This paper reflects on the article “What Panasonic Learned in China,” written by Toshiro Wakayama, Junjiro Shintaku and Tomofumi Amano, published in December 2001 at the Harvard Business Review, pages 109-113. This paper reflects by giving some critical insights on the writer's key statements and arguments.
The article focusses on the theory that International businesses must consider both local responsiveness and global integration when firms are expanding in emerging markets, to secure growth in the future, by providing the example how Panasonic fought this tension in China.
At the beginning of the article you see the statement that most multinational companies do not embrace both global integration and local responsiveness. As most companies seek the usual benefits of cheap labor, or low manufacturing costs, they forget that engaging more deeply with host countries can result into potential market entrance by gaining customer insights. This is due the fact that these firms “expect local initiatives to stay local, to minimize cost and risk”. (paragraph 1) Because of this, there is tension between local responsiveness and global integration.
Panasonic has been picked by example to initially show this tension. They realized that they had to engage more deeply with Chinese consumers. In the last years, Panasonic learned to “treat both worldwide operations and local consumers' needs as equally important” (paragraph 4). In fact, they found a way that invited greater worldwide integration due to deeper localization.
Panasonic learned to build competitive advantage by exploiting this tension. As the Chinese middle class began to emerge, the company started to see “flaws” in their strategy. Therefore, Panasonic carried out a reorganization and began to focus themselves on local consumers' needs.
Panasonic needed both global technology and local adaption. That is why they called out a product planner- Tetsu Miyoshi, who encouraged local researches to learn about Panasonic Japan's sophisticated technologies, and build new product proposals upon that technology.
As Panasonic was developing this idea, they founded the Shanghai-based China Lifestyle Research Center, with the goal to develop understanding of Chinese consumers. The main goal of this center was “not to simply collect data, but to interpret that data” (paragraph 13) to generate more local responsiveness.
As all the staff members held regular meetings with engineers from various business concepts, lifestyle center staff gained new technological knowledge and engineers developed a deeper understanding of preferences on the Chinese market. Knowledge flowed in both directions. The more deeply the company adapted to local conditions, the more extensive was the worldwide integration of knowledge. This led to a greater global collaboration between local insight centers and centralized technology centers.
The level of trust, which is essential for global collaboration (paragraph 25), increased. Therefore, the local departments received more autonomy and responsibility.
The purpose of the article is to give the reader an insight into how International businesses can use tension between local responsiveness and global integration.
Within the article, lots of examples are provided how Panasonic's research in emerging markets such as China, can lead to solving this tension, which was followed by increase in profit. An illustration of the example that has been used and gave the reader a better understanding of the statement is shown in paragraph 17, as the article mentioned that Panasonic went beyond conventional research by “staff members that visited consumer's homes and took note of elements as floor plans and kitchen heights”, to improve customer insights on kitchens.
Furthermore, statistics are given to substantiate statements with facts. An example of this is mentioned in paragraph 23, as Panasonic's market share jumped from 3% to 15% in front-loaded washing machines, due to better customer insights and global integration.
To begin with a more critical note towards the content, the article implicates that multinationals go to emerging markets to “seek the usual benefits of cheap labor and low manufacturing cost”. However, it should be mentioned that many companies seek market entrance to introduce their products, for example by obtaining better customer insights. In fact, western multinationals expect to find 70% of their future growth there—40% of it in China and India alone. (Paragraph 1, HBR: New business models in emerging markets, 2011, see detailed reference page 4)
Although the writer's theory on over winning “the tension” can be applied upon the Panasonic case, he does not show any other examples to support this theory. In addition, any counter-arguments are absent. For example, a reasonable question to ask is whether companies such as Samsung with conventional R&D departments differ in market share. This comparison has not been highlighted, although it could significantly improve the reliability of the article.
Although the argumentation of the author is good to follow, the article lacks sources on which statements are based upon. For example, in paragraph 29 the article mentioned that “Integrated solutions create opportunities for both higher margins and greater local adaption- well beyond the possibilities that individual products can offer”. Is this an assumption? Or has this statement been proven in previous research?
Besides this, it is important to see which parties where invested in studying this case. As seen in paragraph 5, the writers have studied this story “in collaboration with Takafumi Kikuchi, a senior manager of global consumer marketing at Panasonic“. To lower insinuations, it does not have to be a problem that an employee of Panasonic provided the authors of information, although it must be remarked that it is not clear which other sources were involved. Because of absence of other sources, the reader can now interpret this as the only source. The risk that the reader does not have a complete image of all parties involved could by simply avoided by mentioning which sources he used.
Usage of article
The overall topic of International Business is presented in this article by explaining one of the main ideas of this course – moving from one country to another and the strategy that the company would like to follow in order to realize this successfully. In this specific article, Panasonic changes its view on the emerging markets, as they are no longer seen by them as cheap place for manufacturing, but also as an opportunity to attain new customers and generate information which can lead to better global integration. In addition, the example of Panasonic shows that the ability to manage the tension between local responsiveness and global integration, may be a FSA that can be seen transferable. Therefore, we learned that local responsiveness and global integrations are an important matter that should be discussed in international businesses. The differences in culture and customer demands can be used to accomplish better global integration.
The article gave us food for thought, so we went looking for more examples of embracing the tension as mentioned in the article. It turns out that Panasonic used the same embracing-culture not so long ago to fight smog (Nikkei: Panasonic sees opportunity in China smog, 2017, see detailed reference page 4). As major cities in China are regular polluted, Panasonic gathered local information which they used to start engineering processes to improve air quality. Nowadays, this technology is being used in other countries with heavy smog pollution, including cities in both India and Japan.
Although the example of Panasonic is a perfect fit to describe the problem-solving tension between local responsiveness and global integration, the article lacks other examples and sources. Furthermore, we conclude that the writer of the article did not bring in counter-arguments which could bring more objectivity into the article. Therefore, we have the following questions we would like to see answered.
1. On what sources is this article based upon?
2. Through with aspects do companies such as Samsung with conventional R&D departments differ from Panasonic in terms of success in local responsiveness?
Is this tension between local responsiveness and global integration only measurable in emerging markets? Or also in developed markets?
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