The Right Strategy

Executive Summary

Sharp has been a very prestigious name when it comes to electronics not only in Japan but in the whole world. As many companies have had ups and downs at different times, Sharp is experiencing a tough time at the moment. The company has faced a loss first time since its inception due to its lack of competitiveness. Therefore, Sharp has to make some major changes in its business model in order to cut the costs and maximize the profit for the shareholders. It can be done in several ways such as outsource the manufacturing process or manufacture regionally so it can take benefits of becoming a multinational corporation. There are a lot of business models that can be followed by Sharp in order to sail through these tough times. Such as Apple's business model teaches us to outsource the manufacturing but research and development remains at home. On the other hand, Honda's business model tells us to manufacture regionally to manufacture quick and make it seem like a local product rather than imported one. In any way Sharp has to take some tough decisions in order to make the company profitable once again.

Problem Statement

Sharp's current business model is very simple but very backward at the same time. The firm has a very unusual strategy of manufacturing its products in a way to make them stand exclusive and hard to duplicate by other firms and its intellectual property. The company manufacture the components and assemble everything in Japan and then ship it out to local or the international market. In today's economy, efficiency is very important in the market, but Sharp is failing to deliver that competitive price to the consumer and it is the main reason Sharp is losing revenue. The company never experienced losses since its inception in 1956 until second quarter of 2009. Therefore, Mikio Katayama has to make some major changes in Sharp's business model to make the company more sustainable in current economy as well as make it more profitable for the shareholders.

Analysis

Sharp's need to overhaul or completely change the business model is due to several reasons. The biggest reason is that the company has faced the losses that it never seen before in the history of almost 74 years. The global recession played an important role especially US being the biggest market of Sharp outside Japan, and people started to re-prioritize their spending according to vulnerable economy. So the whole idea of Sharp's priorities and the way Sharp has been doing business have become obsolete in this new global market.

The second biggest reason is that Sharp is mainly a domestic player and it is trying to play a bigger and better role in the international market. The firm has been experiencing a comparative disadvantage to manufacture its products in Japan due to higher taxes and higher shipping costs combined with higher wages as compared to its competitors who are mainly in South Korea, Malaysia and China. Due to higher taxes, duties and shipping costs Sharp is incurring unnecessary costs and because of this reason the firm is unable to deliver the competitive pricing. Any change in business model that will shift the manufacturing unit of the business from Japan to overseas will cut the costs and bring the company back on track. Therefore, Mikio Katayama has to make some major changes in company's business model in order to make it up and running better than before.

Another reason of being inefficient is that Sharp is manufacturing everything at home in Home currency (Yen) but trading in US dollars that means when the revenue comes home it had to be converted in Yen. Any fluctuation in US - Yen exchange rate directly affects Sharp's revenue either positively or negatively. In order to eliminate this complexity in its business model Sharp has to trade in either currency. As the whole world witnessed the economic fall of the United States during 2008 and 2009 and how vulnerable the US dollar became. Whenever the US dollar loses its value the Japanese Yen gains value in comparison and make the Japanese products expensive for the international consumer. Hence, make them less desirable in terms of price. Also when the US dollar gains value the Japanese Yen gets weaker in comparison and at the time of convergence Sharp receive less revenue due to the fluctuation of the exchange rate. Therefore, Sharp has to pick one currency (most