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Daily News

Panasonic Restructures Worldwide
May 2, 2011
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Appliance and consumer electronics giant Panasonic Corp. (Osaka, Japan) announced a large-scale reorganization plan that will include cutting 17,000 employees worldwide.

Panasonic President Fumio Ohtsubo, speaking on Saturday, April 28, 2011, said the company was severely impacted by the March 11 earthquake (the Great East Japan Earthquake). Operations have been recovering "steadily" at Panasonic plants in the region hit by the earthquake and tsunami. Supply chain disruptions are still affecting operations. Panasonic continues to extend assistance to those in the affected region as it strives to get operations back to normal. Ohtsubo said that, even as the company plans to cut costs and investment as part of the reorganization plan, Panasonic "is determined to play a significant role in the country's reconstruction efforts with its products and business activities."

Panasonic will promote energy-efficiency measures and propose use of its solutions that combine energy creation, storage, and management in the rebuilding of the affected regions.

The first fiscal year of Panasonics' Green Transformation 2012 (GT12) management plan ended in March 2011. Ohtsubo reported that, in the plan's first year, there was steady growth in the heating/refrigeration/air-conditioning and LED businesses, two of its six key business areas. Sales in emerging countries showed 20% growth over the previous fiscal year, with especially good sales in India and Vietnam.

Panasonic's Group-Wide Reorganization

Panasonic currently consists of five business segments, segmented by technology platform. These will now be reorganized into three business sectors by business model:
• Consumer
• Components & Devices
• Solutions

In the three business sectors will be nine internal companies - "business domain companies" - and a new marketing division will be established.

Consumer Business Sectors Growth Strategies

The consumer business sector consists of two business domain companies:
• AVC Networks
• Heating/Refrigeration/Air Conditioning & Home Appliances
It will also include a marketing division called Global Consumer Marketing.

Heating/Refrigeration/Air Conditioning & Home Appliances: This business segment will take steps to reduce overlap between Panasonic and Sanyo Electric Co., which Panasonic acquired in 2009. While this is expected to reduce sales, the division's goal will be to generate sales of 1.2 trillion yen (94% of FY 2011) or more in fiscal 2013 by:
• accelerating development of overseas markets
• increasing global sales of small cooking appliances, personal care appliances, and healthcare products
• expanding B-to-B business, which capitalizes on Sanyo's strength

Ohtsubo said that a "drastic shift in business focus to overseas markets along with buildup of its competitiveness " will enable this business segment to achieve faster growth after fiscal 2013.

AVC Networks will develop new businesses in network-connectable products. AVC will shift development and production to emerging countries to tap into growth of local demand, aiming to achieve sales of 2.1 trillion yen (113% of FY 2011) or more in fiscal 2013.

The Components & Devices business segment will include three business domain companies: Automotive Systems, Components & Devices, and Energy Devices.

The Solution business sector consists of four business domain companies: Systems & Communications, Environment & Energy Solutions, Healthcare & Medical Solutions, and Factory Solutions.

Corporate Reorganization

The head offices of Panasonic Corp., Panasonic Electric Works Company (PEW), Sanyo, and six corporate regional management divisions will be consolidated to form a smaller global and group head office. The new global and group head office will consist of a global head office and five regional management headquarters:
• China and Northeast Asia
• North America
• Latin America
• Asia, Oceania, Middle East and Africa
• Europe and CIS

The global and group head office will be organized according to job functions.

Head office procurement, logistics, and part of manufacturing innovation functions will move to Asia. Panasonic will also significantly strengthen other functions at the Asian base. Positioning these functions under the Global Manufacturing Division, Panasonic will seek to raise the level of manufacturing capability by developing strong manufacturing bases, boosting local procurement, and strategically utilizing outside sources.

Sanyo will operate businesses that cannot be integrated into the new domain companies:
• OEM manufacturing of products that compete with domain companies
• Sanyo-formed overseas joint ventures.

