Panasonic
Corporate History & Strategy

Konosuke Matsushita was born in 1894 in Wakayama Prefecture. His family fell into poverty after his father's business failure, and at age 9 he was sent to Osaka as an apprentice at a bicycle shop. While handling chores such as babysitting and cleaning, he gained exposure to the business world. He later joined Osaka Electric Light Company at age 15, where he worked on wiring installations. His meticulous work earned him successive promotions, and at age 22 he was promoted to inspector—an exceptionally rapid advancement that was considered a career milestone among his fellow electricians.

The inspector's duties primarily involved next-day checks of completed work, with actual working hours amounting to only 2-3 hours per day. However, Matsushita was not content with this comfortable position and aspired to commercialize a new socket he had been researching during his tenure. When he showed a prototype to his supervisor, it was dismissed with 'This is no good,' but this only strengthened his resolve to develop the product on his own. He decided to pursue the path of bringing his own products to market rather than settling for a career as a company employee.

In June 1917, Matsushita resigned from Osaka Electric Light. He assembled approximately 200 yen in capital from his severance pay, savings fund, and personal savings of about 100 yen, plus 100 yen borrowed from an acquaintance of a former colleague. He converted two rooms of his home into a workshop with a dirt floor and began manufacturing with his wife's younger brother Toshio Iue (who would later found Sanyo Electric) and others. Initially they attempted to manufacture and sell a new socket, but could not find sales channels, and finances became so tight that they had to pawn their belongings.

The turning point came in December 1917 with an order from Kawakita Electric for fan insulation plates. They focused on replacing conventional ceramic plates with molded alternatives, securing 80 yen in profit against sales of 160 yen. Following this profitable venture, Matsushita formally established the 'Matsushita Electric Appliance Factory' in Obiraki, Fukushima Ward, Osaka in March 1918. The first product, an attachment plug, followed by a two-way outlet plug, gained orders through wholesalers, establishing the foundation of the electrical appliance manufacturer.

Konosuke Matsushita had experience as an apprentice at a bicycle shop before starting his business, and was well aware that nighttime bicycle lighting was impractical. The mainstream at the time was gas lamps, and while battery-powered lamps existed, they lasted only 2-3 hours and were unsuitable for extended use. Having built a business foundation in wiring devices, Matsushita turned his attention to bicycle lamps as the next product. The idea was that eliminating the inconvenience of existing products would open up a market.

Upon starting development, Matsushita produced approximately 100 prototypes over about six months. Through testing the structure and battery consumption characteristics, he arrived at a bullet-shaped lamp prototype that could last 30-50 hours. This was more than ten times the lifespan of existing products—a decisive difference in practical usability.

In March 1923, Matsushita Electric began manufacturing and selling bicycle lamps. However, as a small-scale operator at the time, wholesalers and bicycle shops were cautious about handling products from an unknown manufacturer. Matsushita therefore executed a promotional strategy of distributing 2-3 lamps free of charge to retail shops, letting them actually light them to verify performance. Rather than having the product talked about, he let the product speak for itself.

Through 2-3 months of free distribution, trust in the product's performance spread, and orders gradually expanded. From then through the 1920s, Matsushita established mass production factories one after another in Osaka, achieving both cost reduction and expanded supply capacity. The bicycle lamp became the core product that contributed most to Matsushita Electric's business expansion, forming the financial foundation that supported subsequent business diversification.

From the late Taisho era to the early Showa era, the electrification rate in Japan steadily rose, with power distribution networks being developed primarily in urban areas. Electricity expanded beyond lighting to heating, cooking, and entertainment, fundamentally changing household lifestyles. A structural opportunity was emerging for companies that could systematically supply a range of electricity-based products.

Matsushita Electric had secured stable profits with its bullet-shaped bicycle lamp, but the progress of electrification also highlighted the limitations of relying on a single product. As electricity was brought into homes, the scope of demand would expand. Building a system that could place multiple products on the common platform of electricity was becoming a condition for sustained growth.

In April 1927, Matsushita Electric established the 'National' trademark, adopting a policy of deploying all products under a unified brand. The name, meaning 'of the nation,' embodied the stance that the company was not merely a manufacturer of specific products but an enterprise that would deliver electrical products to households across the nation. That same year, it launched the square-shaped National lamp, initiating sales with the brand name front and center.

