What Happened To Panasonic?

Dire State

Once upon a time, Panasonic was one of the largest electronics brands globally, manufacturing a wide range of products such as TVs, appliances, batteries, and phones. Alongside Sony and Toshiba, they were a source of pride for Japan from the mid to late 20th century, rebuilding strongly after the devastation of World War 2.

However, the 2000s marked a downturn for Panasonic. They closed their communications, much of their TV, and even their LCD businesses. Significant assets like their security and semiconductor divisions were sold off, including their entire $3.5 billion stake in Tesla.

Internally, Panasonic faced substantial challenges—revenue dropped by over 40%, gross profit nearly halved, and they reported billions in losses. Consequently, their workforce shrank by over 100,000 employees in the past 13 years. Ironically, amidst this decline, Panasonic’s stock price remained relatively stable, albeit with minimal growth over three decades; adjusting for inflation, it has actually decreased by 66%.

Given these circumstances, curiosity arose about Panasonic’s bankruptcy likelihood. Typically, for major tech firms, this probability is under 1%, and for distressed entities like GoPro, it might reach low double digits. Surprisingly, Panasonic’s probability exceeds 100%, an unprecedented scenario.

Barring a miracle or significant government intervention, the outlook appears grim for a company burdened by debt. How did this happen? There was no single defining moment of collapse; rather, Panasonic seemed to gradually lose momentum over decades. However, the deeper narrative reveals that much of Panasonic’s decline stems from losing sight of its foundational strengths.

To understand this decline better, let’s delve into the rise and fall of Panasonic, examining where things went awry.

Always keep experimenting

Panasonic’s decline serves as a stark reminder of how even major corporations can falter when they lose focus on their core strengths. Once an electronics giant, this iconic Japanese brand faced near bankruptcy due to its inability to adapt to evolving technologies and market trends.

Looking back, the story of Panasonic traces its roots to November 27, 1894, with the birth of Konosuke Matsushita. Born into a poor rice farming family, Konosuke was the youngest of eight children. His family faced hardship when his father lost their farm due to speculative losses in the rice market.

At the tender age of nine, Konosuke began working to support his family, starting at a Hibachi store and later at a bicycle shop. Despite challenging circumstances, these early jobs taught him valuable lessons in business—customer attraction and retention, employee loyalty, and the importance of profitability.

Konosuke’s exposure to streetcars in Osaka sparked his interest in electricity, prompting him to join the Osaka Electric Light Company at age fifteen. His dedication and diligence led to rapid advancement, becoming an inspector by age twenty-two, with a wealth of experience in the electrical field.

Konosuke’s entrepreneurial spirit emerged early when he proposed an improved light socket design to his supervisor, only to face dismissal. Undeterred, he decided to leave his job and launch his own business in June 1917, operating out of a small two-room apartment with his wife and brother-in-law.

While his initial light socket venture did not succeed, Konosuke persisted, eventually finding success with insulation plates for fans. This breakthrough provided the foundation for Matsushita Electric, later known as Panasonic, established on March 7, 1918.

His relentless experimentation and innovation led to the creation of new products like attachment plugs and two-way sockets, which gained rapid popularity. Konosuke’s commitment to experimentation became a guiding principle—always iterating and refining ideas until they found traction in the market.

This early success allowed Konosuke to expand operations, moving to a larger facility and scaling his workforce to twenty employees. Thus began Panasonic’s journey to becoming an influential force in the electronics industry.

Great products don’t sell themselves

Entering the 1920s, Panasonic was becoming a recognized local business, yet challenges persisted for Konosuke Matsushita. His next product, a revolutionary battery-powered bicycle lamp designed to last 30 to 40 hours, initially seemed promising but encountered disappointing sales.

Despite Konosuke’s optimism and extensive efforts to market the lamps, public skepticism about battery-powered lights hindered their acceptance. The setback worsened when the Great Kanto Earthquake struck in September 1923, devastating many of his sales partners.

Undeterred, Konosuke persisted. Four years later, he reentered the bicycle lamp market with a square-shaped design, accompanied by a radically different marketing strategy. Emphasizing its uniqueness, he launched a bold advertising campaign and distributed 10,000 lamp samples to stores without obligations.

This revamped approach proved successful, catapulting sales to 30,000 units per month within the first year. This experience reinforced Konosuke’s second principle: great products require effective marketing. Recognizing the importance of this lesson, he vowed never to let superior products falter due to inadequate promotion.

In 1929, Konosuke undertook a significant restructuring of the company, organizing it into four distinct divisions: electrical sockets, batteries, bicycle lamps, and radios. Each division had its own national sales department, supported by regional offices, and was directly linked to its manufacturing counterpart.

