Stop production

It seems that Panasonic is planning to shut down its TV factory in Czech Republic by March 2022. Panasonic is a Japanese multinational electronics company, but it experienced huge loss in 2008 after the financial crisis. As a result, the company is trying to change its business portfolio and stopped producing plasma television. In addition to this, the Japanese company shut down several TV factories all over the world.

In fact, Panasonic had 9 TV factories including Czech, Brazil, Japan, China, Mexico, Vietnam and India in 2015. However, factories other than Czech and Brazil were shut down. Furthermore, the company will close the factory in Brazil by the end of 2021. There are only two factories where Panasonic manufactures TV and they are in Malaysia and Taiwan.

Even though the Japanese company had more than 10% of the global TV market share in 2000s, it lost the competition. Its competitors such as Samsung and LG are producing and offering cheaper brands. In addition, their quality is not bad, or is better than their price. Panasonic lost what is called “Cash Cow”, which is an existing business to create cash and has high market share.

Cash Cow

“Cash Cow” is very important for companies because they need cash to invest in new businesses. What’s more, new businesses have strong uncertainty to be successful. For example, Google is very famous for its high technologies and high profitable businesses. However, the US tech giant has experienced many failures including Google Glass.

Even though new businesses have strong uncertainty, companies should invest in them. This is because the market has its cycle and we can call it “S Curve”. In other words, there is no market which is continuously growing bigger and rapidly. Or the market will be matured in the end. If the market is not growing, what will happen in the next? In many cases, players in the market try to gain its market share. As a result, the competition would be cost reduction and the businesses could be less profitable than before.

Furthermore, when the market is growing rapidly, companies can increase their profit even if they have the same market share. This is simply because the market is GROWING. In this sense, it seems more difficult for the Japanese companies to compete in the global TV market.

Structural change

Of course, Panasonic understands the situation and that is why it wants to realize its structural change. The partnership with Tesla to manufacture batteries for electric vehicles is one good example. At first, the battery business with Tesla was not profitable and it needed huge investment. Thus, Panasonic experienced loss. However, in Tesla’s official report, the company realized the record high production and delivery consecutive quarters. As a result, the battery business can be the next “Cash Cow” in Panasonic.

Also, the Japanese company acquired Blue Yonder to enhance its software capability. Of course, it is not easy for Panasonic to realize both hardware and software expertise like Apple. Furthermore, post-merger integration (PMI) is a biggest and important issue after the acquisition. However, Panasonic does not have enough time to regain its reputation from the market and cannot help but try new businesses.