Why are Japanese electronics manufacturers losing market share and struggling to compete overseas? The answer may be simpler than you think.
To those living overseas (myself included), it seems like the Japanese no longer hold a monopoly in consumer electronics. Panasonic and Sharp televisions are competing fiercely with the likes of LG. Sony and Toshiba laptops have fallen out of favour to offerings from Acer and Apple. Companies like Hitachi, NEC, JVC Kenwood, Pioneer and Mitsubishi Electric have focused on unprofitable niche markets. Fujitsu and Sanyo are dead to all outside Japan and the business world, while Samsung makes twice the amount nine of the largest Japanese companies do combined (in profits from consumer electronics). Save the gaming and photography industries, consumer electronics from Japan no longer dominate as they have in the past.
To start with, I’ve looked into why Japan had a monopoly to start with and why that monopoly has since ended. The reasons for both are actually one and the same: innovation, quality and the evolution of technology.
To explain why Japanese society got so technologically advanced, here’s a bit of a history lesson: following the Second World War, Japan invested heavily in its education system. It paid off in the form of discipline, a high standard of education and created what was then the highest literacy rate in the world. Being completely dependent on foreign oil after the war, the Japanese economy underwent radical change during the 1973 global oil crisis in shifting its source of economic growth from manufacturing things like cars and ships to making circuits, computers and semiconductors. From then on (and to make a very long story short), Japan transformed into a knowledge based industry driven by innovation in consumer electronics and supported by a strong manufacturing sector; one that offered high quality consumer electronics at a reasonable price.
Which brings me to my first point: Japan no longer dominates either.
Think about it this way: the Koreans and the Taiwanese, perhaps even the Chinese, have not been stuck in a coma for the last 60 years. They too have made improvements to their technological offerings, to the point now where the difference (or in some cases, the lack of such) in quality between Japanese products and those from these countries is negligible at most. Reputation alone no longer cuts it. Combined with a strong yen, many would logically look to Korean or Taiwanese goods as a cheaper alternative with no sacrifices in quality.
Then there’s the evolution of technology. In the past, Japan got by stuffing the fastest processor in new products. Although the hardware used in Japanese consumer electronics is still better than the majority offered by foreign manufacturers, the market has changed. The future lies not in hardware, but in software: things like GPS, applications, connectivity and a slick user interface, not in 1 billion megapixel cameras or in 3.2 GHz octo-core processors. Japanese firms have refused to adapt this new business model and have consequently taken multiple hits to their bottom line.
There’s more. Japanese firms are no longer innovative. Gone are the days of the Walkman, the Betacam, the Betamax, the calculator and even the electric rice cooker (a whole page can be found here). The only Japanese company that seems to be doing any innovating nowadays is Nintendo, and many of the breakthroughs Japan has put forward in the last decade have been evolutionary, not revolutionary. This can perhaps be blamed on the change in Japan’s age demographics. Though difficult to manage, the innovative nature of youth is surpassed by none. And as many may know, youth in Japan are in short supply.
What I think it should do can be found in the graph below:
Theoretically, Japanese firms can bring themselves about face and change their business prospects. I certainly hope that they can.
Photo Credit: Whity / Wikimedia
Comments
re:
>>Why are Japanese electronics manufacturers losing market share and struggling to compete >>overseas
Who says the Japanese are “struggling to compete”? The fact is, lost in all these “doom and gloom” stories is the fact that Japan still has a huge trade surplus with the rest of the world. And electronic goods (as always) make up a good chunk of that surplus. The iPhone, for example, is often regarded as an American success story. But as “The Economist” magazine recently noted, the iPhone wouldn’t be possible without all its cutting-edge, high-tech components—most of which are made in Japan. And for all the talk about how Japan is supposedly “running scared” of nations like South Korea and Taiwan, it’s important to note that Japan still runs a trade surplus with those nations most years. Japan even runs a trade surplus with China most of the time.