This streamlined structure ensured that manufacturing output aligned closely with market demand, minimizing inefficiencies in production. With these changes, Panasonic entered the 1930s poised for growth, becoming a major national player with a workforce exceeding 10,000 employees.

However, just as Panasonic was gaining momentum, World War 2 erupted, altering the course of the company once again.

Downturns are a blessing

World War 2 dealt a devastating blow to Panasonic, severely disrupting its operations and prospects. The company faced immense challenges sourcing materials and recruiting talent as the war effort diverted resources towards industrial production. The situation worsened after the war, as Japan’s infrastructure lay in ruins from bombings, undoing much of what Konosuke Matsushita had painstakingly built.

Adding to the turmoil, General Douglas MacArthur and the American occupation forces took control of Japan, issuing reforms that included orders for Konosuke to step down from Panasonic’s leadership.

Despite these directives, Konosuke’s employees rallied behind him, with 15,000 signing a petition to retain him as their leader. They argued that his leadership was crucial to the company’s reconstruction efforts and that removing him would jeopardize its future.

Fortunately, the order for Konosuke’s resignation was rescinded, allowing him to continue guiding Panasonic through the tumultuous post-war period. Although the company had retained its founder, it struggled to regain its momentum.

Konosuke, however, remained optimistic and resilient, embodying his third core business principle: “Good times are good and bad times are even better.” He viewed downturns as opportunities to reassess and innovate, believing that adversity often spurred transformative change. Embracing this philosophy, Konosuke urged his employees to approach their work with the vigor of a new venture, signaling a shift towards targeting the global market.

Throughout the 1950s, Panasonic pivoted towards producing Western-oriented products such as washing machines, TVs, refrigerators, radios, portable radios, rice cookers, tape recorders, and air conditioners. This strategic move was driven by the recognition that the Japanese economy alone couldn’t sustain the company’s workforce.

It was during this period that the name “Panasonic” was adopted, chosen for its simplicity and global appeal—combining “Pan” (universal) and “Sonic” (sound), symbolizing Panasonic’s mission to bring Japanese quality to the world stage.

This shift marked the onset of Panasonic’s golden era spanning the 1960s, 70s, and 80s, during which the company thrived internationally. However, as history reveals, this period of prosperity would eventually face its own challenges and transformations.

The brutal fall of Panasonic

It’s unfortunate to acknowledge that Panasonic’s peak coincided with the passing of Konosuke in 1989. Since then, the trajectory has been downhill, which is hardly surprising given the apparent departure from the principles that initially propelled the company’s success. Take, for instance, Konosuke’s emphasis on continuous experimentation. Following his death, Panasonic ceased its innovative efforts—a fact corroborated by their own website.

While they launched numerous products in the 1950s through the 1990s, there’s a conspicuous absence of any new entries from the 2000s onward. Their last notable release dates back to 1998 with the introduction of digital TVs in the US. As the saying goes, you can’t hit a home run if you don’t swing the bat; Panasonic hasn’t swung in 25 years.

Not only has Panasonic neglected new product development, but they’ve also faltered in maintaining their existing lines. As previously discussed, there wasn’t a single pivotal moment for Panasonic where their products suddenly declined in quality or became overpriced.

Their products are still commendable, but the issue lies in their failure to effectively market them—a lesson starkly illustrated by the success of competitors like Samsung. Despite ranking lower than Panasonic in product quality, pricing, and customer service, Samsung’s strategic marketing has catapulted them to a position worth over ten times that of Panasonic.

When was the last time you saw a Panasonic ad? It’s likely been so long that it’s hard to recall. In contrast, Samsung’s pervasive advertising presence ensures their brand is consistently top-of-mind.

Another critical oversight by Panasonic is their failure to capitalize on downturns as opportunities for reinvention. Despite overcoming immense adversity in the aftermath of World War 2, the company has not shown similar resilience in recent times.

The early 2000s presented an ideal moment for Panasonic to innovate and seize new trends like smartphones or OLED technology, potentially redefining their place in the modern tech landscape. Instead, it appears they’ve resigned themselves to a defensive stance, clinging to existing strategies rather than embracing change.

What’s most disappointing is the apparent loss of hope within modern Panasonic. Konosuke’s unwavering optimism, evident throughout his life, seems absent in the current corporate culture. Today, Panasonic seems to lack the drive to experiment, market effectively, or navigate economic downturns with resilience.

Their seeming acceptance of defeat raises concerns about their future viability, suggesting that bankruptcy may indeed be looming if they continue on this path.