Matsushita Electronic Industrial

Matsushita Electronic Industrial

Pham Thach

Executive summary: Matsushita Electronic Industrial (MEI) is a very successful company in both Japan and the global in the 1970s and 1980s. MEI's 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, MEI's 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 world's largest by 1985. In the 1980s, MEI became the world's 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 MEI's 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 market's demand, and introduced its products. This extensive business web played a primary role of MEI's source of competitive.

Another important source of MEI business success was its unique corporate culture - Konosuke Matsushita's business philosophy and 250-year corporate plan. The philosophy and plan, which was presented in the MEI's 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 MEI's 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 MEI's employees to work in the same direction.

MEI's 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 MEI's divisions could maintain its growth and flexibility. The core of Matsushita's 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, Japan's 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 company's