Sony Tries to Revive Troubled Aiwa Brand

Back to Contents of Issue: March 2003
by Sumie Kawakami
YESTERDAY'S ENEMY IS TODAY's friend, according to an old proverb. But you are never sure who that friend may be until he shows up on your doorstep. Sony's Masaru Hirauchi had never dreamed of becoming the head of his long-time competitor, Aiwa. Having been a key person in Sony's overseas marketing, Hirauchi had always thought of Aiwa as a threat. It used to be a rising star, with its reputation of producing relatively high-value products with lower prices than its competitors. But those glory days are over; the Aiwa brand -- or what's left of it -- was absorbed by Sony last year, after losing competitiveness in the face of aggressive cost-cutting by Asian rivals. Aiwa had gone through a major restructuring; it cut its head count from 1,200 to 500 last year. After Sony absorbed the company, it created the new Aiwa Business Center, with 180 employees, in December and appointed Hirauchi as its president.

Hirauchi says the renewed Aiwa brand will focus mostly on audio-visual products, which have always been its strength. He sees Aiwa's image as something like a "naughty boy," he says, or in gadget terms, a lipstick-sized digital camera. But how is he going to differentiate the Aiwa brand from Sony's own? When the audio-visual market as a whole has been saturated in Japan, the US and Europe, how is Sony going to expand demand for Aiwa products as well as its own?

Sony explains that the Aiwa brand is focused on PC audio peripherals and/or audio-visual products in a "private space where you can enjoy your individual lifestyle." Hirauchi said in a Tokyo press conference in January: "Users don't necessarily want multifunctional, high-quality products. They sometimes want something simpler."

Despite Hirauchi's enthusiasm, industry watchers say they don't know how Sony will be able to revive the Aiwa brand or how it will benefit Sony as a whole even if it does. Since Sony has long been an Aiwa shareholder, its acquisition of Aiwa was a natural step. But Sony's intentions for Aiwa are unclear.

Kun-Soo Lee, senior analyst at WestLB Securities, says he remains skeptical of Sony's plans. "Aiwa hasn't had a reputation as being strong in PC peripherals to begin with. Considering the fact that Sony needs to build the new Aiwa brand image from zero, it doesn't have to be the Aiwa brand," he said. Lee also said that the Aiwa brand suffers from the image of being somewhat cheap. While the Aiwa brand remains strong in Asia and the Middle East, he said, "Historically, Asian consumers tend to prefer big-name brands, and this trend hasn't really changed. Consumers (in Asia and the Middle East) would prefer Sony (to Aiwa) if or when they can afford it."

The restructuring of Aiwa -- Hirauchi's first step in reviving the brand and differentiating it from its new parent -- is expected to cost Sony about JPY 30 billion this year.

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