Matsushita Electronic IndustrialEssay Preview: Matsushita Electronic IndustrialReport this essayMatsushita Electronic IndustrialPham ThachExecutive summary: Matsushita Electronic Industrial (MEI) is a very successful company in both Japan and the global in the 1970s and 1980s. MEIs success in this period came from its diversification of productions, dominance domestic market, unique corporate culture, and divisional structure in both domestic and international market. However, in 1987, under new circumstances, such as the change Yen prices, and the pressure of integration of information technologies that need international transfers, sharing, and synergies, MEIs faced declines in sales and profits because its structure was exposed some weakness. To overcome these problems, MEI should choose Worldwide Product Division Structure.
Matsushita Electronic Industrial (MEI) was established in 1918 by Konosuke Matsushita to produce a double-end socket in Japan. This company grew rapidly, in 1977 MEI was praised by Fortune as “the most dazzling corporate success in Japan”, and then ranked 20 on Fortune list of the worlds largest by 1985. In the 1980s, MEI became the worlds largest producer of customer electronics product, and the forth largest electrical and electronics firm in the world with the compounded annual sales growth and annual growth in net profits was 11.6 percent and 14.6 percent, correspondingly. The success of MEI in the 1970s and 1980s is contributed by its global strategy in which, its diversification of productions, dominance domestic market, unique corporate culture, and divisional structure in both domestic and international market.
Contributing to MEIs rapid growth and consistent profitability in the highly competitive world consumer electronics industry in the 1970s and 1980s was its diversification of productions. Originally, MEI only produced double-end sockets, then its list of products was unceasingly expanded. MEI introduced various of products to markets: battery-powered bicycle lamp and an electronic iron (1923), radio (1931), Domestic fans and light bulbs, small motors for domestic appliances, then appliances (1935), black and white TV sets (1952), transistor radios (1957), stereos, tape recorders, air conditioners (1958), driers, and disposal unit (1959), color TVs, dishwashers, electric oven (1960). In term of the numbers of its products, MEI outdistanced its competitors.
MEI grew rapidly and gained consistent profitability because it dominated its domestic market. To overcome the flaws of the Japanese distribution system which was highly fragmented and provided little service and no customer education, MEI established its own chain in domestic market. Owning about 40 percent of all electronic appliance stores in Japan by the late 1960s, MEI could gather quickly information of domestic markets demand, and introduced its products. This extensive business web played a primary role of MEIs source of competitive.
Another important source of MEI business success was its unique corporate culture – Konosuke Matsushitas business philosophy and 250-year corporate plan. The philosophy and plan, which was presented in the MEIs emphasized on the active role of MEI in society that MEI and all its employees would make all their efforts “to foster progress, to promote the general welfare of society, and to devote ourselves to furthering the development of world culture.” All MEIs employees had experienced a cultural and spiritual training to understand the role of business in society, and know how the philosophy translates into their daily responsibilities in the company. This philosophy and corporate plan was the glue to tie up all MEIs employees to work in the same direction.
MEIs divisional structure was another important source of its rapid growth and consistent profitability. First introducing in 1933 by Matsushita, this divisional structure was used to delegate more power to junior levels in order to create an organization that would develop managers able to lead the company into the first phase of its ambitious long-term mission. Each division could perform easily because profits responsibility was defined clearly. Therefore, Matsushita created a small-business environment in which all MEIs divisions could maintain its growth and flexibility. The core of Matsushitas divisional structure was “One product-One Division” system in which each product line was managed by a separate autonomous division that was expected to operate as if it were an independent corporation. Corporate management provided division with initial fund, and the corporate treasury operated essentially like a commercial bank. Divisions deposit their excess funds and received normal market interest. Request for additional corporate funds to meet expansion plans were submitted as loan applications to the central finance department. This organizational system generate a high level of internal competition among divisions, and helped drive new product development that managers saw as their best way to maintain long-term growth and profitability. The need to fund new product development also drove managers to maximize performance of existing products.
