in comparison to China, which exports for only $1.713.

When this calculation was used in the calculation, China’s score would drop with minus 0,20 up

to 3,90 and Malaysia’s score would increase with 0,20 to a final score of 4,05. Actually it means

that both countries would change places in the ranking.

Based on these scores the following top four with accompanying final score is created:


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4DETAILED

SURVEY


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4. DETAILED SURVEY

The final phase of the Country Selection Model is the detailed survey. This phase elaborates on the

remaining four countries: Malaysia, Brazil, China and Mexico. For an explanation of the Country

Selection Model, please read the first paragraph of chapter two on page 23. In this section the above-

mentioned countries are subjected to in-depth research. In order to reach a final recommendation, a

MABA analysis based on the Country Selection Model and a DESTEP analysis took place. In addition tothis the culture within the country is also surveyed, with help of – inter alia – the Six Dimensions Model of

Geert Hofstede. The

4.1 The Detailed Survey

Detailed Survey: the criteria

This is the fist step in order to determine the

most interesting emerging market for Sony

Corporation. In this phase, the remaining

countries – as in previous stages – are subject to

the below mentioned research criteria. For

every criterion the country will be assessed with

a score, and this score multiplied with the

weight creates the final rating. The detailed

elaboration of the criteria can be found in

Annex X “Detailed Survey: the criteria” on page

121. In this paragraph a short description and

motivation of the chosen filter criteria:

• Consumption & Demand (weight 0,15)

• Revenue Growth (weight 0,15)

• Market Penetration (weight 0,20)

• Average Revenue Per User (weight 0,05)

• Intensity of Competition (weight 0,15)

• Trade Promotions (weight 0,15)

• Environmental Performance Index

(weight 0,15)

Consumption is normally the largest GDP

component. Therefore, many persons judge theeconomic performance of the country mainly in

terms of consumption levels and dynamics.

Consumer electronics are durable and luxury

goods – it can be used for many years and it is

an essential part of people’s lives. Quite bluntly:

if there is no demand for Sony’s products, the

profit will also be forthcoming. This is therefore

an essential component to study.

A crucial aspect in this in the growth of the consumer electronics market as this shows that the market ismoving in a positive sense. Another thing to keep in mind is the market penetration within the consumer

electronics market. The lower the market penetration, in combination with a

high market growth, the better. Market growth may involve an increasing


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demand with the current buyers, but this might also indicate a new group of potential customers coming

around. A presently low market penetration means a high market potential. Another instrument to

measure the economy is the Average Revenue growth rate per Paying User (ARPU) per year. The higher

the ARPU, the more interesting the market is for Sony.

Secondly we take a look at the competitiveness of a country with help of The Global Competitive Index.

The more competitive a country, the more likely it is that the economy will grow faster over time. Return

on investment is one of the key factors explaining the economy’s growth potential.

Thirdly, we look again at the trade relationship between the two countries, only now specifically whether

there are agreements to facilitate mutual trade. Think for example of a Free Trade Agreement. An FTA

not only promotes bilateral trade, it also ensures that the profit margin is optimized because there are

no taxes to be paid. When entering a new market it will take a while before one can speak of a profitable

market.

Lastly a criterion, which is very important for Sony Corporation: environmental awareness. Sony

recognizes the importance of preserving the natural environment that sustains all life on the earth for

future generations and thereby ensuring that all humanity can attain a healthy an enriched life. To thisend, it is essential that the new emerging market for Sony Corporation attaches great importance to the

environment. The Environmental Performance Index (EPI) ranks how well countries perform on high-

priority environmental issues in two broad policy areas: protection of human health from environmental

harm and protection of ecosystems. This is therefore a decisive factor on what countries should achieve

the highest ranking. In other words: a minimum EPI rating of 51 and higher.

