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Sharp: Building Competitive

Advantage through Innovation

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Case Study Reference No. CCA0012

This case was written by Abdul Samad, under the direction of Sumit Kumar Chaudhuri,
ICFAI Business School Case Development Centre. It is intended to be used as the
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basis for class discussion rather than to illustrate either effective or ineffective handling
of a management situation. This case was compiled from published sources.

© 2005, ICFAI Business School Case Development Centre

No part of this publication may be copied, stored, transmitted, reproduced or distributed
in any form or medium whatsoever without the permission of the copyright owner.
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2 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH...

S h a r p : B u ild in g C o m p e titiv e

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A d v a n ta g e th r o u g h In n o v a tio n

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“Make products that others want to imitate.”1

– Tokuji Hayakawa, Founder, Sharp Corporation

IN T R O D U C T IO N

In July 2005, Sharp began the mass production of the world’s first ‘dual-function LCD’,
which displays information in right and left viewing directions. It has also developed an
LCD, which can be switched between wide and narrow viewing angles. These innovations
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have given rise to a new dimension to competition in the global LCD market. With a
turnover of ¥2,539 billion2 by March 2005, Sharp expects additional revenue of about
¥10 billion3 from these two innovations in 2005-2006, and a substantial increase
thereafter. In its ninety years of existence, Sharp, through its innovations, has created
new categories of ‘never seen before’ products (Annexure I). The company itself came
into existence through an innovation.

A B R IE F P R O F IL E O F S H A R P
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At the age of nine, Tokuji Hayakawa (Hayakawa) became an apprentice to a metal

worker who made hair ornaments for women and other precision metal products.
Hayakawa mastered traditional metal working skills and in 1912, at the age of 18,
invented a snap buckle for western style trouser belts. He was granted a patent on his
invention which was named ‘Tokubijo’ snap buckle. At the age of 19, he set up his own
workshop in Tokyo with an investment of ¥50. This was the beginning of Sharp (this
workshop was renamed as Sharp Corporation in 1970). The workshop expanded and
Hayakawa was granted his second patent on the invention of ‘adjustable flow faucet’ (a
regulator for controlling the flow of liquid) at the age of 20. In 1915, he devised a
mechanical pencil4 made of nickel and got it patented as ‘Hayakawa mechanical pencil’.
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The mechanical pencil became successful in Japan and with further improvements in
thin leads, in 1916, the pencil was renamed as ‘Ever-ready Sharp pencil’ and later as

1
Hayakawa Tokuji, “A word from Tokuji Hayakawa, Sharp founder”, www.Sharp-world.com/corporate/info/his/voice/index.html
2
“Annual report-2005”, http://Sharp-world.com/corporate/ir/ar/index.html
3
Nakamoto Michiyo, “Sharp finds new angle on LCDs”, www.ft.com, July 15th 2005
4
A mechanical pencil or propelling pencil that need not be sharpened due to an internal mechanism that pushes or propels
graphite through its tip. Sampson Mordan and John Isaac Hawkins first patented it in Britain in 1822. Most models have a rubber
eraser on the end.
 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH ... 3

‘Ever-Sharp pencil’. Hayakawa introduced one of the first assembly lines in Japan5 in

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1920 and established a sub-plant at Oshiage, Tokyo, to produce mechanical pencils.
The sub-plant employed 200 people and had a monthly sale of ¥50,000.
On September 1st 1923, the Great Kanto earthquake6 hit Tokyo and the workshop was

