Sony Ericsson Mobile Communications

Sony Ericsson Mobile Communications was established in 2001 by telecommunications leader Ericsson and consumer electronics powerhouse Sony Corporation. The company is owned equally by Ericsson and Sony announced its first joint products in March 2002. Sony Ericsson employs around 5,000 employees worldwide. It undertakes product research, design and development, marketing, sales, distribution and customer services. Today I will concentrate mainly on Sony Ericsson’s worldwide operation and production facilities.

There are three main factors that an international company needs to consider when deciding where to locate its production activities – country factors, technological factors and product factors, whilst still maintaining product quality and minimising costs. Other than keeping costs down, establishing foreign manufacturing facilities around the world also has a strategic advantage. Many of the countries where companies set up their low-cost manufacturing plants have become better and better in the research and development of products. This is good for Sony Ericsson as it enables local engineers with a good understanding of the requirements of the local user to development a product that is ultimately going to be marketed in the surrounding region. Sony Ericsson is currently assessing whether or not is it feasible to shift part of its research and development division to India, which is presently located in Sweden. In addition to this they are also evaluating the possibility of manufacturing in India as well as whether to set up their own plant or to outsourced production to an existing third-party. Sony Ericsson currently has manufacturing plants, both company controlled and outsourced, located in Brazil, Japan, Sweden, Malaysia, China, France, Taiwan and the US. They are also currently constructing their first global logistics centre in Beijing, China, which will assume half of Sony Ericsson’s global procurements. One of the main reasons for Sony Ericsson expanding both its research and development and production into India is that it is the fast growing mobile market in the world with around 5 million new subscribers each month. This will allow Indian engineers to adapt the handsets for local users thus increasing their appeal in the Indian market. Whilst Sony Ericsson has previously not concentrated on the Indian market, it was now one of their primary focuses in a move to become on top three producers of mobile handsets.

Sony Ericsson has primarily outsourced its production to third parties whilst also maintaining some production facilities themselves. Presently around 40% of Sony Ericsson phones are produced in factories controlled by the company and the remaining 60% of production is outsourced. Sony Ericsson is faced with the question many production companies face – whether to make or buy products and their components, both with their advantages. When a company decides to make a product or components themselves they are able to keep the cost low if they are able to produce the product efficiently. In addition, newly designed product features and technology would be kept within the company as to keep their competitors from incorporating these features into their product. Also companies have greater control over their product and are able to coordinate the assembly of the final product more smoothly rather than having to wait for third parties to deliver a component. The advantages associated with buying