Detailed Scan: the elaboration

This section summarizes the findings from the third and final phase of the Country Selection Model, the

Detailed Survey. Full data from the study and a complete overview per country can be found in Annex XI

“Detailed Survey: full data” on page 124. This section predominantly includes interesting facts andfigures plus supporting graphs and tables. As explained previously, the final ranking is calculated

according to the scores given in the Country Selection Model. Since this is the last stage of the model

and there are only four countries left, each country will be discussed at every criterion.

Consumption & Demand

The lowest ranking country is Brazil, ranked on level two. The Brazilian economy is significantly

declining and the level of prosperity suffers on the economic downturn. Due to high supply and low

product demand, manufacturers were even more reliant than usual on seasonal sales periods/dates

such as Christmas and Black Friday. Given the depth of the economic recession in 2015, it is expected

that the demand for consumer electronics will remain weak in 2016 and following years. Even though

Brazil has the 7th largest economy in the world and it is a BRIC country, we must conclude that Brazil isn’t

an interesting emerging market for Sony.

Mexico has struggled with the fast rising exchange rate between the Mexican peso and the US dollar.

There is a large gap between low-income and high-income households in Mexico. High-income

households are the key purchasers of high-end products, continuing to acquire consumer electronics,

while low-income households are being negatively affected by rising prices of imported products. This

disparity in income also results in a clear view of the distinct group of potential customers: the high-

income households. Additionally the Mexican government is supporting low-income families to

transition to digital TV. Multinational companies have turned to Latin America, and more and more to

Mexico, in search of strong opportunities to expand their businesses.


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The Chinese economy grew, but slowed down in 2015 in comparison to 2014. Overall consumer

electronics continued to grown, especially in new categories of wearable electronics and OLED TVs due

to their innovation and smart functions. The sales of more traditional devices on the other hand suffered

declines. Domestic manufacturers accounted for increasing shares of consumer electronics due to

improved technology and growing brand reputation. However, traditional brands gain ground and are

more frequently purchased than the non-domestic brands such as Sony.

The best performing country is Malaysia, which is ranked on the highest level. In recent years thedemand for consumer electronics products has displayed a robust growth aided by the rising

disposable income amongst consumers. ‘Smart’ Consumer electronics become more important in

consumers’ life. There is an apparent shift of preferences towards tablets and other portable computers,

as evidenced in the number of households that own one or more laptops/tablets instead of sharing a

desktop. The core drivers in the volume growth over the forecast period will be the demand from first-

time buyers, largely from rural areas, and the population growth in the country. Meanwhile, existing

consumers are likely to purchase additional consumer electronics with their growing sophistication in

heir preferences and rising disposable income.

Revenue GrowthThe lowest performing country when in comes to the revenue growth is – again – Brazil. The growth rate

in the consumer electronics market is only 8,4%. Malaysia is ranked on level four with a growth rate of

25,3% and China is ranked on the same level with a revenue growth of 27,3%. The difference between

these two countries and the best performing country in this category is even not that big. The highest

scoring country in this case is Mexico with the revenue growth of 28,2%.

Market Penetration

With a low market growth and a relatively high (the highest of the four remaining countries) market

penetration Brazil also scores the worst. It is ranked on level three. The three tolerably good scoring

countries on the category revenue growth, also have a lower market penetration. China is also rankedon level three with a market penetration of 13,6%. Mexico has the highest market growth, but a higher

penetration than Malaysia with 11,6%. It is ranked on level four. The market penetration of consumer

electronics in Malaysia is 8,1%. This fact in combination with the market growth makes that Malaysia is

determined the most interesting country.

Average Revenue Per User

The higher the Average Revenue Per User (ARPU) is, the more interesting the country is for Sony

Corporation. Malaysia with an ARPU of $149,95 and Brazil with an ARPU of $155,79 score lowest this

time: both level two. Mexico is assessed on level four with the Average Revenue per Paying User (ARPU)

or $180,98. China scores highest – level five – with an ARPU of $197,65. This means that Chinese citizen

spend the most on consumer electronics of all four remained emerging markets.

