Posted: March 1, 2016 |  AUTHOR: KEN FOX | CONTACT ME

 

Many Japanese TV, DVD player and other electronic device manufacturers are struggling to survive in an increasingly competitive world. There are a number of reasons, some stemming from Japanese culture but most from competition and the fast moving growth of innovative new products. Simplistically, some of these reasons include:

Lag in software development and information technology
Japanese companies focused too much on production processes rather than breakthrough discoveries
Their orientation was too focused on making expensive products for the Japanese market, rather than understanding other global targets
The poor Japanese economy and lack of government support
Japan was not ready for the digital revolution

Japan’s government lacked a coherent economic strategy since 1990. They also had a number of many changes in government leadership. Two important government ministries, the METI (Ministry of Economy, Trade & Industry) and the Ministry of Finance has apparently lost prestige, public confidence and power. Over the years, officials and industry leaders lost faith in the government’s ability to enhance the country’s competitiveness.

Japan had built an image of building complex electrical machines, such as: color televisions, radios, cassette players and white appliances. For example, there was no software involved with the Sony Walkman.

Japan lost its edge in information and communication technology hardware. Some examples.

Screen Shot 2016-03-07 at 1.47.14 PM

Some of the Japanese household brand names we grew up with are fighting for survival, while others are entering new businesses, such as the automotive industry. The following are selected updates on initiatives taken by some of these companies.

Screen Shot 2016-03-07 at 1.47.29 PM 1. Panasonic started acquiring Sanyo in 2008 with a 20% share and acquired all of the company in December 2010. Panasonic was early in seeking to enter the automotive business. Current President Kazuhiro Tsuga wants to enter the advanced driver assistance market, and plans to become the number one battery supplier for “electrical green cars.”

Panasonic expects its auto battery sales to more than triple to $3.78 billion in their fiscal year 2019 from $1 billion in 2014. It currently supplies lithium ion batteries to Telsa Motors, Audi, Toyota, Ford, and nickel- metal hydride batteries to: Honda, Ford, Subaru, Nissan, VW, and PSA Peugeot Citroen.

Screen Shot 2016-03-07 at 1.47.36 PM 2. Hitachi has left the electronics business to refocus on their core business of heavy engineering. It is back to manufacturing gas and steam turbines, nuclear power plants and high speed trains. It is especially targeting developing countries for its products.

A past CEO, Hiraki Nakanishi, stated in 2010 “digital technology changed everything. One chip can now power a large TV.” Japanese companies could not justify keeping up with sales, marketing and advertising budgets of their competitors in the U.S., South Korea and elsewhere.

Screen Shot 2016-03-07 at 1.47.44 PM 3. Sony is relatively the strongest of the Japanese electronic manufacturers. The auto business is a growing priority for the company. Sony wants to transfer its expertise in digital cameras into sensors for advanced auto safety systems. A typical car will have seven sensors, including backup vision, surround-view parking assist, frontal crash protection and blind spot detection.

Other Sony auto sensor opportunities include advanced driver assisted systems, to detect hard to see road obstacles, control auto braking systems or keeping vehicles centered safely in their lanes.

Screen Shot 2016-03-07 at 1.47.51 PM 4. Sharp has been on the hunt to be acquired for a while. More recently, Foxconn of Taiwan (formally known as Hon Hai Precision Industry, Ltd.) has recently agreed to acquire Sharp for $5.6 billion. Foxconn is the major assembler of Apple products. Sharp makes display panels and is a supplier to Apple as well. Foxconn would have more leverage after a merger with Sharp in negotiating with Apple. Additionally, Foxconn may want to use Sharp’s well known brand name to introduce Foxconn made final products instead of components only.

Unlike Japan, the South Korean government has been more aggressive with reforms since 1997. This includes helping to promote competition in the telecom communications industries, and pursuing bilateral trade agreements to help attract foreign direct investment. Additionally, Japanese electronic companies have not been able to compete effectively against Apple and Google in the U.S.

5. Toshiba is currently Japan’s largest semiconductor manufacturer. About 7% of its global semiconductor revenues are from the auto industry. However, it confronted one of Japan’s biggest accounting scandals (overstating profits). It is currently restructuring and laying off 8,000 workers. The CEO and some senior managers have left the company. It’s healthcare division is for sale, and the overall company may be seeking a merger partner or follow Sharp’s sale to survive and thrive.

Barriers to Growth

1. The Japanese government could be doing more to support new global product development, entrepreneurship and attracting foreign direct investment.

2. Japanese companies trying to reinvent themselves in the auto industry are facing barriers from the long standing keiretsu system.* Gaining access will provide trust and exposure to important partners and clients.

3. The Japanese culture of life time employment, security and centralized company management may prevent competing effectively with the current fast moving and innovative electronics industry.

*Keiretsu is a set of Japanese companies with interlocking business relationships
and shareholdings, usually centered around one large bank company.

Commentary

The major Japanese electronics companies have been in disarray, except possibly SONY. Well known companies in this industry are fighting for survival. The Japanese economy is not helping, as government leadership has changed over the years, and recent efforts by Prime Minister Shinzo Abe to boost the economy have failed. China, Japan’s leading trading partner has reduced imports based on weaker demand for consumer and industrial goods.

Besides Japanese government mishaps and economic weakness, cultural issues contribute to some of these company’s problems. The following are hypothesized reasons for corporate weakness in this industry.

1. The lack of quick decision making. This implies not worrying about “losing face” because problems are not addressed when needed, e.g., not brought to the attention of executive management.

2. Not questioning leadership decisions when appropriate.

3. Underestimating competition. This includes competition from China (Lenovo, Xiaomi, Haier) as well as more aggressive competition and innovation from Taiwan (Foxconn, Acer, ASUS) and South Korean companies (Samsung and LG) .

4. Recognizing the importance and commitments for marketing and advertising spending to help build businesses.

There is clearly a need to enter a keiretsu in order to work in or supply the thriving Japanese auto industry. This seems doable if key banks and the government offer assistance. The surviving major Japanese electronics companies will further weaken their viability unless they change to better compete with and target their businesses beyond their safe, home market.

Resources
Japan’s Economy Shrinks Annualized 1.4% as Quarterly Figures Reveal Weak Consumption, The Japan Times, February 15, 2016.
Foxconn’s Bid for Sharp is a Risky Attempt to Reinvent Its Business Model, The Economist, February 13, 2016.
Toshiba, Facing $4.5 Billion Loss, Plans Deep Cuts, Dow Jones Business News, December 21, 2015.
Japan Electronic Giants Embrace Autos after Consumer-Goods Struggles, Han Greimel, Automotive News, April 13, 2015.
Whatever Happened to Japanese Electronics?, Steven Vogel, Asia Times, Nov. 22, 2013.
What Happened to Japan’s Electronic Giants?, BBC News, April 2, 2013.

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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