Sanyo Electric Company, Ltd.

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Sanyo Electric Company, Ltd.

218, Keihan-Hondori
Moriguchi City
Osaka Prefecture 570
(06) 9911181

Public Company
Incorporated: 1950 as Sanyo Electric Works
Employees: 34,000
Sales: ¥987.54 billion (US$7.9 billion)
Stock Index: Tokyo Nagoya Osaka Amsterdam Zurich Frankfurt Basel Geneva Paris

The Sanyo Electric Company was born in the shadow of the giant Matsushita Electric, one of Japans largest industrial institutions. Sanyos founder, Toshio lue, was the brother-in-law of Konosuke Matsushita and an original partner in Matsushita Electric. Shortly after World War II, the occupation authority ordered Matsushita broken up into two smaller companies as part of its industrial decentralization policy. Several of Matsushitas operations were turned over to Iue, who set up his own company to produce and export bicycle lamp generators. Dreaming of one day having 100 factories around the world, lue called his company Sanyo, a somewhat generic name that means three oceans. On April 1, 1950, after paying off its unsecured loans, the company was incorporated as the Sanyo Electric Works.

Unlike Sony, NEC, or JVC, Sanyo has traditionally relied heavily on existing technologies in product development, concentrating on marketing and price competitiveness. After entering the American market as a low end manufacturer, Sanyo now produces some of the highest quality products coming out of Japan.

The dynamic economic atmosphere in Japan after the Korean War raised personal incomes and stimulated consumer demand. Sanyo grew modestly at first, offering only a limited line of simple electrical appliances. In order to boost its sales through greater name recognition, Iue asked Matsushita for permission to use that companys brand name, National. With only minimal benefit from Matsushitas broad marketing network, Sanyo widened its product line to include radios, tape recorders, and even televisions. The company later began marketing products under its own name through independent retailers.

Toshio Iue believed in a unique management philosophy called the white paper method. Similar to the process by which parliamentary governments announce general policy goals and invite criticism or discussion, the white paper system encouraged a consensus approach to management.

As the Japanese economy began to grow even faster during the mid-1950s, consumers, long deprived of even simple amenities, expressed increasing demand for household appliances. Sanyo was well established in the market and had great success in simple-technology items such as washing machines, air conditioners, and improved radios. lue did not regard other electrical manufacturers as his competition. Instead, he saw consumersthe ones who dictate the marketas competitors. This philosophy generated a very high creative awareness that forced him to anticipate new markets.

Sanyo created a separate affiliate in 1959 called Tokyo Sanyo Electric which, lue hoped, would make it easier for the company to respond to market demand and to raise capital. Although Sanyo eventually only maintained a 20% interest in Tokyo Sanyo, the two companies frequently engaged in bouts of constructive competition, what lue himself described as a friendly rivalry.

In pursuit of his goal of running a world-wide company, lue began to export Sanyo bike lamps to underdeveloped countries. He reasoned that as these countries developed, Sanyos sales volume would grow accordingly, much as it had done in Japan. Most of these countries, however, lacked fundamental industrial bases, and while Sanyo outsold its European competitors, the growth he expected in these economies never materialized. In 1961, Sanyo established its first overseas factory in Hong Kong. Sanyo also entered into an agreement to market transistor radios in the United States with the American antenna manufacturer Channel Master in the 1950s. This arrangement was later expanded to include Sanyo televisions, tape recorders, and some home appliances.

In 1962 Sanyo marketed a revolutionary new type of battery called the Cadnica. Named for its cadmium and nickel components, the Cadnica was especially durable and also rechargeable. The battery became very popular at the high end of the market and represented a new and profitable product line.

During the mid-1960s Japan maintained such strong price competitiveness in certain market segmentsespecially textiles and consumer appliancesthat these segments became the primary source of the countrys export-led growth. In 1965 Sanyo became a leading exporter, deriving an ever larger percentage of its profits from the United States.

Two years later, at the end of 1967, Toshio lue relinquished the company presidency to his younger brother Yuro lúe. While the elder lue continued to serve as chairman, Yuro made some important changes in the companys direction. He led the development of new divisions outside of the traditional consumer products markets, and also placed a greater emphasis on Sanyos internationalization.

