Sony 2001 Annual Report Download - page 7
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Sony Corporation Annual Report 2001
5
appropriate organizational structure is essential to succeed in this rapidly evolving business era. This is why
we conducted a sweeping reorganization in April 2001 and appointed many younger managers.
Vertical Integration and “Soft Alliances”
In a broadband network society, the business spheres of companies will expand globally as reams of
information travel around the world instantaneously. In such a society, it will be extremely difficult for just
one company to dominate multiple business spheres and regions and to sustain a powerful position. Accord-
ingly, it is crucial to achieve a balanced strategy, combining two inherently different approaches. One is a
strategy of vertical integration that encompasses all the activities of the company. The other is a horizontal
strategy whereby alliances are forged with leading companies to complement each other’s business activi-
ties. Leveraging its strengths as a unique company possessing both hardware and content/services, Sony
will explore “soft alliances” with strategic partners, taking fully into account market conditions, competition,
technology and other factors in its business environment.
Plans to Issue a Japanese-version Tracking Stock
Sony Corporation has taken steps for the issuance of a Japanese-version Tracking Stock, a first for a Japanese
company. We intend to issue a new class of Sony stock that would be linked to the performance of Sony
Communication Network Corporation, which is involved in internet-related activities. In so doing, we hope to
spotlight the value of one of our most strategically important subsidiaries. At the same time, Sony Corpora-
tion will retain control of this company, preserving the group’s unity while giving the new company the
freedom to formulate strategies. We therefore believe that this Tracking Stock is a highly effective means of
maximizing synergies among Sony Group companies.
The Use of EVA® Methodology
Sony adopted EVA® two years ago as a tool to evaluate performance in order to increase returns on invested
capital. Our Electronics business was the first to apply this system. The result was a series of decisive actions
including the realignment of manufacturing facilities, the application of stringent standards to all new
EVA® (Economic Value Added), registered trademark of Stern Stewart & Co., is a management metrics. The company needs to generate sufficient return to investors, or those who provided
the necessary capital, in order for it to continue its existence. EVA® measures whether the company was able to generate more return than cost of capital including the cost of stockholder’s
equity, not shown on the income statement, and thus create corporate value.