A reflection on Panasonic’s annual plan for 2010

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Ken’s notes on Panasonic:

http://panasonic.net/vision/amp/ is the link to Panasonic’s Anil annual management plan (AMP)

Panasonic’s annual vision and strategy plan notes:

the new Panasonic group is sorting out how to incorporate Sanyo electric Company into their business while maintaining their current management philosophy of “contributing to the progress and development of society and enriching people’s lives through manufacturing”

Panasonic focusing on products connected to people’s lives, Sanyo has been a key player in solar cells rechargeable batteries and industrial components. The addition of Sanyo has broadened the depth and scope of the group’s business and Panasonic is looking to leverage group synergies

they hope to gain from the wisdom of both companies and become leaders in the fields of environment and energy, looking for bold strategies to lead to growth. They hope to eliminate duplication and conduct rapid restructuring as necessary to make a single ideal company.

Looking forward to 2018, they want to emphasize green life innovation and green business innovation, which combines customers and their own business practice. They are looking to leverage global networks and improve the many to one relationship to individuals to maximize lifetime customer value. They want their subordinate businesses to collaborate spontaneously and autonomously in diverse fields to achieve flexible dynamism and consistent collaboration through autonomous management.

Note to self: the image of spontaneous combustion came to mind.

They plan to measure performance using the following indexes: global excellence index and green index. Global excellence index values having multiple key products that hold top market share in the world, achieving ¥10 trillion in annual sales and 10% or more of operating profit and return on equity. Green index aims to reduce CO2 emissions by 50% in manufacturing internally and by improved performance in their customer appliances

implementation framework: this plan represents a new focus with a goal of becoming the number one green innovation company in the electronics industry by 2018. They will examine growth and the environment together. They will shift from Japan oriented to global oriented products and services. They believe this growth will return them to profit.

Four businesses at their center: appliances, black boxes, automobiles, digital AV networks.

Six business areas for growth: energy, HVAC, network AV, security, healthcare and LED. They believe they have unique solutions for homes and buildings that are unrivaled in the industry and that this uniqueness gives them their competitive advantage.

The next section of their report itemizes initiatives within each of the six business areas and they examined the connection between Panasonic and Sanyo. They incorporate sales and profit projections and positioning objectives within their industry. Of special note are initiatives in energy, healthcare and appliances.

They have identified overarching strategic themes: manufacturing and management reform: they are aligning their regional production with regional demand to create regional centers of excellence. They intend to use communications to tie together these regional operating sites, tied together with online search and social networking services which links internal operations with customers. They think social network services affords them insights into lifetime customer management. Their merging various group management offices into a single innovation division. The environmental innovation subcommittee will look at initiatives that cross product and business area boundaries.

They even have a management slogan for 2010, which has Deming rolling over in his grave, entitled “unite our efforts – drive eco-innovation”

note: this visioning document is not to be confused with the 2009 major restructuring Panasonic undertook which affected their home appliance, automotive motor and industrial motor businesses. http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=6479:JP&sid=abp_RkElyrco

analysis:

