CHANGING STRUCTURE: SONY BPE AND THE

INTRODUCTION OF BUSINESS TEAMS1

THEORY:
Chapters 5 and 6
Jones, G. R. 2007. Organizational Theory, Design, and Change. Upper
Saddle River, NJ: Pearson Education, Inc.
How to cite:
Quintane, Eric & Mol, Joeri. 2007. Changing Structure: Sony BPE and
the Introduction of Business Teams. Teaching Case, Department of
Management & Marketing, University of Melbourne.
Introduction
Path-dependency is a determining factor in the way in which
organisations are structured. However, pressures from the environment
can force a company to make drastic changes to its structure in order to
stay competitive. The introduction of the business teams in Sony
Broadcast and Professional Europe (BPE) provides insights about the
reasons and dynamics of structure change.
Sony Europe
Sony Overseas S.A. was established in 1960 in Switzerland to provide
financial services and general support to a growing number of
independent distributors that sold Sony products across Europe. These
independent distributors enjoyed considerable autonomy in sales and
marketing and received their products directly from the factories in
Japan. By 1970, Sonys European operations had sales over DM 150
million, with a total of 200 employees.
Sony continued to grow aggressively during the seventies. It began to
purchase the independent distributors to establish its own network and
gain more control over its operations. The country managers of the new
organisation were often the former head of Sonys distribution
companies. As a result, they usually regarded their Sony operation as
a private kingdom. They would negotiate products, volumes and prices
directly with Sony Japan, received the products directly from the
factories in Japan, and were mostly free to determine marketing plans,
sales policy and promotion activities.
During the seventies and the eighties, Europe was
the most profitable region for Sony. Jack Schmuckli,
1

Sony Europas Chairman and Chief Executive Officer

gave the reason for this: In Europe, we have 15
country managers who worry about profitability. In
the US and Japan, there are only a few people who
do that (Kashani and Kassarjian, 1998: 3).
During the late 80s and the 90s the overall European
context changed dramatically. An enduring recession
meant that the industries in which Sony operated
started to consolidate; competition was fiercer
and

Jack Schmuckli

Copyright 2007 by Eric Quintane and Joeri Mol. All rights reserved. Much of
the empirical information pertaining to the case has been collected by Eric
Quintane during his position as Eurograd at Sony BPE.
1

focused on price, forcing companies to achieve higher levels of

efficiency. Additionally, the creation of a common market in Europe - and
especially the harmonisation of barriers and tariffs between European
countries - were requiring higher levels of European co-ordination,
which Sony Europe was not able to provide given its strong countryspecific focus.

Sony Broadcast and Professional Europe (BPE)

One of the operations that were set up in Europe is
Sony BPE, the European division of Sony that
serves the professional market for Sony Europe. It
Broadcast
comprises of two major business groups: Broadcast
(BC) and Business and Industrial (B&I), which are
Industrial
complemented by several smaller business units
(Projectors, Displays amongst others). Sony BPE
has its headquarters in Basingstoke (UK), a town 77
km southwest of London, and serves 116
countries divided in three zones (Western Europe,
Displays
Eastern and Central Europe, the Middle East and
Africa). In fiscal year 1996 it generated DM 17.6
Projectors
billion in sales and employed 1500 people
employed in 23 different
locations (Collins and Bechler, 2000).
Until the early 1990s, Sony BPE enjoyed a dominant position and
was a market leader in broadcast TV and professional audio. However,
with the emergence of digital technologies, national broadcasters
started to shift from an analogue to multi-channel digital TV
environment. Furthermore, improvements in computer processing power
meant that computer-based systems could be used for TV program
production. This meant that competition from its traditional Japanese
rivals (Panasonic, JVC etc.), and global niche players was becoming
much fiercer, and Sony BPEs margins were starting to decline.
Additionally, the 1990s marked a period in which Sonys customers were
becoming more integrated at a European level and were expecting Sony
to provide Pan-European services and solutions that required a large
amount of cooperation between the different country operations,
something that was not possible under the current structure.
The introduction of the Business Teams

