Can Panasonic bring the prestige back to the 'Made In Japan' label? Shoji Itoh, Panasonic's regional managing director tells Yadullah Ijtehadi why it can.
Japan Inc is fighting back. After years of watching its market share shrink in the face of 'upstart' Korean and Chinese companies, Japanese corporate stalwarts are trying to wrest back control.
Where as once a 'Made In Japan' label evoked a sense of exclusivity and quality, now it rings, 'where-can-I-buy-a-cheaper-knock-off'. But class will endure, says Shoji Itoh, managing director of Panasonic Marketing Middle East (PMME). Panasonic's parent company, Matsushita Electric Industrial Corporation, along with fellow samurais such as Sony and Toshiba, are now spearheading a drive to bring Japanese brands back to their former glory.
To beat the Chinese dragons to the door, Panasonic has trained its sights on three high-definition technologies that its neighbouring countries are still coming to grips with: digital still cameras, plasma screens and DVD recorders. "Based on these three products we can revive 'Made in Japan'," says Itoh. "Previously, our products were bought by customers because they carried the label 'Made in Japan'; now these products are being made in Malaysia, China and [other] Asian countries. But front display panels and still cameras can revive technologies that are developed in Japan. Perhaps our cost of production is higher, yet technology-wise we are far ahead of other countries."
At the moment, demand for the three products is limited, but growing exponentially. According to Itoh, sales of DVD recorders, for example, stands at 10 million worldwide, of which Panasonic claims to enjoy a 50 per cent market share. "In Japan, DVD RAM recorders are exceeding sales of video recorders - this trend is now spreading worldwide."
This year demand for front display panels (FDP) is forecast to reach eight million pieces globally, with Panasonic aiming for roughly a quarter of the market share. According to Display Research, a Texas-based research company specialising in the FDP industry, in the last quarter of 2003 Philips enjoyed the highest unit and revenue share in FDP, followed by Samsung, LG Electronics and Panasonic. Itoh claims that Panasonic is currently the market leader - it certainly was number one in the public display panel sub-sector during the last quarter of 2003.
To stay ahead, Panasonic has poured in sizeable funds to build the world's largest plasma display panel factory; it is also aiming to bring down FDP prices to much lower than $100 per inch. The company's not far off from that target: at the moment a 42-inch screen retails at around $4350 ($103.6 per inch).
But surely the Chinese will master these technologies quickly - how long can Japanese brands hold on to their market share? "Not in this line," says Itoh ambitiously. "They can't compete with technology."
Itoh argues that to date no competitor has been able to capture Panasonic's share in tough notebooks' the 'Toughbook' series, and believes its three new technologies will remain impenetrable, at least for sometime.
While the market dynamics are changing, Panasonic has also gone through an internal revamp. This year the company assimilated its legendary National brand in its Panasonic marque, laying to rest a label that once spelled durability but lately seemed tired in the face of newer and more energetic product lines.
Regionally, PMME bought out Majid Al Futtaim's (MAF) 30 per cent stake in Panasonic Gulf, and now has full control of the company. "Panasonic Gulf Free Zone (PGF) was launched with Majid Al Futtaim in 1996 mainly for re-exports... In 2001 we established Panasonic Marketing Middle East and based our regional headquarters in Dubai," Itoh explains.
Once PMME felt at ease in the regional market, the company made the buy-out offer to MAF, who 'kindly' accepted, according to Itoh. "We paid them fair value - the equity capital of the company was Dhs30 million ($8.17 million), and there was no additional payment," says Itoh, refuting claims that MAF exited the deal at a premium.
Getting Bold
Panasonic's confidence in the market arises from its impressive performance in the region. Last year, the company's revenues stood at a stellar $1.2 billion, its key markets being Iran, the UAE and Saudi Arabia - in this order. "In 2004 our target is a 20 per cent increase; in three years till 2006, we would like the figure to reach $1.5 billion."
For Iraq, Panasonic has devised an 'open' strategy, meaning it does not wish to be tied down to a single distributor in the unstable country yet. Even though revenues from Iraq remain minimal, its share of Panasonic's regional sales already rivals that of Oman and Qatar. "In Iraq, in the first stage the demand was
for infrastructure good like air-conditioners, washing machines, refrigerators and TV. Recently, there has been demand for mobile phones, and for other entertainment products such as video cameras," says Itoh.
Like the archetypical Japanese samurai, Panasonic is biding its time to enter Iraq lock, stock and oil barrels - waiting for the right opportunity to make its presence felt in the country.
© Gulf Business 2004