Toshio lue died in July, 1969, leaving Yuro lúe in a dual role as president and chairman. At the end of 1970, he turned over the presidency to another brother, Kaoru lue. Kaoru introduced a new sales plan to Sanyo, known as the one-third marketing strategy. Under this scheme, Sanyo would attempt to diversify its manufacturing capacity geographically into three equal sectors: domestic manufacture for the domestic market, domestic manufacture for foreign markets, and foreign manufacture for additional foreign markets. Less a means to Toshios 100 factories than a method to reduce risks in the international trade structure, Kaorus one third plan nevertheless contributed to the balanced growth of the company on a global basis.

In 1973 the American company Emerson Electric asked Sanyo to help revive its subsidiary, the Fisher Corporation. Fisher, acquired by Emerson in 1965, had moved its manufacturing operations to Hong Kong due to high labor costs, but continued to suffer from quality problems. The cooperation between Emerson and Sanyo continued until May, 1975, when Sanyo, which still had no American manufacturing affiliate, engineered the transfer of several Fisher product lines to Japan and rehabilitated a Fisher speaker plant at Milroy, Pennsylvania. As 50-50 partners, Sanyo and Emerson were unable to resolve numerous differences of opinion in regard to Fisher. Finally, in May, 1977 Emerson agreed to sell its share in Fisher to Sanyo. That year the new, profitable Fisher Corporation moved its headquarters from New York to Los Angeles.

Sanyo realized tremendous growth during the 1970s; sales grew from $71.4 million in 1972 to $855 million in 1978. Subsequent growth, particularly in the video sector, was slowed by the ill-fated decision to adopt Sonys Betamax VCR format instead of Matsushitas VHS. While initially successful, the Betamax has since become all but obsolete. Sanyo avoided further damage by later switching to the VHS format.

During the same decade it became increasingly evident that in order to remain competitive in world electronics, Sanyo would have to move more decisively into high-technology markets. This process was begun in the mid-1970s, but pursued in earnest only in the late 1970s, when a variety of products and integrated systems, ranging from LED televisions to home solar energy systems, were introduced commercially. Several manufacturing facilities and sales organizations were established in Europe and China, and a research institute was inaugurated at Tsukuba.

By 1986, in light of the increased industrial concentration of competitors and the rising value of the yen, the sibling rivalry between Sanyo Electric and Tokyo Sanyo had become uneconomic. It was decided at that time to merge the two companies to form the New Sanyo Electric. Similarly, the following year, Sanyos American affiliate merged with Fisher to become Sanyo Fisher (U.S.A.) Corporation. The mergers made the entire organization more efficient, but also resulted in the departure of certain key executives, most notably Howard Ladd, a Fisher executive who first introduced the Sanyo name to America in the early 1970s.

Kaoru lue resigned suddenly in 1986 as a demonstration of responsibility for the deaths of customers who died using faulty Sanyo kerosene heaters. He was succeeded by Toshio lues son, Satoshi lue, and subsequently died two years later.

Sanyos new president promised to expand the companys overseas production capacity. Already the largest Japanese manufacturer outside of Japan, Sanyo builds refrigerators in Kenya, portable stereos in Zimbabwe, air conditioners in Singapore, and operates a television factory in Argentinas desolate Tierra del Fuego. Despite labor problems at a large plant in Arkansas, Sanyo intends to expand in the United States. To that end, in 1988 Sanyo created Sanyo North America Corporation, with 24 subsidiaries and affiliates.

Somewhat behind its competitors in the high-technology field, Sanyo nevertheless remains highly profitable in consumer electronics. Its current restructuring, intended to improve the companys standing in high-technology areas, will not be completed for several years. A more immediate high-growth area will likely come in office automation products, a market where Sanyos strong consumer sales network may be deployed easily and quickly.

Principal Subsidiaries:

Sanyo Electric Trading Co., Ltd.; Sanyo Electric Credit Co., Ltd.; Sanyo Electric Tokki Co., Ltd.; Tottori Sanyo Electric Co., Ltd.; Sanyo Manufacturing Corporation; Sanyo Fisher (USA) Corporation.