This decision marked a shift from product-level evaluation to brand-level trust building. As the company repeatedly entered markets where established competitors had the lead, it was derided as 'Maneshita Electric' (a pun meaning 'copycat electric'). However, the system of bundling quality, price, and distribution channels under a unified trademark created a structure where existing trust could be transferred each time a new product was introduced.

Using the establishment of National as a starting point, Matsushita Electric successively launched household electric heating products including electric stoves, electric irons, and electric kotatsu heaters. By leveraging the common technological platform of electricity to expand products by application, lateral expansion through the sales network became possible. Under the brand umbrella, the more products were added, the greater the turnover per store.

In the 1930s, the company further expanded into radios, dry batteries, motors, and light bulbs, also moving into in-house production of core components. By handling everything from final products to components, the product lineup evolved into a structure with both breadth and depth. The series of developments following the establishment of National transformed Matsushita Electric from a single-hit-product company into a comprehensive electronics manufacturer.

By the early 1930s, Matsushita Electric had grown to approximately 1,200 employees in just over a decade since its founding. As it expanded its product range from lamps and wiring devices to radios, its positioning was shifting from a mere manufacturer to a social entity. With the growing scale of the enterprise, the need arose to articulate the significance and direction of the business beyond daily production activities.

During this period, Konosuke Matsushita visited a religious organization and was struck by 'the strength of an organization united by a sense of mission.' He also gained the insight from the example of Ford's mass production in the United States that expanding production itself could serve as a means of social transformation. The idea that supplying goods as cheaply and abundantly as tap water could overcome poverty was formed during this period.

On May 5, 1932, Matsushita Electric assembled all employees and Konosuke Matsushita delivered an address. He declared that 'the mission of industrialists is to overcome poverty and increase wealth,' and publicly presented the 'Tap Water Philosophy'—the policy of supplying electrical products as cheaply and abundantly as tap water through mass production. It defined corporate activity not as private profit-seeking but as connected to a social mission.

Furthermore, he presented a '250-year plan' with a timeline of 10 periods of 25 years each for achieving this mission. May 5, 1932 was effectively redefined as the founding date, placing the announcement of the philosophy rather than the start of the business as the company's starting point. The very act of setting a seemingly unrealistic timeline of 250 years was intended to foster a management culture not swayed by short-term performance.

Following the announcement of the Tap Water Philosophy, morning and evening assemblies were implemented at all Matsushita Electric offices. The practice of singing the company song at the end of the morning assembly emerged spontaneously from each office and became an institutional foundation for disseminating the philosophy. The idea of 'sharing mission through ritual,' gained from the visit to a religious organization, was concretized in daily organizational operations.

Redefining the founding year from 1918 to 1932 directly demonstrated the stance of valuing the existence of a philosophy over the scale of the business. The Tap Water Philosophy subsequently became the fundamental value standard for Matsushita Electric's management decisions, serving as a reference point in both periods of expansion and retreat.

By the early 1930s, Matsushita Electric had expanded its product range to include radios, dry batteries, and wiring devices, with production facilities scattered across Osaka Prefecture up to the 12th factory. Each factory had been added as orders grew, but the dispersal of facilities posed challenges in both management efficiency and logistics. Consolidation of sites and modernization of equipment were essential to establish mass production systems and reduce costs.

At the same time, the increase in product variety was reaching the limits of decision-making by Konosuke Matsushita alone. While organizational expansion generates vitality, it also carries the risk of blurring the locus of responsibility. Without simultaneously redesigning both the production system and organizational structure, sustaining growth was becoming increasingly difficult.

Matsushita Electric decided to construct a large-scale factory in the Kadoma district on the outskirts of Osaka, completing the headquarters factory in May 1933. The site covered approximately 70,000 square meters. Of the 500,000 yen investment, 300,000 yen was procured from Sumitomo Bank without collateral. Unsecured lending to a company that had started as a small workshop demonstrated the level of creditworthiness Matsushita Electric had achieved by that time.