PEW's businesses will be fully integrated into the new domain companies, and Panasonic and PEW will operate them in a unified manner.

Branding
The company will continue to make a single global brand, Panasonic, the face of the company across product lines and business segments. The exceptions are established brands for specific regions and products.

Management Structure

The new management structure is intended to enable the company to "Act Decisively, Change and Mix Together."

Act Decisively initiatives include focusing efforts on emerging markets, with the goal of achieving sales of 615 billion yen for fiscal 2012 from BRICs + V countries (Brazil, Russia, India, China, and Vietnam) and MINTS + B (Mexico, Indonesia, Nigeria, Turkey, Saudi Arabia, and the Balkans).

In India the group plans to double its sales, and will accelerate efforts to strengthen its product lines and marketing structure, including opening B-to-B showrooms. Panasonic wants to achieve sales of 100 billion yen in fiscal 2012 in India as a stepping stone to reach sales of 200 billion yen in fiscal 2013.

Act Decisively initiatives include focusing efforts on
Growth Areas. These include Devices for Smartphones, where it will build up its high-density circuit board business based on Panasonic's proprietary ALIVH (Any Layer Interstitial Via Hole) technology.

Other Act Decisively Growth Areas include next-generation Lighting Devices and Solar. In next-gen lighting, Panasonic believes OLED lighting has the potential to grow to levels on par with LED. The company formed a joint venture called Panasonic Idemitsu OLED Lighting Company with Idemitsu Kosan Company on April 12, 2011.

To help Japan's rebuilding Panasonic will focus on boosting its solar panel supply, including purchases from other vendors. In Europe and the United States the company intends to develop new business models in solar, including alliances with utilities and possible acquisitions.

Another Act Decisively Growth Area will be in Environmental Engineering. To address environmental challenges being faced by factories, Panasonic will propose comprehensive solutions for the entire factory. These solutions will include water purification technology using filtration membranes developed by Sanyo and energy-saving support service.

Change initiatives include the formation of the Corporate Division for Group Management Innovation, made up of six subcommittees and one committee to that will orchestrate innovation initiatives across all Panasonic group companies and accelerate group-wide innovation efforts.

"Individual businesses will also be drastically reorganized," Ohtsubo said.

The division's V-Products Subcommittee will design "V-Products." While developed to achieve "victory" in the consumer electronics market globally, the products will be designed for specific markets based on findings of Panasonic's lifestyle research. The division's Environment Innovation Subcommittee will work to boost manufacturing of energy-saving and recycling-oriented products.

A new subcommittee, Management Strengthening Subcommittee, focused on strengthening Panasonic's management structure, will drive the group's cost cutting efforts with the goal of reducing the break-even point by 4% in two years.

Flat-panel Television Business Reorganization
Panasonic will outsource more LCD panels and move a production line at its PDP plant in Japan's Amagasaki City to China.

Semiconductor Business Reorganization
The company will shift development resources to growth areas, build new business, and move production.

Mix Together is a broad-based initiative, involving all Panasonic Group employees, aimed at creating a new group culture. It entails sharing management philosophy and capitalizing on diversity within the group.

Panasonic after Reorganization

"When the drastic group-wide reorganization is completed, Panasonic will have an optimum structure that enables the group to effectively pursue new growth strategies," said Ohtsubo. "Panasonic aims to realize sales of at least 3 trillion yen from each of the three business sectors in fiscal 2013."

Panasonic expects to see sales declines in fiscal 2012 – declines it sees as inherent in the consolidation of home appliances businesses and sales companies. However, it also expects the restructuring will more than offset the sales declines and will increase its annual operating profit by 6 billion yen in fiscal 2012.

In fiscal 2013, Panasonic expects synergies from the restructuring will contribute 60 billion yen to its annual operating profit from increased sales in solar cells, lithium-ion batteries, LED lighting, and air conditioning equipment, as well as from rationalization.

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