Sony, one of the most iconic global brands, now seems to be the eternal brand-in-trouble. Sony has always been known for superior quality, world class design, cutting edge technological products and constant innovation. But off late, Sony has been slipping from its ivory tower of global dominance in the consumer electronics and gaming industry.

The losses of the gaming unit alone, which contributes 14% of overall Sony sales, exceeded US$1.9 billion in 2006 as against US$72.5 million profits in 2005. Further, Sony's overall operating profit dropped 68% from its 2005 figure to US$598 million in 2006. Much of this has to do with Sony's overwhelming reliance on the latest play station - the PS3.

The PS3 was probably one of the most awaited products in recent years. Customers around the world were waiting with bated breath to collect their PS3 from stores. But, right after the launch, Sony was shocked to see that the stocks were out and the demand was increasing. Even though this initially signaled the overwhelming positive response of customers, numbers at the end of the fiscal year has painted a different picture. Sony did not even achieve its own internal target of 6 million units by March 31st.

It managed to sell only 5.5 million units and that too only 3.6 million units reached the stores with the remaining either in transit or in warehouses. This performance has forced Sony to announce a conservative 11 million units for the year ending 31st March 2008. To add to Sony's woes, the competition is catching up with the market leader. Nintendo shipped 5.84 million units of its game console in the same time frame and Microsoft sold a total of 10.4 million units for the year ended 31st March 2006.

Even though Sony estimates to make money in 2009, it will be a very rough two years to survive in the very highly competitive gaming industry. One of the alternate routes being discussed is to discount the PS3, which is a 60-gigabyte hard disk drive console with a US$599 price tag. The logic behind such a possible step is to increase the volume of sales immediately so as to stop the revenue sliding for the next two years.

These events bring to fore two core branding issues - the strategic role of branding and the impact of price discounts on the brand image. Branding is an organization wide discipline that encompasses the different functions within an organization. The stock out scenario immediately after the PS3 launch and the failure of 1.9 millions units to reach the stores in time are cases in point that demonstrate Sony's lack of comprehensive brand management by not managing production and distribution functions.

Similarly, the discounting option directly contradicts the very underlying premise of branding, which is competing on superior value and not on price. If Sony does discount the PS3 units, the short-term sales might surely soar up, but the effect of such price cuts on the brand image may be long lasting and disastrous. Instead of cutting prices to boost sales, Sony will benefit if the distribution, communications and different avenues to constantly engage its customers are taken care of.

Efficient management of multiple customer touch points is indeed a corner stone of branding. It will be interesting to watch how Sony handles this brand challenge.