Simultaneously that month, the company adopted a divisional system that clarified management responsibility by product. The 1st Division was assigned to radios, the 2nd Division to lamps and dry batteries, and the 3rd Division to wiring devices, synthetic resins, and electric heaters. Each division was structured to handle everything from production to sales. This came 13 years after DuPont's adoption in the United States and was an extremely early implementation among Japanese companies.

The construction of the Kadoma headquarters factory consolidated production sites, advancing cost reduction and expanding supply capacity. The extensive grounds included room for future expansion, functioning as a long-term growth foundation. The integrated layout of headquarters and factory groups enabled management efficiency and faster decision-making.

The introduction of the divisional system signified a transition from founder-centered management to decentralized management. The system where each division held profit-and-loss responsibility under independent accounting became the organizational model that would support later diversification. The simultaneous consolidation at Kadoma and adoption of the divisional system was a turning point that advanced both production modernization and management institutionalization, forming the framework for Matsushita Electric's growth into a comprehensive electronics manufacturer.

As postwar recovery progressed, expectations for household electrification grew in Japan along with rising living standards. Areas such as laundry, refrigeration, and video represented the next growth sectors for Matsushita Electric, which had built its business foundation in radios and lighting equipment. The early 1950s in particular saw demand for durable consumer goods beginning to materialize, entering a phase where the home appliance market was taking off in earnest.

Matsushita Electric had developed a nationwide sales network before the war and maintained relationships with retail shops. If the company could leverage both its production system and distribution channels, it had the conditions to deploy new home appliance products on a national scale. As competitors also eyed this opportunity, being the first to assemble a product lineup was key to gaining competitive advantage.

In 1951, Matsushita Electric began manufacturing washing machines, marking its full-scale entry into household appliances. The following year, in 1952, it launched black-and-white televisions. For CRT technology, it partnered with Philips of the Netherlands and established Matsushita Electronics as a joint venture, setting up production at the Takatsuki factory. It was an approach of pursuing technology introduction and mass production launch in parallel.

Furthermore, in 1953, it launched refrigerators. Mass production was built through Nakagawa Machinery (later Matsushita Refrigeration), a company with capital ties. Covering washing machines, TVs, and refrigerators—products that would later be called the 'Three Sacred Treasures' of postwar consumerism—within just three years clearly demonstrated the transformation from a wiring device manufacturer to a comprehensive home appliance manufacturer.

By covering the Three Sacred Treasures, Matsushita Electric transformed its business structure into a comprehensive home appliance manufacturer targeting all aspects of household life. Each product was sold through National Shops across the country. In 1957, the sales company system was reorganized into the National Shop Association, organizing local electronics shops into a network with integrated management of pricing, promotion, and service.

Postwar distribution regulations that restricted the establishment of large retailers also served as a tailwind for strengthening ties with small home electronics retailers. Production volumes expanded year by year, and a virtuous cycle emerged where cost reduction through mass production and expansion of the sales network mutually reinforced each other. Through the 1960s, Matsushita Electric established a top-tier position in the domestic home appliance market, and the simultaneous entry into the Three Sacred Treasures was the turning point that determined the company's postwar growth trajectory.

By the 1960s, domestic penetration of black-and-white TVs, refrigerators, and washing machines had run its course. Meanwhile, home electronics manufacturers had built new mass production factories, and oversupply had become chronic. On the sales floor, discounting and long-term promissory note payments were rampant, and some latecomers were falling into financial distress. The entire home electronics industry was facing the limits of quantitative expansion.

Matsushita Electric was no exception. The standalone results for November 1964 showed revenue of 207.1 billion yen and reported profit of 12.9 billion yen—a decline in both revenue and profit. For a company that had sustained high growth in line with home appliance adoption since the 1950s, a revenue decline was a major turning point. Konosuke Matsushita, who had stepped back to chairman in 1961, assumed the role of acting head of the sales division and decided to personally lead the sales reform.

In the summer of 1964, Konosuke Matsushita summoned the presidents of all nationwide sales subsidiaries (distributors) to Atami in Izu, and held what became known as the 'Atami Conference.' It was a meeting where Matsushita Electric, responsible for production, and the sales subsidiaries sought a resolution regarding inventory burden and settlement conditions amid rampant price-cutting. The conference was organized in an unusual format with no fixed end date—it would continue until a conclusion was reached.

