Sony Split?: Entertainment and Electronics Proposed to Separate

Several weeks ago, hedge fund manager Daniel Loeb approached executives of the Sony Corporation and offered a restructuring plan. Under Loeb’s plan, Sony would split off its entertainment group from the rest of the company and sell a portion of the new group in a public offering.

Currently, Sony has three main business units—electronics, entertainment, and financial services. Whereas the financial services and entertainment units of Sony have been strong, the electronics group has been struggling lately, which has affected the company’s bottom line: for the fiscal year ending in March 2012, Sony posted an $860 million loss; this year, they posted a $2.77 billion dollar gain on $81.84 billion in revenues.

In addition to affecting the company’s overall profitability, the challenges of the electronics group mute the successes of Sony Entertainment. Although the entertainment group has half the revenues of electronics, entertainment’s profits are nearly three times higher; the segment margin of Sony Entertainment is five times that of Sony Electronics.

On top of the financial benefits of separating Sony’s entertainment group from its electronics group, this restructuring creates an important opportunity for the Sony brand. It is difficult for a brand identity to truly capture the essence of a company that has a wide array of business units. By separating the groups and creating a subsidiary, Sony can establish new, independent brand identities for their entertainment and electronics companies.

In order to create effective new brands, Sony must evaluate how their electronics customers differ from their entertainment customers. Then, they can create a brand identity to best appeal to their defined target audience, which should bring Sony Electronics back to prosperity. The task will not be easy, but anything is possible with the right branding team.

Don’t let struggling business units drag down the brand equity of profitable units! If this is the case in your company, separate the units and give individualized and independent attention to each rebranding process. Focus on the unique target market of your new business entities and use that to create a brand strategy that will drive sales and equity for years to come.