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wiped out. Hayakawa lost everything including his family. As he could not rebuild the
factory in Tokyo, he established Hayakawa Metal Works in Nishitanabe, Osaka (where
Sharp’s Head Office is currently located), in September 1924, with the help of three
employees and resumed the manufacturing of mechanical pencils.
Hayakawa anticipated the dawn of the radio age when he purchased a crystal radio7
set imported from the US. He began to assemble radio sets. When Japan Broadcasting
Corporation, Osaka, started its operations on June 1st 1925, the company began mass
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production of radio sets. The set was known as ‘crystal radio set’ in the beginning, and
was soon renamed as ‘Sharp radio set’, which eventually became a household name in
Japan. In 1928, the crystal in radio was replaced by AC vacuum-tube8 technology,
which detects radio signals and transmits audio. The company also began research on
the vacuum tube in 1931, which was used in making televisions later.
On May 1st 1935, Hayakawa Metal Works was registered as Hayakawa Metal Works
Institute Co. with a capital of ¥300,000. The following year, the belt conveyor system
for mass production of radios was completed. This helped the company to manufacture
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a quality radio set in 56 seconds. In 1942, Hayakawa Metal Works Institute Co. changed
its name to Hayakawa Electric Industry Co. Ltd. In 1956, Sharp Electric Co., a wholesale
subsidiary of Hayakawa Metal Works Institute Co. was established. In 1958, Sharp
‘Friend Shop System’, an independent regional sales subsidiary was launched so that
stores could cooperate in marketing, promotion, advertising and market development
across Japan. In the late 1950s, the company diversified its products range to air coolers,
kitchen roasters, electric fans with plastic blades and refrigerators with an ultra-compact
bipolar compressor, which increased storage space.
In 1960, Hayakawa Electric Industry Co. Ltd. began mass production of multi-colour TVs
with the commencement of colour broadcasts. The company also began its research on
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5
“Introduction of an assembly line”, http://Sharp-world.com/corporate/info/his/h_company/1920_1924/index.html
6
The earthquake struck the Kanto plain at 11:58 on September 1st 1923. It had a magnitude between 7.9 and 8.3 on the Richter
scale, destroying the port city of Yokohama as well as the surrounding prefectures of Chiba, Kanagawa, Shizuoka, and Tokyo.
Atleast 105,385 lost their lives and over 37,000 were reported missing or believed to be dead. Most of the fatalities were caused
by 88 fires which broke out separately and spread rapidly due to high winds from a typhoon. Over 570,000 homes were destroyed,
leaving an estimated 1.9 million homeless and damage is estimated to have exceeded one billion U.S. dollars.
7
The crystal radio (also known as a crystal set), was first built in 1900 by Greenleaf Whittier Pickard using crystalline minerals, which
detect radio signals and help to transmit audio.
8
A vacuum tube or (thermionic valve) is a device that is generally used to amplify or modify a signal. They are arrangements of
electrodes in a vacuum within an insulating, temperature-resistant envelope.
4 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH...

computers, semi-conductors, ultra-short wave technology and microwave ovens. Central

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research laboratories were set up at the head office and the company continued its research
on electronic calculators, solar cells, electronic medical equipment, optical semi-conductors
and computers. In 1962, Sharp Electronics Corporation (SEC) was established in New

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York city as the company’s first overseas sales subsidiary, in order to tap the overseas
demand more efficiently and provide better after-sales service. Mass production of microwave
ovens was also started during that time. The company also came out with other inventions
like the X-ray monitor, ultrasonic cleaning system, multi-phenomenon monitoring and
recording system (a system to automatically monitor body functions), portable electric
scalpel and portable electrocardiograph.
In 1963, the company was reorganised into three divisions of radio, home appliances
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and industrial equipment. In 1964, the world’s first all transistor-diode9 electronic calculator
was invented, which marked the company’s entry into the fields of semi-conductor,
LCD and information communications. In 1966, the transistors in calculators were
replaced by Integrated Circuits (ICs10 ) and later by LSIs (Large Scale Integrations),
which reduced its weight, number of sub-parts and thereby price. In 1970, the company
changed its name from Hayakawa Electric Industry Co. Ltd. to ‘Sharp Corporation’,
emphasising its change in corporate direction from home appliances to electronics.
After 58 years of its inception, the founding president, Tokuji Hayakawa was appointed
as the chairman of Sharp and the senior executive director, Akira Saeki, as its new
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president. In 1973, Sharp successfully introduced the world’s first LCD (Liquid Crystal
Display) calculator, which was 1/12th as thick, 1/125th as heavy, used 1/250th number of
components, cost 1/20th as much and consumed 1/9000th power as compared to its
previous model.
To respond to the needs and likes of its customers, Sharp conducted consumer surveys
in April 1976 and launched a ‘new lifestyle’ product strategy to design products from the
consumer’s point of view. This strategy led to innovations of a VCR with front-loading
facility, a stereo that could play both sides of a record automatically and a word
processor11 capable of processing voice input. In 1977, the company introduced the
world’s first card-sized sensor touch electronic calculator of only 5-millimeter thickness
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and a TV employing EL12 panel of only 3-centimeter thickness.

9
Transistor-diodes are tiny electrical devices that can amplify an electrical signal. They can switch on and off, letting current to pass
in one direction only or blocking it as necessary.
10
Circuit component, consisting of a piece of semiconductor single silicon chip carrying millions of microscopic transistors, resistors,
capacitors and electrical circuits. It is typically 10 mm on a side.
11
A typewriter connected to a computerised recording medium to input, edit and output data and allows the correction and
reformatting of documents before they are printed.
12
Electroluminescence, an optical and electrical phenomenon where a material such as a natural blue diamond emits light when
an electric current is passed through it.
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After the death of Tokuji Hayakawa in 1980, the 12 marketing companies of Sharp

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electric home appliances were merged to form Sharp Consumer Electronics Company
Ltd. On entering the digital age, Sharp introduced a compact disc player and also the
world’s first integrated personal computer-television set.

