Sony is a worldwide renowned corporation for the sale of electronics such as televisions, cameras and play stations group of gaming gargets. The corporation has well established technology giving it a good reputation worldwide. The success of the corporation is pegged on some factors such as its success in outsourcing of both employees and other business support services. Indeed, globalization of the corporation as well as outsourcing are the main strategies of the firm from the CEO, Howard’s decision to cut down the sum costs of operations on electronics manufacturing. Various theories have been put forward to describe firms with regard to their daily operations. Certain theories elucidate the way firms operate. They own them as well as the manner in which they are administered (Contractor 2005.).
The core competence of Sony Corporation is that it is a leading manufacturer of electronics. It provides the products for consumers as well as professional markets. Sony Corporation was founded in 1946 by Masaru Ibuka. He was later joined by Akio Morita. Sony Corporation’s Headquarters are in Tokyo, Japan. One of its revolutionary products is the transistor radio. Sony employs 168,000 people worldwide and operates in many countries worldwide. However, Sony has had its own bunch of challenges (Kindleberger 2009). For instance, in 2005, it had a managerial problem. CEO in charge, in 2005, Sir Howard Stringer, led to the closure of eleven plants and then decided to cut more than 10,000 jobs. In addition, he shifted the component industrialization a lower cost positions as the Chair and a Chief Executive Officer of the company. This was as a result of loss of a market share. The intention of Sony Corporation was to decrease the cost of production, as well as a centre on of essential competencies.
Human resource outsourcing at Sony. Sony Company decided to outsource some of its employees for a number of reasons. As described by the Kogut and Zander’s theory of evolution, the company outsourced its employees with two major companies namely: IBM and Hewitt. From the latter theory, the rate of the creation and regional transfer of knowledge is extremely low. One of the main motivator of Sony Company in its quasi-outsourcing strategy is to diversify across and beyond the border. According to Kogut and Zander, the MNEs do no emanate from market failures of human resource transfer across the border. Indeed and as the case of Sony, this comes about due to its credible ability to act as a propagation mechanism of human resource across the border. It is for this reason that Sony decided to outsource its human resource base.
Indeed, the tacit knowledge across the border in the move to transfer production of various commodities in its own subsidiary firms and others faced formidable challenges. Consequently, due to less codifiable and hard aspect of teaching technology, passing over the tacit knowledge, the company made a choice of outsourcing its human resource to overcome the challenge of teaching technology and maximize its profits. Indeed, the transferred combinative aspect of knowledge is the root of evolutionally theory of Multinational Enterprises.
Sony Company embraces the aspects of equality and mutual trust in its business front. For this reason, the company fetch its suppliers from all round and gives every potential supplier equal chances of supplying the company’s raw materials among other needed products. This aspect of fetching suppliers is beneficial to the company in a number of ways: besides giving the company the sole discretion of deciding on the type and class of products it requires, this mode enables the company to have the sole mandate to determine the terms and condition of the supplies. Furthermore, the Company has been in a position to diversify over a larger scope of supplies which has made it possible to acquire the products of choice and regarded quality.
Sony Company through its CEO, Howard, disputed the issue and identified a loophole that made it necessary to outsource both its human capital and other services from within the company. This leads to various awareness foundations and potentials among firms being the main determinants of a persistent aggressive advantage and the superior corporate performance. The company’s decision to outsource some of its human resource in Japan to IBM Japan is an initiative to expand the market for its products besides setting up a collaborative venture of the three with the injection of Manpower Japan Company. This knowledge is embedded and spread through multiple articles counting the managerial culture and distinctiveness, strategies, customs, documents, systems and staff.
One of its tremendous advancement is negotiation of terms and conditions of outsourcing with the Hewitt Company. Hewitt is a strong company with a strong domain of its human resource. Through outsourcing initiative, Sony would attract highly trained and resourceful resource body and therefore increase its productivity as a result. Therefore, this came as a strategy to improve the production capacity of Sony.
