Economic Interests

If you owe the bank £100, that's your problem. If you owe the bank £100 million, that's the banks problem.

Failing Giants of 2012 so far…

First up is Sony, the Japanese technology giant. Once known for its market leading products, they have struggled in recent times with a predicted loss of 520 billion yen ($6.5 billion) in this next fiscal year and a planned cutting of 10,000 jobs. This would be the company’s biggest ever loss in its history and has seen shares fall by up to 40%. One of the problems has been a decline in the TV industry, where they have been losing money for the last eight years and lost $2.2 billion last year. Sony are leaning towards a policy of slowly withdrawing from this market with the firm already stating it has halved its target for TV production and is focusing on gaming, cameras and mobile phones. But Sony is also making a loss on each PS3 it sells (hoping to make it up by pricing games high) with it estimated that they lost around $300 on each console they sold when the product first came out. Its telling that Microsoft are able to produce their consoles for less and can therefore make a profit on each XBOX, showing Sony aren’t being forced into this surprising strategy. Add to this that the XBOX outsold PS3’s by over 1.7 million units last year and it shows a failing strategy for a product that is accepted to be the best on the market right now but too highly priced. Problems with Japan haven’t helped, like the natural disasters and stronger yen and Sony will need to re structure there company to get back on track, maybe by dropping some of its product ranges.

Sony need to improve sales in their core products. 

Nokia are another technological giant facing big trouble, as they struggle to compete with Android and the ever growing Apple. They have had to issue yet another profit warning recently and their newest product, the Lumia 900 has already been found to have a crucial fault (a problem with the devices internet connection). Poor showings in emerging markets have undermined Nokia and a 70% drop in sales to China since last year has been a big blow. They were late to join the tablet computer faze and their smart phones find it hard to compete with Apple and Samsung. In the first quarter of this year, Nokia saw sales decline by 40% and suffered a net loss of $1.2 billion, with blame pointed towards highly competitive markets pushing down prices. But really mismanagement has seen Nokia lose their innovation and they have failed to challenge Apple due to both the popularity of the app market and the windows operating system not taking off as predicted (though that could change with the new Windows 8 system soon to come out).

Nokia’s future could depend on the success of Windows 8.

Tesco is another firm that is struggling hard in the market right now. The supermarket giant has seen its share in the market slump to a seven year low, with customers either leaving for up market stores (Waitrose) or cheaper options (Aldi, Lidl). Tesco’s shares have dropped by 22% since last year, its trading profits in the UK have fallen by 1% and a bleak Christmas (the busiest period of the year) has seen the first profit warning for Tesco in modern times. Critics have pointed to out-of-date stores, a poor discount range, a £500 million “price drop” campaign that backfired (emphasising low quality rather than low price), a neglect of the UK market while concentrating on foreign markets (with its US business slumping)and too much diversification away from groceries. This has lead Tesco to announce a £1 billion revamp of its UK operations and they will need to concentrate on their core business by investing in its stores and offering better value for fair values to an austerity ridden UK.

The campaign that backfired, losing Tesco market share. 

The last giant is not really failing, but a recent product disaster has cost the business both money and its chairman. Disney’s chairman Rich Ross resigned after a horror return on its latest film, John Carter. The film has become the film maker’s biggest flop, losing Disney around $200 million after costing $250 million to make. This leaves Disney with $80-$210 million in operating losses, shares down by almost 1% and a big dent in their reputation. Disney will be hoping new films this year in blockbuster Avengers and Brave will help make up for this poor showing, with both highly anticipated by audiences. Disney’s theme parks have helped boost the business and the firm should survive this flop, but they will need better returns on future projects.

Showing the huge budget of the flop: John Carter


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2 thoughts on “Failing Giants of 2012 so far…

  1. Creative destruction examples?

  2. As in Sony, Nokia and Disney? You could argue they havnt been innovative enough against their competitors. Sony are losing out to new upcoming firms in South Korea, Nokia were late joining the smart phone and tablet phase properly and Disney are struggling with new material it seems.

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