Buy our book here.

The pace of change in the business environment is quite astonishing. Organizations face intensive and extensive pressures from global competition, technological change, and more. Organizations today need fluid and responsive strategies; this in turn will have impact on the nature of management information and roles of management accountants.

Recently we saw how two electronics giants, Samsung and Sony, changed a joint venture arrangement between them. In 2004 both organizations came together to share ideas and jointly develop liquid crystal displays (LCDs). At that time, the global economy was booming and there was healthy demand for consumer electrics. Samsung and Sony saw the opportunity to capitalize on this through joint activities in certain areas – can you think of some of the potential benefits from such a joint venture, and how would you manage and control such joint ventures?

However, since the financial crisis in 2008, there has been significant slowdown in global economic activity, including demand for consumer electronics. At the same time, the average price of LCD panels has fallen significantly, further reinforcing pressure on profit margins. Sony, in particular, has been struggling (financially) for many years, continually making losses.

In late-2011, Samsung and Sony decided to create a different joint venture whereby Sony would continue to purchase LCD panels from Samsung at prevailing market prices, but not manufacture its own. Samsung also paid Sony large sums of money to buy-out the latter’s stake in the original joint venture. The U-turn (or, a re-configuring of the original alliance) has been generally received in a positive way.

What do you think were the motivations of Sony in this joint venture, from the original agreement through to the current (reconfigured) agreement; and how might it have changed the roles of their management accountants?

Source: ‘Samsung buys Sony’s entire stake in LCD joint venture’, BBC News ‘Business website, 26/12/11