SANYO Electric Co., Ltd.

1947–1959

SANYO Electric Co., Ltd. (Sanyo) is a leading global manufacturer of numerous electronic products. The company produces video equipment, including televisions, VCRs, and video cameras; audio equipment, including CD players, minidisc players, and car stereos; home appliances, including refrigerators, vacuum cleaners, small kitchen appliances, and dehumidifiers; industrial and commercial equipment, including refrigerator/freezer supermarket showcases, vending machines, incubators, and golf carts; and information systems and electronic devices, including personal computers, copiers, point-of-sale systems, and semiconductors. A particular area of emphasis is that of environmentally friendly products, such as rechargeable batteries, solar cells, and CFC-free compressors for refrigerators and air conditioners. Another growth area is multimedia products, such as digital cameras, LCD projectors, and digital cellular phones. Sanyo has about 150 subsidiaries and affiliates in 27 countries; about half of overall sales are generated outside of Japan, with about 20 percent originating elsewhere in Asia, about 17 percent in North America, and about eight percent in Europe.

Early History: Created Out of Matsushita Electric

Sanyo was born in the shadow of the giant Matsushita Electric Industrial Co., Ltd., one of Japan's largest industrial institutions. Sanyo's founder, Toshio Iue, 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. In 1947 several of Matsushita's 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, Iue called his company SANYO Electric Works, 'Sanyo' being a somewhat generic name that means 'three oceans'--referring to the Pacific, Atlantic, and Indian Oceans. On April 1, 1950, after paying off its unsecured loans, the company was incorporated as SANYO Electric Co., Ltd. It went public in 1954.

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. To boost its sales through greater name recognition, Iue asked Matsushita for permission to use that company's brand name, National. With only minimal benefit from Matsushita's broad marketing network, Sanyo widened its product line in the early 1950s 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. Iue did not regard other electrical manufacturers as his competition. Instead, he saw consumers--the ones who dictate the market&mdash 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, Iue hoped, would make it easier for the company to respond to market demand and to raise capital. Although Sanyo eventually maintained only a 20 percent interest in Tokyo Sanyo, the two companies frequently engaged in bouts of constructive competition, what Iue himself described as a 'friendly rivalry.'

Sanyo realized tremendous growth during the 1970s; sales grew from $71.4 million in 1972 to $855 million in 1978.

1961–1977

International Expansion in the 1960s and 1970s

In pursuit of his goal of running a worldwide company, Iue began to export Sanyo bike lamps to underdeveloped countries. He reasoned that as these countries developed, Sanyo's sales volume would grow accordingly, much as it had done in Japan. Most of these countries, however, lacked fundamental industrial bases, and although 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 later was 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 segments--especially textiles and consumer appliances--that these segments became the primary source of the country's exported 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 Iue relinquished the company presidency to his younger brother Yuro Iue. While the elder Iue continued to serve as chairman, Yuro made some important changes in the company's direction. He led the development of new divisions outside of the traditional consumer products markets and also placed a greater emphasis on Sanyo's internationalization.

Toshio Iue died in July 1969, leaving Yuro Iue in a dual role as president and chairman. At the end of 1970, he turned over the presidency to another brother, Kaoru Iue. 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 Toshio's '100 factories' than a method to reduce risks in the international trade structure, Kaoru's '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.

1972–1988

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 Sony's Betamax VCR format instead of Matsushita's VHS. Although initially successful, the Betamax eventually became all but obsolete. Sanyo avoided further damage by later switching to the VHS format.

During the same decade it became increasingly evident that 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.

Mergers: Marking the 1980s

In 1985 a research institute was inaugurated at Tsukuba, the Tsukuba Research Center. By the following year, 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, Sanyo's U.S. affiliate merged with Fisher to become Sanyo Fisher (U.S.A.) Corporation (later renamed Sanyo Fisher Company). 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 the United States in the early 1970s.

Kaoru Iue 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 Iue's son, Satoshi Iue, and subsequently died two years later.

Sanyo's new president promised to expand the company's overseas production capacity. Already the largest Japanese manufacturer outside of Japan, Sanyo built refrigerators in Kenya, portable stereos in Zimbabwe, and air conditioners in Singapore, and operated a television factory in Argentina's desolate Tierra del Fuego. Despite labor problems at a large plant in Arkansas, Sanyo intended to expand in the United States. To that end, in 1988 Sanyo created Sanyo North America Corporation as its U.S. headquarters, with 24 subsidiaries and affiliates.

Roller Coaster 1990s

1986–2002

The bursting of the Japanese economic bubble in 1991 threw the country's economy into a lengthy downturn. Sanyo, like most Japanese electronics firms, was hurt by the difficult economic operating environment at home, where consumer demand--particularly for audio-video equipment--went into a steep decline. Overseas, the electronics firms felt the effects of a high yen, which made Japanese exports more expensive&mdash did high Japanese labor costs. In late 1992, shortly after the company posted a net loss for the 1992 fiscal year, Satoshi Iue stepped down as president of Sanyo and assumed the mostly ceremonial role of chairman. Yasuaki Takano stepped in as president, having been promoted from the title of vice-president he had held since 1986. Takano assumed responsibility for implementing a sweeping restructuring, which included the shifting of additional production outside of Japan, the adopting of a decentralized management system that focused on discrete profit centers, and an overhaul of the company's audio-video and office automation businesses to cut costs and improve profits. In 1993 Sanyo revamped its research and development activities by consolidating eight R & D facilities into five, creating an overall R & D system that consisted of 13 facilities.