Originating from the strategic management literature, this viewpoint builds upon and expands a resource-based view of the firm. The resource-based view of the company also identifies an imperative role of awareness that accomplishes the competitive advantage (Bain 2006). The information expertise plays an imperative function in the knowledge-based analysis of the organization. This is whereby information systems could be used to fabricate, advance, and accelerate the large-scale, intra- and inter-firm knowledge organizations.
Kogut and Zander put across evolutionary theory to which the Sony’s outsourcing
strategy is embedded. According to Kogut and Zander, the main distinction as opposed to the internalization theory was is, if the firm is described by its ability to store technology, tacit knowledge while the expansion of its scope is defined by the level of its knowledge transfer, it is hard to dictate the value of the knowledge in the firm due to existence of uncertainty. Consequently, it proves hard to describe the internal transmission of the firm. As a result, the existence of the firm’s opportunism is useless. Further, prior to this fact, Kogut and Zander misconceived the role played by the internalization partner in the wider market.
In line with this finding, Sony Company entered into a new era of quasi human outsourcing. This company found it necessary to outsource from major partners in order to eliminate the aspect of internalization which was futile in role at the global scene. Indeed, the company’s market size had grossly diminished as a result of a rising completion despite its positive placement in the global market arena. Human resource management of Sony is responsible for negotiation of terms with regard to the human resource of the company.
Evolutionally theory also makes the unwavering critics that the internalization theory aims at minimizing the operational cost without prior determination of the foreign entries and their ability to add value to the already existing capital base of the ‘inferior’ enterprise. Consequently, due to the primary focus on cost minimization other than the competence of the intruding firms outsourced, then, the concept of internalization becomes ineffective in exploring the possibility of a potential firm joining the subsidiary of the firm subject to outsourcing.
Furthermore, the theory indicates that the concept of internalization is ‘overdetermined’. The two argues that the theory over relies on the opportunism and bounded rationality of human behaviour as the key description criteria of explaining global expansions and transfer of technology. However, the latter is not important in the explanation of the global market and production expansive mechanisms. Besides this, the internalization theory focuses and depends on a single concept of a transaction and the technology transfer especially across the border. In practice however, this does not occur as from the transfer decision by the MNE and cannot be practically separated from the larger umbrella of transaction across and within the country boarder.
The value of the company has been defined by Kogut and Zander as a store of comprehension and development of its boundaries. This principle is correlated to the transmission of knowledge, alongside obligatory doubts about the value of this information. These notions are sufficient to elucidate the internal transmission accordingly and the existence of firms. Opportunism is not required in organizations; and this theory puts it off completely (Buckley 2002). Hence, they discover the extensive responsibilities that the opportunistic behaviour by transactional associates in markets plays in some internalization forms. It is not essential but leads to a definite model. Kogut and Zander have upheld that discrepancy costs of transmission of knowledge within the firm versus amid firms provide a sufficient foundation for influencing on the mode of the organization. The MNE uses it in the oversea market (Contractor, 2005).The decisive postulation is that the knowledge transmission is not costless but may be universally good. They make the case implicit with a bit of know-how and tricky. This leads to the posh transmission. This is because the cost of teaching increases the level of competence. Greater density, lower codifiability, and teaching skills are all the forecasters of an alternate of owned auxiliary, as opposed to joint ventures. There is also licensing to shift technology and sovereign the character of transactors (Casson 2002).
