Revival of Matsushita
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Case Code: BSTR101 Case Length: 11 Pages Period: 2000 - 2004 Pub Date: 2004 Teaching Note: Available |
Price: Rs.300 Organization: Matshushita Electronics Industry: Consumer Electronics Countries : Japan Themes: Corporate Restructuring |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Decline
In 1990, Matsushita acquired MCA Inc., a US movie studio, with the idea of including the hardware (TV, VCR and CD players) and software products (music, movies and TV shows) in the field of electronic entertainment in its portfolio. The deal cost the Matsushita group $6.59 billion. The acquired firm had problems with Matsushita's bureaucratic style of management. Matsushita executives would turn down MCA's request for funds and there was a communication gap because Matsushita executives didn't know English. In 1995, Matsushita sold 80% of its stake in MCA Inc., to the liquor company, Seagram. Matsushita lost ¥164.2 billion through the MCA stock sale, due to foreign exchange losses. In the financial year 1991-1992, Matsushita had interest bearing debts as high as ¥2.755 trillion on the books. In 1993, Tanii resigned, accepting the responsibility for the sharp drop in profits and 700,000 defective refrigerators, which the company had to call back...
Restructuring
At the beginning of 2000, Kunio Nakamura (Nakamura) was appointed as the new president of Matsushita. Nakamura had been with Matsushita since 1962 and had successfully headed the US and European operations. Nakamura made a mid-term plan "Value Creation 21"with the aim of transforming the company into a lean and agile "Super Manufacturing company". The plan consisted of two parts - destruction of the old management structure and creation of a new one to compete in the 21st century. The destruction phase was aimed at reducing the inefficiencies in the company with the help of structural reforms. In the creation phase, the company wanted to develop V-products (products with high margins) and launch them in the domestic and overseas market. The concrete objectives of the plan were to increase the operating margin from 2.2% in 2000 to 5% in 2004 and make consolidated annual sales of $81 billion, by 2004, increase overseas production to 40% of total manufacturing by 2004 from 30% of total manufacturing in 2000...
The Comeback
In 2002, the company launched a DVD-RAM recorder and PDP TV. According to the market researcher NPDTechworld, Matsushita captured 50% of the global DVD recorder market in the same year. It also enjoyed a 30% market share of the large screen plasma display TVs. Also its camera cellular handsets were becoming more and more popular. At the end of the financial year 2003, Matsushita made an operating profit of $574 million on net sales of $61,680 million. The growth was attributed to the 88 V-products launched by the company, which generated sales of 1 trillion yen. MCICL had sales of US$5.9 billion in 2002. It was the first manufacturing company to make a 3G handset for commercial use. MCICL aimed to make thin, light-weight camera phones and capture 15% of the global wireless phone market by the end of 2003. In 2003, Matsushita decided to consolidate all its brands outside Japan under the single brand name 'Panasonic' by March 2004. The brand Panasonic contributed about 90% of Matsushita's sales outside Japan. As a part of its global brand strategy, a campaign "Panasonic ideas for life" was launched in 2003...
Future Outlook
Matsushita, along with its partner Tenzing Communications, was working towards the development of an in-flight communication and entertainment system since 2001. The communication system would enable air passengers to send e-mails in flight. The entertainment system would equip the passengers with the audio and DVD-video quality movies on demand and games. Panasonic entered into a partnership with the International Olympic Committee, for the 2006 Torino Olympic Winter Games and the 2008 Beijing Olympic Games. Under the partnership, Panasonic would be the worldwide official partner of the Olympic Committee in the category of audio, TV and Video equipment, and Recording Media relating to Audio and Moving Images, including Broadcast and Professional use. Panasonic planned to use audio/video equipment such as Astrovision large display systems, RAMSA professional sound systems, large projection systems, and other consumer electronics products to enhance viewer experience...
Exhibits
Exhibit I: Mission Statement
Exhibit II: Operating Profits of Matsushita
Exhibit III: New Business Domain
Exhibit IV: Business Segments
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