MEI managed the international business by categorizing its overseas branches and plants into three groups: The A group, the wholly owned single product global sourcing plants that reported primarily to the relevant product divisions of MEI and were tightly controlled by them; the B group was the multi-product sales and manufacturing subsidiaries that reported to corporate overseas management (COM); and the third groups of offshore companies was the sales and marketing subsidiaries that imported their products from Japan and from the global production centers. These reported to METC, the trading company.
Applying a “Hand off” management, Japans headquarters gave a sales and a profit target and the subsidiary must achieve them. Headquarters provided advice and support. Local managers had complete autonomy in managing employees, salary, other expenses, purchasing less critical but quality standard assured parts from local vendors. Sales subsidiaries had some choice with regard to the products they sold. The linkages between MEI headquarters and its subsidiaries were strengthened by regular visits of managers of all foreign subsidiaries to the headquarters, and vice versa. MEI also managed its international business through its web of expatriates. The expatriates hold senior positions as subsidiary general managers, accounting mangers, technical managers in MEI subsidiaries. They transmits a complex and bustle philosophy, act as the communication links translating information about the overseas environment to headquarters and transferring the companys
Operations and maintenance were performed at offices of the local company. The operation of the company was governed by the international agreement governing the performance of foreign management responsibilities. MEI, also at this time receiving additional support from other companies of MEI assets, had taken the most aggressive course in all cases in relation to export or export management. There was no longer any pressure on MEI to conform to international procurement rules while maintaining a good quality of operations and the proper management of the company. The company decided that it is not acceptable for an MEI overseas to accept more than its limited capacity and the number of foreigners there, as part of its international business. The company would not have agreed to pay more than a 100 per cent, though a 100 per cent minimum required that the MEI employees be working well in a foreign country, for example in the USA or the UK. All foreign employees were paid a 10 per cent annual salary. MEI did not follow the law to avoid this problem. A few MEI employees were also subjected to physical abuse, having to be physically removed from their home premises under a legal order after giving up their jobs on February 13, 2012. The company issued a notice to all the employees that it would investigate all the allegations of physical abuse arising in the US and France against MEI employees by local authorities. As an option to stop further physical harassment, the company also cancelled the visa to French employees which was due on February 6, 2012. MEI made no effort to notify the French Ministry of Foreign Affairs of this alleged retaliation. However, it does take special measures as well according to the international treaty in force, to reduce the number of employers from 1,000 to 1,500 in the next 5 years. For example, in December 2012 the company filed a complaint in the Court of Justice against the French employees. In addition to the physical and mental abuse, which resulted in no one being able to communicate with MEI employees, the company also provided free food and medicines, provided free food and medicines to MEI workers and did everything in its power to keep them from hurting other employees and their families. The company also provided the employees with food, water and toilet and personal transportation at its office in the US, where meals were taken for MEI staff, and in France. To prevent further verbal abuse, the company instituted some measures to prevent any further physical abuse among employees. The company also extended legal assistance to employees who lost their jobs as part of the process: In January 2012, the employee said that his employees were physically humiliated and threatened with beatings during his work visit. The company also paid out to the employees 1,800 euros a month of support in return for their cooperation. When a case takes to court in a US court, both the French Ministry of Foreign Affairs and the President of the European Union (EU) of France expressed concern in the EU by making comments to the company about the possibility of this legal mechanism. The company sent some of the employees their own documents with this kind of legal protection which could help to clarify the case in its favour. In May 2012 the company sent the employee a letter of apology for their actions, with a guarantee that the employee will stay in their position until they see their new job and get compensation under the law as well as a guarantee that the former employer will be considered as the first person to come before the court. The company also promised to reimburse the employees for their physical and mental abuse. A year back, two or three employees went through this process in France and were able to make good progress. In June 2012, the company signed a settlement with the French Ministry of Justice, and started to pay employees 1,500 euros a month for work done with local workers. The company also continued its case in Italy. It signed a mutual agreement with several European state offices to ensure that the employees got financial support.
MEI at the same time held a small role in the