  1. the Panasonic group falls into the area of global industries identified in figure 15.1 on page 372 of our text since their lines of operations feature high levels of international trade and high levels of foreign direct investment. You can notice their intent to shift from a Japan centric to global centric focus as recognition of the increasingly important global trade in energy and healthcare. This implies greater competitive pressures and reduced profit margins and so their 10% ROE is reflective of that intense competition.
  2. The grouping of healthcare, home appliances, energy, automotive instruments, and industrial products exposes them to a wide variety of specialized competition. It’s not clear to me that they have a natural alliance and synergy possible among those six lines of operation.
  3. There’s a lot of jargon in their management vision statement about finding the synergy spontaneously into diverse companies and rapidly reorganizing to eliminate duplication. The fact that both are Japanese oriented gives them a leg up on solving cultural differences but we know that that kind of merger is nontrivial.
  4. Applying Porter’s national diamond framework does not suggest that Japan has a natural advantage in the areas of energy and healthcare although they have advantages in AV and electronics and automotive to exploit. You would think that Japan would have more of an advantage in healthcare with their aging population and commitment to social support networks. This section in the text begs the question of how Porter’s national diamond framework really applies in the world of multinational and transnational corporations.
  5. The annual strategy document from Panasonic does not address the ideas of national resource availability and tradability as determinants of geographical location except where they note that by maintaining a regional focus on production and sales they hope to take advantage of local conditions. This is essentially the same idea that Brenda and I used in the BSG with our Africa first idea.
  6. I was interested to note the discussion of the shoemaker Ecco’s value chain since I am a long-term customer and will only buy Ecco shoes and noticed that many of their value chain decisions are similar to the ones we used in BSG.
  7. Table 15 four suggests that Panasonic is going to be challenged in their idea of locating production completely within a region when you look at the dispersion of Hewlett-Packard‘s laptop components production.
  8. It’s not clear from the vision document how they see the alliance and joint venture of Sanyo and Panasonic will bring synergies. It doesn’t look like they had that much overlap except in areas where they were already strong in the manufacturing of electronic components.
  9. The itemized list of benefits of a global strategy on pages 386 and 87 are all prominent in Panasonic’s vision document: cost benefits of scale, global orientation, exploiting national strengths, mutual learning, strategic competition by joining forces.
  10. Figure 15 sevens image of Japanese centralized hubs looks very much like the end state Panasonic proposes to achieve with their merger with Sanyo with centralized innovation pushing ideas to separate business areas and lines of operation.
  11. Chapter 16’s discussion of diversification decisions: it’s not clear how Panasonic hopes to achieve a competitive advantage within healthcare unless it’s in medical devices, but that’s not made explicit in their strategy document.
  12. The text on page 405 discusses turbulence and transaction costs and the strategy document suggest that those are trivial.
  13. Motives for diversification: Panasonic mentions both growth and risk reduction and they hope to achieve these through shared knowledge and leveraging strengths. There was no discussion of how to leverage the goodwill and intangible resources associated with Sanyo brand and how that carries over into a single Panasonic group.
  14. The amount of diversification and specialization in this merger seems to be slight to me and that the basic lines of operation between Sanyo and Panasonic sufficiently overlap to minimize the effect of disparate lines of operations. That’s not necessarily automatic as we know from the difficulties in merging Compaq and Hewlett-Packard.
  15. Concerning the M form:
  • dispersed decision-making: this could be possible if Panasonic truly empowers their regional production and sales centers to adapt to local conditions
  • allocation of decision making: the idea of centralized innovative centers that push strategies to the different lines of business works against the idea of local autonomy although it does seem to try to consolidate research and development in a centralized location for efficiency
  • minimizing coordination costs: to the extent that they rapidly reorganize after examining the overlap of Sanyo and Panasonic culture and operations suggests that Panasonic is aware of the cost of protracted analysis and is looking to get the low hanging fruit through rapid reorganization.
  • Avoiding goal conflict: they’ve settled on two primary goals of performance and eco-culture and have tied it both to internal operations and external products in this narrow focus bodes well for their strategy. There are few competing demands.
  • Resolution of agency problems: there was no discussion of how to empower local decision-makers in the regional centers to benefit from their initiatives. It still sounded very Japanese in that central offices would benefit as a whole from local initiatives.
  • Mintzberg’s cautions on two key rigidities of multi divisional structures:
    • constraints on decentralization: it’s not clear how corporate top level production goals will be allocated to local regional centers in Mintzberg would caution that this should be explicit in order to not prematurely stifle local performance and initiative
    • standardization of divisional management: Mintzberg advises that it’s normal to see an attempt to standardize control systems and management styles and he would observe that Japanese centric managerial practice may not be suitable for this expanded global focus in the new vision document. Anecdotally, I know this is a concern as my brother relates stories of what it’s like working for Japanese managers transplanted to America and auto manufacturing plants.

Finally: here is some real world news from currency markets that put the discussion of “ountry vs company” as the unit of analysis into perspective http://news.yahoo.com/s/ap/20100829/ap_on_bi_ge/as_japan_boj_meeting;_ylt=AvBfxNtxniyJsWRwQmHp7h1v24cA;_ylu=X3oDMTM5cWlmOGhtBGFzc2V0A2FwLzIwMTAwODI5L2FzX2phcGFuX2Jval9tZWV0aW5nBGNjb2RlA21vc3Rwb3B1bGFyBGNwb3MDNwRwb3MDNwRzZWMDeW5fdG9wX3N0b3JpZXMEc2xrA2JhbmtvZmphcGFudA–

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