MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD. – Company Profile, Information, Business Description, History, Background Information on MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

1006 Kadoma
Kadoma City
Osaka Prefecture
Japan

History of MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.

The Matsushita Electric Industrial Company is the largest consumer electronics firm in the world. While the company’s name is virtually unknown outside of Japan, the brand names under which Matsushita sells its products are household words: Panasonic, Technics, Quasar, and National are all manufactured by Matsushita. In Japan, Matsushita is as well-known as its brand names. In recent years, Matsushita has also moved into industrial electronics with great success. The company’s founder, Konosuke Matsushita, is regarded as the patriarch of the Japanese consumer electronics industry and a “god of business management”.

Konosuke Matsushita was born in 1895, the son of a modest farmer who lost his family’s savings speculating on commodity futures when Matsushita was only nine years old. At that age, Matsushita was forced to take a job in a bicycle shop to help his family survive. When he heard some years later that the city of Osaka had installed an electric railway system, Matsushita realized that great opportunities lay ahead for the Japanese electronics industry. He spent a few years working for a light bulb factory in Osaka, and by age 23 had accumulated enough business experience to found his own company to manufacture electric plugs, with his wife and brother-in-law Toshio Iue (who later founded Sanyo Electric).

Although Japan became a major international power during the 1920s, its domestic economy developed unevenly. Matsushita’s small company prospered by keeping prices low and by incorporating new technological advances into its products. For this, Matsushita became very popular with consumers. He was also popular with his workers, whom he regarded as important partners with a right to participate in decisions.

After diversifying production to include bicycle lights and electric heaters, Matsushita moved boldly to secure a position as a direct supplier to Japan’s large, complex retailing networks, which were historically dominated by larger, more established companies. Matsushita introduced radio sets and dry batteries in 1931 and electric motors in 1934; by creating fierce competition through discounts, the company was able to build large market shares in these selected markets. By 1935 the company had grown to several times its original size. On December 15 of that year, it was incorporated as Matsushita Denki Sangyo (Electrical Industrial).

Japan at this time was undergoing a severe political transformation as a right-wing militarist clique rose to power. The group won support from many industrialists, including Konosuke Matsushita, because it advocated the establishment of a Japanese-led pan-Asian economic community promising great profits for Japanese companies. As a leading manufacturer of electrical devices, Matsushita benefited greatly from the government’s massive armament program. It soon gained markets in Japanese-controlled Taiwan, Korea, and Manchuria, and prospered during the beginning of World War II.

After the Battle of Midway, it was clear not only that Japan would lose the war, but also that the Greater East Asia Co-Prosperity Sphere promised by the militarists would never come to pass. Matsushita, locked in an uneasy partnership with the government, saw its fortunes deteriorate with Japan’s.

After the war it seemed that the company’s greatest task was to maintain sales in a country so thoroughly decimated by the war that the economy relied on barter. But first the company had to deal with the American occupation authority, which not only set price controls but also attacked Konosuke Matsushita for his support of the Japanese war effort and demanded that he resign his chairmanship. The labor unions, which the occupation authority sought to preserve, strongly supported Matsushita and threatened to strike if he resigned. Hoping to avoid wider labor unrest, the authority relented.

In 1951 Matsushita traveled to America for the first time to study the “rich America” he planned to make his most profitable market. An astute businessman, Matsushita recognized that his product lines must first prove themselves in their local market, though. His company successfully introduced washing machines, televisions, and refrigerators in Japan in 1953, and vacuum cleaners the following year. Concerned with maintaining measured and well-planned growth, Matsushita also became the first Japanese businessman to introduce five-year business plans.

When anti-monopoly laws were relaxed after the Korean War, Matsushita was permitted to make its first major corporate acquisition, a 50% share of the financially troubled Japan Victor Company (JVC). It was, for Matsushita, merely an investment; JVC was to remain not only independently managed, but also Matsushita’s competitor in several areas.

Matsushita moved “upmarket” early, around 1957, by introducing a line of high-quality FM radio receivers, tape recorders, and a stereo sound system developed by JVC. In 1958 the company succeeded in relaying a color television signal, and soon afterwards entered the television market–an especially important market as Japanese consumers became increasingly prosperous.

Until now, Matsushita had focused on the foreign market in its growth strategies, but the company began actively working to build a solid domestic market share, confident that its sales in Japan would grow with the economy. Using the brand name National, the company established a retail network to sell Matsushita products. With income generated by domestic sales, Matsushita was able to finance an ambitious global strategy independent of the trading houses that controlled the retail system in Japan. As a result, Matsushita brand names became well known in Europe and the United States.

