Panasonic SWOT and PESTLE Analysis

Strength

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Weakness

1. Decreasing R&D expenditure compared to industry rivals: Since the global recession in 2008 the R&D expenditure of Panasonic Corp has steadily decreased from more than $5 Billion to slightly less than $4 Billion in 2017. These figures seem to be small when compared to its industry rivals such as its South Korean counterparts Samsung, LG, and even some of the new Chinese entrants such as Haier. Samsung R&D expenditure last year stood just below $ 13 Billion whereas LG’s expenditure stood above $ 4 Billion with a steady growth rate of around 7%. The Japanese firms such as Sony, Panasonic, Hitachi and Toshiba that cater the white goods market segment have experienced stagnation in sales and revenues in the past decade because of low R&D expense.

2. Retracting their products from the key markets: When Panasonic introduced their plasma televisions in Europe and North American markets they sold them like hot cakes apart from their home turf, but in 2014 they exited the plasma TV market in America, while other competitors in the TV segment moved onto the LED displays and then onto the 4K televisions. Panasonic fell short as they launched their products late when compared to their competitors and they lost the first mover advantage that they previously held with their plasma televisions. Similarly, Panasonic exited the smartphone market in India and several other developing countries in Asia by offering their brand to other manufacturers. The burgeoning smartphone market could have provided them a high growth opportunity but they faced stiff competition from the local as well as international manufacturers catering the lower price segment because of their low-cost leadership which Panasonic was not able to sustain for long.

3. Low Spending on Marketing: Samsung last year spend an estimated amount of around $10 Billion as their marketing and $4 Billion as advertising expenditure in 2017 which was a 15 % increase from their last year’s budget, similarly LG’s advertising and marketing budget was just more than $5 Billion up by 13% from their last years expense whereas Panasonic lacks severely in this context where Panasonic ended up spending less than LG last year even though Panasonic earns $12 Billion more revenue than LG head to head in their global operations. In India the Chinese duo of Oppo and Vivo spend a sum of Rs2200 crores in 2017 which vastly outnumbered Panasonic marketing budget of Rs 200 crores for their smartphone business. Though trailing when compared to the industry leaders Panasonic does make an attempt to showcase their products on global platforms such as the $350 Million deal that they have with the International Olympic Committee for a period of 8 years and with this deal Panasonic are targeting the 2020 Tokyo Olympic Games to showcase their products on a global scale.

Opportunity

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Threat

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Political

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Economic

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Social

1. Decline in population of Japan translates to lower revenue in Japan: Panasonic and other homegrown Japanese companies such as Sony, Sharp, Toshiba and other have seen a decline in their business on their own home turf, a reason that contributes to this decline in business is that Japan is suffering a cultural malaise where in the major population of Japan has aversion to human contact in a society dominated by technology, this leads to an extremely low birth rates in Japan because of which Japan is experiencing an irreversible decline in its population, Japan’s population peaked in 2010 at 128 million and since then it has been on a steady decline, Japan is also one of the very few countries to have a negative population growth (-0.1%). Because of this declining population the growth of Panasonic has stagnated severely in their own home country which contributes a significant portion of their international revenues.

2. High average age of Japanese population and high labor cost: Besides the issue of declining population, the average age of Japanese citizen is around 48 years one of the highest in the world whereas average age of India’s population is expected to reach around 29 years by the year 2020. Because of such high average age of population, Japan is seeing a decline in overall expenditure, Last year Japan’s GDP growth rate was around 1% and to make matters worse the labor costs in the country are extremely high which makes it worrisome for companies like Panasonic to increase their revenues within the country and also the high operational cost that the company has to bear due to high labor cost to operate in Japan. Over the years Panasonic has seen decrease in the percentage of the revenues that their Japan’s operations contribute compared to their global revenues.

Technological

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Legal

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Environmental

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