Until the 1990s Sony BPE had little power over country operations.
The professional market was served in each country by the local
company, with direct links to the Japanese plants and business leaders.
For this reason, a critical decision made in 1994 (and implemented in
1996) that the Broadcast and Professional country operations had to
report directly to Sony BPE headquarters in Basingstoke. It meant that
BPE management effectively took control over the performance of the
country operations, and it paved the way for the reduction of the power
of the local companies and the creation of the Business Teams.
In April 1997 Miles Flint (currently the President of
Sony Ericsson), then President of Sony BPE took the
decision to create the European Business Teams. This
decision mirrored developments that were taking
place at the corporate level under the leadership of
Norio Ohga. Sony BPE was divided into 12 distinct
business teams that were fully responsible of the
performance of the product groups (Collins and
Bechler, 2000). In doing so, Sony BPE was shifting
from a central product focus with country-level profit
centres to a European business focus with European
profit centres.

Miles Flint

The positions of Product Group Heads at the country level were

eliminated. They were replaced by European Business Teams Heads
with responsibility for a range of product over a zone. Business Teams
were created with members dedicated 100% to each team. They were
responsible for their own customers and their own line of products; they
defined their own Pan- European strategy with the aim to attain
leadership in their market. The Business Teams would create their
strategic plans at a European level building upon the expertise of their
members in each country. These plans identified objectives with
regard to budgets, marketing strategy, recruitment policies and
investment opportunities.
This entailed that team members were dispersed across the countries
in which the Business Teams operated. The Business Teams Heads
were based in country operations offices rather than at the European
headquarters in order to spread the decision-making authority across
various countries. The result of these change programs at BPE was that
team members depended on the Country Heads for their offices and
operational resources, while they also had to coordinate with their
Business Team Heads for team specific operations. While the Business
Team Heads were responsible for the meeting the goals for their
specific business niche, Country Heads were accountable for the overall
performance of the Business Teams present in their country. Both the
Business Team Heads and the Country Heads reported separately to the
European headquarters.
Changing structure through people
The process of introducing Business Teams in Sony, because it
created a second layer of authority in the hierarchy, challenged directly
the power of the country operations. As such, the changes initially
encountered much resistance within Sony BPE. In order to ensure the
transition to the new business model, Sony BPEs top management had
to change the companys organizational culture in order to align the
behaviour of its employees with the newly formulated organisational
goals. One of the ways in which this change took form was the creation
of the Eurograduate program in 1999. Through this program, Sony
BPE recruited European graduates, in order to expose them to work
experience in a wide array of countries and to train them to become the
next generation of European managers. These graduates were positioned
in the Business Team and given tasks and projects that forced them to
become familiar with as many dimensions of the organisation as
possible. They quickly became a tool for change and were given an

official voice in the organisation. By presenting their impressions and

views for the future to official Sony meetings, they were given liberty
to challenge the established order and promote a different vision of the
organisation.
References
Collins, R. and Bechler, K. (2000) Sony Broadcast and Professional
Europe: Becoming a Virtual Company, IMD Case No. IMD-6-0221.
International Institute for Management Development: Lausanne,
Switzerland.
Kashani, K. and Kassarjian, J.B.M. (1998) Sony Europa (A), IMD
Case No. IMD-5-0488. International Institute for Management
Development: Lausanne, Switzerland.

Questions
Please Note: your word limit for answering the questions below is set at 1000
words

Question 1
Identify and describe the structure of Sony BPE before the introduction
of the Business Teams. Highlight its advantages and disadvantages and
explain why it was appropriate at the time.
Question 2
Identify and describe the structure of Sony BPE after the introduction of
the Business Teams. Highlight its advantages and disadvantages and
explain the rationale behind the change.
Question 3
Can you foresee the problems that were likely to emerge because of the
introduction of the new structure? What did Sony do to prevent them from
occurring? And what else could have been done?