Cheap labor and good labor relations kept Matsushita’s costs low, and helped the company to build a strong following in North America. Yet, as the Japanese economy continued to grow, unemployment fell and wages rose. Predicting that rising labor costs would one day compromise its price competitiveness, Matsushita was one of the first companies to set up factories in less developed countries such as Taiwan and Singapore, where wages were lower and the local currency was more stable against the dollar.

In May of 1974 Matsushita purchased the Quasar television division of Motorola for $100 million, hoping to gain U.S. market share by capitalizing on Quasar’s well-known name. Quasar had begun to lose market share to more popular imports, so Matsushita made heavy capital investments to improve production efficiency. Efficiency was raised, but market share remained stagnant.

In the early 1970s Matsushita became deeply involved in the development of a commercial home video cassette recording system, or VCR. Matsushita seemed close to an acceptable design when Akio Tanii, then head of the VCR group, saw what he believed was a far superior design under development at JVC. Tanii convinced Matsushita to delay the introduction of a VCR until JVC’s Video Home System, or VHS, could be perfected and adopted. This meant allowing Sony, the company’s largest competitor, to enjoy a one-year monopoly on the market.

Sony refused to share its Betamax VCR technology with other manufacturers. But Matsushita knew that despite its VCR monopoly, Sony had a limited VCR production capacity. He gambled that there would be enough pent-up demand when JVC and Matsushita entered the market for the two companies to establish VHS as the industry standard. To help this prediction come true, Matsushita made licensing agreements with RCA, General Electric, Philips (which had abandoned its own VCR design), NEC, Toshiba, and Sanyo, all of whom introduced VHS-compatible machines. Sony’s Betamax lost so much market share so quickly that Sony’s chairman, Akio Morita, was compelled to ask for a compromise. Konosuke Matsushita refused, telling him that such a desperate display was both unacceptable and dishonorable. Eventually even Sony began to manufacture VHS machines.

By the mid-1980s Japan’s consumer market was saturated. Tanii, who had been chosen to succeed the company’s popular president, Toshihiko Yamashita, advocated entrance into new markets: semiconductors, factory automation, business machines, and audiovisual devices. He noted Matsushita’s inability to attract the best engineers graduating from universities and began an effort to build a talented research and development team. He also saw that Matsushita’s older, “obsolete” engineers would become under-utilized, and recommended transforming them into expert salesmen capable of selling these new technologies, if not creating them. Finally, he complained that Matsushita’s 600 subsidiaries and group companies were too poorly coordinated to work with each other efficiently and decided that contacts within the company should be improved in order to develop technologies more quickly and economically.

In 1989 Konosuke Matsushita died at the age of 94. He had seen his company rise from a small manufacturer of electric sockets to one of the world’s premier consumer goods manufacturers. Matsushita had retired from active management of the company in 1973 and had spent his later years writing books on business philosophy–his basic philosophy, “Peace and Happiness through Prosperity,” was the focus of some 50 books.

Matsushita is under contract to manufacture a number of computers for IBM, which is historically weak in the consumer market, and has expressed interest in acquiring Fujitsu, which has traditionally attracted the most talented software engineers. A closer relationship with either company would strengthen Matsushita’s sales in the more dynamic and profitable corporate and institutional markets.

Matsushita is sure to remain a major consumer goods manufacturer, protected by its strong presence in the Japanese market both from competition at home and from currency fluctuations and trade protectionism abroad. The company’s expansion into industrial electronics has also been highly profitable. In fiscal 1989, industrial electronics represented 35% of sales by Matsushita’s major operating units. Tanii’s initiatives have positioned the company for several decades of stable growth. He has done much to dispel the notion that Matsushita is merely an imitator of more original companies, but it will take some time to transform the company; its basic strength is still manufacturing.

Principal Subsidiaries: Matsushita Electronics Corporation; Victor Company of Japan, Ltd.; Matsushita Electronic Components Co., Ltd.; Matsushita Battery Industrial Co., Ltd.; Matsushita Seiko Co., Ltd.; Matsushita Kotobuki Electronics Industries, Ltd.; Matsushita Communication Industrial Co., Ltd.; Matsushita Refrigeration Co.; Kyushu Matsushita Electric Co., Ltd.; Matsushita Housing Products Co., Ltd.; Matsushita Industrial Equipment Co., Ltd.; Matsushita Graphic Communication Systems, Inc.; Teichiku Records Co., Ltd.; Matsushita Electric Corporation of America; Matsushita Electric (Taiwan) Co., Ltd.; Matsushita Industrial Corporation Sdn. Bhd.; Matsushita Refrigeration Industries (S) Pte. Ltd.; Matsushita Electric (U.K.) Ltd.; Panasonic España S.A.; Matsushita Electronics (S) Pte. Ltd.