TOKYO — After a year and half of pushing through reforms since it was purchased by China’s Midea Group, Toshiba Lifestyle Products & Services, the former home appliances wing of Toshiba, is looking to grow again.
As a first step, Toshiba Lifestyle this month opened a new headquarters in Thailand to handle its overseas business. The headquarters will assume responsibility for developing products and sales strategies for Southeast Asia. Previously that operation fell under the head office in Kawasaki, Japan.
The new international headquarters is part of Toshiba Consumer Products (Thailand), located in suburban Bangkok. The hope is that by being closer to key Southeast Asian markets, including Malaysia and Vietnam, the Thai headquarters will do a better job of creating refrigerators, washing machines and other home appliances tailored to local needs.
“Working with Midea, we will begin offering new products, starting with Thailand, which is at the center of Southeast Asia,” said Toshiba Lifestyle President Toshiro Ishiwatari at a Dec. 15 news conference in Bangkok.
At the moment, only 30% of the company’s sales come from overseas. Ishiwatari wants to raise that to 50% by 2020. The Thai office will have broad decision-making powers and work to raise Toshiba Lifestyle’s profile in Southeast Asia, which already contributes nearly two-thirds of the company’s overseas sales.
“Thailand is a good place to track regional market trends and consumer preferences,” said Takahiro Onda, who runs the company’s overseas business. In addition to exporting household appliances, the Bangkok office will import products made at Toshiba Lifestyle plants in Japan and China for sale in Southeast Asia.
The region poses unique marketing challenges, however, due to wide differences in lifestyles and income levels.
Twin-drum washing and spinning machines are popular in most Southeast Asian countries, for instance, but there are marked differences in individual markets. In Thailand, where houses tend to be large, consumers prefer big machines that can handle up to 12kg of clothes in a single load. In Indonesia, where living standards are lower on average, people generally opt for 6kg machines.
Onda said Toshiba Lifestyle will also manufacture products developed by Midea for sale under the Toshiba brand. It will also offer the high-end products sold in Japan to wealthy customers in Southeast Asia, he said. Later this month, the company will roll out dishwashers and large refrigerators developed jointly with Midea.
These products will be sold not only in the three priority markets of Thailand, Malaysia and Vietnam but also in Hong Kong, Taiwan, Cambodia and Laos.
The company tries to pinpoint the unique needs in specific markets. During its Toshiba days, it developed a washing machine equipped with a special filter. This proved a hit with customers in Southeast Asia who have to contend with dirty water when doing laundry.
Toshiba Lifestyle has the largest share in the washing machine market in Vietnam and is No. 3 or better in refrigerators and microwave ovens in Thailand and Malaysia. The company is battling for market share with LG Electronics of South Korea, China’s Haier Group and Panasonic of Japan.
Until now, to develop products for Southeast Asia, Toshiba Lifestyle had sent personnel from Tokyo headquarters to hear and learn from local sales agents. It has also hired local companies to do market research. But it is difficult for a faraway head office to grasp subtle differences in consumer preferences in various markets, Onda pointed out, such as the number of refrigerator doors most popular in each country, which ranges from one to four.
The Bangkok headquarters will have a staff of around 20, including employees of the local subsidiary. They will interview customers frequently to find out how the products can be improved.
Bright and shiny
Sales of white goods in Southeast Asia totaled 537.38 million units in 2016. That number is forecast to grow 9.2% by 2021, according to Japanese market research specialist Fuji Keizai. Southeast Asia is already a larger market for home appliances than Japan and it is growing faster than the mature markets of Japan, Europe and the U.S.
Toshiba Lifestyle’s sales in the region grew by more than 5% in 2017. Onda will try to maintain that momentum.
Midea Group acquired Toshiba Lifestyle in June 2016, seeing value in the brand despite the unit’s operating loss of around 60 billion yen ($541 million at the current exchange rate) for the year through March 2016. Under Midea’s ownership, the company has taken steps to become more profitable, such as joint procurement of components. That has helped Toshiba Lifestyle return to the black quickly. In the second half of 2016, it eked out a small profit on sales of 120.4 billion yen. It appears set to stay profitable in fiscal 2017.
Cooperation with Midea, with its global sales network, has given Toshiba Lifestyle “a chance to compete with global brands,” Ishiwatari has said, as he tries to address the worries of employees working under new management.
Last autumn, the company launched a new product: a cordless canister vacuum cleaner. It is rolling out dishwashers and water dispensers in Southeast Asia under its new growth strategy. Toshiba Lifestyle is also taking a second shot at cracking the Chinese market in a sign of renewed zeal to grow.
One big worry for the company is the huge damage the Toshiba brand has suffered due to the problems of its Japanese former parent with its nuclear power business. Toshiba’s financial woes have been widely reported in Southeast Asia, raising concerns among customers about its products, according to Ishiwatari.
But recovering earnings are lifting employee morale at Toshiba Lifestyle, prompting pledges from many to support the Toshiba brand. The main challenge for the company is whether it can come up with innovative, high value-added products in Japan and the rest of Asia.