Sony Ericsson is a joint venture established on October 1, 2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector. Both companies have stopped making their own mobile phones.
The company's global management is based in Hammersmith, London, and it has research & development teams in Sweden, Japan, China, Germany, the United States, India, Pakistan and the United Kingdom. By 2008, it was the third-largest mobile phone manufacturer in the world after Nokia and Samsung. The sales of products largely increased due to the launch of the Walkman and Cyber-shot series.
(1).Troubles in Ericsson's mobile phone business:-
In the United States, Ericsson partnered with General Electric in the early nineties, primarily to establish a US presence and brand recognition.
Ericsson had decided to source on chips for its phones from a single source, a Philips facility in New Mexico. In March 2000, a fire at the Philips factory contaminated the sterile facility. Philips assured Ericsson and Nokia (the other major customer of the facility) that production would be delayed by less than a week. When it became clear that production would actually be compromised for months, Ericsson was faced with a serious shortage. Nokia had already begun to obtain parts from alternative sources, but Ericsson's position was much worse as both production of current models and the launch of new ones was held up.
Ericsson, which had been in the cellular phone market for decades and was the world no. 3 cellular telephone handset maker was struggling with huge losses in spite of booming sales since 2000 due to this fire and its inability to produce cheaper phones like its competitor Nokia. To curtail the losses, it was thinking of outsourcing production to Asian companies that can produce the handset for lower costs.
Speculation had begun about a possible sale by Ericsson of its mobile phone division but the company's president said that it had no plans to do that. "Mobile phones are really a core business for Ericsson. We wouldn't be as successful (in networks) if we didn't have phones", he said.
(2).Background of the joint venture:-
Sony was a marginal player in the worldwide cell phone market with a share of less than 1 percent in 2000. It was also struggling in this area with losses but wanted to focus more in this area. In April 2001, Sony confirmed that it was in talks with Ericsson for a possible collaboration in the handset business. This was soon after Toshiba and Siemens had announced plans in November 2000 to work together on handsets for 3G mobile networks, which was cancelled in 2001.
By August 2001, the two companies had finalized the terms of the merger announced in April. The company was to have an initial workforce of 3,500 employees.
In spite of having aimed to be profitable in its very first year, Ericsson's market share actually fell and in August 2002, Ericsson said it would stop making mobile phones and end its partnership with Sony if the business continues to disappoint even as Sony said it was fully committed to the joint venture and wanted to make it a success. However, in January 2003, both companies said they would inject more money into the joint venture in a bid to stem the losses.
Sony Ericsson's strategy was to release new models capable of digital photography as well as other multimedia capabilities such as downloading and viewing video clips and personal information management capabilities. To this end, it released several new models which had built-in digital camera and color screen which were novelties at that time. The high-end P800 which featured a built-in camera and PDA attributes was successful and helped in turning around. The joint venture,…