IN THIS ISSUE

tomorrow’sleaders todaythe top 5 graduates in the industry

fall 2013

who are these faces?

the video format war: “betamax vs VHS”to CD or not to CD?socio-political legitimacy explained

(“europestar”, 2013)

(“ebay”, 2013)

The Video Format War: “Betamax VS VHS:

PSPSony Company Magazine, Fall 2013

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Cognitive and Socio-political legitimacy explained

To CD or not to CD? A joint venture with Philips

Feature:Top 5 graduates in today’s industry

Sony CSR:Introducing Malawi Folktales Project

SONYcompanymagazine

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10References

(“betamax vs VHS”, 2013)

(“top 10”, 2013)

(“the petronas towers”, 2013)

(“pioneer 90.1”, 2013)

(“sony global”, 2013)

(“betamax vs VHS”, 2013)

The Video Format War: “Betamax VS VHS”Based on the Resource Dependence Theory, identify the relevant types of interdependencies in the ‘Video Format War’. Did Sony adequately anticipate and manage them?

Organisations rely on strategic management of their relations with other companies for success; this is referred to as interdependence (Pfeffer & Nowak, 1976). A symbiotic interdependence occurs between unlike organisations which do not compete in the same market (Hawley, 1950), and competitive interdependencies are between competitors. In the early market for video cassette recorders (VCRs), manufacturers relied on Hollywood producers for content rights. Sony did not adequately anticipate its dependence on the motion picture industry which resulted in heavy resistance, litigations, and a lack of content (Quintane and Mol, 2007).

In contrast, JVC’s agreements with Hollywood granted them sufficient content. Their strategy fit Selznick’s (1949) definition of ‘co-optation’, where outsiders are given control or power due to their ability to threaten organisational goals (Scott & Marshall, 2009). There was a symbiotic interdependence between JVC and Hollywood, relying on one another for content and extra revenue respectively. Sony experienced a competitive interdependency with JVC and competed for customers as well as content from Hollywood. Sony did not adequately anticipate its interdependence on other VCR manufacturers sharing its VCR format. Castro (1988) noted that

Sony kept its Beta technology to itself while JVC shared its ‘secret’ with other firms, increasing its chances of becoming a standard.

Kale & Singh (2009) define a strategic alliance as a relationship between independent firms that involves the “exchange, sharing, or co-development of resources or capabilities” for mutually relevant benefits (p. 46). Philips attempted to reap these benefits with their collaboration, although the lack of buy-in from content creators made them inadequate against JVC’s VHS. In the ‘war’, there was a contingency that resources would be wasted on VCRs which wouldn’t survive. Ranganathan and Lertpittayapoom (2002) identified uncertainty reduction as a motive for strategic alliances. If Sony and JVC formed a strategic alliance, both parties could have reduced their risk of wasting resources on a product that would not become the industry standard.

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As the permanent and unfixable downsides of the then industry standard vinyl came to be known, Sony and Philips saw an opportunity to develop a completely new product to record sound. According to Pfeiffer & Salancik (1976), strategic alliances are implemented to solidify the movement of resources and decrease the environmental risk faced by a company. On their own the resources of Sony and Philips were incapable of creating such a product and subsequently formed a strategic alliance (Quintane and Mol, 2007). Each respective company had their own strengths. Philips had made further developments in areas such as EFM allowing for extended playing time and a higher resistance to damage (Quintane and Mol, 2007). Sony had made advancements in other areas such as CIRC which improved the overall precision of laser reading technology (Quintane and Mol, 2007). The Kale & Singh (2009) definition of a strategic alliance in the previous

to cd or not to cd?a joint venture with PhilipsBased on the Resource Dependence Theory, identify the relevant types of interdependencies in the creation of the Compact Disc. Did Sony adequately anticipate and manage them?

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(“top 10”, 2013)

question highlights “mutually relevant benefits” for both parties to partake in the venture (p. 46). However Sony and Philips did not absolve themselves of risk by entering a strategic alliance. Research conducted by Vaidya (2011) shows such alliances are “unstable” and “prone to failure” (p. 90). This is due to a focus solely on the expected rewards and not taking into consideration the associated costs of forming and maintaining the venture (Vaidya, 2011). This was not the case for Sony and Philips who successfully combined their technological expertise and created the compact disc which eventually become the industry standard (Quintane and Mol, 2007). The “post formation phase” hypothesised by Schreiner, Kale & Corsten (2009) is the final integral aspect of a strategic alliance which dictates its ongoing goal to provide a sustainable value proposition into the future. The Sony Philips alliance proved this was their focus as the alliance brought in millions of dollars over a number of years. In the ways analysed it is clear Sony adequately anticipated and managed the associated risks and costs of their strategic

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(“ebayimg”, 2013)

Cognitive and Socio-Political legitimacy - explained. Explain the importance of cognitive and socio-political legitimacy for new products in relation to the Resource Dependence Theory. Explain for both cases – the video format war and the CD - whether or not Sony

The innovation of Betamax and CD by Sony was considered as first mover advantages as they had set industry standards for their technical superiority. This has created environmental dynamism for Sony at the organizational level whereby Sony is expected to achieve legitimacy with minimal resources provided by suppliers(Jones, 2013).

