What Exactly is Meant by Panasonic’s ‘Core Business’?

1. Company Background

In 1918, Konosuke Matsushita established the company known as Matsushita Electric Housewares Manufac­turing Works, which was changed to Matsushita Electric Manufacturing Works in 1929. The company has been using the name Matsushita Electric Industrial Co., Ltd., ever since its incorporation as a joint stock corpora­tion in 1935.

Panasonic now has 591 subsidiaries and 88 affiliates all around the world (Langbehn 2019).

While the Japanese firm had used Matsushita (in Japan) and Panasonic (international business) brand names over a long period, the Japanese management decided in 2003 to unify its global brand to Panasonic with the brand slogan ‘Panasonic “Ideas for Life.”’ Since October 1, 2008, the company has officially been named Panasonic Corporation which is applied all over the world (Panasonic 2008). In 2018, celebrating the firm’s 100th anniversary of its founding, Panasonic launched a new slogan: ‘A Better Life, A Better World’ (Pana­sonic 2018).

Immediately after founding the company in 1918, Konosuke Matsushita began production of an innovative attachment plug and a two-way socket, both of which he designed himself. These new products became very popular, earning the company a reputation for high quality at low prices. Panasonic (Matsushita Electric) began printing English instructions for its products in 1931; and in April 1932, Konosuke Matsushita set up an export trading department to carry out research and marketing development in order to evaluate the com­pany’s international sales potential. This represented a truly innovative approach in an industry where, in Japan, exports were traditionally left to large trading houses (as a part of Keiretsu, which was named ‘Za- ibatsu networks’ before 1945). With a unified policy for domestic and export markets, Panasonic was able to actively expand its export business. With exports increasing, Konosuke Matsushita incorporated the ex­port trading department as the Matsushita Electric Trading Company in August of 1935. In 1936, the founding owner sent three people to the US and Europe in order to learn about advanced industries there. They visited about twenty local factories, including Philips and Siemens (Matsushita 2008).

In 1952, after intense negotiations, Panasonic (Matsushita Electric) concluded a technical and capital co­operation agreement with Philips of the Netherlands, setting up Matsushita Electronics Corporation as an international joint venture. This was the result of Konosuke Matsushita’s efforts to find an overseas business partner, convinced that the adoption of advanced Western technology was essential for Japan’s post-war re­construction.

In 1954, Matsushita Electric allied with Victor Company of Japan (JVC) a record player producer that was established in 1927 by the Victor Talking Machine Co. of the United States. JVC merged with Kenwood in 2008 to become JVC-Kenwood. The Panasonic-JVC/Kenwood partnership lasted for 58 years until 2012 when Panasonic reduced its equity and withdrew its management.

In 1959, Panasonic expanded its business activities abroad. Konosuke Matsushita founded Matsushita Elec­tric Corporation of America in New York as its first overseas sales company. He urged his managers to adapt to their new host nation and to apply themselves to providing products that Americans would appreciate. The formation of an overseas sales network proceeded at a rapid pace.

The first European sales company established was National Panasonic GmbH in West Germany in 1962, which was used as a base to enter the European market. Since then, various sales companies have been established throughout the world. On March 22,1974, Motorola Inc. of the US and Matsushita Electric of Japan signed a con­tract for the purchase of Motorola’s television set operations in the US and Canada. The purpose of the acqui­sition was to start a television business in the US market. On May 22,1987, Matsushita Electric and Beijing City in the People’s Republic of China signed an agreement to establish an international joint venture to produce cathode ray tubes (CRTs) for color TVs. This was Matsushita Electric’s first investment in China in the post-war period. The new company, Beijing Matsushita Color CRT Co., Ltd., started production in June 1989 with about 1,400 employees. The Chinese subsidiary first produced 21-inch color picture tubes and later added 14-inch and 18-inch tubes. The products were supplied to color television set plants in China (Matsushita 2008).

MCA Inc. joined the Matsushita Group in November 1990. MCA was a multibillion dollar diversified interna­tional entertainment conglomerate engaged in the production and distribution of theatrical, television, and home video products, as well as the operation of two amusement parks in Hollywood, California, and Or­lando, Florida. MCA brought a diversity of new capabilities into the Matsushita Group and also the promise of innovation in the field of electronic entertainment through the integration of hardware and software prod­ucts. However, in June 1995, Matsushita Electric divested its engagement in business fields diversified from consumer electronics and transferred an 80 percent share of equities in MCA Inc. to the Seagram Company Ltd., a Canadian liquor manufacturer (Matsushita 2008). Obviously, Panasonic worried about moving too far away from its consumer electronics business which served as the core business since the firm’s foundation.

