Sony Names First Western Boss; Japan Inc. May Follow Its Lead

 

by Doug Tsuruoka

It's the Japanese version of a western omelet.

Take a Welshman who has music and movie smarts and toss him in as CEO of one of Japan's biggest electronics makers.

The combination's rarely been tried. And neither Sony (NYSE:SNE - News) nor Japan's tight-knit business community may be the same again.

That's what analysts said Monday after Sony tapped Howard Stringer, current chief of Sony Corp. of America, as its next chairman and CEO.

It's the first time a non-Japanese will head a Japanese company the size of Sony, which had $68 billion in sales over the last four quarters.

"This is the first time a major Japanese company has looked to a foreigner to manage it," said veteran Japan consultant Keith Rabin.

Some said the shakeup dramatizes Sony's special problems as it fends off a gaggle of rivals from the U.S. to Asia.

"Stringer's promotion shows how atypical Sony is," said Adam Posen, a senior fellow at the Institute for International Economics in Washington. "Sony was always the most western and open company in Japan." As such, Stringer's promotion doesn't surprise him.

Others are convinced Stringer's rise signals a sea change in Japanese management practices.

"(Stringer's) appointment shows Japanese companies have confidence in the managing abilities of foreigners in top positions," said Akihiro Tada, a spokesman for the Japan External Trade Organization in New York. JETRO is a Japanese government agency.

Noted Japan expert Chalmers Johnson said Stringer's march to the top at Sony was inspired by Renault executive Carlos Goshn's successful stint as president and CEO of Nissan Motor (NasdaqSC:NSANY - News).

As part of a Renault-Nissan alliance, Goshn took over Nissan in June 2000 and turned it around.

"(Goshn) did a terrific job," said Johnson, a former professor of political science at the University of California, Berkeley.

Sony is hoping for similar magic, Johnson said. He said Stringer, a former CBS executive, is known for his grasp of Hollywood, software and ability "to read American taste."

Sony has been wobbly since the second quarter of 2003 when sales slid 7% to $13.4 billion and earnings plunged 98% from a year earlier. Sony's shares quickly shed a quarter of their value.

The problem traces back to a series of miscalls in Sony's product and manufacturing strategy.

Sony must counter the onslaught of rival products like Apple's successful iPod digital music player.

Stringer, a non-Japanese speaker, also must find ways to offset an increasingly "commoditized" electronics business. Makers in China and elsewhere in Asia can make CD players and TV sets -- once Sony mainstays -- for much less.

Sony also has been faulted for its rigid approach to product development, going all the way back to pushing Betamax in the 1980s, a format for video recorders, as the rest of the industry embraced VHS.

"Sony has been foundering for so long," said Johnson. "Stringer's appointment shows not so much that Japan is changing, but that people at Sony are getting desperate."

But can Stringer, an entertainment maven with no engineering background, turn Sony around?

"I find it hard to believe he can do anything about Sony's manufacturing in Japan," Johnson said.

Others say Stringer's elevation signals another departure from the Japanese practice of having foreigners head overseas subsidiaries or cosmetic posts at home offices.

If Stringer shines, other Japanese firms, suffering from a decadelong business slump, may follow suit.

"There will be more positions for foreigners of excellent ability at Japanese companies inthe future," JETRO's Tada said.



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