Revival of Matsushita

 
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Case Details:

Case Code : BSTR101
Case Length : 11 Pages
Period : 2000 - 2004
Organization : Matshushita Electronics
Pub Date : 2004
Teaching Note : Available
Countries : Japan
Industry : Consumer Electronics

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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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...

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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...

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