Panasonic Corporation is a Japanese multinational electronics corporation headquartered in Osaka, Japan which was established in year 1918. It has grown to become the largest Japanese electronics producers. Panasonic Gobel Indonesia is the name of the company’s Indonesia division based in East Jakarta which was founded in the year of 1960. Currently, Panasonic remains as the most prominent electronic brand with its series of innovative products ranging from plasma TV, camera, air-conditioner, washing machine and many more.
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The first possible reason why Panasonic Corporation expands to Indonesia is because of the tax incentives in Indonesia. The Indonesia government has exempted the luxury sales tax on Panasonic Manufacturing Indonesia’s single shutter refrigerators and 230 litre capacity two shutter refrigerators. In addition, new foreign or domestic investors, or existing investors who are expanding their production by at least 30% or varying into new products will be granted duties relief on the importation of capital goods for two years, and on the importation of raw materials and manufacturing components for two years of production.
Another possible reason for Panasonic Gobel Indonesia to be established is high possibility of achieving economies of scale for production. This is because the household electric appliances industry in Indonesia has developed strongly although there is not much advancement in technology. So, competition among industry players lies mainly in the selling prices and the quality of the materials used for production. Large producers such as Panasonic which operate full manufacturing facility could keep down the production cost and hence become more competitive in prices. Thus, Panasonic Gobel Indonesia might compete in the industry with a more favourable competitive position.
Besides, by having 248, 645, 008 population in the year of 2012, Indonesia is proved to be the fourth most populous nation in the world after China, India and the United States. Indonesia is also expected to be Asia’s third fastest growing economy in year 2011 with the consistent growth of 6% over the past decade (Riady, 2011). This shows that Indonesia is a potential market for Panasonic Gobel Indonesia to be operating in.
Gains of entering foreign country
Panasonic Corporation, the worldwide leader in the development and manufacture of electronic products had invested into many different countries such as in North America, Europe, India, China and as well as in Indonesia. We can see that there are many advantages for a multinational electronic corporation to enter a foreign country. First of all, by entering a new country it will help to increase the total market size. According to an article, it is stated that Panasonic Gobel Indonesia had a total sales of around 440, 000 units of room air-conditioner in year 2011 and targets to have a control of 26% over the market share of room air-conditioner in Indonesia (Saksono, 2012).
Secondly, by entering into a foreign country will help to increase the productivity and sales of the company. As for Panasonic Gobel Indonesia, they started to produce LCD TV in year 2007. From an article, it is stated that the production capacity for the LCD and Plasma TV reaches 50,000 units per month. Either its LCD panels which are imported from Japan or the 26 and 32 inches type of LCD TV which are produced in Indonesia itself, are dominating the demand. This also means that the sales of Panasonic Gobel Indonesia increases from time to time. In order to fulfill the demand required, Panasonic plans to build a production facility for LCD TV in Indonesia. This shows that after Panasonic Corporation has entered Indonesia, the demand and sales did increase and cause Panasonic Gobel Indonesia to expand bigger in Indonesia itself.
Thirdly, from using joint venture as their company’s expansion strategy, Panasonic Gobel Indonesia able to enjoy the benefits of cost and risk-sharing among the local partners in Indonesia. From an article, we can see that there is a joint venture between PT Transistor Radio Manufacturing and Matsushita Electric Industrial Co., Ltd under PT National Gobel since year 1970. By that, Panasonic Gobel Indonesia can hold a definite degree of control and at the same time limits the risk exposure. Not only that, Panasonic Gobel Indonesia can also gain access to the knowledge about Indonesian market about how they operate in Indonesia with the technology, capital and management provided from the headquarters.
Shortcomings of entering foreign country
One of the major disadvantages of entering foreign market is when there is inevitable issue happens in the particular country. For example, the drop of the country’s currency. From a recent article, the weakening of the rupiah of Indonesia causes a lot of problems to all businesses. The articles stated that the rupiah is weakened from 9,000 to 9,500 comparing to the dollar. This means that all the cost incurred will be increases about 5 percent. According to Mr. Suganuma, President Director of Panasonic Gobel Indonesia, if the currency level remains unchanged the company might need to increase the selling price (Bisara & Nangoy, 2012)
Besides, the degree of competitiveness can be another shortcoming of entering a foreign country. The level of competitiveness in the industry that Panasonic Gobel Indonesia is competing is quite stiff. This can be shown as when other competitors in the industry started their production of LCD TV earlier than Panasonic Gobel Indonesia whom started on year 2007. Based on the article, LG Electronics started assembling LCD TV in year 2005 whereas Toshiba Consumer Product Indonesia started their LCD TV business in year 2004. For not being the industry’s first innovator in the industry in Indonesia compared to other competitors can be a great disadvantage for Panasonic Gobel Indonesia as first innovator usually gets to control large portion of the market share and also grabbing more demand.
Besides, Panasonic Gobel Indonesia will face some issues of government policy and cultural differences in their company based in Indonesia. This is because the culture, rules and regulation in Japan and other countries surely differ from Indonesia. Panasonic Gobel Indonesia will face complex and time consuming bureaucracy and an unclear regulatory framework whereby it becomes more complicated due to the Indonesian’s government’s effort to decentralize the power to regions. This may cause drop in the efficiency and productivity of Panasonic Gobel Indonesia while operating in Indonesia if it could not bear with the government policy.