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On June 27th 1986, Akira Saeki was appointed as the chairman of Sharp and senior
executive director, Haruo Tsuji, was appointed as the new president. The new
management gave the highest priority to the LCDs. In 1987, Sharp developed a TFT
LCD13 and incorporated it in an LCD colour TV. In 1988, the company introduced an
LCD TV of 2.7 cm thickness and a dual-swing door refrigerator with OCR14. In 1994,
the world’s first Reflective TFT LCD (that required no backlight) was launched and the
world’s largest 21"colour TFT LCD TV was released.
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In January 1996, Sharp created its Japanese (www.Sharp.co.jp) and English
(www.Sharp-world.com) websites. The mass production of highly reflective LCD began
in 1997, followed by the establishment of Sharp Electronica Mexico S.A. de C.V, the
first production company in Mexico to produce colour TVs and home appliances, and
‘Sharp Middle East Free Zone Establishment (SMEF)’ a sales company in UAE. Using
the world’s first CG-silicon15 technology, jointly developed with Semi-Conductor Energy
Laboratory Co. Ltd.16 in 1998, it introduced the ultra-high-definition 60" rear projector
LCD panels followed by an ultra thin notebook PC. The latest product from Sharp is
its ‘dual function LCD screen’. The innovative features in Sharp’s products have
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helped it to develop a competitive edge over other players in the industry.

C O M P E T IT IV E A D V A N T A G E T H R O U G H IN N O V A T IO N

Sharp’s mission statement stated, “We do not seek merely to expand our business
volume. Rather, we are dedicated to the use of our unique, innovative technology to
contribute to the culture, benefits, and welfare of people throughout the world. It is the
intention of our corporation to grow hand-in-hand with our employees, encouraging
and aiding them to reach their full potential, and improve their standard of living. Our
future prosperity is directly linked to the prosperity of our customers, dealers, and
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shareholders... indeed, the entire Sharp family.”17

13
TFT LCDs are a variant of liquid crystal display. They use thin-film transistor technology to improve their image qualities.
14
Optical Character Recognition is the process used to identify characters from scanned images and electronically ‘read’ to convert
them into editable text.
15
CG-silicon is a variant of the LTPS (Low Temperature Poly Silicon) process. It uses laser annealing to get larger domains.
16
SEL is a Japanese company specialising in the R&D of semiconductor technology. SEL does not engage in manufacturing and
supports its research efforts from revenues from patent licensing. Since 1980, SEL has filed over 5,000 patent applications
worldwide and has been awarded approximately 1,500 US and foreign patents.
17
“Mission”, http://www.sharpusa.com/about/AboutMission/0,1326,,00.html
6 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH...

Sharp spends 10% of its gross profits on research and employs 8,200 researchers to

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design innovative products. In all, Sharp has 27 manufacturing facilities around the
world. Its research centers include the Central Research Laboratories and 22 other
laboratories. Sharp identifies ten technologies in which it works – new materials, devices,

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optoelectronics, 18 displays, recording, printing, information processing,
telecommunications, environment/energy and production/design. These technologies
support five application areas like multimedia/audiovisual (AV) systems,
telecommunications systems, recording/printing systems, information processing systems
and home electronic amenity systems. The aim of these R&D laboratories is described
as the development of demand-creating products.
The component technologies of Sharp have longer life cycles and offer a wide range of
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opportunities for product innovation. Sharp applies its manufacturing expertise in these
technologies and develops a wide range of end products using this technology and gains
competitive advantage. As in the case of its LCD, the component technology for the
LCD panel remains the same whereas its usage in different products may change every
six months. A product using this LCD technology may be obsolete after six months but
the same technology could be incorporated into some new product. LCD technology
has a wide range of applications like home entertainment, audio, home appliances,
medical equipment, office equipment, etc., providing a long-term growth potential.
Sharp has applied LCD technology successfully in different product lines.
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Sharp, like other consumer electronic companies, finds lower cost, higher reliability,
better performance, longer life before battery recharge and lighter weight/smaller size as
the five dominant customer requirements. These depend on the integration of the
components and density of component assembly, which doubles every generation (four
years). Sharp’s more recent products have a component density of 16-30 units per
square centimeter and the company continuously aims to double its density every
generation.
As Sharp introduces innovative products, it generates customer interest, and in turn a new
market is created. As the market develops, it has the advantage to enhance its technology
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and introduce newer and improved products based on that technology, till the competitors
catch up with the technology. This strategy enables Sharp to be a technology leader,
capture major market shares and sustain that position as long as improvements continue
and meet customer requirements and demands. Sharp has used a similar strategy for its
products like calculators, word processors, PCs, LCDs and camcorders.