Intensity of Competition

The intensity of competition in the four remaining emerging markets is almost identical. Mexico (4,27),

Mexico (4,34) and China (4,89) are all assessed on level four. After all, they all have a score below five

on a scale from one to seven of the Global Competitiveness Index. Malaysia received the highest

evaluation with 5,16 on a scale of seven.

Trade Promotions

A Free Trade Agreement (FTA) or an Economic Partnership Agreement (EPA) results in a higher profit

margin for Sony Corporation. Brazil is the only country with no negotiations

going on or agreements with Japan. Due to the strong relationship with Japan,


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this country is assessed with score two. China does a little bit better: since a couple of years there are

negotiations going on. However, Mexico and Malaysia are both doing better because both countries

have a FTA and an EPA with Japan.

Environmental Performance Index

In the first paragraph of this section, when explaining the criteria, we already stressed that the

environmental awareness of the country is essential. Sony doesn’t prefer a country that doesn’t have this

subject high on its agenda. In other words a country must have a minimum Environmental PerformanceIndex of 51 and higher. In this case, this means that China alone cannot fulfil this condition. China

therefore drops out as a potential candidate for market expansion. The other three countries, Mexico,

Brazil and Malaysia are all scoring higher than 51. Brazil scores 52,97 out of hundred, Mexico scores

55,03 out of hundred and Malaysia scores highest with 59,31 out of hundred.

Detailed Survey: “to proceed or not to proceed”

The last section of this chapter focuses on the conclusion of the detailed survey. The complete detailed

survey in Excel format can be found in Annex XII “Detailed Survey Excel” on page 130.

The table on the next page shows the total scores in the Rough Scan of the country selection model. Asstated in the legend, each colour stands for a separate filter criteria. The size of this area reflects the

degree of impact on the final score. The rods also show the individual scores for each criterion in each

country.


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In fact, all four counts form an interesting market for Sony Corporation. However, there are two countries

that fall of due to two different reasons. China didn’t make it due to the low score on the Environmental

Performance Index of only 43 and Brazil didn’t make it in connection with the poor economic conditions

and the low demand for the products. China ended last with a third score of 3,15 and Brazil ended last

with a score of 3,00 in the Country Selection Model.

During the comparison it is proved that Mexico and Sony are both interesting markets for Sony

Corporation. Malaysia has clearly the lead-position with the final score of 4,30 in the detailed survey.Mexico follows with a respectable score of 3,95. Based on the detailed survey we would recommend

Malaysia as the new interesting market. In the next chapters all four countries will be elaborated with a

DESTEP analysis, MABA analysis and elaboration of the 6D-Model of Geert Hofstede.


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5MALAYSIA


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5. MALAYSIA

This chapter provides an in-depth analysis of the country Malaysia. In this section we will look more

closely at the macro-economic factors of Malaysia through a DESTEP analysis. Also you’ll find in this

chapter more information about the Malaysian culture with amongst others the Six Dimensions Model of

Geert Hofstede. Last but not least the business attractiveness versus the market attractiveness is

examined in the MABA analysis.

5.1 DESTEP

The company is not alone in doing business. It is surrounds by and operates in a larger context. In this

case the delineation is the country Malaysia. To gain insight in the macro environment of the potential

market, the following six forces are surveyed: Demographic, Economic, Socio-Cultural, Technological,

Environmental and Political. The results of which will be summarized in this chapter. The complete

DESTEP analysis can be found in Annex XIII: “DESTEP Malaysia” on page 131.

Demographics - In July 2015 Malaysia counted more than 30,5 million citizens.

The two most represented groups within the population are 15-24 years with

16,91% (circa 5,16 million people) and 25-54 years with 41,12% (circa 12,55

million people). The number of men versus women is equally spread. The most

common ethnicities in the country are Malay and Chinese.

Economics - Malaysia, a middle-income country, has transformed itself since the

1970s form a producer of raw materials into an emerging multi-sector economy. It

is attempting to achieve high-income status by 2020 and to move farther up the

value-added production chain by attracting investments in amongst others high

technology industries and services. Current Prime Minister NAJIB is working on

the Economic Transformation Program (ETP) to boost product demand and

reduce the economy’s dependence on exports. Gross exports of goods and

services constitute more than 80% of the GDP.