In the television set business, Panasonic concentrated its research and development resources during the 1990s on the development of plasma technology. In 1996, Panasonic developed the world’s first 26-inch plasma television set. In the field of plasma displays, the Japanese electronics firm was technologically ahead of its time and truly served as a benchmark for other manufacturers. Would this be worthwhile in the future?

2. The Market at the Beginning of the 21st Century

In 2001, as the market for plasma television set panels was expected to grow significantly, Panasonic (Mat­sushita Plasma Display Co. Ltd.), began full-scale mass production of modules targeting high picture quality at an affordable price. Panasonic aimed to be the number one plasma display panel manufacturer in the in­dustry by strengthening its manufacturing structure, including the commencement of production at its plant in China in December 2001 (Matsushita 2002).

Also in 2001, Panasonic centralized its domestic manufacturing locations, having discontinued monitor tube production and implemented the joint global supply and purchase of television sets. As a pacesetter in the digital television set industry, Panasonic led the market in televisions with digital satellite tuners. In 2002, the company extended its line-up of flat-surface cathode ray tube television sets and augmented its plasma display panel product portfolio with new 36-inch and 42-inch models, followed by a new 50-inch television set model, all with the industry’s highest levels of brightness and contrast to date and all equipped with digital satellite tuners. As a result of the upcoming flat-panel technologies, which resulted in a continued decline of the cathode ray tube television set business, Panasonic decided to reduce cathode ray tube production incrementally, which ended in the closure of all remaining cathode ray tube related operations worldwide beginning in 2006 (Matsushita 2005).

In April 2002, Panasonic established eP Corporation, a common joint venture with Toshiba Corporation and Hitachi Ltd., which launched the world’s first trial service integrating digital broadcasting and high-storage data casting. The introduction of this service enabled users in Japan to access multiple channels with ad­vanced functions on demand as well as to participate in home shopping, home banking, and other interac­tive services (Matsushita 2002). However, customers who have an affinity for using interactive services can use their internet-linked computer and do not necessarily need a television set. Thus, the ambitious plans to create new markets for television sets with compatible terminals could not be realized as expected, simply because computer, laptops, tablets and, last but not least, smartphones developed over time and became major end-user devices for internet services.

The decline of the conventional cathode ray tube television set business, which came along with an increasing cost pressure in flat-panel technologies, semiconductors, and other electronic components, caused a severe loss for Panasonic in 2002. Its efforts to reduce fixed costs and rationalize activities in parts and material purchasing were not enough to offset negative factors stemming from the price decline. Furthermore, the company incurred various restructuring charges, which included USD 1.23 billion related to employment re­organization programs, USD 1.35 billion for impairment losses associated with the closure or integration of several manufacturing locations, and a write-down of investment securities, resulting in a net loss of USD 3.24 billion (Matsushita 2002). In terms of sales and net income, Matsushita recovered stepwise after 2002 and successfully managed a turnaround. The restructuring activities of 2002 resulted in an increasing profit.

Mainly because of the initiative of Panasonic, which concentrated on plasma panel technology but aimed to manufacture and sell liquid crystal display (LCD) panels for flat-panel TVs, IPS Alpha Technology started operations in 2005 against an industry background of increasing international demand for LCD TVs. TV man­ufacturers faced a growing necessity to ensure a stable supply of high-quality panels at reasonable prices. Thus, Panasonic, Toshiba, and Hitachi decided to join forces to enable themselves to effectively respond to production price pressures and rising customer expectations for high-definition picture quality. Because the IPS Alpha joint venture incorporated Hitachi Displays’ world-leading In-Plane-Switching (IPS) mode system technology, the three partner companies enjoyed favorable conditions for gaining highly competitive mar­ket positions based on standardization and high capital-efficient mass production of IPS mode LCD pan­els (Hitachi 2008; HitachiDisplays 2004). In June 2010, IPS Alpha Technology finally became a full-fledged wholly owned subsidiary of Panasonic Corporation. Beginning on October 1, 2010, the subsidiary company was named Panasonic Liquid Crystal Display Co., Ltd (Panasonic 2010).

The incremental turnover of the joint venture majority by Panasonic was due to the fact that the global LCD business had developed successfully since 2006. This market attractiveness meant that existing and new competitors from Japan, South Korea, China, and Taiwan sharply increased their capacities during that time which contributed to various price reductions and manufacturing cost pressures (Panasonic 2011, 2013, 2015a).

