Expecting first profit in years, Sharp must turn attention to brand

In March this year, Samsung Electronics provided Sharp with US$102 million (¥10.4 billion) in exchange for a three per cent stake. The deal also ensured Samsung a supply of small display screens from Sharp, which will help Sharp maintain capacity rates at its factory. Other companies, including Taiwanese company Hon Hai Precision and chipmaker Qualcomm have also invested in the business.

As part of the plan, Sharp intends to focus on big-screen TVs and LCDs while moving away from its tottering solar business. According to media reports, Sharp plans to market its domestic appliances, including refrigerators and washing machines, in Southeast Asia based on healthy regional demand. It will put $68.3 million toward new LCD technologies while the remaining will be spent on mobile devices. Sharp has also named Kozo Takahashi as president to oversee its turnaround.

All this, Sharp believes, will help it post its first annual profit in three years.

"The roots of Sharp’s deal-making are straightforward—the need to strengthen its financial base and keep its factories busy enough," said Divya Ahulwalia, director, brand development, Oracle Added Value. "The deal does not solve Sharp's financial woes, nor does it change its lackluster brand image.”

Graham Hitchmough, Brand Union’s regional director, warns that the dominance of Samsung and Apple continues unabated and brands like Sharp, Panasonic and Sony need to think very carefully about the role they want to play in the consumer-electronics landscape.

All three brands are looking to rebound from years of significant losses by selling off assets, streamlining costs and focusing on key product lines such as LCDs, a large proportion of which will be sold to the category giants.

A worst-case scenario for Sharp would be for the brand to travel a course opposite to that of Chinese companies that are transforming themselves from component makers to fully fledged consumer brands. “This would involve focusing more and more of the business of supplying components to other, bigger brands while gradually dropping off the consumers’ radar, or at the very least becoming a price-fighting second- or third-tier brand,” Hitchmough said.

He advises that to genuinely rebuild the brand on a global basis, the best way forward would be to invest newly realised profits in highly focused innovation strategies and seek to develop new niche consumer products as a platform for rebuilding brand relevance and differentiation.

Alternatively, Ahluwalia sees this as an opportunity for Sharp to market itself as a producer of a coveted, brand-name product that stands for performance that consumers should look for while buying their next TV or smartphone. “Since Sharp still sees LCD’s as the core of its business, the brand could build a more relevant and compelling brand image using the Ingredient branding strategy—similar to what Intel did with the ‘Intel Inside’ campaign,” she adds.

Marketing was seemingly a casualty of the company's woes in recent years. Last year, it was reported that Sharp’s the 12 members of the company's US marketing team, responsible for advertising, PR, social-media, sports marketing and promotions, were asked to leave the company. At the time, Sharp said that marketing functions would be handled by individual business units. The company is also believed to have cut its media spend by half in the US in 2011.

It is unclear whether similar measures were taken in other markets. Campaign Asia-Pacific’s emails to a Sharp spokesperson did not evoke a response.

At present, Japan contributes 48 per cent of Sharp’s revenues. China is its next big market, accounting for 19.7 per cent of sales. The Americas and Europe contribute 11.7 per cent and 11.5 per cent, respectively. Among categories, LCDs currently account for 17 per cent of sales. A category titled ‘audio visual communication equipment’ contributes 43 per cent of revenues.

Sharp’s troubles date back to the financial crisis. The company had forked out billions to build a massive LCD plant in Japan when demand began to slump and the yen started to rise, which made products from Japan more expensive, consequently hurting exports. Nimble South Korean brands like Samsung and LG were building sleeker flat-panel TVs and selling them at competitive prices. Experts also argue that Sharp was too focused on its domestic market to notice its sliding market share.