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  • Jul 11, 2014
  • Updated: 8:03pm
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THE INTERVIEW

Ex-Panasonic chief schools Chinese firms on cracking tough US market

Japanese executive get a sense of déjà vu from his experience introducing Panasonic to the US decades ago, and Chinese firms' current push

PUBLISHED : Friday, 13 December, 2013, 1:38pm
UPDATED : Saturday, 14 December, 2013, 1:34am

If there’s anyone who knows how to sell foreign-made goods to an American consumer, while facing aggressive local competitors and often antagonistic politicians, it’s Hideaki “Don” Iwatani.

Chinese companies are grappling with precisely that dilemma might do well to heed his advice.

The former chief executive of Panasonic North and South America has three key messages: offer relevant products, build a strong brand and nurture consumers. The biggest challenge, however, is handling headquarters back home.

Iwatani helped introduce the Japanese electronics brand to the United States in an era when “Made In America” was a common appendage on household items.

He often got “stupid requests from headquarters” in Osaka regarding sales and strategy. The firm would sell a ton of product in Tokyo and ask why you couldn’t sell it in the US, he relates.

"Thank you very much for your suggestion,” he would reply, before presenting the board with reasons why the US market was unsuitable.

One example: in the 1980s, when Japanese favoured ever more compact electronics, US households preferred large ghetto blasters and shoulder-mounted VHS camcorders. He argued that point for two years.

His gripes will be familiar to many overseas executives struggling with the dual challenges of managing a company in a foreign land while fending off impractical expectations from head office.

Just over 10 years ago, he noticed that a resurgent Apple had developed a new micro-hard disk for music storage. It was called an iPod. “I reported this to our engineering department in Osaka … the engineer laughed,” Iwatani said.

Back in Japan, the iPod was seen as too flimsy for Panasonic’s exacting consumers. Having slowly climbed the value chain since the 1950s, Panasonic saw the iPod as a step backwards.

Returned products as a big focus for the firms. “[It was] the one philosophy Japanese companies care about … even one or two pieces [returned], they care too much,” he said. “Apple said within 4 to 5 per cent of exchange is OK.”

But Apple persevered. In the same manner that Panasonic had revised its earlier transistor technology to introduce innovative radios, cassette players and home recording systems like VHS and DVD, Apple’s iPod was followed by the iPhone, iPad and, within a decade, domination of the global mobile handset and music device market.

The glory days

“I am very emotional to talk about the story of Panasonic,” 68-year-old Iwatani said. “Panasonic was number one 15 years [ago] when I was US chairman.”

Panasonic was hugely successful in the US from the late 1960s through to the 1990s before stumbling under the onslaught of American and South Korean manufacturers.

American people said the Japanese were stealing American business but today nobody thinks about that
Hideaki Iwatani, former Panasonic North and South America chief

At its peak, Panasonic had 15 per cent of the global television market, and alongside Sony, the firm garnered global respect for Japanese technology. But it reported a US$10.2 billion loss last year, and recently closed several factories, ending production of plasma televisions.

The firm’s earlier rise to dominance in the US was an uphill struggle. In 1969, when Iwatani arrived in America, 90 per cent of televisions were locally made. By focusing on products and brand combined with aggressive advertising, Panasonic slowly made inroads into the local market and won over consumers.

The allure of the US market remains strong for foreign manufacturers. According to the UN Statistics Division, the United States was still the world’s largest market last year, with US$13.7 trillion in consumer spending.

Currently an adviser to Chinese electronic firms selling into the US, Iwatani sees parallels between the two experiences.

“In 1960 American people did not trust [Panasonic] quality. Trust only price. Price was the cheapest. Made in China, in the past 10 years, pricing is very important … quality is good but people do not appreciate the quality, only the price,” he said, suggesting the challenge for Chinese brands is recognition and differentiation.

The first step for Panasonic was to make a name. Known in Japan as Matsushita Electric Industrial after its founder, Konosuke Matsushita, the name Panasonic (from the Latin “all sound”) was chosen in the 1950s for an international audience.

A good name is important, Iwatani says.

“China continuously supplies good products with no name … American people buy TCL and Chang Hong without any respect to the brand,” he said. “Now China has to strengthen their brand. This is about image and advertising.”

To support product development, he suggested Chinese firms should source technology and design from Japan.

Playing politics

A continuous focus on quality and brand positioning was only part of the battle. Starting from the 1960s, several American competitors aligned themselves with politicians to attack Japanese firms, and in a precursor to the later debate over Chinese imports, accuse them of stealing American jobs.

Iwatani said the campaign was led by US manufacturer Zenith and included attempts to sue Japanese firms for dumping. Zenith eventually filed for bankruptcy and was bought by Korean firm LG.

While localising the company can win over detractors – Japanese carmaker Toyota stood out early on by opening car plants in the US for example – Iwatani is adamant quality will determine a firm’s success.

“American people said the Japanese were stealing American business but today nobody thinks about that,” he said. “American people love ‘Made in Japan’. We are making better products than Americans. The only proof is good quality products at reasonable prices eventually [beats] criticism.”

One Chinese success story is white goods firm Haier, “because people think it is German”. Another is the Taiwanese firm Acer, Iwatani said, citing the owner’s willingness to invest in advertising.

Others have met with a frosty reception. One notable case is the Shenzhen-headquartered tech firm Huawei, which recently said it would quit the US market after concerns from Washington the firm posed a national security threat.

In Hong Kong to address the Executives Global Network, Iwatani asked whether “the dinosaur can dance again”. Suggesting that Panasonic’s tribulations have spurred constant reinvention, the former executive is excited by the company’s outflow of luxury rice cookers, massage chairs and, more recently, lithium ion battery packs for Tesla electric cars.

The real growth potential, he said, could come from new technologies in green energy, robotics and mass transportation.

Addressing Chinese firms with advice that could have also applied to his former bosses, Iwatani urged companies to tackle America with confidence.

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