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Friday, June 28, 2013

No. 33: A company is too small to please everyone in the global market (June 29, 2013)

Management:
Panasonic will reportedly withdraw from the plasma TV business in 2014. The withdrawal is a wise decision because the company recorded a consolidated net loss of more than 700 billion yen two consecutive years. The cumulative investment of more than 500 billion yen will fall into oblivion with the discontinuation of the plasma TV business. Panasonic launched a plasma TV in 1997 with the hope that it would replace the cathode-ray tube TV. However, the plasma TV was outdone by the liquid crystal display (LCD) TV, and it has currently a market share of less than 10%. The extraordinary low market share means everything. (Photo) Panasonic's plant for plasma TVs. (Photo) The world largest plasma dispaly by Panasonic

Even though Panasonic is a huge company, it is totally useless and hardly possible to continue the plasma TV business and LCD TV business simultaneously, given the fact that the former is plagued by such an extremely low market share. The TV business is so huge, and TV is a commodity now. Even though Japanese TVs are famous for high quality, long durability, and multiple functions, they can hardly compete successfully with amazingly low-priced TVs from Korea and China. At present, the greatest TV market is not advanced countries but newly industrialized countries where price speaks for itself. The Panasonic case gives the lesson that a company is too small to please everyone in the global market. It can be said that Samsung of Korea, which focused on LCD TV to become the market leader, realized this fact earlier than Japanese electronics giants.

The same is true in the ongoing merger trend of the shipbuilding business. The merger between Kawasaki Heavy and Mitsui Engineering and  Shipbuilding did not materialize. In view of the growing competition and shrinking sales, pursuing economies of scale is vital for survival. As in the case of the TV business, Japan will clearly have to survive tough competition with strenuous efforts to launch competitively-priced products. It is a matter of concern that most Japanese companies are satisfied with the current status because they are increasing sales. However, what is most important is the share in the market. If a company decreased the share because competitors increased sales more than it did, it has to hold a meeting for reflection instead of a banquet for celebration. A decreased market share is a red signal asking a company to be alert. (Photo) A double hull ship built by Mitsui Engineering and Shipbuilding 

In Europe, it is not unusual that two companies headquartered in two different countries merge in pursuit of economies of sales. In a sense, today is the days of cross border alliance. Knowing the amazing growth of Samsung of Korea, Japan is somewhat slow in reorganizing and integrating its domestic business structure. Perhaps, it may originate from the Japanese culture that asks us Japanese to stick to the importance of “Never give up.” As time goes by, we have to change of our value to survive in the day of global competition. Like it or not, profits tend to concentrate in leading companies in the world market. As Jack Welch of GE told, “No company can survive unless it is the market leader or the market follower.” His thoughtful insight seems to give a warning about the current situation of Japanese companies. In this sense, Daikin that focuses on air-conditioners and develops its competitive edge with steady and continuous efforts to expand business worldwide seems to give a good example to follow.  

Daikin's latest air-conditioner 
featured by advanced technology

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