I continue to be amazed at all the cocky Anglo-American commentators out there who tout the supposed virtues of Anglo-American capitalism and who brag about America’s “competitiveness”, when in fact, the U.S. has been running titanic trade deficits for many years. How can a nation that has giant, chronic trade deficits be considered “competitive”? And how can a nation like Japan (which has run trade surpluses for decades) be considered a nation that is “struggling” to compete?
As for Sony, unreliability of the Vaio was legendary. I can’t count the number of people in the 2000s who said to me “I have a computer, but its broken”. Vaio every time.
Sony, more than any company, was associated with the “Land of the rising Sony” in western consciousness and cliches.
There goes that Deeming award for quality…
the main reasons for Japanese dominance in the 80s was 1. unfair trading practices in the 80s ie. non reciprocal market penetration of the US by Japanese products, but 2. receiving US technology, then copying it well on a production line using Deeming quality techniques
And 3. no China to compete with. Korea (at the time a fascist dictatorship) and Taiwan (ditto) had yet to get their stuff together, as you say.
No miracle, no “unique” business practices, unless unfair trading and protectionism (who can forget the hilarious “The Rice is sacred” or “Japanese peoples’ intestines cannot handle US beef”) are “unique”.
Thats even simpler than you think.
Let’s not forget that mass-production in china is cheap because of terrible workplace conditions and low wages. Japan can hardly compete with that except by moving its own production to china, like Apple does.
Yes innovation seems to have grinded to a halt in Japan. The country that seemed futuristic only 10 years ago, now seems a bit old-fashioned and clinging to the past.
Just look at the banking system, the mobile phone market, the car industry, the internet industry and even the movie industry. They declined to keep track of what was happening in the rest of the world and now they’re getting passed by.
The government answers to this by becoming ever more right-wing and thinking that adding more anti-outsider laws can stop Japan’s downward spiral.
Save Dell, the examples you cited are incorrect. Despite its current popularity, Apple still remains fifth in total PC market share in the States. IBM has since sold off its ThinkPad division to Lenovo, which does not even show up as a blip on the map (though it is extremely popular amongst business users). Acer is third in total PC market share and has been for a while now. Toshiba maintains a fourth place standing overall and Sony, like Apple, is a minor player. I think my argument still stands. Peripheral? Hardly. Especially in the case of Toshiba.
Home electronics? True, but home electronics are hardly lucrative. When writing this article, I had TVs, computers and cell phones in mind. Not your Panasonic alarm clock.
I never said that they weren’t as good as they once were (though it may be so when it comes to cars). I said that the Koreans “have made improvements to their technological offerings, to the point now where the difference (or in some cases, the lack of such) in quality between Japanese products and those from these countries is negligible at most”.
Please read the article in its entirety before criticizing the points that you have above.
Save Dell, the examples you cited are incorrect. Despite its current popularity, Apple still remains fifth in total PC market share in the States. IBM has since sold off its ThinkPad division to Lenovo, which does not even show up as a blip on the map (though it is extremely popular amongst business users). Acer is third in total PC market share and has been for a while now. Toshiba maintains a fourth place standing overall and Sony, like Apple, is a minor player. I think my argument still stands. Peripheral? Hardly. Especially in the case of Toshiba.
Home electronics? True, but home electronics are hardly lucrative. When writing this article, I had TVs, computers and cell phones in mind. Not your Panasonic alarm clock.
I never said that they weren’t as good as they once were (though it may be so when it comes to cars). I said that the Koreans “have made improvements to their technological offerings, to the point now where the difference (or in some cases, the lack of such) in quality between Japanese products and those from these countries is negligible at most”.
Please read the article in its entirety before criticizing the points that you have above.
“Sony and Toshiba laptops have fallen out of favour to offerings from Acer and Apple.”
What? Sony and Toshiba have never been but peripheral in the U.S. laptop market, which has long been dominated by IBM, Dell and Apple.
Sony, Toshiba and Panasonic, among other Japanese manufacturers, still dominate home electronics. Samsung and LG have taken larger market share not because Japanese companies products aren’t as good as they once were, but because Lucky Gold and Samsung are vastly improved.
You may be a multi-linguist, but your understanding of the Japanese economy seems a bit lacking.