Sanyo also aimed to focus more on value-added products, particularly in those areas in which the company was ahead of the competition. One such area was that of environmentally friendly products, such as rechargeable batteries. In 1990 Sanyo had already extended its offerings to include nickel-metal hydride batteries, which offered 50 percent more energy output than nickel-cadmium batteries, lasted longer, and were free of cadmium, a toxic heavy metal. The even more powerful lithium ion rechargeable battery was introduced in 1994. Meanwhile, in 1990 Sanyo developed new CFC-free absorption-type chiller/heaters and refrigeration systems incorporating hydrogen-absorbing alloys. Such systems were used to heat and cool large buildings, and Sanyo was the clear world leader in such technology in the 1990s. Solar energy continued to be a key area as well, and the company introduced a solar air conditioner in 1992. Three years later Sanyo's solar energy operations were bolstered through the establishment of Sanyo Solar Industries Co., Ltd. Another 'clean energy' initiative was the development of high-tech waste processors, which Sanyo first introduced in 1994. Available in both home and commercial versions, these devices transformed organic trash--banana peels, coffee grinds, fish bones--into a soil-like substance that could be used as a fertilizer. Sales began to take off in 1997 when the prices of these appliances, which were initially available only in Japan, began to fall.

After posting another loss in 1993, Sanyo returned to the black in 1994 when it reported net income of US$114.5 million on revenue of US$17.12 billion. The following year Sanyo established Sanyo Electric (China) Co., Ltd. to serve as its headquarters subsidiary in China, where by the end of the decade the company had more than 30 subsidiaries and affiliates, 25 of which were manufacturing operations producing air conditioners, consumer electronics, semiconductors, compressors, home appliances, telecommunications equipment, and numerous other products.

Also in 1995 Sanyo introduced its first digital still camera, part of its drive to 'enrich people's lives' through multimedia technologies. The company's digital cameras were well received in the market, and by early 1998 Sanyo was making about 30 percent of the world output--more than any other firm--including brands that Sanyo produced for other companies. In the 1990s Sanyo also successfully entered the field of LCD projectors, which were used to make computer-based presentations. By 1998 the company held 15 percent of the world market, placing it in the number two position. Among the company's other key multimedia products in the late 1990s were digital cellular telephones and other personal communications devices.

During the fiscal year ending in March 1999, another management change occurred; Takano was named vice-chairman while Sadao Kondo was promoted to president. Despite Sanyo's continuing innovation, troubles recurred in the late 1990s as a result of the continuing sluggishness of the Japanese economy and the Asian economic crisis that erupted in mid-1997. Profits fell during fiscal 1998, then the company posted a net loss of ¥25.9 billion (US$216 million) for fiscal 1999. In the wake of this result, Sanyo announced in April 1999 a major reorganization that rearranged all of its operations into five newly created 'truly independent' companies--Multimedia Company, Home Appliances Company, Commercial Equipment Systems Company, Semiconductor Company, and Soft Energy Company--each with its own president and its own business strategies tied to basic overall objectives of increasing sales, cutting costs, and utilizing human resources in the most effective manner. The company also reformed the role of its board of directors, making the board more action-oriented and giving it greater oversight powers; the membership of the board also was overhauled, most notably with the addition of Corazon C. Aquino, former president of the Philippines. At the same time, Sanyo announced that it would reduce its overall workforce by 6,000 by March 2002, seeking to save about ¥40 billion (US$330 million) annually in labor costs.

Other initiatives that looked toward the new century included several alliances with leading global firms. Sanyo was working with Koninklijke Philips Electronics N.V. of the Netherlands on developing optical sensors used in digital still and digital video cameras. In February 1999 Sanyo entered into an alliance with Eastman Kodak Company to jointly develop next-generation, organic electroluminescent, flat panel displays for use in digital cameras and personal digital assistants. In April 1999 Sanyo diversified into the financial securities industry through the purchase of a 55 percent stake in Osaka-based Yamagen Securities Co., Ltd., an integrated securities company focused on the retail market.

By early 2000 the Japanese economy had not yet fully recovered but other Asian economies were on the upswing and the U.S. and European markets continued to expand. In this environment Sanyo was able to bounce back with solid results for fiscal 2000: net income of ¥21.7 billion (US$204.6 million) on net sales of ¥1.94 trillion (US$18.31 billion). During the early 21st century, Sanyo planned to continue to focus on multimedia and clean energy. Within these fields, the company had identified three areas that it felt had great potential for growth: products related to a home-based information society, such as 'smart' appliances; products related to healthcare, food hygiene control, and an aging society; and environmentally friendly products, such as rechargeable batteries for hybrid vehicles. Sanyo was placing itself on the cutting edge of several potentially explosive areas of 21st-century growth, setting the stage for an exciting if somewhat uncertain future.