10 Year’s Joint Venture --- SONY and Ericsson Mobile Communication Company

Last week, my blog focused on that the Sony acquired the whole ownership of the Sony and Ericsson Mobile Communication Company, and why they traded with Ericsson with full cash and what other reasons to support the acquisition in the unstable currency period. This week, I would still like to concern myself on this company, but my focus would move to their cooperative model from joint venture to wholly owned subsidiary.

Global market makes millions of multinational company, some of them were established into a joint venture module like SMART mini car, while some of them preferred to run their business in wholly owned company, so what is the advantages and disadvantages for these two kinds of modules? According to the textbook, joint venture could be defined as shared ownership in a foreign business, but in contact, the wholly owned subsidiary could be a totally owned by the parent company. Compared with wholly owned subsidiary, joint venture could have the advantages such as local type of management, marketing, easier capital raising and technology development. Wholly owned company could perform better on the control and strategy consolidation.

Sony and Ericsson Mobile Communication Company (will be short as S&E below) should be one of the successful joint venture companies in the world. However, on February 16^th 2012, Sony declared that they would like to acquire the mobile communication company with 10.5 billion Euros, which stopped 10 year’s success of joint venture. In this 10 year, Sony made the most of their digital imagine technology with Ericson’s mobile communication technology, including EMES (Ericsson Mobile Extension Service), WENS (Wireless Enterprise Network Solution) and so forth. Besides, Sony has successfully stepped themselves into European market with this cooperation. Speaking from Ericson’s perspectives, the famous mobile communication company received great amount of capital and at the same time, it helped the company transfer their vision from the handset provider to service and infrastructure provider. Actually, this acquisition has already been written into the contract of joint venture before they build this multinational company, but why Sony wants wholly owned subsidiary instead of the joint venture?

The reasons could be summarized in two main parts: company strategy and finance. Divergent views could be most difficulties for their operations. In the recent years, Sony Company looked further increases on the Android OS system, but Ericsson would not like to focus their perspectives on this single system too much, so the Wholly owned subsidiary could let the company consolidate their strategies. Besides, product integration has become a trend in the world, since Apple Company achieved their great remarkable success. Sony would like to follow this idea to integrate their products, but the joint venture could become a barrier for the company to some extent. They have to consider about the patent protection and transfer their competences with Ericsson, so the acquisition should make this operation much easier than that before. In terms of the finance, the wholly owned Sony Mobile Company could benefit from the financial safety and financial control, for most of the joint venture should exposure their financial information to their partner, which could provide the potential dangers to their parent company, such as key data lose, and wholly owned subsidiary could overcome this back draw. More over, the financial control would lead to more troubles for each other, and they would spend amount of time to argue with that, and sometimes, they have to turn their finance to the third part company to keep the fairness. Sony would use the acquisition to keep their financial information safe and improve the efficiency of financial management.

However, for wholly owned Sony Mobile Communication Company, they have to face up with several new challenges, such as new agent fee, whole risk burden and further capital requirement. How to deal with these could be the key for the company to continue success in the future.