At the within-population level, Sony collaborates with other electronics companies. Sony has achieved this by adopting a formal symbiotic interdependency strategy, such as entering into a strategic alliance with Philips.

Sony had to face competitions from

electronics industry and other industries. This has created a need for Sony to distinguish itself by creating alliances and competing at the same time at the between-population level to foster competitive interdependencies. Betamax was not successful due to Sony’s failure in competing against JVC, and its copyright infringement with the motion picture industry (Quintane & Mol, 2007).

In general, different types of technology being invented brings convenience towards the general public. Sony will have to collaborate with different industries to achieve certain outcomes, specifically in generating resources for the public which is integral for the electronics industry.

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Level of analysis Example Cognitive Strategy Sociopolitical Strategy

Organisational Sony Sony needs to understand its organisational routine on creating Betamax and CD

Sony needs to get potential consumers to understand its new technology

Sony needs to manage its status

Seek cooperation from dominant selectors such as research bodies

Establish Sony’s brand Within-population Sony and other

electronics companies Setting industry standard for

other electronics companies Engage with relevant

selectors to boost Sony’s status

Seek for quality assurance as a technical superior

Collective action with other electronics companies

Between-population Electronics companies vs. other substitutes

Create a market position against other substitutes such as other forms of technological innovations

Engage with relevant selectors by stressing mutual benefit between selectors and industry especially with other electronics companies

Collaborate with other electronics companies as allies against other substitutes who are competitors of electronics companies

Community Community in general Seek synergies of technology advancement in the society

Emphasise on the importance of technology

Create optimal infrastructure with technological creators

For Sony, it is crucial to develop legitimacy with resources using cognitive strategies and socio-political strategies in relation to Resource Dependence Theory (Aldrich, 1999; Jones, 2013). This can be analysed through four different levels of legitimacy where Sony has effectively dealt with garnering legitimacy for CD but has failed to do so for Betamax.

Table 1 Adapted from Aldrich (1999)

Reference List Word Count: 1073

Administrative Science Quarterly, 21, 398-418.

Aldrich, H. (1999). Organizations & Social Change (Chapter 9). Organizations Evolving.

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Castro, J. (1988). Goodbye Beta: Sony will make VHS players. Time Magazine. 131(4).

Ebay, 2013, retrieved from http://cgi.ebay.com.au/ws/eBayISAPI.dll?VISuperSize&item=221010061003

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Hawley, A. (1950). Human Ecology. New York: Ronald Press.

Jones, G. (2013). Organisational Theory, Design and Change, 7th ed., Harlow, U.K.: Pearson.

Kale, P., & Singh, H. (2009). Managing strategic alliances: what do we know now, and where do we go from here. The Academy of Management Perspectives, 23(3), 45-62.

Mol, J., & Quintane, E. (2007). Competition or collaboration? Betamax and the Compact Disc. Teaching Case, Department of Management & Marketing, University of Melbourne.

Pfeffer, J., & Nowak, P. (1976). Joint ventures and interorganizational interdependence.

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Pfeffer, J., and Salancik, G. (1978). The External Control of Organizations: A Resource Perspective. New York: Harper & Row cited in Varadarajan, P. Rajan, and Cunningham, Margaret H. (1995). Strategic Alliances: A Synthesis of Conceptual Foundations, Journal of the Academy of Marketing Science, 23, 282-296.

Pioneer 90.1, 2013, retrieved from http://www.radionorthland.org/wp-content/uploads/2012/10/Library-Books.jpg

Ranganathan, C., & Lertpittayapoom, N. (2002). Towards a conceptual framework for understanding strategic alliance in E-commerce. Proceedings of the 35th Hawaii International Conference on System Sciences. Computer Society, Hawaii.

Schreiner, M., Kale, P., & Corsten, D. (2009). What really is alliance management capability and how does it im- pact alliance outcomes and success? Strategic Management Journal, forthcoming.

Scott, J., & Marshall G. (2009). A dictionary of sociology. Oxford: Oxford University Press.

Selznick, P. (1949). TVA and the grassroots. New York: Harper and Row.

Sony Global, 2013, retrieved from http://www.sony.net/SonyInfo/csr/ForTheNextGeneration/malawi/8ido18000002udmp-img/8ido18000002uds1.jpg

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Vaidya, S. (2011). Understanding Strategic Alliances: An Integrated Framework, Journal Of Management Policy & Practice, 12 (6), 90-100.

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