Panasonic focuses on growth in Asia; positions itself as provider of eco technology and solutions

FOR just about every other Singapore family in the post-independence years, the National brand rice cooker was a must-have home appliance when they moved into their spanking-new HDB flats where electricity was readily available at the flip of a switch.

With the passing years, technology has improved and Singaporeans are spoilt for choice when it comes to selecting high-tech gadgets and household electrical goods. Panasonic, the company behind the National brand, has expanded its range of products to include TV sets, digital cameras, lithium-ion batteries, solar panel modules, laptops and car navigation systems. This makes the company Japan's largest manufacturer of electrical appliances.

Interestingly, the humble rice cooker, whose durability has helped burnish Panasonic's brand image over the years, is still a growing business for the company even as fancier rice cookers of other brands emerge. For example, Panasonic's Chennai factory used to make 200,000 rice cookers a year. However, with some advertising, the same factory now needs to make a million rice cookers a year to keep up with the demand. "The rice cooker is still very much a healthy and profitable pro­duct category for us," says Yorihisa Shiokawa, managing director of Panasonic Asia-Pacific, in an interview with Management@Work for The Edge Singapore.

Shiokawa, a graduate of the elite Waseda University, joined Panasonic Corp in 1974 and was appointed to his present post last April. In between, he served in various capacities in Europe, including as managing director of Panasonic Polska, Panasonic Eastern Europe and Panasonic Marketing Europe.

Turnaround in 1QFY2013

The company, which will celebrate its centennial in 2018, was founded by Konosuke Matsushita to supply bicycle lamps. Known as Matsushita Electric Industrial Co Ltd, the company changed its name to Panasonic, after its biggest product brand. Together with Sony, Toshiba and Sharp, Panasonic was once the global leader in consumer electronics, selling TV sets, refrigerators, video recorders­ and other household appliances in every part of the world.

However, competition has become keener and the persistently strong yen has not helped these exporters. For FY2012 ended March 31, Panasonic posted its worst-ever loss of ¥772 billion. Sales had dropped 10% to ¥7.8 trillion in the same period. The company, however, has quickly swung back into the black. On Aug 1, it announced that for the three months to June 30, earnings came in at ¥12.81 billion, reversing a net loss of ¥30.4 billion in the year-earlier period. The turnaround, the first profitable quarter after 1½ years of losses, was driven by cost-cutting measures that included lay-offs and plant closures.

Shiokawa admits that it hasn't been easy for the company. It might have some cutting-edge products in its domestic market, such as mobile handsets, but it is not always easy to sell them outside Japan, as there are significant software issues to overcome. Nevertheless, he believes that within Asia-Pacific, the region under his charge, there is still a broad range of products with the Panasonic brand name that has significant cachet among consumers.

In fact, he has spent a lot of time over the past year visiting the various markets under his responsibility, including those that were not a priority for the company, such as Bangladesh, Myanmar and Cambodia — countries closed to foreign trade or with import restrictions. "I am very surprised that the dealers there are asking Panasonic to relaunch in those markets," says Shiokawa.

He thinks there is a demand for Panasonic products in these developing markets not because the company offers the latest and most feature-packed gadgets but because its products are reliable. "Panasonic has earned consumers' trust, and the good brand image is because of the high product reliability built over the years by the rice cookers, radio cassette and video cassette players."

Product localisation

For markets in which Panasonic is already seeing brisk sales, the company's size and broad product portfolio and volume mean it is able to make certain changes to suit the requirements or preferences of consumers. India, according to Shiokawa, is a very interesting example of such product localisation.

Most consumers want a balanced mix of style, picture and sound quality in their LCD TV sets. A slim TV set — a nice departure from the fat cathode-ray tube ones of the previous era — has to also go with thin bezel (the frame that goes around the screen). However, the bezel is also where the TV's built-in speakers are found. If a bezel is to be kept narrow, it means that there is a trade-off in the sound quality, which most consumers elsewhere can accept.

