New CEO’s Panasonic revival plan

Home Appliances Director Masahiro Shinada sees a pivotal part of Panasonic’s future located in a town in the country.

At its 5,000-worker factory located in Shiga prefecture, Pansonic manufactures high-tech air conditioners with new features. It produces microscopic water droplets that fight against corona viruses and other viruses, bacteria and pollutants in the air. The technology that produces hydroxyl radicals, or atmospheric cleaners, is being used in cars, elevators, buses, and trains in Japan. Panasonic’s Ziaino air purifier sales tripled to more than $ 100 million during the Covid-19 period. The company sets a target of nearly $ 500 million in sales over the next five years. Ziaino has a high ability to disinfect and deodorize by creating hypochlorous acid. In an interview with Nikkei Asia, Mr. Shinada said that the company wants to leave the image of a disgraced television maker behind to focus on health-related products. The increase in sales is a sign of a happy revival for Panasonic’s 103-year-old home division. He does not hide his ambitions to become No. 1 globally or regionally in some areas. “We may not be as big as LG, but we can compete on profit margins. We want the rest of the world to know that Panasonic has been reborn, ”he told Nikkei Asia. This is the message Panasonic hopes investors will listen to. From April 1, Mr. Yuki Kusumi will replace Kazuhiro Tsuga as the company’s CEO after 9 years in office. During his tenure, Mr. Tsuga had to “clean up” the aftermath of the costly 2009 acquisition of Sanyo Electric, withdrew from the semiconductor industry, LCD panels, solar panels, and turned to components car, aviation. Panasonic wants to begin a new journey under the new CEO after he led a restructuring of the company’s auto division. Optimism is gradually spreading. Shares have risen more than 35% since the announcement of a leadership change in November 2020. On February 2, Panasonic raised its annual profit forecast for fiscal year 2020. The electric vehicle battery joint venture with Tesla is expected to be profitable for the first time since it opened in 2017. At the annual shareholder meeting in June 2020, Mr. Kusumi pointed out that many parts of Panasonic have low revenue. From the founder’s point of view, it means that Panasonic is not contributing as much to the community as it used to be. Konosuke Matsushita was the founder of Panasonic in 1918 without formal training. Mr. Matsushita once said that profit is the reward of giving to society, the mission of a manufacturer is to make products “cheap and plentiful like tap water”. Panasonic is the resurgent symbol of Japan in the post-war era. They manufacture and export household products like many other country companies. Although initially considered a second-class product, Panasonic has gradually gained international recognition for its quality. In the 1990s, Panasonic was a rival of Sony and Phillips in the global television market. In the mobile phone market, Panasonic also balances Motorola, Nokia and Ericsson. During the 12 months ending March 1991, they were the second most profitable company in Japan, behind only Toyota Motor and Asia’s leading consumer brand. But this giant did not adapt to the times and turned from a hero to the representative of Japan’s troubled industry. Over time, Panasonic lost its lead to Korean and Chinese rivals such as Samsung, LG, and TCL. The past two decades have been a battle that has turned the firm’s destiny. During most of that period, Panasonic’s operating profit margin remained below 5%. As of the end of December 2020, the rate was 4%, lower than 11% for Sony, 6.3% for Hitachi, and 5.1% for LG, according to data from Quick FactSet. Market value is only half of its 2006 peak and a quarter of Sony. Panasonic did not have a product that had great success on the world stage. While some are quite powerful, such as DVDs and video players with 17% market share, they are too small to support businesses that feed 250,000 people. In 2020, in Japan, Panasonic accounts for nearly 30% market share of household appliances, but globally only 2.5%, down from 2.8% in 2015. The company ranks 7, after Midea, Phillips, Haier, according to research firm Euromonitor. Even the market share of air conditioners, a strong product of Panasonic, in the past 5 years, only 4.1%, ranked 5th in the world, still according to Euromonitor data. Atul Goyal, director of research management at investment bank Jefferies, rated Panasonic “too diversified” and “too many products.” “I wish they focused first and reduced to a smaller scale, winning in 3 or 4 fields and developing them without looking anywhere else.” Other experts argue that the problem is more with marketing than with technology. In the global marketplace, marketing is important. Others commented that Panasonic in particular and Japanese electronics in general paid too much attention to technology without paying attention to convenience, ease of use, electronic features, and cost efficiency of the product. Panasonic is not alone in the transformation. Hitachi abandoned home appliances to focus on transportation and infrastructure. Sony re-formed an entertainment, image sensor and game consortium. Sharp sells itself to Taiwan’s Foxconn. New media reported that Panasonic is looking to acquire Blue Yonder, an AI company that monitors real-time supply chains and predicts demand, allowing for the optimization of inventory and logistics operations. Acquisition ambitions show that business services still play an important role in Panasonic’s bottom line, but once again questioned whether they are “overwhelmed”. After the news was released in March, the company’s shares fell 6%. Even Panasonic’s strategic partnership with Tesla hasn’t been smooth. Back in 2010, when Panasonic decided to invest $ 30 million in a startup, the electric car market was small and uncertain. In 2014, the company agreed to participate in the development of Tesla’s electric vehicle “big factory”. However, Panasonic hesitated at the idea of ​​expanding in 2018. It was not until August 2020 that they decided to step forward. The hesitation angered investors as Tesla turned the offer to other suppliers such as CATL in China, LG Chem in Korea and began to develop batteries on its own. According to analyst Goyal, Panasonic cannot even focus on a “good food” business. They should have invested more heavily, took risks, and actively expanded. In the context of a change in leadership, Panasonic adjusted and put the household division at the center. The department head believes they are regaining their “fighting spirit”. He admits that Panasonic needs to focus on areas of strength. “Working for people is this company’s original mission. That is what we want to focus on. Mr. Shinada emphasized that Panasonic must cut costs to make their prices more affordable to many foreign users. The decision to move the global home appliances division to China is an example. In China, Panasonic QR code-operated smart lockers are available at convenience stores and cafes in major cities, including the HeyTea tea chain, to serve customers without need. contact. These cabinets were installed at 98 HeyTea stores last year and are expected to grow to more than 500 this year, according to Tetsuro Homma, CEO of Panasonic China and Northeast Asia. Panasonic accounts for 30% of the Chinese frozen food display market with sales of around $ 500 million. Mr. Homma believes that the scale can be tripled, equivalent to the US market, which Panasonic is serving through the Hussmann branch. However, Panasonic’s business in China has never been easy. Its sales still stand at $ 7 billion, equivalent to 2% market share in the home appliance market, even though it was the first Japanese company to enter the country in 1987. According to Mr. Shinada, Southeast Asia is where Panasonic has a larger market share and a more solid foothold. He pledged to spend a lot of effort revitalizing the home appliances business in Southeast Asia like China. Panasonic still has to improve many things. Some analysts say that the recent rally in stock prices was purely due to the overall economy going up, not on the efforts of the company itself. CEO Tsuga admitted that when he revealed his retirement plan in November 2020. “It is very difficult to achieve growth with profits.” He places his hopes on Kusumi’s successor because “he can make harsh decisions even when others are reluctant to accept it”.