Mitsubishi Electric (ME)
Parent Company - Mitsubishi Group
Category - Electrical Equipment
Sector - Energy Power and Industrial Equipment
Tagline/Slogan - Changes for the better
NOTE: I want to relate all points to customer equity (the total sum of current and future lifetime
customer value) since marketing can be defined as the process by which companies create value for
customers and build strong customer relationships in order to capture value from customers in
return. I separated profitability from customer equity, but the former would affect the latter through
changes in ME microenvironment.
Unique Selling Proposition
Offers high quality products characterized by commitment to innovation and sustainable operations
Segment
Industrial air conditioning systems, automotive equipment, factory automation systems, home
products (we shall examine only this segment and apply the relevant “analysis”), information &
communication systems
Target Group
People who require high quality home appliances
Positioning
Applying technologies to contribute to society and daily life around the world as a leading green
company
As per the company’s website “Mitsubishi Electric develops home appliances by incorporating its
unique technologies and perspectives so that its products can be used in various scenes of daily life,
such as the kitchen, living room, and bedroom. Efforts are made to develop products that contribute
to making life more comfortable for users, meeting and even surpassing their expectations.”
Financial Information
For the Financial Year ending March 2015, home appliances made up 18.9% (945 billion yen) of net
sales for Mitsubishi Electric. By geographical allocation, sales in Japan ONLY for the entirety of
Mitsubishi Electric accounted for 58.3% of net sales.
PESTLE Analysis
Political
1. Increased barriers to trade – dismantling of existing trade pacts, imposition of trade tariffs,
and duties imposed on exports from Japan by other countries. In order to provide the same
value proposition, ME would have to sacrifice profitability.
2. Improved access to trade – new trade pacts may open up its home market (Japan) or
markets where it has significant market share to competition. In this scenario, more
competition would require ME to create more value to satisfy consumers who could
otherwise have their wants served better or less expensively.
3. Change in corporate tax structure – Could result in lower profitability, but would not affect
lifetime customer value. A change in personal income tax or sales tax could affect the
customer’s perceived ability to spend.
4. Nationalisation of private sector companies – This has been ongoing for some time, will
leave the consensus open as to how it would affect ME.
5. Anti-trust laws – Also known as the “Act on Prohibition of Private Monopolization and
Maintenance of Fair Trade”, anti-trust laws do not hold the same sway in Japan as compared
to the United States. Even so, a separation of ME from its parent company is unlikely to
affect customer equity.
6. Interests groups – Not enough data.
7. Civil unrest – Japanese society seems relatively resilient, so I would not consider this factor
seriously.
8. Labor/trade unions – Membership in labor unions is steadily decreasing and the relationship
between unions and companies is close (possibly due to cultural factors). Labor unions could
potentially affect productivity and even the public’s perception of ME, the latter could have
an effect on customer equity.
9. Domestic terrorism – Japan is the most homogenous society in the world. Ignoring the
political terrorism of the Japanese Red Army, terrorism in the sense of “radical Islam” is
practically non-existent in Japan. Sakoku most possibly resulted in the homogenous society
that exists today in Japan. This is just here for consideration.
10. International terrorism – Shock value of terrorism has diminished (discuss if want to), since
it’s unlikely to affect any consumer market significantly, this point is moot.
11. War – Increased tensions in the South China Sea, a more dominant role played by China in
its sphere of influence, the change in legislature in March 2016 allowing the JSDF to
participate in foreign conflicts, the foreign policy of the new US administration would
adversely affect customer equity. The scope of the war and the duration would be the prime
determinants as to how badly customer equity would be affected.
Economic
1. Low inflation rate – Japan has had a low inflation rate for decades. A higher inflation rate
would represent the government’s promise to transfer resources from young people (who
work and pay taxes) to old people (who own government bonds). This would increase
consumer optimism and encourage consumer spending. Since the inverse is true, the
dampening of consumer spending results in a lower lifetime customer value
2. Uncertainty in interest rates and the influence on the yen – Lowering of Japan’s interest
rates did not result in a depreciation of the yen, which would have helped exporters to sell
more product. Even then, a depreciation of the yen while increasing sales abroad could
result in lower profitability if sales are reported in a foreign currency such as the USD.
Lifetime customer value of overseas markets may decrease due to reporting standards OR
may decrease due to a decrease in sales volume
3. Changes in foreign exchange rate – see above (affects pricing in overseas markets and
tendency of customers to purchase goods)
4. Competitor behaviour – Main competitors of ME are Hitachi Ltd, Toshiba Corporation and
NEC Corporation. Depending on the actions taken, customer equity for ME could increase or
decrease
5. Change in wage rates – An increase should increase customer equity but there are many
factors that would preclude such a change.
6. Change in raw material prices – An increase in the pricing of raw materials would have an
impact on profitability.
7. Change in supplier behaviour or the supply chain – Increase in freight rates would affect
profitability, customer equity would be negatively affected if a distributor, delivery company
or retailer were to behave in a way so as to negatively affect the creation of customer value.
Social
1. Japan’s aging population – This places a huge burden on the younger working (and
taxpaying) population, reducing their ability to spend and increasing their tendency to save.
Lifetime customer value is lowered simply because the total disposable income decreases
over time.
2. Rising populism – Consumers may prefer to buy goods made in their home country,
shunning Japanese’s goods due to nationalistic sentiment. Conversely sales of ME products
would increase as Japanese customers buy “Japanese”
3. Change in social values – Japanese couples are delaying marriage, moving out and having
children at a later age as compared to previous generations. ME would not be able to
capture customer equity if the perception of home is that of a family unit.
4. Change in lifestyle preferences – Young professionals are less likely to eat in compared to
their parents’ generation. More time spent out of the home results in less need for home
appliances, this would result in a decrease in customer equity.
5. Labour mobility – Japan’s dual track system results in career stagnation for those in the noncareer track. Low incomes and social values result in lowered marriage prospects for males.
A decrease in married couples and the decreasing birth rate would negatively affect the
customer equity for a home appliances company like ME.
6.
Technological
1. Increase in R&D budget may not pay off – Smart appliances may turn out to be a superfluous
innovation due to a variety of reasons, improper implementation, does not fulfil a need,
does not save time, may be seem as gimmicky etc. ME might suffer a loss in profitability but
also a loss in customer equity if the new products do not provide a customer with value.
2. New production methods – 3D printing could result in cost savings, customers might be able
to customize or personalize their home appliances or even possibly make their own home
appliances. ME could find itself ill-placed in such a situation.
3. Innovation in e-commerce – The retail experience could enter the realm of virtual reality.
The retailers and the competitors of ME that partner with them who are able to properly
leverage this innovation could see potential cost savings and increased customer equity. No
more trips to a crowded departmental store. ME would see a loss in customer equity.
4. Innovation in manufacturing start-ups – Crowdfunding sites can provide a way for new
entrants to compete against incumbents. Customers may like the appeal of being involved
from the beginning and if their brand loyalties change, ME would find itself losing current
and potential market share.
Legal
1. International trade – Mentioned earlier.
2. International law – Similar to point below.
3. Local regulations – Defects found in products resulting in recalls or changes to laws
regarding emission standards, types of refrigerants used, efficiency of appliances are
examples that could negatively affect ME ability to capture customer equity.
Ecological
1.
2.
3.
4.
Increased awareness in climate change or lack thereof and green technology –
Increased awareness regarding pollution or forced obsolescence –
Increasing demand for more efficient products Increasing demand for carbon neutral production -