Panasonic VCR Sales Driven Down by the Rising of DVD

Case Type: industry analysis; business competition.
Consulting Firm: KPMG Consulting 1st round job interview.
Industry Coverage: Electronics; Entertainment.

Case Interview Questions #00003: Your client Panasonic VCR is a subsidiary company of Japanese multinational consumer electronics corporation Panasonic Corporation (NYSE: PC). Panasonic VCR is a major manufacturer of video cassette recorders (VCRs). The company offers a full range of VCR options using the most sophisticated and quality-driven manufacturing techniques.

There are several issues Panasonic VCR is currently facing that they would like our help to address. Although the firm’s sales representative turnover rate has been increasing, the remaining representatives claim that sales are at record high levels this year. In the past, Panasonic targeted two consumer groups – older, middle income and middle-aged, middle income individuals. Recently, your client has been losing middle-aged target market customers. Panasonic has traditionally managed its relationship with retailers very well. However, the firm has recently lost several major accounts due to retailers’ inability to move Panasonic’s VCR products. The CEO has hired you to figure out why they have been experiencing an alarmingly poor sales year. What would you do investigate the cause?

Additional Information: (to be given to you if asked)

• Currently there are only 2-5 other major players in the industry, a steep decline from several years ago. This has directly contributed to Panasonic’s growth in market share from a steady 32%, the second largest in the industry, to a present day 44% market share.
• The VCR industry is a mature market, having existed for quite some time now. Associates understand that they have limited opportunities for career progression and commissions in a market stunted from further growth. So its sales force attrition is not necessarily a cause for diminishing sales, but more of a signal of a declining industry due to other factors such as diminishing consumer interest.
• As DVDs (Digital Video Disc) and DVD players are becoming more prevalent with technology improvements, VCRs are becoming obsolete. Declining interest is more of an issue with the middle-aged target market than with the older target market, because the middle-aged baby-boomers have historically been more interested in purchasing more technologically advanced, “trendy” electronic equipment than the older generation, which generally has more traditionalist preferences.

Possible Answer:

Suggested Frameworks:

1. Look at the implications of the increasing sales representative turnover rate and retailers’ inability to sell Panasonic’s VCR products.

2. Once you explore the implications of these issues, you can begin to develop solutions that aim to correct the company’s poor sales.

Possible Solutions:

Because of this growing inclination toward DVD players in the middle-aged market, Panasonic has two main options:

1. Focus on its older, loyal customer base, which is less likely to switch to the new technology.

2. In the long run, expand its technology capabilities to become a provider of DVD players and dual DVD/VCR players.