The Great Global Consumer Electronics Race

By Kaminsky, James | Management Review, July 1988 | Go to article overview

The Great Global Consumer Electronics Race


Kaminsky, James, Management Review


Former RCA Consumer Electronics Group vice-president Jack Sauter, one of the pioneers of color television marketing in the U.S., recalls a now-historic management decision his company made in the 1950s. "We looked at the possibility of entering the European market very carefully," he says, "and we decided not to make the move. The logistics were difficult, the engineering standards different. And most importantly, we felt that the United States market was vast enough to support an industry leader like RCA-big enough to keep every one of our factories moving to capacity."

When the RCA and General Electric brands were purchased last year by French government-owned Thomson S.A., leaving long-unprofitable Zenith Electronics as the lone U.S.-based TV supplier, the globalization of the consumer electronics industry finally became an inexorable fact-and Sauter would be the first to admit that the rules of the game changed forever.

"This is the only U.S.-born consumer goods industry that's seen a complete migration of all decision-making into other countries," he says. "All thoughts are now modified by a worldwide approach, and the U.S. is looked at in terms of where it fits into the international marketplace. It's creating fundamental shifts in the business." For veterans like Sauter, it might seem like a nightmare vision of World War III: the Japanese, Koreans, and Europeans fighting it out for dominance of the United States. But for the multinational leaders in today's estimated $100-billion, worldwide consumer electronics business, success or failure in the cutthroat American marketplace may well be the decisive factor in a rapidly changing and increasingly volatile global battle.

It's an ironic turn of events in an industry that has seen more than its share of reversals. While manufacturers grow ever more global in production, tough business conditions have spurred them to pull in the reins and localize marketing and product development. "The emphasis in consumer electronics is shifting away from global marketing to global production," notes Darrel Whitten, a Tokyo-based analyst with PrudentialBache. "Those contradictory forces are driving today's business.

Nowhere is that dichotomy more apparent than the U.S. market. Even as the electronics conglomerates are busy jockeying for position in the international trade, a leading market share in the U.S. remains the brass ring that all are scrambling to grab.

Thomson's purchase of RCA/GE Consumer Electronics, for example, was widely viewed as its U.S. entry visa, instantly giving it an estimated 23 percent of the domestic color television market. And firms already operating in the U.S. are looking to strengthen their foothold: Dutch-based giant N.V. Philips last year bought back the 43 percent of its stock outstanding from its American subsidiary, North American Philips Consumer Electronics (NAPCE); Japanese titans Matsushita and Sony have restructured their U.S. subsidiaries to give them greater autonomy and quicker reaction time; and the leading Korean firms, Goldstar and Samsung, have boosted U.S. product lines and production.

THE NEXT GENERATION?

One reason for the all-American push: As the largest and most open world market, the U.S. is viewed as a critical launching pad for the next generation of television products, which are expected to revolutionize the embattled business. A pitched research and development race is underway to develop and push through a standard for High-Definition Television (HDTV), a technology promising vast improvements in picture quality. Numerous competing systems, each with its own backers, are now vying for acceptance and standardization. Faced with a slew of political and technological stumbling blocks, integration of an HDTV standard in the U.S. remains at least five years down the road. Yet few would argue that the sales potential in the American market-and worldwide-is staggering. …

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