Go to contents

Learning from the fall of Japanese electronics

Posted November. 23, 2012 23:18,   


The pride of the world’s best economy for electronics has been damaged. Japan`s electronics companies yielded the No. 1 position to Korean companies as Samsung Electronics ranked first and LG Electronics second in the global TV market. Japan also seems to have no place in the world mobile phone market. Japanese electronics companies were once called banks because they had so much cash, but even if the operating profits of major Japanese electronics giants such as Sony, Panasonic and Sharp are combined, the amount is still a far cry from Samsung`s.

Global ratings agency Fitch downgraded Sony three levels to "BB-" and Panasonic two levels to "BB." In August, Fitch also downgraded Sharp, which broke its century-old tradition of lifetime employment to conduct massive layoffs, six levels to "B-." Thus the stocks of all major Japanese electronics companies that used to be extremely lucrative were deemed inappropriate for investment. About 10,000 workers were laid off by the above three companies this year to attempt a turnaround, but even this was not enough to ensure their future due to the bad credit ratings as well as deteriorating competitiveness.

The fall of Japanese electronics companies was largely expected. Their products could not compete against those of Samsung or LG. Against this backdrop, their splendid legacy crumbled like a sandcastle in the wake of the European fiscal crisis, a strong yen and last year`s massive earthquake and tsunami. Japanese companies are said to have lost their unique creative energy after the first entrepreneurial generation retired. The following generation took on a strategy of pursuing gradual improvement while setting aside the bold innovation of the past. This did not fit the new digital era, in which technologies evolve rapidly. Japanese companies grew conservative and bureaucratized as professional businessmen replaced company founders, and such businessmen focused on the domestic market to avoid risks abroad. This resulted in missed timing for investment and restructuring for the Japanese electronics sector.

There is no everlasting winner in the market and no correct answer to who should run a company. This is the lesson Korea must learn from the fall of Japanese conglomerates. Korean companies executed large-scale restructuring after the Asian financial crisis and eventually overtook Japanese companies under the leadership of owners that nurtured strong strategic staff. Leadership by owners is proper for setting a long-term vision, making bold investment, arriving at fast decisions, and pushing forward with plans. Not only have companies of emerging countries such as China and India sent staff to Korea to learn how to expand business, but also those from Japanese and European companies.

Now is a critical time for Korean conglomerates, which have been fast chasers, to become market creators. Yet they are being forced to stop trying anything significant because they are under attack in the name of "economic democratization." It is important to maintain market order by correcting wrongs committed by conglomerates or business owners. Politicians, however, should avoid killing companies and not cater to those who hate conglomerates leading the economy.