The fundamental analysis of the MNE is to evaluate both locations alongside with domestic strategies. Production has several processes that are marked by a series of different activities linked to the transport of resources which are not fully manufactured (Caves 2003). The orthodox theory of location presupposes sturdy returns to scale, as the liberally accessible and consequently standardized technology. Despite the related shortcomings, the Company practices the process of internalization. This process refers to a situation where a firm introduces a manufacturing plant in other country outsourcing both of its inputs and at the same time producing variety to avoid dependency on other firms for supply. In line with Kogut and Zander’s theory, the inception of the outsourcing within the Sony Company was not in any way resulting from a decline in the market share. Instead, the market disequilibrium of the Sony Company declined in the year 2005 due to technical hitches within the company. the company has had a well lied human resource base at the Sony Human Capital Corporation. Consequently, the company wished to diversify and internalize in the foreign countries in order to beef up its technological preview status in 2010. In order to maintain their market supremacy, Sony employs just a small percentage of the outsourced employees to the joint venture signed between the three main partners. In addition, the theory advancement on internalization of the multinational enterprises (MNEs), leads to the fulfilment in the company’s fitful agenda of diversification and development into a worldwide multinational enterprise with roots in the home country.
The company also undertakes various steps towards the achievement of a global outlook through the outsourcing forum and collaboration with other international business groups. In order to beef up its profit generation in the global market, the company made several reinstating of various business front among them being the outsourcing of human resource among other outsourced capital base of the company with IBM of Japan.
The fundamental study shows some inventive manufacturing processes alongside the advanced advertising schemes. Therefore, Sony determines the kind of efforts to be put on the skilled labor as well as its accessibility. As a result, this exercises an important authority based on the domestic policy. There is also an issue of companies largely dealing with some defectively competitive markets (Coase 1999). Thus, MNEs would not be ranked as price controllers in intermediary businesses, but the frequent occurrence in several occasions. Accordingly, the company that majors on input and issue prices in a picky region is liable to ponder the manufacturing activities required in the particular area. Moreover, the judgment of where to set up the MNE is predisposed to the extent of internalization of markets and the specific company to modify the above deliberations.
When the corporation endeavours to exploit profits in the area characterized by flawed markets, there exist frequent incentives to circumvent the flawed markets in transitional goods and services. The tasks formerly linked to the machinery joined under common possession and control in all local markets of the company (Davis 2008). The target consumers are evaluated across public boundaries; the MNEs result from such processes. The profits of internalization arise from the expectancy of scarcity in the exterior market, though costs also play a key role. The optimal size of MNEs is based on where the rates along with the profits of further internalization are being stabilized at the periphery. The joint effects of internalization and set up region lead to an outlay about the distribution of meticulous markets amid local manufacturers as a supplementary of MNEs. The exported products from foreign companies are also outsourced from partner of the leader, Quasi partner. The distribution of exports and domestic services principally hails from money matters of that area. The lower costs of the company are inclined by prevailing diversities and barriers to business. This mainly directs the percentage of the market run by exported products. Nevertheless, this is an adaptation of economics of concentrating the product market in one area. Such a situation is affected in the way that the price sanction of a subsidized location occurs at any stage of defence (Dunning 2003). This also affects the progress of MNEs. This is done consequent to local markets, which are different from peripheral ones as the general business ideologies direct. Therefore, the issue of servicing an ultimate market inextricably goes along the uniqueness and possession of local markets. They are proscribed by market rates as well as the reimbursement of localizing the business.
The company also undertakes various steps towards the achievement of a global outlook through the outsourcing forum and collaboration with other international business groups. In order to beef up its profit generation in the global market, the company made several reinstating of various business fronts among them being the outsourcing of human resource among other outsourced capital base of the company with IBM of Japan.
Moreover, the vertical outsource feature of the company through Quasi-outsourcing has enabled the company to extend its role and mandate to the outside market and gather a share of the main market in the larger perspective of the leading partner, IBM. However, Sony needs to also put into consideration the aspect of internal outsourcing thorough its subsidiary firms in Japan. Above all, the Company strategically plots to split its account operational service and other human resource base in Japan for relocation to IBM, Japan. In this manner, the company focuses in the minimization of operating cost under the current venture in the subcontracting deal of outsourcing.
