JIN-330 -- Thoughts on "The Nikkei's" Survey of Global Share

T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business, Technology and Cultural News

Issue No. 330
Wednesday July 20, 2005 TOKYO

++ VIEWPOINT Thoughts on "The Nikkei's" Survey of Global Share
1. The Lesson -- Run With the Main Pack, or Don't Run
2. Managerial Competitiveness: the Lifeline of Digital Businesses

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+++ VIEWPOINT Thoughts on "The Nikkei's" Survey of Global Share
1. The Lesson -- Run With the Main Pack, or Don't Run

The "Nihon Keizai Shimbun" published a "Survey of [Global] Shares of Flagship
Products and Services" in 2004 in its edition for July 19, 2005. The survey,
of 24 products, shows dramatic changes in shares. In 14 categories of digital
equipment and related parts, two manufacturers newly moved into first place,
and among 12 categories there were changes in positions two through five.
Also conspicuous was the degree to which Korean and Taiwanese makers have
chipped away at Japanese share, although Japanese companies have preserved
top shares in 10 of the 24 products.

Against the background of intensifying global competition, Japanese companies
have learned that unless a product is running in the main pack, they can't
expect it to be a profit maker, and have keenly felt the need to concentrate
managerial resources in their areas of expertise and to speed up decision
making. The question becomes how well they have been able to apply that lesson
in the rapidly expanding digital market. With that question in mind, let's
look at the newspaper's survey of global share.

It is apparent many Japanese companies have not applied that lesson, with
consequent loss of international competitiveness. The survey shows that the
Fujitsu-Hitachi Plasma Display dropped to fourth in global share, falling
further behind leaders Samsung SDI (24.4 percent) and LG Electronics (22.0
percent), both of Korea. In plasma televisions, two of three Japanese manufacturers
(Matsushita Electronics [Panasonic] being the exception) lost share. As for
liquid crystal panels, the survey makes clear that Sharp, with the third largest
share (12.3 percent), is the only Japanese heavyweight in the industry.

In the digital field, which has high growth potential, investment competition
is fierce and increasingly oligopolistic. The world's three leading companies
have expanded total share of four digital-related products, including plasma
panels and liquid crystal panels. Taiwanese and Korean makers have an edge
over Japanese manufacturers in degree of concentration of resources and decision-making
speed. It is questionable whether Japanese firms have the managerial capacity
to compete globally.

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2. Managerial Competitiveness: the Lifeline of Digital Businesses

The survey reveals that manufacturers are already fighting a war of attrition
in certain product areas. Take, for example, DVD players. Japanese makers
have lost share in DVD players as the ready availability of parts necessary
for manufacture has facilitated market entry by other companies. Prices have
dropped 30 to 40 percent over the course of a year. Because companies have
not been able to cover falling prices by ramping up production, many are doomed
to stagnant profits in the digital field in the future.

Executives will have to be decisive in withdrawing from products and enterprises
for which no improvement in profitability is foreseen in spite of rising demand.

During the period of deflation and during the depression in information technology,
Japanese companies achieved positive results through "selection and concentration"
-- the strategy of clarifying areas of strength and then sinking managerial
resources into those areas in a focused way. The question is, Are they gripped
by an even greater sense of crisis today, such that they are prepared to divest
unprofitable products and businesses and redirect managerial resources? Kyocera's
withdrawal from digital cameras is a positive sign.

Technical innovation is said to be the lifeline of digital businesses, but
today managerial competitiveness has become the new lifeline. Managerial judgment
and ability to get things done are necessary for success in the digital field.
The survey reflects the change in the nature of the competition.

-- Burritt Sabin

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Written and edited by Burritt Sabin (editors2@japaninc.com)

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