What happened between 2006 and 2014 in the ups and downs is rather similar to a roller coaster ride (compare Figure 4.4).

Both 2012 and 2013 show the greatest loss (more than US dollars 6 billion each year) in Panasonic’s recent firm history. Sales of flat-panel TVs and mobile phones plummeted in the period with the result that Panasonic turnover has shrunk from around USD 105 billion (2011) to around USD 65 billion (2013 and 2014). As a result Panasonic moved to reconfigure its business units following the purchase of Sanyo Electronics, including revamping its television and computer chip operation and cutting jobs (Halliday 2012).

3. New Businesses Introduced, Other Businesses Disappear

For too long a time, Panasonic focused its research and development efforts on plasma displays, which the management thought would become the leading display technology. However, liquid crystal display (LCD) panel technology assemblers like Samsung, Sharp and LG Electronics improved their display performance significantly in terms of picture brightness, sharpness, energy consumption, and viewing angle, which meant that it became increasingly difficult for Panasonic to be competitive. In 2013, Panasonic announced that pro­duction of new plasma units would end; and all related operations would be wrapped up by March 2014. Three of Panasonic’s factories stopped building new units. In the press release, Panasonic said that due to rapid, drastic changes in the business environment that led to increasing supply, which caused price pres­sure from more affordable LCD TVs, the ‘unhappy decision had to be made.’ In 2014 Panasonic has started to divert its plasma research and development efforts to organic light-emitting diodes (OLED). The company sees televisions using the OLED technology as one of the key future products (Savov 2013). In addition to TVs, OLEDs are assembled in products used in the automotive industry, mobiles, tablets, and virtual reality devices. OLED panels continue to be a significant display technology trend adopted across the world, with larger screen sizes, and improved 8K resolution. In fact, since 2014 Panasonic is able to increase its net sales and generates profits. The OLED market is expected to grow around 15 percent per year from 2019 until 2024. Meanwhile, Panasonic is positioned as third in the highly competitive OLED market after LG Electronics and Samsung from South Korea which hold the leading positioning in global OLED business and competition becomes increasingly intense (Mordor 2019).

At the all-time height of its losses in 2012, electric car manufacturer Tesla and Panasonic announced that to­gether they would develop nickel-based lithium-ion battery cells for electric vehicles assembled in the newly built gigafactory in Nevada, US (Garthwaite 2010). Over the years Panasonic became almost the exclusive sup­plier of batteries assembled in Nevada for electric cars such as model 3 from Tesla. For a long time, Panasonic has also been delivering batteries to Toyota (Higgins and Mochizuki 2019).

As a result of the firm’s entering and leaving business segments, Panasonic has modified its organization accordingly. Since 2019, the new organization, led by Japanese president and chief executive officer, Kazuhiro Tsuga, now consists of four major business units: Appliances Company, Eco Solutions Company, Connected Solutions Company and Automotive and Industrial Systems Company (compare Figure 4.8).

The healthcare division, introduced in 2002 to Panasonic’s organization, has been eliminated. Instead, in 2019 Panasonic’s strengthened its ‘Appliances Company’ business unit which offers various kinds of products such as television sets, smart-energy devices, home entertainment equipment, laundry machines, telephones, vacuum cleaners, refrigerators, air-conditioning units, electric shavers, and household kitchen equipment. Panasonic offers a range of health-conscious devices such as the slow juicer MJ-L700, which makes it easy to prepare fresh juices, sorbets and frozen yoghurts. Panasonic introduced various new prod­ucts for bathroom such as shavers (compare Figure 4.9) and oral irrigators for thorough tooth cleaning (Langbehn 2019). At the beginning of 2019, according to its management, Panasonic has positioned itself in strategically important future segments such as two full-format digital single lens mirrorless (DSLM) cam­eras named LUMIX S1 and S1R. However, Panasonic competes against highly reputable camera makers such as Nikon, Canon and Sony, which try to increase their market share similar to Panasonic in the advanced camera business. In the entertainment division, Panasonic sells newly developed Dolby Atmos Sound Bars and a brand new range of OLED TV models (Langbehn 2019).

Panasonic is also expanding its Automotive and Industrial Systems Company. The business covers in-car infotainment-related electronics, batteries, energy solutions, semiconductors, and liquid-crystal display de­vices (LCD). With a focus on the automotive industry, Panasonic intends to work to enhance its competitive positioning as an important component supplier for global manufacturers of electric cars.

Source: Glowik Mario (2020), Market entry strategies: Internationalization theories, concepts and cases, De Gruyter Oldenbourg; 3rd edition.