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Optoelectronics is the study and application of electronic devices that interact with light. In this context, light often includes invisible
forms of radiation such as ultraviolet and infrared. Optoelectronic devices are electrical-to-optical or optical-to-electrical transducers,
or instruments that use such devices in their operation.
 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH ... 7

With focus on vertical integration, Sharp’s state-of-the-art plants have integrated facilities

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that have been designed to streamline and enhance material flow, production and
inspection/testing processes, to bring Sharp’s products to a finished stage in a single
operation. Sharp’s entry into optoelectronics is its vertical integration strategy, which

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began when the company was developing calculators in the 1960s. This constitutes the
upstream integration. Similarly, in the downstream, it has established wholesale,
distribution, sales, marketing, promotion and service centers worldwide. Customer
feedback from these outlets is used to design new products according to customer
requirements, thereby gaining a competitive edge over its competitors.
Sharp’s competitive edge is achieved through competence building, which wholly depends
on technology that forms its core competency. Competence building at Sharp goes
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hand-in-hand with its long-term corporate strategy, evolution of R&D organisations,
organisational evolution and technological capabilities, sustaining its strengths and
improving on its weaknesses (Annexure II). Sharp’s competitive advantage lies in owning
unique electronic device technologies such as LCD panels, CCD19 imagers and flash
memory that enables the company to introduce distinctive communication products in
the market, based on these component technologies. The five key concerns that are
generally addressed by the company in the process of strategy formulation are: Structural
features of the industry and how they are changing, the firm’s position within the industry,
resources that it can leverage on to secure a unique advantage, the ability to sustain a
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competitive advantage in the long run and the national infrastructure (where it is located),
that can support or inhibit the competitive advantage for firms like communication and
information technologies.
In the 1980s, when it was apprehended that the market for consumer electronics was
becoming saturated, the company shifted its focus from consumer electronics to non-
consumer related areas like medical equipment, office equipment and industrial
applications. More recently, Sharp has stated its corporate goal as being “to fulfill its
social obligation as an integrated electronics maker built around optoelectronics”20 (LCD
is a part of optoelectronics). Besides optoelectronics, Sharp’s other areas of competencies
include microelectronics21, solar energy, multimedia22, mechatronics23, digital magnetic
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19
Charge-coupled device. A common image sensor or a chip found in digital cameras that can convert light into electronic signals.
A DV camera focuses light through a lens and onto a CCD where it is converted into electronic signals that can be stored on tape.
20
Miyazaki Kumiko, “Building technology competencies in Japanese firms”, http://ncart.scs.ryerson.ca/NCART/RESOUR/
teccomp.html
21
It consists of micro devices like integrated circuits, which are fabricated in sub-micron dimensions to form the basis of all electronic
products.
22
Multimedia is the use of several different media to convey information (text, audio, graphics, animation, video, and interactivity).
Multimedia also refers to computer media.
23
Mechatronics is the synergistic combination of mechanical engineering, electronic engineering and software engineering.
8 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH...

storage and precision engineering. Sharp has also been decentralised, divisionalised and

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restructured from time to time, to face a competitive future and transform the organisation
to one better suited for building technological capabilities.

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T H E C O M P E T IT IV E F U T U R E

For Sharp, in spite of being a technology leader in the LCD segment, the newer technologies
like DLP and LCOS have brought in stiff competition from companies like Texas
Instruments and Intel. However, the real winner will be the company who can produce
the best picture at the lowest cost. Comparing the DLP with LCD, the LCD has a better
colour saturation, image sharpness and is more light efficient. However, it has a few
drawbacks like visible pixelation, screendoor effect and not-so-impressive black levels
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and contrast.
Sharp needs to increase its pace in the technological advancement to stay ahead of its
competitors. The company also needs to develop and venture into a completely different
technology from time-to-time, since the increase in number of competitors and the
limitations of its present core technology might saturate its range of products and
applications. As the battle heats up among the electronics manufacturers, it is opined
that the company would have to distinguish itself from its competitors through innovation.
Sharp has now focused towards consumer requirements of low energy consumption
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products and products that use alternate energy sources without any impact on the
environment. The company plans to make solar cells as the second pillar of its business.
Sharp aims for a net sales (solar cells) of ¥500 billion in the fiscal year 2010 and plans
to invest ¥220 billion in the fiscal year 2005, with main investment of ¥140 billion for
LCD business (¥64 billion for large LCDs and ¥76 billion for small- and medium-size
LCDs) and ¥10 billion in solar cell business.
Katsuhiko Machida, president of Sharp Corporation, said, “Sharp embraces the high
ideal of contributing to the preservation of the natural environment through our unique
proprietary technologies, and our target is to become an ‘environmentally advanced
company’. More specifically, by emphasizing technologies related to energy-creating
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and energy-saving products, we have set our new corporate vision to be a company that
has ‘zero global warming impact by 2010’.”24

