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Search for a management policy for stable growth
In August 1971, U.S. President Richard Nixon rocked world financial markets with the announcement of emergency measures to shore up the U.S. dollar. In Japan, currency exchange rates were allowed to fluctuate. However, in December, a 10-nation financial summit restored fixed exchange rates, setting the yen at ¥308 per U.S. dollar. This was abandoned in February 1973 due to the sustained rise of the Japanese trade surplus, and the yen rapidly revalued.
Despite efforts to bolster its economic health by rationalizing production and developing attractive new products, the high yen left Panasonic with reduced profits at the end of 1971, and only a slight increase in sales.
In October 1973, the Yom Kippur War broke out, and Middle Eastern oil producing nations reduced their output. Shortages ensued and crude oil prices quadrupled almost overnight, sapping investor confidence and triggering price increases in almost every commodity. World consumer demand plummeted. Economic growth slowed to a crawl as much of the world faced the triple problems of price inflation, recession and international trade deficit.
The Japanese economy was quickly gripped by confusion.
Prices spiraled and, stirred by rumors of shortages, people hoarded daily necessities. Managerial steps to lower costs by rationalizing production failed to cover the rising cost of raw materials, and the company was forced to raise the prices of many products. The electrical appliance market failed to recover its original demand, causing several companies to announce layoffs and shortened working hours. The Japanese economy showed an international trade deficit, and the GNP shrank for the first time since 1945. Matsushita Electric saw increased sales and lower profit in 1974, and 1975 ended with a drop in both sales and profit.
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