TOKYO: Consumer electronics firms like Panasonic, Sharp and Sony must urgently reform their business models to survive, and also offer warning signs to rivals from overseas, a report has suggested.

Citigroup, the financial giant, argued Japan's biggest electronics manufacturers needed to streamline their operations, and exit categories such as TV sets and cameras, where sales and margins are falling.

"In Japan, a decision to get out of a business is not taken until everyone ... is on the same page," said Kota Ezawa, an analyst at Citigroup, according to Investor's Business Daily. "However, doing this is not fulfilling the traditional role of management."

Sharp expects to make a net loss of ¥450bn in its latest fiscal year, a figure set to reach ¥765bn for Panasonic. Sony predicted it will log a modest profit, despite posting a ¥15bn net loss in the last quarter.

Ezawa named IBM, which sold its PC manufacturing arm to Lenovo in order to focus on services, and Philips, which diversified away from appliances and televisions, as examples to be followed.

"We believe the structural change needed at Japanese companies requires new management decision standards," he added. "Even competitive businesses that have been developed in-house should be handed over to new management if they are peripheral to the core group strategy."

Increasing expenditure on technologies like fuel cells, small power storage systems, home energy management tools and devices for the medical and healthcare sectors may be similarly beneficial.

The launch of smartphones and tablets was cited as a major shift which has proved detrimental both to Japanese companies and several of their foreign peers.

"Problems are not confined to Sony and Panasonic, but have shown up in the recent numbers from Dell, Hewlett-Packard, HTC and Quanta," said Ezawa.

Looking more broadly, Citigroup's report asserted that the difficulties that have hit these operators should serve as a cautionary tale for more prosperous players like Apple and Samsung.

"Consumer electronics markets normally develop as a downward pyramid with prices declining, and we anticipated that, with growth, the smartphone and tablet PC markets will also shift toward lower prices," Ezawa said.

"Therefore, it is increasingly likely that low-priced items will appear to challenge the dominant positions held by Apple and Samsung. Furthermore, it is possible that the mixes of original products at Apple and Samsung themselves may shift toward lower prices."

Data sourced from Investor's Business Daily; additional content by Warc staff