Malaysia’s GDP PPP per capita in international dollars quintupled from circa $5000

in 1990 to $25.100 in 2015. At this moment the Malaysian economy’s development

is in transition from stage two “efficiency driven” to stage three “innovation driven”.

The economy performed together with two other emerging markets the highest

from the twenty largest emerging economies. The Philippines, Russia and Malaysia

recorded all a higher than 100 value of the Global Innovation Index.

Japan and Malaysia have a very strong relationship, which goes back to the 15 th

century. Malaysia has also an Free Trade Agreement and Economic Partnership

Agreement with Malaysia, which means that there are no import duties to be paid

when importing to each other countries.

There is a growing demand for consumer electronics in Malaysia. As the economy

grows, so does the demand for luxury items too.


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The overall infrastructure of Malaysia is one of the most developed countries in

Asia and the country is ranked 8th in Asia and 25th in the world. Also their

transportation network is one of the most comprehensive in Asia and covers a total

of 144,403 kilometres. They have a well-organized public transport system and

118 airports. The country is strategically located on the most important shipping

lanes in the world. Malaysia has two ports that are listed in the top 20 busiest ports

in the world.

More interesting facts about the Malaysian economy:

• A relatively low inflation rate of 3,10%.

• A somewhat strong exchange rate of 23,20%: this means that $1 USD is

worth $4,40 Malaysian Dollar at a particularly moment.

• The GDP official exchange rate is $326,93 billion in 2014, representing 0,53

per cent of the worlds economy.

• Gross National Income (GNI) per capita is $22.530.

• Malaysia exports for $224.900 billion every year.

• The market size for consumer electronics is $252,90 million USD. This

market is in 2015 grown with 25,3%.• The market potential in 2020 for consumer electronics is $512 million USD.

The corresponding growth rate for market potential in 2020 is 202,45%.

• The Compound Annual Growth Rate for 2014-2020 is 8,5%.

• The Average Revenue per Paying User per year in 2015 is $149,95 USD.

• The Intensity of the Competition on a scale of seven is 5,16.

• In Malaysia there are 1,86 million users of consumer electronics. The

Penetration in the Malaysian market is 8,10%.

Social & Cultural – Malaysia is a multi-cultural society. The Malay language is an

Austronesian language spoken not only by Malaysians but all Malay people whoreside in the Malay Peninsula, southern Thailand, the Philippines and more. The

main ethnic groups are the native Malays as well as large populations of Chinese

and Indians. When visiting the country it is clear that the ethnicities retain their

religions, customs and way of life. The most important festivals of each group are

public holidays, which makes Malaysia the country with the most public holidays in

the world. The country is predominantly Islamic in its religion but it’s only the

Malay Muslims who are bound by Islamic laws. The rest of the population is free to

practise their own religions.

Family is considered the centre of the social structure. As a result there is a great

emphasis on unity, loyalty and respect for the elderly. The family is the place where

individuals can be guaranteed both emotional and financial support. Malays,

Chinese and Indians all strive to maintain face and avoid shame both in public and

private. Face is a personal concept that embraces qualities such as a good name,

good character, and being held in esteem by one’s peers. The desire to maintain

face makes Malaysians strive for harmonious relationships. Face can be lost by

openly criticizing, insulting, or putting someone on the spot; doing is done in

public; showing anger at another person; refusing a request; not keeping a

promise or disagreeing with someone in publicity.


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Popular media reinforce the idea of consumerism as a lifestyle and carry the

advertising meant to draw consumers to products and services. Rising freedom

gives people more economic and social room to engage in consumer lifestyle. At

the same time, the new choices available in consumerist societies let people

express their social freedom as they buy products that help define and

differentiate them from their fellow citizens.

