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 profitabil...
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...mashita initiated Operation Location and Action 86 programs to shift more activities to its vast oversea operation, and shift its business emphasis. However, some subsidiary managers worried that this program could weaken their relationship with headquarters managers and reduce their access to central resources and expertise. Some managers were afraid that by deemphasizing traditional products, the company might lose its competitiveness in its existing market, and its capabilities in responding quickly and flexibly to market changes, change Matsushita’s culture and philosophy, undermined its source of strength. However, under new circumstance, the traditional structure were exposed these flaws mentioned above, and its impact was the decline of MEI sales and profits. To be a firm that was reasonably diversified and, accordingly, originally had domestic structures based on product divisions, MEI could apply Worldwide Product Division Structure. By that, MEI could easier to pursue the consolidation of value creation activities at key locations necessary for realizing location and experience curve economies, and to transfer of core competencies within a division’s worldwide operation.
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