Discussions became heated, with sales subsidiary representatives erupting: 'We can't make money because Matsushita's guidance is bad.' On the third day, Konosuke Matsushita tearfully apologized, saying 'Matsushita was wrong.' This gesture became the turning point, and the sales subsidiaries shifted to cooperation. They reached agreement on the introduction of 'one distributor per region,' 'direct transactions between divisions and distributors,' and the 'new monthly payment system.'

Following the Atami Conference, the trade practice of relying on long-term promissory notes was corrected, and discipline was restored to the sales front. The one-distributor-per-region system clarified the locus of responsibility, and the reorganization of the relationship between divisions and distributors enabled integrated management of inventory, pricing, and cash flow. The shift was from quantity expansion through price-cutting to sales accompanied by profitability.

The revenue and profit decline was a temporary setback, but the sales system reform served as an occasion to redesign Matsushita Electric's distribution structure. The transition from the quantitative expansion model of the high-growth era to management emphasizing control and profitability advanced, and the foundation supporting subsequent domestic and overseas expansion was rebuilt.

Konosuke Matsushita had stepped back to chairman in 1961, but continued to exercise influence at critical junctures thereafter. At the Atami Conference in 1964, he returned to the frontline as acting head of the sales division and led fundamental sales reform. The 16 years in which he remained the de facto supreme decision-maker despite having formally retired left limited room for the organization to develop autonomy.

In February 1977, Matsushita Electric announced the appointment of Toshihiko Yamashita as president, and Konosuke Matsushita formally retired from the management frontline. The founder-family-led management structure that had driven postwar high growth reached an institutional conclusion at this point. However, Matsushita remained a symbolic presence of the company's philosophy as honorary chairman until his passing in April 1989, and his influence did not entirely disappear.

The succeeding Yamashita administration inherited the founder's philosophy while shifting its focus to organizational consensus and the divisional system as the axis of management operations. Thereafter, four consecutive professional managers—Akio Tanii, Yoichi Morishita, Kunio Nakamura, and Fumio Otsuba—led the company, and management transitioned to a professional executive system completely separated from the founding family.

This transition was a change in governance structure to accommodate the company's expanding scale and diversifying businesses. However, it also posed each president with the question of how far the founder's philosophy should serve as a guiding principle for management decisions. Structural reforms such as the company name change and holding company transition were only executed in the 2000s, once the founder's shadow had faded.

From the late 1970s through the 1980s, the home video market saw a format war between Sony's Betamax and the VHS format championed by Matsushita and JVC. VHS ultimately won the global standard, but the process left a lesson that hardware superiority alone was insufficient for long-term revenue security. The structure was becoming clear that in the video industry, the side controlling content held strong influence.

In 1989, Sony acquired Columbia Pictures of the United States, launching a strategy of hardware-software integration. For Matsushita Electric, which held a global share in AV equipment, incorporating content such as movies and music into its group also emerged as a strategic priority. The competition had moved from format wars to who would control the software.

In November 1990, Matsushita Electric acquired MCA, a major American entertainment company, for approximately $6.1 billion. The vision was to integrate video equipment and content within the group by bringing Universal Pictures and music businesses under its wing. This was one of the largest overseas acquisitions by a Japanese company at the time and attracted international attention.

The aim was to secure dominance in the video era by layering content on top of the sales base built through hardware. It also carried the meaning of countering Sony's Columbia acquisition. However, the creative business—highly dependent on hits—inherently carried a fundamentally different risk structure from manufacturing, which excels at mass production and cost management.

After the acquisition, differences in corporate culture and management approaches between Japan and the United States became apparent, and the expected synergies did not materialize. Revenue from video software was subject to the box office performance of individual works and did not directly correlate with the outcome of video format wars. Even with high global hardware market share, stabilizing the content business proved far from easy.