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Becoming the No.1 Green Innovation Company in electronic industry by the year 2018 is the vision for Panasonic. Panasonic has work out lots of efforts to make this vision statement turn out to be real. Therefore, in our opinion, Panasonic should use the strategy that they applied in China, which is opening appliances recycling factory in Indonesia as what they did. In year 2011, Panasonic have reached an agreement to form a jointly-held company in China, Panasonic Hangzhou DADI to recycle home appliances and electronics. Therefore, according to the research done by Rochman, 2010 and Annisa Anjani, 2011, the figure shows that the number of E-waste (Electronic Waste) is increasing. Since, Panasonic’s vision is to be the No.1 Green Innovation Company in the industry, they should bring in their recycling technology from Japan to Indonesia just like what they have done in China. By applying this strategy, it able to enhance the “Eco Ideas” factory concept by enhancing some recycle activities, at the same time, it will also increase the corporate’s image which is one of the element that will influence Indonesian consumer loyalty towards the brand (Lii, 2009).
According to the data showed, Indonesia currency (Rupiah) is appreciating from year 2009 to 2011. However, Rupiah depreciates last year, 2012. This has cause a great problem to Panasonic Manufacturing Indonesia especially when the foreign currency is strengthen, which means Panasonic Manufacturing Indonesia need to spend higher price in Rupiah to purchase raw materials for production and this increases the production cost. Panasonic Indonesia is recommended to oppose the strategy that they have applied in year 2011which is decreasing the price of LCD TV due to the decrease in production cost when Rupiah currency is appreciating in 2011. Since Rupiah currency is depreciating now, Panasonic Indonesia can just apply previous strategy in an opposite way, which is rising the price of their product to cover the cost of production, just like what they have done in India. Panasonic India had hike prices by 4-5% due to the pressure of commodity. In order to show the successful possibility of the recommended strategy, according to the result in Annual Report for the fiscal year ended March 31, 2012, it shown that in the energy system business, Panasonic was successful in bolstering its sales and manufacturing capabilities in India, China and Indonesia, those countries that continue to exhibits high rates of market expansion as well as in environmental system business in China and Indonesia. Hence, it is appropriate to follow what Panasonic India have done because the situation similarity between Indonesia and India are high, both country currencies depreciates.
In order to manufacture in the electronic industry, there are many costs needed to be incurred and one of the most influencing cost would be the labour cost, especially for those large producers like Panasonic Corporation that requires large amount of labour to operate the manufacturing factory. It will cause Panasonic Corporation to experience an increase in the production cost and hence will increase the selling price of their products which may lead to lower demand or sales of their products. In order to solve this problem, Panasonic Corporation can possibly make Panasonic Gobel Indonesia more to an export-based manufacturing factory instead of focusing production for domestic demand in Indonesia since Indonesian market has a weak purchasing power which leads to Panasonic Indonesia to cut down their production. The reason why Panasonic Gobel Indonesia should go for an export-base manufacturing is because Indonesia offers the labour cost which is the lowest among countries in Asia, which is 113 USD Dollar per month. So, Panasonic Manufacturing Indonesia should utilize this advantage and produce more in Indonesia and export the product to other Panasonic branches, especially to branches which the country it is operating in consume high production cost. The act of China becoming the global manufacturing hub for Panasonic due to the advantage of the lower manufacturing cost in China can be used as a reference for Panasonic Gobel Indonesia to implement the recommended strategy, which is to focus more on the exporting-based manufacturing of product.
As we have mentioned in the shortcoming part of Panasonic entering the Indonesian market, Panasonic’s production of LCD TV is later than other competitors in the industry. It is shown that Panasonic Gobel Indonesia’s Korea competitors, PT Samsung Electronic Indonesia and PT LG Electronic Indonesia have a rapid growth in the Indonesia LCD TV market while Japanese company such as Sony, Sharp and Panasonic are suffering negative growth in this product line. As we know, PT Samsung Electronic Indonesia also considered as “late comer” to this market. However, by applying different type of strategies, they have successfully gain market shares. Panasonic Gobel Indonesia can follow Samsung’s footstep, which is halting their production of CRT TV in 2012 as the CRT TV market has been on the decline and eyed Indonesia’s potential market for its LED TV. Therefore, Panasonic can focus more on the potential LED TV instead of continuously competing in the LCD TV market in Indonesia. Besides, Panasonic can also refer to their competitor, Changhong, who is among four largest producers of plasma TV panels in the world together with Panasonic, LG, and Samsung. Other than expanding their market in Indonesia with more than 1000 selling places and 100 after-sales service in different places, Changhong also serves the high-end market in Indonesia, which has not been fully served yet (“Indonesian television industry growing rapidly,” 2012). Therefore, Panasonic Indonesia should apply this strategy to find out underserved market from this emerging flat screen TV market.
In conclusion, we have learnt that it is not easy for an organization to develop its expansion strategy into another country. There are numbers of issues that an organization should be aware of before entering a foreign country. The organization should be aware of the differences in the sense of the culture, government policy, needs and demands of the market and many other perspectives in different countries in order to successfully penetrating in it. Many researches and analysis have to be done before bringing an organization into a foreign country.
Besides, it is vital for organizations to keep innovating and improving even after successfully entering a foreign country to keep competing and lead in the industry, not only in one country but globally. In order to become a successful multinational corporation which operates in few different countries at the same time, it is vital to ensure that every branch of its organization in different countries is operating well and having a good competitive position in the industry. This is because when one of the organization’s branches faces problem or failure, the whole organization will be affected; although it is in different countries.
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