Management
Such gloomy news items as the failure of
Elpida Memory and the heavy deficit of leading consumer electronics makers are
widely discussed in media, and these miserable results are attributed to the overemphasis
on the selection and concentration strategy. However, the misery of the leading
consumer electronics makers is because of the lack of market and customer segmentation.
It provides a good lesson that unless a company divides products, markets, and
customers into segments before implementing the selection and concentration
strategy, it will get involved in price competition and have it results badly
damaged. Hitachi, once dubbed as a sinking big ship, has recovered dramatically
because it abandoned unprofitable business fields and concentrated its
resources only on profitable and highly prospective business fields. This is
the selection and concentration strategy in the true sense of the word.
The same is true of Elpida Memory. The
company put its resources exclusively to produce high-performance and
high-quality products at a low cost to satisfy the requirements imposed by the
former NTT group companies. Today, consumer electronics and semiconductors are
highly commoditized. Doubtlessly, highly commoditized products have a tough
game in the age of global competition even through they are high in quality and
performance. It is hardly possible for Elpida Memory to compete successfully
with competitors from the countries where labor costs are terribly lower than
in Japan. In addition, data and information of a product race around the world instantaneously
to allow them to underprice their products, like it or not.
It is totally the geocentric theory
centered by Japan to think that high-performance and high-quality products
offered at a low price will be readily accepted by consumers worldwide,
enabling a company to achieve a sales increase. The Japanese market is just one
of the markets on the earth, and the global market does not go around the
Japanese market. As Samsung of Korea is doing, companies competing in the
global market have to station their employees in countries around the world to know
the requirements local consumers in an honest way. Samsung’s great presence in the
global market is the results of these efforts. Highly appreciated Japanese yen
is just one of the factors that deteriorated the results of Japanese home electronics
makers.
In addition, it is absolutely necessary to study
if the new market is suitable to a company. Kodak is said to have failed
because of the overemphasis on the selection and concentration strategy.
However, the real cause of Kodak’s failure is that the printer market is too
small for such a big company as Kodak to do business. A company cannot achieve
good results in a market that is too small in comparison to its company size. In
a similar way, a company cannot do well in a market that is too big in comparison
to its company size. As proverb goes, the crab makes a hole suited to its shell
(Cut your coat according to your cloth). It is vital to study the strength of
your company and the size of a new market carefully before cultivating or participating
in a new market.
Even in today’s severe business
environment, Iris Ohyama and Kobayashi Pharmaceutical are growing quite
rapidly. These two companies focus on how to avoid excessive competition. That
is, they set up a business domain not from the industrial field but from the
phrase “the business to create something new that consumers want to have in
their life. The business domain of these companies is neither the manufacturing
industry nor the pharmaceutical industry. Coincidentally, they are
ex-wholesalers. It may be said that they know well how to understand the needs
of consumers because they used to be wholesalers.
The days have come to define the business
domain of a company as they show. In the past, NEC achieved a dramatic growth
with the help of its famous business domain “C&C (Computer and
Communication)” that means the business based on the merger between computer
and communication. NEC, however, has deteriorated its results drastically partly
because it was not able to create a new business domain to succeed the C&C.
It is rather hard to increase sales only in the business domain of the home
electronics manufacturing in today’s business environment where globalization
is developing fast, like it or not.
