Panasonic eyes emerging mart

Last Updated 18 July 2010, 16:31 IST

The company also sells no-frills refrigerators for poorer countries that come with extra space for pumped water and are priced at $170. And between those extremes Panasonic has a vast catalog of other consumer electronics products in various price ranges, including four types of nose-hair trimmers and a separate device for ear fuzz.

But how long can Panasonic keep trying to be all things to all consumers?Analysts complain that the company suffers from a case of the attention deficit disorder that they say plagues many Japanese consumer electronics firms. The affliction, critics say, has distracted management and ceded markets to more focused, agile players like the American company Apple and South Korean major Samsung.

After the empire-building glory years for Japanese manufacturers in the 1980s, as markets began to clog with cheap products and competition grew more intense, it became clear that the Japanese needed to concentrate on fewer products instead of trying to compete across hundreds of unrelated ones.

And yet, despite repeated company promises to “choose and focus” —an oft-heard corporate refrain in Japan in the recent years — many Japanese manufacturers have struggled to pare their operations and curtail overlapping product universes.

But Panasonic, shrugging off criticism, seems intent on even further product expansion — despite having lost $1.2 billion on revenue of about $83 billion in the fiscal year that ended in March. An investment bank, Macquarie, predicts that Panasonic’s net profit will rebound to 91 billion yen for the fiscal year ending in March 2011, as the global economy recovers. “It’s true our business spans a wide area,” said Panasonic President Fumio Ohtsubo. “But it’s not as difficult as you might think,” he added. In fact, the new drive by Panasonic to sell its wares in poorer countries like India and Indonesia has yielded early successes. So has its push into 3-D technology, billed as the next revolution in home entertainment in rich countries like the US and Japan.

But those efforts also increase entropy in an already far-flung product universe, each category with its own broad spectrum — Blu-ray disc recorders to mobile phones, microwaves to massage chairs, rechargeable camera batteries to automotive fuel cells. At the same time, Panasonic is also shouldering the costs of its $4.5 billion acquisition last year of Sanyo Electric, the world’s largest maker of rechargeable batteries and a major manufacturer of solar panels. The purchase was meant to raise Panasonic’s standing in the promising renewable energy field, but it also expanded its product line even further.

Sprawl is by no means unique to Panasonic. Until recently Sharp, Fujitsu, Toshiba, NEC, Casio, Hitachi, Kyocera and Sony all made cellphones, while in some cases also building nuclear reactors and advanced business-network server computers. Sony, perhaps best known for its televisions and the PlayStation game consoles, is also busy making car navigation systems and rechargeable batteries for laptops and other gadgets, while also running a movie studio and a financial services firm. That breadth, some analysts argue, is distracting Sony from major battles like the one against Nintendo and Microsoft in the lucrative gaming market. Generally bucking the trend is Nintendo, one of Japan’s most consistently profitable tech companies, which sells just two hardware products: the Wii home video game console and the DS hand-held. An obvious move that many Japanese manufacturers could consider, favoured by American giants like General Electric, would be to sell off money-losing or marginally profitable businesses and cut excess workers. But large layoffs, considered a lapse of social responsibility, especially at larger companies, are still frowned upon in corporate Japan.

There have been some steps toward consolidation. Last month, Fujitsu and Toshiba said they would combine their cellphone operations to better compete domestically against companies like Apple and its iPhone. Separately, NEC, Casio and Hitachi merged their handset operations.

But Panasonic, with 385,000 employees worldwide, continues to push forward on all fronts. Its revamped business strategy, presented to analysts in May, charts a three-year course. Panasonic is aiming for a 330-billion-yen expansion of sales in emerging markets like Brazil, Russia, India and China, and plans to reach 1 trillion yen ($11 billion) from those markets by 2013.

“In terms of technological potential and breadth, we’re on top,” said Ohtsubo.
And over all, Panasonic means to increase annual sales to 10 trillion yen ($112 billion) in 2013, which would be up 35 per cent from its most recent fiscal year.

To tailor products to local needs, Panasonic says it has conducted “lifestyle research” in various emerging markets. For example, the company designed a refrigerator with extra space for the pumped water that families often store in bottles, as well as a dedicated shelf for medicines and cosmetics that are often stored chilled alongside fruits and vegetables.

To drive down costs, Panasonic also eliminated a separate freezer compartment, which simplified manufacturing and cut down on parts, to achieve that $170 price tag for the standard model.

At the opposite end of the pricing spectrum, Panasonic has been pushing its 3-D plasma TVs, rushing early models to market in the US in March

(Published 18 July 2010, 16:31 IST)

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