In 1995, Matsushita Electric sold the majority of its MCA shares, effectively withdrawing. The sale resulted in recorded losses, demonstrating the difficulty of large-scale overseas acquisitions. This episode came to be cited as a case symbolizing the overheated M&A of the late 1980s and the subsequent bubble collapse, and it stands as one of the major turning points in Matsushita Electric's management history.

In the 1990s, Matsushita Electric significantly reduced interest-bearing debt and improved its financial health, but revenue growth had stagnated. AV, communications, home appliances, and devices businesses were distributed among multiple listed subsidiaries, and a structure of overlapping business areas within the group persisted. With each company independently pursuing R&D and capital investment, resources were dispersed, making cross-functional product development and technology integration difficult.

As digitalization and networking advanced rapidly, an integrated development system spanning communication devices, AV equipment, and home appliances was required. However, under the subsidiary structure, decision-making speed and investment concentration were hindered, and a structure was becoming entrenched where the group's overall competitiveness could not be fully leveraged.

In April 2001, Matsushita Electric made Matsushita Communication Industrial, Kyushu Matsushita Electric, Matsushita Seiko, Matsushita Kotobuki Electronics, and Matsushita Graphic Communication Systems wholly-owned subsidiaries through share exchanges. By eliminating their individual listings and placing them under unified management, the company aimed to rationalize its capital structure and integrate group management.

Simultaneously, the business was reorganized into 14 business domains, transitioning to a system that cross-functionally integrated R&D, manufacturing, and sales functions. This represented a shift from profit management at the subsidiary level to resource allocation oriented toward group-wide optimization, aiming to curb redundant investment and accelerate technology integration.

The full subsidiaryization rationalized capital relationships and enhanced the flexibility of centralized decision-making and business reorganization. With lower barriers between former subsidiaries, the preconditions for building a development system spanning AV, communications, home appliances, and devices were established. In organizational terms, it marked a clear turning point from the subsidiary management model.

However, whether the integration immediately translated into profitability improvement is debatable. Consolidating overlapping businesses and reallocating personnel took time, and the competitive environment of digitalization was changing faster than expected. While the structural reform established the prerequisites for growth recovery, challenges remained before profitability effects would clearly materialize.

In the early 2000s, the flat-panel TV market expanded rapidly with the start of terrestrial digital broadcasting. Amid a landscape where plasma (PDP), liquid crystal (LCD), and organic EL competed to be the next-generation technology, PDP was considered to hold superiority in image quality and response speed for large screens of 50 inches and above, and Matsushita Electric faced a decision on whether to stake the company's future on this technology.

Meanwhile, LCD was initially seen as centered on small and medium sizes, but Sharp and Korean manufacturers rapidly pursued larger sizes and lower prices, and the market structure was changing at a pace exceeding expectations. In the panel business as a capital-intensive industry, competitiveness was determined by the scale of capital investment and the speed of mass production ramp-up—if the first mover secured scale, it would be difficult for latecomers to follow.

Matsushita Electric transferred its LCD business to a joint venture with Toshiba and defined its core as PDP. Positioning TVs as a 'V-product' (volume product), the strategy was to build competitive advantage through vertical integration from devices to sets, making it the growth engine for the post-reorganization company.

Matsushita Electric decided to build large-scale PDP production facilities in Amagasaki, Hyogo Prefecture, following the Ibaraki factory. Amagasaki Plant No.1 commenced operations in September 2005, followed by Plant No.2 in 2007, and further expansion to Plant No.3. Each factory was designed on the premise of larger glass substrates and high-efficiency production, aiming for cost reduction through mass production effects.

The total investment, including related equipment, reached a cumulative scale of approximately 600 billion yen. Management operated under the conviction that 'you cannot be the market share leader without being the leader in production capacity,' piling up investments aggressively during the demand expansion phase. Even in the medium-term plan that generally maintained the principle of investing within the scope of depreciation, the PDP business was granted exceptional resource allocation.

The massive investment becomes fixed depreciation costs from the moment operations begin. Even if market conditions change, the investment cannot be unwound—once committed, it was a decision that crosses the point of no return.

After the 2008 Lehman Brothers collapse, the TV market rapidly shrank and price declines accelerated. Simultaneously, LCD's upsizing and cost competitiveness improved, and PDP's advantages diminished rapidly. The market shifted to evaluating 'flat-panel TVs' as a whole rather than by technology type, leaving plasma at a price disadvantage.

