| Global credit rating agency Moody`s Investors Service downgraded Japanese electronics maker Sony`s credit rating from Baa3 to "junk" Ba1. Moody`s rating scale comprises of 21 notches, and Ba1 is one notch below investment grade. Moody`s said, "(Sony) faces challenges to improve and stabilize its overall profitability. Of primary concern are the challenges facing the company`s TV and PC businesses, both of which are encountering intense global competition, rapid changes in technology, and product obsolescence," Moody`s said in a statement. Credit rating downgrade raises borrowing costs and has adverse impact on the company`s stock prices.
Sony is a global company and is proud of Corporate Japan along with Toyota. It developed the outrageously popular Walkman in the 1980s as well as making founder Akio Morita become a world renowned entrepreneur. Prospects that Japan will soon surpass the U.S. were prevalent in 1990 when U.S. market research firm Landor named Sony as the world`s second powerful brand (behind Coca Cola).
Over the past 10 years, however, Sony has declined rapidly. Even as the global markets were undergoing a paradigm shift, the Japanese firm remained complacent and was in full conceit, and adhered to its own standards. Neglecting the global trends, Sony continued to focus on the domestic market and ultimately fell behind. A new term Galapagos syndrome was coined to describe Sony who was being isolated from the world at large. Bureaucracy prevailed in the organization where no employee could put brakes on the executives` wrong decisions that led to worsening long-term competitiveness.
Sony saw earnings rebound last year thanks to the Abenomics and its emphasis on weak Japanese yen. Yet the improvement was far from fundamental. In the first half of fiscal year 2013, Sony suffered from a deficit that was continuing for one and a half years. American global branding consultancy Interbrand`s survey showed that Sony`s brand power plunged to 46th last year, far below Samsung Electronics who ranked eighth. American economist Todd G. Buchholz picked Sony`s brand power falling behind Samsung Electronics for the first time in 2005 as a memorable historical event in the corporate world.
There is no eternal winner in the corporate world. Once a well-off company can fall to bottom by being off guard or by making a wrong choice. Sony`s case show that Korea`s flagship companies, including Samsung Electronics, Hyundai Motor, POSCO, Hyundai Heavy Industries, LG Electronics and KT, should be armed with global mindset, make constant innovations and eradicate bureaucracy, to raise competitiveness.