This is a re-posted opinion piece.
Hardly a day goes by without bad news for the Japanese electronics industry. With a few notable exceptions, such as Canon, the titans of the industry are projected to hemorrhage $17 billion in red ink in the current fiscal year. S&P has lowered its credit rating on Sony and Sharp to BBB+, just two notches above junk status.
Electronics executives are quick to blame the strong yen. But that is a self-serving excuse, not a reason. The recent high nominal value of the yen doesn’t explain why Sony lost money on TVs for the past eight years in a row—including when the yen was weak. Nor why the firms which gave us the transistor radio, the Walkman, the CD and the VCR seem to have run out of ideas.
The plunge in the past decade is nothing short of breathtaking. From 2000-10, Japan’s electronics production plummeted 41%, exports tumbled 27% and the sectoral trade surplus dove 68%. Counting only exports by high-income OECD countries (to avoid the impact of China and the like), Japan’s global market share of electronics goods and services exports almost halved to 10% in 2009 from 19% in 1996. In the same period, Germany’s share rose to 11% from 8% and Korea’s rose to 9.2% from 6%.
The immediate cause of the problem is bad product strategy. Japanese firms and the government failed to heed two big lessons taught by Harvard Professor Michael Porter. First, as countries mature, their sources of competitive advantage change. At one point, abundant skilled labor and cheap capital and price are keys to competitiveness. Later on, innovation in products and processes becomes pivotal. Secondly, strategy is not just about what products to offer, it’s also about what products not to offer.
Read the full article: http://online.wsj.com/article/SB10001424052702304724404577297102672086074.html
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By: Richard Katz
Source: The Wall Street Journal, March 22, 2012
To view the original article, click here.
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