I found an article about the Japanese TV market. The demand for Plasma TV has fallen for last few decades and so the Japanese companies like Panasonic, Sony Corp., and Sharp Corp have made a lot of losses. The reason for the falling demand for Japanese TV is because other companies offer TV which adopted the LCD technology at cheaper prices and higher quality. Thus, the consumers were taken by these firms.
Panasonic is closing its last plasma television factory and plans to pull out the business by March 2014.
The remaining three manufacturing plants of Panasonic will produce only LCD after the
last plasma television factory closes. Plasma TVs only account for 6 percent of global shipments compared 87 percent LCDs. Rival Samsung Electronics has 27.7 percent of the flat-panel TV market and LG has 15 percent. Panasonic, Sony, and Sharp hold 20 percent combined.
Panasonic is closing its last plasma television factory and plans to pull out the business by March 2014.
The remaining three manufacturing plants of Panasonic will produce only LCD after the
last plasma television factory closes. Plasma TVs only account for 6 percent of global shipments compared 87 percent LCDs. Rival Samsung Electronics has 27.7 percent of the flat-panel TV market and LG has 15 percent. Panasonic, Sony, and Sharp hold 20 percent combined.
The Panasonic's losses
Panasonic reported losses of $15 billion over the last two years. The company has not made an official announcement regarding the plant closure yet, but the move falls in line with Tsuga’s strategy to cut losses by closing weak operations. The costs of closing the plant could be $400 million.
The costs of closing the plant ($400 million) is much lower then the total losses ($15 billion). Also, the reason why the company decided to shut down the factory might be because the losses were greater than the fixed costs. This means the company is better off by stop operating and paying only the fixed costs.
These graphs show the Panasonic's cost/price/revenue of the production of the TV.
The costs of closing the plant ($400 million) is much lower then the total losses ($15 billion). Also, the reason why the company decided to shut down the factory might be because the losses were greater than the fixed costs. This means the company is better off by stop operating and paying only the fixed costs.
These graphs show the Panasonic's cost/price/revenue of the production of the TV.
There is a fall in demand so that the demand curve shifts to the left that made the marginal revenue curve to shifts to the left. The extreme fall in demand has made losses. The red area illustrates the cost of closing the plant and the (red+blue) area represents the loss that Panasonic has made. The revenue of the firm does not cover the fixed cost, thus Panasonic has made a decision to close its plant.
* I assumed the firm had made normal profit as there was no mention of making economic profits in the article and I think the market is pretty competitive even though the TV market would be classified as an oligopoly as there are not many firms producing TV and there are high barriers to entry since the high technology is needed and it is hard to compete for everyone if they do not have the highly qualified labour force or massive capital to invest in the development of technology. Only few firms with economies of scale are able to produce TV.
http://www.theepochtimes.com/n3/313480-panasonic-to-close-last-plasma-tv-factory/
* I assumed the firm had made normal profit as there was no mention of making economic profits in the article and I think the market is pretty competitive even though the TV market would be classified as an oligopoly as there are not many firms producing TV and there are high barriers to entry since the high technology is needed and it is hard to compete for everyone if they do not have the highly qualified labour force or massive capital to invest in the development of technology. Only few firms with economies of scale are able to produce TV.
http://www.theepochtimes.com/n3/313480-panasonic-to-close-last-plasma-tv-factory/