Sony Company has decentralized its operations so far beyond the home country to fit in the increased competition fragmented global market. The company outsourced its human resource base in order to compete in the world environment sustainably. Indeed, the company outsourced through the external related firm in order to diversify the risk of the business accruing challenges on its behalf. This outsourcing strategy help the company to increase its output outlay without beefing up the investment on more technical staffs besides harnessing local and international clients. For a company to achieve
Internalization is a universal ideology that gives the precincts of MNEs. Moreover, the principle exclusively targets on elucidating where boundaries recline as well as on the process of modifying them as a result of varying conditions. Internalization alone does not clarify other portions of organizations. The advancement in the internalization hypothesis combines a central approach along with other schemes to spawn diverse forecasts on diverse aspects of MNEs. For instance, internalization can be joined with trade theory to enlighten the place where the company should be situated (John 2007). Also, it can be merged with the organization theory to give some details on international joint ventures (IJVs). Internalization is also joined along with the modern hypothesis to expound on how MNE industries operate. It applies to both substantial boundaries of MNEs alongside the margin of the MNEs product variety. The product variety is usually perceived as a separate subject of diversification. The inclinations of entrepreneurship bring out a scrutinized study of cultures expounded by the theories of MNEs.
The process of internalization is associated with familiar operations and intermediary products. These internal operations of companies are typically harmonized by the information flow through the domestic markets of the organization. This is an elementary shift from a neoclassical economic analysis of the company as a universal “black box” dedicated utterly to production. The company’s effort and productivity result from the effortless production rationale. The modern goal of MNEs emphasizes on the interior division of labour linking specialized tasks that entail production and marketing (Dunning 2004). The modern goal of MNEs enables them to control several other branches. For instance, some of their new branches are dealing with certain activities, while others specialize in diverse tasks. The notion behind organizing an internal supply of labour, without considering the technology, gives limits to the margins of MNEs. Technology may perhaps dictate the size of the MNE Company. This may lead to diminishing returns of the same. The executive organization, which decides on the size of the MNE firm, is also affected in the process. These limits mirror both an aggregate extent of output as well as the variety of localities of selling the output, in general.
Since the innovative technologies had diverse global functions, diverse companies were recognized in many dissimilar parts of the world. The MNEs were propagating, in return. MNEs failed to set the companies in all countries though they could open several branches in some of them while neglecting others. The expertise was hard to reassign to few states since their educational structure was poor. Hence, it became tricky to enlist workers with the ability to understand that technology hastily. Additionally, the political jeopardy in the post-colonial civilization subjected industries to nationalization or expropriation.
Evaluating the low-cost aground alternatives as well is another way of solving the arising outsourcing challenges. However, the adoption of vertical partnership with IBM was one of the misinformed decisions the company made without prio-consideration of the effect of joint market approach as illustrated by the Kogut theory of evolution. The savings obtainable from the low-cost onshore and the “near shore” serve as the alternatives that may counteract with the craving to go offshore.
In conclusion, outsourcing of human resource can be accommodative or disastrous to the operation of a firm. The outcome however depends on the nature of partnership in relation to the sizes of the firms entering the agreement. In quasi outsourcing however, the leading firm may develop and enjoy the benefit of publicity if the inferior firm has a higher level of production value. This is because; the product sells with the brand of the leading firm though it may not have participated in direct production of the commodity. On the other hand, the leading firm may end up in failure in case of poor quality products by the inferior ‘firm’. This occurs if and only if the firms enter into a quasi outsourcing strategic partnership.
Furthermore, the industry is likely to increase focus on the aspect of specialization in particular areas. For instance there has been emerging trends in the human sourcing focusing on specialized agencies for specific sectors. Therefore, this may result in a more demand for the knowledge of particular segments of the industry such as IT. Currently, the industrial sector is grossly paying particular attention to well trained personnel. Consequently, there is a great likelihood for the emergence of special training units to complement the rising demand.