Transformation Of Matsushita Electric Industrial Co., Ltd 2005

Transformation Of Matsushita Electric Industrial Co., Ltd 2005

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Problem: Mr. Nakamura must decide on what action plans to pursue for the rest of the year (i.e., the "Value Creation 21" and the 5 emergency measures)
Learning from Morishita's experiences, Mr. Nakamura should consider the following Critical Factors:
1. Full cooperation of senior management in the implementation of the plan. Mr. Nakamura's plan will fail if he never got the full cooperation of the whole management team of MEI. To get the cooperation, he must be able to get management to fully understand and believe in the principles of his plans, as the senior management team will serve as the implementers of the plan. They will also be the one who will drive the employees to the direction that they want to go. With management being clear with one goal prevents confusion among employees. This would also avoid any sabotages or complacency out of conforming attitudes from some management. Mr. Morishita was faced by many opposing parties especially from the powerful division managers. This led him to give up his plan because he couldn't push it through, as the implementers won't implement. I feel that Mr. Otsubo, who was responsible in revamping the current manufacturing system in Kadoma, sabotaged the whole process. I believe Mr. Otsubo made sure that the physical manufacturing system was changed as efficiently as he can so that nothing can be said about him not following nor is his performance affected because it was done very fast and efficiently. However, I think he intentionally ignored the need for staff training with the change of the system to prove that the plan will fail. It is impossible for Mr. Otsubo, who did an "all out effort to implement the change" and is supposed to be "highly capable and experienced factory manager", would have overlooked such a basic task that should be done.