Technological – Although IT is now well and truly a global industry, eachindividual region and country reacts to international influences in its own way. One

of the most notable trends that Malaysian businesses are focusing on is the

Internet of Things (IoT), which, according to Cisco, involves connecting people and

devices at a level that previous generations would have considered impossible.

This allows for more mobile workforce, with a staff no longer restrained by their

physical workstation. High-speed Internet, a reliable cloud-computing service and

the newest technologies are essential to make this work.

Information technology – primarily the Internet – has become increasingly

important to consumerism in recent years. Think of E-commerce, collaborativefiltering, eBay and product research as a few of the innovations.

The number of people buying smartphones has increased to 7.8 million in January

2013. Broadband penetration in Malaysia increased from 55,6% in 2010 to 66% in

2012.

Ecological & Environmental - Malaysia is ranked pretty well on the Environmental

Performance Index with their score of 59,31 out of 100. Nevertheless this still

means there is a lot of room for improvement. At this time, Malaysia suffers from air

pollution from industrial and vehicular emissions, water pollution from raw sewage,deforestation and smoke/haze from Indonesian forest fires. This last point is also

for Malaysia difficult to influence.

Malaysia is a relatively safe country. The World Risk Index has assessed Malaysia

with 6,44% risk of becoming victim of a natural hazard.

Political & Legal – Malaysia is the only federation in Southeast Asia. The system of

government is closely modelled on that of the Westminster parliamentary system,

a legacy of British colonial rule. The head of the country is referred to as the King.

The Political Stability Index is assessing Malaysia with 71% political stability. The

country is multi-ethnic and multi-cultural, which plays a large role in politics. The

constitution declares Islam the state religion while allowing freedom of religion to

non-Muslims.

Since 2004 Malaysia and Japan have a Free Trade Agreement and Economic

Partnership Agreement. This means no import duties must be paid when

importing to each other countries.

The Malaysian Government is the driver in the consumption trend. It is focussing

on green growth and high level of prosperity.


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5.2 Six Dimensions Model

Professor Geert Hofstede conducted one of the most comprehensive studies of how values in the

workplace are influences by culture. He defines culture as “the collective programming of the mind

distinguishing the members of one group or category of people from others”. The six dimensions of

national culture are based on extensive research. The model consists of the following dimensions:

• Power Distance Index (PDI)

• Individualism versus Collectivism (IDV) • Masculinity versus Femininity (MAS)

• Uncertainty Avoidance Index (UAI)

• Long Term Orientation versus Short Term Normative Orientation (LTO)

• Indulgence versus Restraint (IND)

For a complete overview of the Six Dimensions model for Malaysia, I would like to refer to Annex XVII “6D

Model & Country specified cultural habits” starting on page 170. This last part won’t be a part of this

chapter and is only added to provide more insight into the business culture of the country.

Malaysia’s Six Dimensions

If we explore the Malaysian culture through the

lens of the 6-D Model of Geert Hofstede, we can

get a good overview of the deep drivers of

Malaysian culture relative to other world cultures.

Power Distance (100)

This dimension deals with the fact that all

individuals in societies are not equal – it

expresses the attitude of the culture towards

these inequalities amongst us. Malaysia scores

very high on this dimension (score of 100) which

means that people accept a hierarchical order in

which everybody has a place and which needs to

further justification. Hierarchy in an organisation

is seen as reflecting inherent inequalities,

centralization is popular, subordinates expect to

be told what to do and the ideal boss is a

benevolent autocrat. Challenges to the

leadership are not received well.

Individualism (26)

The fundamental issue addresses by this dimension is the degree of interdependence a society

maintains among its members. Malaysia, with a score of 26 is a collectivistic society. This is manifest in a

close long-term commitment to the “member” group, be that a family, extended family of extended

relationships. Loyalty in a collectivist culture is paramount and overrides most other societal rules and

regulations. Such a society fosters strong relationships, where everyone takes responsibility for fellow

members of their group. In collectivistic societies, offence leads to shame and loss of face.

Employer/employee relationships are perceived in moral terms (like a family link); hiring and promotion

take account of the employee’s in-group. Management is the m

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