In this interview, Daizo Ito, President, Panasonic India talks about the company’s future plans and what it takes for a consumer goods company to succeed in India
Panasonic India has been doing consistently well in the consumer electronics and home appliances segment and has garnered a good market share, particularly in the television and AC segments. This is despite competition from domestic, Korean and Chinese brands. The reason for its success is based on three core pillars – empowerment, particularly in promoting local talent to leadership positions; localisation, as in, the creation of products that meet the specific needs of Indian customers; and rich communication, through above-the-line and below-the-line marketing activities, amidst employees, suppliers and the manufacturing ecosystem, and also among existing and potential consumers.
Daizo Ito, the man who is responsible for driving such profitable business growth for Panasonic in India, has a vision of making it a household name in the country. In this interview with The Smart CEO, the President of the company shares his insights on what it takes for a consumer goods company to succeed in India and his future plans for Panasonic India.
What is Panasonic India’s five year growth strategy? What kind of support and commitment is the Japanese company offering its Indian arm, to facilitate this growth?
Currently, we are working towards becoming the most trusted brand, with responsibility towards the society, thereby creating a new Panasonic. To achieve our goals, we have embarked on a three-pronged strategy: creating new categories in the B2B and B2C business; reforming our business structure by promoting local management and expanding our business, and thirdly, pursuing an autonomous management system under four broad categories which include, product planning and development, quality assurance, partnerships and alliances for business development, and new business incubation.
We have reached another milestone in India, with the opening of our new manufacturing unit, Technopark, in Jhajjar, Haryana, with an investment of US $200 million from the year 2010-2015. This unit will help improve the design and propel research and development of energy efficient products, to suit the domestic demands of the Indian market and will also help us deepen our foothold in India.
Moreover, with the implementation of the new management plan, we are looking at renewing our focus on the B2B and B2G business, and aim to double the contribution of the B2B segment to Panasonic’s overall revenue, by 2015. Panasonic will be introducing new product ranges mainly in the healthcare, security and education space and will also be looking at collaborating with Indian enterprises for the same. Recently, we also made an entry into the smartphone category, given the huge potential it offers.
Currently, we have identified India as the centrepiece of our future growth and we plan to invest Rs 1,500 crore over the next three years, towards expansion of products and services. By pursuing a localisation strategy in India, we have recorded revenues of US $1.3 billion in FY12 and are expecting it to reach US $1.65 billion by FY13.
What is Panasonic India’s roadmap for its products? Out of its products basket, which categories have a better market potential in India and which products is the company looking at phasing out?
Localisation or indovation (India-specific-innovation) has been our key growth drivers in India. The value to the customer and need assessment is researched while the products are created. Researchers visit consumer households to gather feedback about products and identify the requirement gaps which could help in developing tailor-made products for Indian market. For instance, when we found that there was a price vacuum between a window and a split AC in India, we introduced the CUBE AC, which is a split AC in the window AC form.
Moreover, the rapid advancement in technology has led to many changes. There has been a significant improvement in the resolution of TV panels in the country. The bulky curved televisions which ruled Indian homes at one point in time, are heading for an exit and flat panels are gaining a bigger foothold in the Indian market. In fact, we see a fast transition towards LED TV models this year. Thus, with a continued focus on product differentiation for its customers, Panasonic only has LED TVs in its product portfolio and we are expecting growth by introducing a huge line-up of LED models in 2013.
What are the factors that contribute to the success of a consumer goods company in India?
The success of any consumer goods company is determined by four key factors. One, there should be a requirement for the product. Two, the marketing mix has to be precise and the product features and technology should be designed in accordance with the customer’s needs. Three, the pricing must be right and the products should be made available in the right place and the right time. Lastly, adequate promotions should be carried out, to create awareness among target consumers, about the availability of the product. A successful promotion will help a firm spread costs over a larger output.
The other drivers of success are R&D, innovation and new product development. As a part of this effort, product localisation has emerged as a driver of sales, customer excitement and customer interest. While Indian consumers want access to products available overseas, they also look forward to a product that has been created especially for them.
Many Japanese firms in the recent past have adopted the strategy of appointing senior Indian managers to take care of the day-to-day operations, instead of controlling the management. What is your observation on this? What are the advantages of this move?
With an aim to cater to a live and dynamic market like India, companies are gradually changing their ways of doing business here. Moreover, The FTA (Free Trade Agreement) signed between Japan and India has strengthened the relationship between the two countries and now we see a lot of Japanese companies betting on India like never before. Japanese firms do not have formal written policies that ban locally hired employees from managerial posts. In fact, they endorse the goal of localising management.
Given the current situation, I believe that the Indian management will certainly boost the growth of our company. Localisation can be a complex process and may require effective manage¬ment, but such a strategy can generate tremendous cost efficiencies in the production process. Taken to its optimal level, it can change the way a company develops its core products and authors its source content.
You have been at the helm of Panasonic India for five years now. What is your observation on the trends that have emerged during this period in the consumer electronics industry and what have been the causes for the same?
An expanding middle class, rising incomes and spending power, a youthful population and rapid urbanisation have led to the surge in India’s consumption story, thereby accentuating India’s consumer electronics industry. These elements have led the consumer electronics industry to witness the following trends:
While the total number of product categories per household remains stable, many consumers are narrowing their technology interest to those devices that serve multiple functions.
The increasing capabilities and rapid adoption of mobile multi–function devices are fueling continued consumer influence and control over devices and applications used in the workplace. Not only are consumers using these devices for work purposes, but they are finding productivity improvements in doing so.
With the rising cost of fuel and power, the number of people and households using energy efficient products has risen sharply in recent years, especially in metros, which provides an opportunity for businesses that are using eco-friendly as a component of their value proposition.
DAY IN THE LIFE OF ITO
How much time do you spend in India in a month?
In a month, my stay in India is for about 20 days.
What is your typical day like when you are here?
Considering the time difference between Japan and India, I get on a call with the Japanese headquarters early morning. Even through a busy schedule, I make it a point to not compromise on health and fitness. I try and go for a walk or a jog early in the morning. Once I am in office, I connect with my team in India, where we go over pertinent issues, decisions and way forward, which help my team communicate their views. In the second half, I meet external stakeholders, to analyse the business environment and study the consumer culture in India.
How do you unwind?
Reading newspapers is a part of my daily morning routine as it keeps me updated about industry news. Moreover, I am deeply influenced by the Bhagavad Gita, which I like to unwind with. Travelling to new places and learning about new cultures is also something I enjoy the most. Lastly, since I belong to a family of avid golfers, I have a special interest in the game but don’t pursue it consistently due to lack of time.