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2. Employee morale will play a key role in the success of the implementation of Mr. Nakamura's plans. An important aspect for employee morale is for them to feel that they are really part of the company, besides wages. This is because, in the Japanese business context, the Japanese people see the companies that they work for as their second family and home. This is why all employees pretty much stay in MEI and in the division that they started with. During Mr. Matsushita's era, all employees were happy and believed in his philosophy. Under Mr. Morishita's management, the employees felt "confused" because they didn't know what work they should do. Even though one can say that Mr. Morishita was facing a lot more challenges than Mr. Matsushita, Mr. Matsushita handled the problems while keeping the drive in the employees (e.g., cutting production down to half, with employees that were redundant were sent out to sell the products).
3. Impact on Brand Equity. Brand Equity refers to the value of perception of the brand to consumers. It represents the identity of both the company and the products it produces; and is important for MEI as it produces consumer products. Its brand equity has been hurt during the past years and it is vital for the plans of Mr. Nakamura to improve on or at least not to damage it further. Already, there is skepticism on "Nakamura's ability to implement his ambitious plans" and is being compared to Y. Morishita. This is bad publicity that will hurt the Brand if it becomes true.
Option 1: Mr. Nakamura drops Value Creation 21 by just consolidating the changes that have been implemented and focus on implementing the 5 emergency measures for the rest of the fiscal year. The good side of this option is that it's fast (has immediate results) and action-oriented. The 5 measures plan immediately addresses, if successful, the potential problem that will be caused by the failed change in the manufacturing system by increased sales revenues and reduced costs to maximize the net profits.
However, the bad side of this option is that by giving up Value Creation 21 plan, Mr. Nakamura admits defeat to the opposing managers like Mr. Morishita and giving further bad publicity to MEI by making the skepticisms of business critics true. Also, this option provides answers for the short-term results only. MEI will still be plagued by the underlying inefficiencies in its system.
Option 2 & Chosen Option: Mr. Nakamura pursues Value Creation 21 concurrently with the implementation of 5 emergency measures. The good side of this option is that there is continuity, as Mr. Nakamura will not show as fickle-minded by suddenly changing his strategy. Also, I believe that the Value Creation 21 (VC21) strategic plan of being customer-focused company will help increase the quality of its products as quality should both be based on technical aspects of products and perception of the consumers. The VC21 provides an answer to this issue where the sales and marketing department have a say on a product's design/features/quality, delivery and price (a dependent variable of productivity). The sales and marketing personnel are the ones who know the consumers better and would know their needs and wants. Feedback from them is of utmost importance. The VC21 also had a good start with good results. This would mean that the employees have seen the improvement and will most likely pursue the plan. The 5 emergency measures that Mr. Nakamura came up with to react on the negative effects of the "failed" attempt on the conversion of the manufacturing system. It's a reaction to save the profits of the company, which will show good results to both investors and company members.
The bad side of this option is that there are 2 plans that will be implemented and may cause confusion among management and employees as to which one to prioritize. It may even be a cause for confusion to Mr. Nakamura on which one to prioritize.
Implementation (Please see Exhibit 1 for Potential Problem Analysis for basis of the implementation plan): It seems to me that Mr. Nakamura is already feeling overwhelmed as he thinks that he may not be able to pursue VC21 anymore and just focus on the 5 emergency measures. This is not true. Analyzing the 5 measures given, all 4 of them (exclusion of "aggressively pursue sales", which is a given strategy to most mass-produced consumer products) can be attributed to strive cost-reduction, cost-savings and efficiency. Having an efficient management system "creates" value for the customers because MEI will incur lower costs and will have the power to lower its prices if needed. If price lowering is not the strategy that they would want to pursue yet, at least, with higher margins, MEI is able to improve on its technology, which is also the main component for the VC21 strategic plan. First, Mr. Nakamura must align his plans and emergency measures to the corporate vision and value principles as provided by the founder, Mr. Matsushita. The employees have obviously identified themselves to Mr. Matsushita and his management principles (e.g., Mr. Matsushita is revered as "management god"). Mr. Nakamura can leverage on this identification, which he already initially did by keeping the theme of his 3 year action plan to be "Deconstruction and Creation". He mentioned the founder's philosophy. Changes that he's trying to implement should be based on the founder's philosophy. A revamp is not in order, but just a change of strategy due to the changing needs of consumers as time advances. Mr. Matsushita's vision of having MEI products be "as cheap as tap water", where the means on reaching this vision has been provided by Mr. Matsushita himself. Second, Mr. Nakamura should communicate its plans by making sure that people see them as objectives based on the 7 principles. Below is a table on how the action plans can be matched for communication:
Contribution to Society Value Creation 21 elements: providing value and quality products are reasonable prices by being efficient.
- Cutting expenses
- Aggressively negotiating price breaks with suppliers
- reducing purchasing costs
- cell manufacturing
Fairness and Honesty Encouraging communication with management and employees to be honest to each other and prevent bad publicity due to scandals.
Cooperation and Team Spirit Consolidation and streamlining of businesses and factories to avoid internal conflict and have efficient use of resources.
Pooling purchasing among divisions
Reducing purchasing costs
Untiring Effort for Improvement Change in sales and distribution organization.
Improvement on inventory levels
Reducing purchasing costs
Courtesy and Humility (connected to cooperation and team spirit)
Adaptability Cell Manufacturing
Different changes like consolidation and streamlining as needed in changing times
Gratitude (connected to cooperation and team spirit in getting people to see obstacles as blessings in pursuit of true happiness)
This step also clarifies that Mr. Nakamura's plan is not a "cultural revolution" because everything is aligned to the vision and mission of the company. The underlying problem to this perception is that the employees and management of the organization have focused too much on what worked before (division separation and internal rivalry) and denies the possibility that it's not working anymore and is actually causing burden on whole organization now.
Third, Mr. Nakamura needs to be able to re-live or re-invigorate the spirit of Mr. Matsushita's principles in the whole organization because it seems that these have deteriorated from the employees' minds. Instead of basing judgment on the vision and mission of the organization, they only saw the effective corporate strategy (division separation and internal rivalry) that worked decades ago as the ultimate truth and will be the only one that works. The 7 principles creates a learning organization and employees/ managers with open minds to change for improvement.
Ultimately, all preventive and contingent actions for potential problems (Exhibit 1) that may arise and future management decisions must be grounded on the 7 principles as it has been inculcated in everyone in the organization that shaped "its culture and guide for key decisions".


Exhibit 1
Potential Problem Analysis (based on the listed critical factors):
1 2 3
What can go wrong? Opposing personnel (particularly management) will sabotage or at the very least be complacent on tasks that are assigned to them for the implementation. Unable to get full cooperation. Employees have low morale and is unable to work on their tasks. MEI product brands get affected by bad publicity and scandals. (e.g., failures in the improvement of MEI product quality, delivery and pricing (QDP))
Preventive Actions Constant dialogue among management for clear understanding of their hesitance and addressing them (see implementation plan) Align strategic plans, tasks to the corporate value principles. Ensure that product quality is very good that bad publicity from employees won't affect its sales too much.
Re-live 7 principles.
Ensure product QDP is improved and not negatively affected when making changes especially for manufacturing systems.
Residual Problem Some members of management still disagrees and creates confusion among employees. Some employees still continue to have low morale.
Contingency Provide venue for communication between top management with employees to get their opinion and suggestions. This will clear up any confusion to employees if their manager is intentionally not providing information on the plans and goals of the organization. Encourage suggestions for improvement from all levels of employees in their own work place (like Mr. Matsushita)
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