Matsushita Electric announced delayed launches and investment reductions, but the combination of massive depreciation burden and declining demand drove the TV business into consecutive losses. After halting production at Amagasaki Plant No.3, the company decided on complete withdrawal from PDP production in 2013. In fiscal years ending March 2012 and March 2013, it recorded final losses exceeding 700 billion yen for two consecutive years.

The trajectory of concentrated investment of approximately 600 billion yen failing to win against LCD competition, leading to business withdrawal and massive losses, starkly demonstrates the irreversibility of technology choices in capital-intensive industries. Along with Sharp's Sakai factory, this is recorded as a lesson in capital investment decision-making faced by Japanese home electronics manufacturers in the 2000s.

In the late 2000s, Panasonic faced deteriorating profitability in digital home electronics and the rise of emerging-market manufacturers, and was pressed to establish a new growth axis. The environmental and energy field was positioned as a next-generation core business, and securing technology for automotive lithium-ion batteries and solar cells was urgent. Sanyo Electric possessed world-class competitiveness in rechargeable batteries and held proprietary technologies such as HIT solar cells.

In December 2008, the two companies signed a capital and business alliance agreement. While the global financial crisis had weakened Sanyo's financial health, Panasonic was eager to establish competitive advantage through technology integration. Against a backdrop where Korean manufacturers were announcing massive investments, the judgment was that speed was essential to seize the initiative in the environmental energy domain.

In December 2009, Panasonic acquired a majority of Sanyo Electric's voting shares through a tender offer (TOB), making it a consolidated subsidiary. The total acquisition cost reached a maximum of approximately 800 billion yen—the largest investment since the company's founding. It was the first phase of an integration process with full subsidiaryization in view.

Positioning the energy business as the core, the vision called for integrating batteries, solar, air conditioning, and refrigeration equipment to transform from individual product sales to a comprehensive proposal business covering 'the entire home' and 'the entire building.' Notably, Sanyo Electric's founder Toshio Iue was Konosuke Matsushita's brother-in-law, who had worked together in the founding-era dirt-floor workshop. After approximately 60 years, the company that had split from Matsushita was absorbed back into Panasonic.

Full subsidiaryization was completed in 2011, and integration was accelerated through brand unification and organizational restructuring. In 2014, approximately 7,000 Sanyo employees were transferred to Panasonic, completing the unification of personnel systems. On the technology side, Sanyo's HIT solar cells were deployed under the Panasonic brand, and full-scale entry into the solar business was also announced.

However, the financial burden from the massive investment was heavy—interest-bearing debt increased and rating agencies expressed concerns. The solar cell business later shifted to contraction, and it took time before the battery business was monetized through supply to Tesla. The realization of integration benefits commensurate with the 800-billion-yen investment required more years than initially anticipated.

In the late 2010s, Panasonic's revenue had plateaued at the 7-8 trillion yen level. Competition intensified in both black goods and white goods against overseas players, and the hardware-centric sell-and-done model made it difficult to chart sustainable growth. Under the Tsuga administration, strengthening the BtoB domain was emphasized, and the management theme became transforming from product sales to a solutions and services model.

What attracted attention within this context was the supply chain management (SCM) field. Software handling demand forecasting and inventory optimization for manufacturing, logistics, and retail was seen as a domain where a recurring revenue model through data utilization could be built. Panasonic sought to establish a BtoB business pillar by making Blue Yonder of the United States, in which it had already invested, a wholly-owned subsidiary.

In April 2021, Panasonic announced the acquisition of Blue Yonder of the United States for a total of approximately $7.1 billion (approximately 770-800 billion yen). This was the largest deal since the Sanyo Electric acquisition, and in terms of overseas deals, rivaled the 1990 MCA acquisition in scale. It was described as accelerating the transition to a recurring revenue model centered on SCM software, symbolizing a shift from hardware-centric to data and software-centric.