24
“A message to our shareholders”, (Sharp Annual Report 2005), http://sharp-world.com/corporate/ir/ar/index.html
 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH ... 9

A n n e x u r e I

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A H is to r y o f F ir s ts
1912 Sharp’s founder, Tokuji Hayakawa, establishes a metal workshop in Tokyo.
1915 Tokuji Hayakawa invents the Ever-Sharp pencil. The Sharp corporate name and

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trademark are derived from the Ever Sharp pencil.
1925 Successfully built Japan’s first crystal radio.
1953 Built Japan’s first TV- The TV3 – 14T.
1964 Development and mass production of the world’s first all-transistor desktop calculator.
1973 Development of the world’s first COS electronic calculator incorporating an LCD.
1978 World’s first TV with inset screen (TV in TV).
1979 Development and introduction of the world’s first super-thin (1.6mm) card-sized
calculator. tC
1979 Introduced world’s first microwave oven equipped with microcomputer that
automatically controlled food cooking.
1980 Developed world’s first calculator using voice synthesis technology.
1981 Developed world’s first “auto disc” function for playing both sides of a record.
1982 Introduction of the world’s first combination PC/TV set.
1986 Industry’s first combination microwave oven and refrigerator.
1987 Release of 3-inch color TFT LCD television with the world’s highest resolution.
1988 World’s first dual swing refrigerator that opens from either side.
1988 Development of the world’s first 14-inch large screen, thin profile, high definition
color TFT LCD unit.
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1989 Introduction of 100" LCD video projectors.

1990 Development and introduction of the world’s first LCD View Cam.
1991 Developed World’s first wall mount TV.
1996 Development and introduction of the Color Personal Information Tool that can
gather, create and send sound, images and Internet data in colour.
1998 World’s first photovoltaic power generation system with snow melting function
and installed it in the Industrial Research Institute of Ishakawa.
1999 Introduction of the world’s first Internet View Cam using MPEG4 technology.
1999 World’s first 1-Bit digital amplifier with 2.8 MHz sampling and 7th order delta-sigma
modulation.
1999 World’s first oven, which downloads recipes from the Internet and set them to
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cook dishes.
1999 Introduced 60-inch LCD Hi-Vision rear projection TV, the world’s first to use CG
silicon LCD.
1999 Introduced advanced TFT LCD (multi-scene display) that became popular as
‘third-generation LCD’.
2000 World’s first 28- inch LCD TV, compatible with digital HDTV broadcasts.
2000 World’s first air purifier with Plasmacluster Ion Technology to inactivate airborne
mold fungi.
2003 Developed a 3D-LCD that does not require special glasses to be worn by the
viewer and enables selection between 2D and 3D formats.
Compiled by the author
10 SHARP: BUILDING COMPETITIVE ADVANTAGE THROUGH...

A n n e x u re II

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S tre n g th s a n d W e a k n e sse s o f a F e w Ja p a n e s e F ir m s

Company Areas of Strengths Areas of Weaknesses

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Sharp Semiconductor lasers, CCDs, Optical disks, Optical comm. system
LCD
Sony Semiconductor lasers, CCDs, Optical disks Optical comm. system, OEIC,
LCD, photodiode
Philips CCDs, Optical disks Optical comm. system, key
components for optical comm.
Toshiba Optical disks, CCDs, LEDs, IT-related key Optical comm. system
components
Hitachi
Siemens
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LED, OEIC, optical disks, LCD
Optical comm. system, optical fiber, key
Optical fiber
Optical disks, LCD, CCD
components for optical communication
NEC Optical comm. system, semiconductor laser, Optical disks, LCD
CCD
Fujitsu Key components for optical comm., OEIC, Optical disks, LCD
semiconductors
STC Optical comm., optical fiber, OEIC, Optical disks
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semiconductor lasers
GEC Optical comm. system, optical fibers, Optical disks
OEIC, LED
Sumitomo Optical fibers, OEIC, optical comm. system Semiconductor laser, optical
Electric disk, LCD, CCD

Compiled by the author

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