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Japanese high tech industry challenges

Akihabara, or “Akiba,” is a district in Tokyo revered as a consumer electronics mecca. Bursting with all manner of electronics goods, shoppers are spoiled with a huge array of choices.

And it’s this consumer choice that is placing the Japanese high-tech industry at a critical juncture. Home-grown local companies and manufacturers have for decades been world leaders, building formidable brands on the back of sophisticated products that were one step ahead of consumer demands.

Now, however, the picture isn’t so rosy due to a sluggish response to mounting global competition, particularly from China, South Korea and Taiwan. Where once the local Akihabara clientele and travelers from overseas would have clamored to purchase Japanese brands, this is no longer necessarily the case.

The challenge facing Japanese high-tech companies is how to grow quickly and profitably while maintaining global scale. How can they use inherent strengths and technological excellence to once again create competitive advantage? How can they expand and/or re-enter emerging markets with winning products and brands tailored to the needs and pockets of consumers?

One key to achieving high performance will be aligning operating models and required capabilities to a redistilled competitive essence better suited to the demands of an increasingly crowded consumer market. Action is necessary across market focus and position, capabilities and performance.

While impossible to develop an industry-wide cookie-cutter solution, one key recommendation is to “strategically shrink to grow.” Each company requires an individual strategy for the next decade based on core strengths and the value opportunities it wants to unlock.

There are a number of possible scenarios, not all of which are mutually exclusive: domestic rightsizing, diversification in high-growth markets and becoming a global solutions provider. After determining the core competitive essence, companies can transition to becoming a global solutions provider through areas including product portfolio, innovation and talent globalization.

High-tech companies also need to harness group-level synergies and reduce inefficiencies. Japan’s first-movers have been successfully leveraging core strengths and capabilities of their group companies to quickly expand into adjacent products and services promising robust and durable growth. The reduction of inefficiencies is also imperative, exemplified by companies such as Hitachi, Sony and Toshiba, who have all divested their underperforming small and mid-sized liquid-crystal display businesses, freeing up resources and capacity to support new opportunities. Sony has also shed its chemical business for the same reason.

In emerging markets, the objective should be to target the emerging middle class. Panasonic Corporation’s white goods business is a fine example, with Panasonic setting up factories in India and Brazil to help expand into fast-growth cities in countries such as China and India.

This is a critical time for Japan’s high-tech industry, and it’s only through leveraging core strengths to facilitate differentiation and implementing a strategy that harnesses group-level synergies, that the industry will be able to reinvent itself at speed and at scale to once more achieve global preeminence.

Only then will Akihabara’s shopping hordes—and indeed electronics buyers across the globe—put Japanese high-tech brands back in the coveted #1 spot.