Outsourcing isn’t a word that executives in Japan like to toss around. Japan Inc. prefers to tie its fortunes to state-of-the-art factories that churn out chips, cars, and flat-screen TVs for the global market. But when Sony Chief Executive Howard Stringer announced on January 22, 2009, that he was considering drastic cost-cutting steps for the company’s core electronics division, outsourcing topped his to-do list. The shift marks a minor victory for Stringer. After more than three years at the helm, Stringer finally appears to be breaking the company’s addiction to manufacturing, and to be channeling ever more resources into developing and designing products that users crave. To show he now really means business, the Welsh-born American CEO has said he will close five or six of the company’s 57 plants globally and slash the company’s budget for factories and chipmaking equipment by a third over the next fiscal year, ending March 2010. “There is no aspect of Sony that isn’t being examined right now,” Stringer told journalists in Tokyo last week. “We have to move very, very quickly and control our costs.” Sony will spend the next couple of months drawing up a detailed plan. But Stringer appears to have made up his mind about outsourcing one product: TVs. The TV division accounts for 10% of Sony’s overall sales but hasn’t made a profit since it launched the Bravia brand of flat-panel TVs in 2005.

Questions 

1. What problems is Sony currently experiencing in the global environment? 

2. Why is Sony’s CEO Howard Stringer considering outsourcing TV production? What potential benefits and costs of outsourcing must Stringer evaluate to make his decision?