The Sharp Corporation is one of the world’s leading manufacturers of electronic products and components. Founded in 1915 by Tokuji Hayakawa, who invented the ‘Ever-Sharp Pencil’, the company had net sales of just under ¥3 billion in 2013
Sharp and the production of liquid crystal displays
The Sharp Corporation is one of the world’s leading manufacturers of electronic products and components. Founded in 1915 by Tokuji Hayakawa, who invented the ‘Ever-Sharp Pencil’, the company had net sales of just under ¥3 billion in 2013 and produced a wide range of products, including television sets, electronic calculators, microwave ovens, solar panels and LED lights. The company first experimented with liquid crystal displays (LCDs) in the 1960s when it licensed the technology from RCA. LCD technology seemed unpromising at first because displays were expensive to produce and small, but Sharp, along with a number of other firms in the industry, invested in R & D and over time barriers were overcome. By the turn of the century, LCD technology had become the dominant technology in flat-screen television displays and Sharp had developed a strong reputation for capability in the broad area of optoelectronics (the fusion of light and electronics).
In the early days of development, the major players in the electronics industry had collaborated on LCD technology and breakthroughs were disseminated quickly but as the technology matured, competition intensified. Lehmberg points out: ‘By the time production technology reached its fifth generation, it had been improved to the point that firms with little LCD experience could buy a new plant and get it to function well with limited outside help.’58 Firms based in countries with lower labour costs, such as Taiwan and Korea, started to compete. In response, Sharp, afraid that its core technology might be at risk, sought to wall off its proprietary knowledge. The company implemented a policy of secrecy; no outsiders, even suppliers, were allowed to visit Sharp’s LCD plants.
Sharp’s business model was based on manufacturing in Japan and selling overseas. For a long time, this strategy served the company well. Prior to 2000, the main market for Sharp’s electronics products was Japan and a significant proportion of its LEDs went into its own products, the remainder being sold to other producers of electronic goods. The company was able to benefit from the geographical closeness of its plants and its proximity to a cluster of small and medium-sized suppliers in an area known as Crystal Valley. These firms supplied key inputs into the LCD production process, for example ‘steppers’ – machines that etch circuitry into LCD panels – and specialized adhesives and films. Sharp’s ‘make in Japan’ policy meant that it was able to consolidate production and exploit available economies of scale. Successive generations of LCD technologies required larger and larger investments and Sharp achieved efficiency gains by investing in new plants. In 2009, it opened its ¥430 billion, state-of-the-art factory at Sakai in Japan, which produced large tenth-generation LCDs that were primarily used in flat-screen television sets.59
As Sharp internationalized, however, the drawbacks of its ‘export’ model became evident. While in 2004, 34% of sales had been in overseas markets, by 2009 that figure was 54%, dropping back to 48% in 2010. LCDs were expensive to ship by air and transport by sea was slow. The LCD market was very competitive and prone to significant fluctuations in demand and supply, causing price volatility. Sharp faced higher taxes and labour costs than many of its non-Japanese rivals and the rapid appreciation of the yen in the latter part of the 2000s meant that Sharp received less revenue from overseas sales designated in foreign currencies. At the same time, the Korean won depreciated, giving an advantage to Korean competitors such as Samsung. To add to the company’s problems, sales of electronic products like televisions that utilized LCDs were severely affected by the global recession. The combination of new competition and weak sales drove prices down, for example between 2004 and 2012 the price of 40-inch LCD panels fell from $2,700 to $250. Sharp moved from profit to loss with a consequent drop in its share price.
In 2009, Sharp’s president, Mikio Katayama, announced a change in business strategy.60 He declared that Sharp was moving away from its Japanese-centric policy to one based more on the concept of chisan chishou – local production for local consumption. Following the example of Japanese car-makers, Sharp planned to change its global production strategy to one based more on the establishment of LCD and TV assembly plants abroad. He argued that Sharp’s core technology wasn’t making LCD panels or assembling LCD TVs: it was production technology. By inference, the company was beginning to place less emphasis on investment in big production plants and to give greater emphasis to its intellectual property and specialized knowledge.
The most obvious location for offshore production was China. As the global economy came out of recession, the strongest market growth was in China, and Sharp had received approaches from several Chinese electronics firms who were interested in entering into agreements with them to produce LCDs. Sharp entered into negotiations with the China Electronics Group but these stalled because the Chinese authorities were only prepared to approve tenth-generation LCD plants whereas Sharp wished to license eighth-generation plants and was not willing to export its latest technology. At the same time, Sharp found itself caught up in a wave of anti-Japanese sentiment that swept through China following the Japanese government’s decision to purchase three islands located in the East China sea from a private owner. China disputed the ownership of these islands and the incident fuelled already deep-rooted anti-Japanese nationalism, resulting in attacks by Chinese nationals on Japanese-owned businesses and brands.
Before the new strategy could be put in place, Sharp’s position deteriorated further and President Katayama was replaced by Okuda and shortly afterwards by Takahashi. In 2012, the year that the company celebrated its 100th anniversary, it also announced its greatest ever losses of ¥545 billion, and even its senior executives started to question the company’s ability to survive. In its scramble to stay afloat, it was forced to turn to rivals such as Taiwan’s Hon Hai Precision Industry Co. (also known as Foxconn) and Samsung for capital. The new president (Takahashi) blamed some of the company’s failure on its inward-looking culture, which, he argued, had resulted in excessive numbers of meetings, a time-consuming consensusbased approach to decision making and greater attention to managing the organization chart than to doing what was best for the business and its customers.
Case questions
? What factors did the Sharp Corporation need to consider when deciding where to locate its LCD production? What are the advantages and disadvantages of changing its ‘make in Japan, sell overseas’ strategy?
? What are the potential costs and benefits to Sharp of engaging in joint ventures with Chinese and Taiwanese electronics manufacturers?
? Critically evaluate President Katayama’s suggestion that Sharp should have placed greater emphasis on its knowledge assets rather than its physical resources.
? What impact has national culture had on Sharp’s strategy and performance?
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
