Japan's leading electronics makers are falling into two groups. Some companies, including Hitachi and Panasonic, have recovered from the industry slump triggered by the global recession that started in 2008 and exacerbated by the 2011 earthquake and tsunami.
Others, most notably Sony, are struggling to return to profitability.
The difference between the winners and losers has been the quality of leadership.
Electronics giants with top executives who have clear and smart visions for the future of their organizations as well as the ability to swiftly carry out necessary reforms to realize their visions have done well.? Companies whose CEOs have failed to show strategic acumen and strong leadership skills have remained mired in trouble.
The brightest performer has been Hitachi, which has turned itself around dramatically since it posted a staggering net loss of 787.3 billion yen ($8.1 billion at the time), the largest in the history of the Japanese manufacturing sector, for the year through March 2009. Under the leadership of Hiroaki Nakanishi, who is now chairman, the company made a spectacular comeback by radically restructuring its business portfolio.
Hitachi has spun off its electronics parts business, which was vulnerable to wild price fluctuations, and focused on infrastructure-related products such as power generators and railway cars. This restructuring has proved an effective antidote to the company's woes.
Panasonic has also improved its earnings performance faster than expected. The company recently logged its first net profit in three years. Panasonic President?Kazuhiro Tsuga two years ago took over a basket case. He has since taken steps to shift the company's strategic focus from consumer electronics to housing and automobile-related products for corporate customers.
As part of his restructuring drive, Tsuga has pulled the plug on the company's smartphone and plasma TV operations. The challenges now facing Panasonic are how to accelerate its global expansion and nurture new growth businesses.
By contrast, Sony remains a rudderless ship. It posted a net loss of more than 100 billion yen for the fiscal year ended March 31. It is expected to keep losing money in the new fiscal year. More serious than its dismal earnings results is the lack of a clear, convincing vision for its future. Symbolizing this problem is its TV business, which has been bleeding red ink for 10 straight years.
Sony CEO Kazuo Hirai took over company's management around the same time as Tsuga?was appointed to the top post at Panasonic. But their leadership performances have diverged widely. This fiscal year will be crucial for Hirai's quest to put Sony back on track.
Sharp has posted profits for the first time in three years, but it is still on a wobbly footing.
Companies face intensifying global competition and increasingly complicated management challenges. This has significantly increased the importance of the abilities of top executives. It has been said that Japanese companies generally have a competent workforce and an underperforming management team. But remaining competitive under the current environment definitely requires strong and smart leadership.
Even the most successful Japanese companies are lagging behind their bigger foreign rivals in terms of profitability. Despite improved bottom lines, Japanese companies need to continue serious efforts to reform their organizations and operations.