The market reaction was cautious. On the day of the announcement, the stock price temporarily fell about 5% from the previous day, with numerous observers pointing out it evoked memories of past large-scale acquisitions. Following the MCA acquisition ($6.1 billion, withdrawal within 5 years) and the Sanyo Electric acquisition (800 billion yen, difficult integration), this was the third massive acquisition, and the question was on what timeline returns commensurate with the investment could be achieved.

Approximately four years after the acquisition, Blue Yonder's monetization has not progressed as much as initially expected. Upfront investments in cybersecurity measures and other areas have been substantial, and SCM adoption in the Japanese market has also been slow to expand. While the establishment of a new company and listing plans have been suggested, Blue Yonder has not yet reached the stage of driving the overall group's performance.

The question of whether a hardware manufacturer can achieve 'post-product sales' by acquiring a software company remains unanswered more than 30 years after the MCA acquisition. Whether the investment of approximately 800 billion yen will function as a growth engine is still under evaluation.

In June 2021, Yuki Kusumi became representative director and president. Under the previous in-house company system, headquarters had led numerical target setting and key decisions, but there was a recognition that target-setting by headquarters departments not necessarily well-versed in business-specific characteristics was undermining frontline agility and obscuring the locus of responsibility.

Consolidated revenue for the fiscal year ending March 2022 was 7.3887 trillion yen with net income of 255.3 billion yen, maintaining profitability. However, the structure remained opaque regarding which businesses were profitable and which fell below the cost of capital. Transitioning to a system that could visualize these differences and enable selection-and-concentration decisions was required.

In April 2022, Panasonic changed its name to 'Panasonic Holdings' and transitioned to a pure holding company structure. It established 8 operating companies under the holding company, with businesses in energy, automotive, HVAC, home appliances, and others transferred to their respective companies. While structurally a holding company system, it is referred to as an 'operating company system' reflecting the philosophy of centering on the businesses.

The purpose of the operating company system was to delegate authority to business leaders and enforce autonomous responsible management. By entrusting numerical target setting and investment decisions to each operating company, it enables rapid decision-making in response to changes in the external environment. Simultaneously, by fully exposing segment-level profitability, it created a mechanism for organizationally executing divestiture decisions for unprofitable businesses.

After the transition to the operating company system, large-scale divestitures were restrained for two years from 2021 as profitability improvement was prioritized. However, in 2023 the divestiture of Automotive Systems was decided. This major sale just 18 months after the transition was evidence that the visualization of segment-level profitability had accelerated selection-and-concentration decisions.

89 years after the introduction of the divisional system in 1933, Panasonic has returned to decentralized management. The evolution from divisional system to in-house company system to operating company system is one phase in the pendulum swing between centralization and decentralization, but unlike past decentralization, the holding company structure has institutionally made it easier to carve out or consolidate businesses. The results will be judged by how far growth capability and capital efficiency improvements at each operating company progress.

In May 2023, Panasonic Holdings announced a plan to invest approximately 600 billion yen in the EV battery business. In the automotive domain, batteries were positioned as the core, and the policy to reorganize other automotive-related businesses based on capital efficiency and growth potential was clarified. While consolidated revenue for the fiscal year ending March 2023 was 8.3789 trillion yen with net income of 265.5 billion yen, maintaining profitability at the group level, differences in segment-level profitability had become apparent.

Panasonic Automotive Systems (PAS) had revenue of approximately 1.4 trillion yen but profitability remained low, recording losses on a standalone basis. The question was whether to continue additional investment in the intensely competitive automotive components market or concentrate resources on the battery business. The transition to the operating company system, which made segment-level profitability visible, made it easier for divestiture decisions to reach the management table.

In November 2023, Panasonic HD announced a basic agreement on the share transfer of PAS with funds advised by Apollo Global Management. In March 2024, a share transfer agreement was signed, and the sale was decided at an enterprise value of approximately 300 billion yen. The sale price was below book value, and a loss of approximately 50 billion yen was expected.

This was a major divestiture just 18 months after transitioning to the operating company system, representing the first case where the mechanism for carving out unprofitable businesses under the holding company structure actually functioned. While the decision to divest a business with 1.4 trillion yen in revenue entails a special loss in the short term, it should be evaluated alongside the practical benefit of securing investment funds for the 600-billion-yen battery investment.