However, for the Indian market, the consumers want their TV sets to be loud — very loud in fact. Panasonic has developed a feature called "Sound for India" for its range of home audio and TV products, where sound volume and quality take priority. "We have to develop special models with bigger speakers and output; they don't mind the thick bezel, they don't care, as long as the TV set gives good sound," says Shiokawa.

Such modifications for local markets can also be seen in air-conditioners — another best-seller with the emerging middle class of India. Air-conditioning units tend to come with moveable louvres, to circulate the cool air evenly in various parts of the room. However, louvres mean more moving parts and more complexity in construction and, thus, higher costs. Indian consumers like the cool air to be directed straight at them, which means Panasonic can skip the whole louvre system and save costs in the process.

Moreover, Indian consumers, according to Shiokawa, like to keep their air-conditioning units on all day and at a constant temperature. This means Panasonic need not provide remote controls, thus making the product simpler and the supply chain shorter.

Recently, the company introduced four colour choices for its air-conditioners instead of one previously. "These may be small details, but they are important. They have helped us capture demand in markets such as India, as they are very well appreciated by consumers," says Shiokawa.

Beyond consumer electronics

Of course, Panasonic doesn't produce just consumer electronics, a highly competitive business with thin margins. It has also created numerous products and systems that are not quite household names but play important roles in their various niches.

For example, since 1996, Panasonic has developed a whole line of "Toughbooks" — rugged handheld computers and tablet computers­ that are designed to withstand vibrations, drops, spills, extreme temperature and other rough handling. The computers are targeted at users in the military,­ construction, healthcare and forestry industries.

Panasonic not only sells these products but it has also tried to create a whole ecosystem around them. On Aug 30, it announced the launch of the Toughbook Asia Developer Programme, through which it hopes to increase the range of Android-based applications designed for its Toughpad line of tablets.

Another interesting but under-the-radar segment of Panasonic's business is the inflight entertainment system of commercial airlines, of which the company says it has a 70% market share. "Singapore Airlines and Emirates are some of our customers; they are happy with the quality of our products," says Shiokawa.

Previously, Panasonic was selling only the screens, but it has since expanded into contents, sourcing for movies and other entertainment programmes for the inflight entertainment systems. "The Panasonic brand is not shown on the product, but it's a very good business segment for us," says Shiokawa.

Eco solutions for eco town

The bigger focus now, for Panasonic, is to position itself as a leading provider of technology and solutions for a sustainable future. Its offerings are already in use at high-profile developments such as the Tianjin Eco-City and the Dalian Best City in China.

Closer to home, the company is involved in providing its products for Punggol, slated to become Singapore's largest housing estate and the country's first "eco town". Last August, Panasonic began a test bed for "total energy solutions" by installing its photovoltaic systems to supply renewable energy for common facilities such as lifts, water pump and lighting to help achieve "zero emissions".

The company is also supplying its lithium-ion battery to store excess electricity generated by the solar panels for use at night and to serve as a back-up electricity generator. As part of the test, Panasonic also installed its Home Energy Management System in about 10 Punggol households to help these households monitor their power, gas and water usage patterns.

Panasonic is especially keen to take part in the Punggol pilot, which is meant for existing households and not just newly built apartments. If the test is successful, it will open the doors to a much larger market for Panasonic's products. "This is retro­fitting, not [a completely new project]. Demand for retrofitting will be bigger than for new projects," Shiokawa explains.

Indeed, with major markets such as the US, Europe and even Japan seeing flat or negative growth, Shiokawa and his team at Panasonic Asia-Pacific know they have their work cut out if the company is to avoid going into the red. To streamline its operations, the company had to carry out a rationalisation exercise. Even then, Shiokawa acknowledges that the challenges are enormous. "There's a lot of work for us to do; all our staff have no time to feel bored," he notes.

This story first appeared in The Edge Singapore weekly edition of Oct 22-28, 2012.

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