Toshiba Essay, Research Paper

Paula Dean

April 27, 2000

Strategic Management

Case Study

Toshiba: The Future is Theirs

In 1875 Hisashige Tanaka established Tanaka Seizo-sho, Japan’s first manufacturer of telegraphic equipment. The company thrived for over 60 years as an independent entity. In 1890, Hakunetsu-sha & Co., Ltd, was founded. It was Japan’s first manufacturing facility of electric incandescent lamps. Then in 1939, the two companies merged to become Tokyo Shibaura Denki. They were now an electric equipment manufacturer. The company’s reputation was established rapidly and they soon became known simply as Toshiba. They made this official with the name change to Toshiba in 1978.

Throughout the company’s long life there have been many major inventions that have guaranteed them a place in history. Among these are the following world’s firsts:

1. 1967—first automatic zip code reader

2. 1970—first color video phone

3. 1986—first laptop personal computers

4. 1995—developed high-density optical disc, DVD

They have remained successful for many years because of their ability to stay on top of the world of technology. This is no small feat. Numerous companies have been lost because of a rapidly changing technology market that most were unable to keep up with the pace.

With a resume of inventions spanning more than 120 years, a solid financial history and their status of being a multinational corporation, where does Toshiba go from here? Can they continue to keep up the pace of the past with the technology market changing more each and every day? What can they do to maintain their current level of success without compromising their values and commitment to the global society? To sum up all these questions: What’s next for Toshiba?

Before looking at what the next step should be for Toshiba, it is necessary to examine what the driving forces behind the operation and all its decisions are. For them, The Basic Commitment is this force. In 1990 this Commitment was formulated as a “statement of management philosophy.” Every management decision made is done so by the guidance set forth in the Basic Commitment, which follows:

We, the Toshiba Group companies, based on our total commitment to people and to the future, are determined to help create a higher quality of life for all people, and to do our part to help ensure that progress continues within the world community

Commitment to People

We endeavor to serve the needs of all people, especially our customers, shareholders, and employees, by implementing forward-looking corporate strategies while carrying out responsible and responsive business activities. As good corporate citizens, we actively contribute to further the goals of society.

Commitment to the Future

By continually developing innovative technologies center on the fields of electronics and energy, we strive to create products and services that enhance human life, and which lead to a thriving, healthy society. We constantly seek new approaches that help realize the goals of the world community, including ways to improve the global environment.

When evaluating a mission statement, there are nine essential components that should be present to prove its effectiveness. Toshiba’s Basic Commitment includes all nine and then some; therefore, it is appropriate to say that Toshiba has a clear idea of who they are and what they’re doing.

Another key factor in the business world today, is to know what your actual market is. Toshiba is active in diverse business fields, each with its own unique characteristics and markets. With this in mind, the markets referred to from this point on will be their two largest and most profitable: Energy and Electronics. For most large companies, domestic markets, while key to their establishment, are only a small piece of the picture. Globalization is the current trend and with technology the way it is, it is sure to be the way of the future. While many companies are just now beginning to expand into the global marketplace, Toshiba has already established itself worldwide.

Toshiba has subsidiaries and joint ventures throughout the world. They have a strong presence in Europe, Asia and the Americas. For instance, in the United States alone, Toshiba America employs thousands of people and has eight separate divisions. When you consider that this is only one of the many countries that they are present in, this demonstrates their strong ability to compete and survive in the global marketplace.

When you consider the rapidly changing market in which Toshiba participates, establishing itself as a multinational player is of the utmost importance. If they had little presence in the global marketplace, their innovations would take longer to reach the consumers and the chance of someone else developing a similar product would be greater. By being established in various countries throughout the world, they are able to market their new products immediately and be the first. This is another key point. While others may follow suit and come up with substitute or look-alike products, people know that Toshiba was the original. The fact that they have a good quality reputation increases their chances of being the brand that people are willing to try with regard to a new product.

Now that we know the history, mission and markets for Toshiba, what about the company structure itself? In April of 1999, Toshiba underwent a huge restructuring transforming from a traditional hierarchical/functional structure to that of a divisional structure. They actually have used a combination of various divisional structures throughout the entire company. In Japan, the divisional structure is by product with a separate structure for corporate headquarters.

In their overseas markets, they are structured first by geographic area and then by product line. This has proven to be very effective for them in many ways. Now the individual divisions have autonomy which allows for maximization of communication and the ability to respond even faster to the changes in their respective markets. For Toshiba as a whole, this has allowed them to identify exactly which products/divisions are performing the best with regard to their profit margins and overall growth. By identifying these problem areas, Toshiba has been able to develop a Medium-term Business Plan for FY 2000 to 2002.

This new plan involves “pulling back from slow-growth businesses and focus the electronics giant on faster-growing areas, including semiconductors, computer systems and Internet related services”(Guth, A12). While there are some repercussions to the plan such as the announcement of the 6% work force reduction in Japan, the overall benefit to the company will justify this downsizing. Toshiba is planning on spending more than $3.3 billion on this plan per year. While this amount seems rather large, when one takes into consideration the possible rewards for the company, it is merely a necessary expense. The continued survival of Toshiba is hinged upon its ability to compete in the fast-paced technology market which means concentrating more on these markets than those with little change from day to day, such as their domestic appliance lines. These areas, while well established and profitable, do not require as much R&D as do the product lines of the digital and technological worlds.

Upon evaluating Toshiba through a SWOT analysis, it is easy to understand why the 125-year-old company is still a major force in the business world.

Strengths

1. Reputation

2. Innovative

3. Global market-share

4. Ability to keep pace with fast-changing technology market

Weaknesses

1. Assets tied up in slow growth areas

2. Technology industry is so fast paced

Opportunities

1. Increase percentage of global market share

2. Technology becoming more commonplace in the home—more customers

3. Internet market

Threats

1. Increased competition in technology industry

2. Fast-paced changes in technology

3. Slower growth areas utilizing valuable resources

Toshiba is a strong company and finding many weaknesses proved to be a very difficult task. They know what needs to be done and they do it.

With all of the preceding information in mind, I have formulated some ideas/recommendations that I feel would prove beneficial to the company. The first of these is to continue with their new business plan. By freeing up assets that can be used to increase sales in growing market places, the results could be astronomical profits for them. The second is to look for more joint ventures that can increase their market position in current markets. By joining with other similar companies, they are reducing their competition while improving their own profits. My final recommendation is one that involves a subject that was not previously covered in this paper, but rather one that is from my own perception/experience. This would be to increase their marketing in the United States. The amount of commercials that I have either seen or heard for Toshiba since the inception of this product is zero. While a good reputation is a solid base, in a country with as many choices between consumer products as the U S has, advertising is a necessity for success.

In conclusion, Toshiba has been a major force in the technology industry for many years. The future will be no different. They are a well-established, quality oriented company that will not stop until they are NUMBER 1 in all that they do. Toshiba will be here through our lifetime and that of our grandchildren if they continue to operate the way they do today. Their encapsulated management philosophy is the best way to describe Toshiba:

Committed to People, Committed to the Future. Toshiba.

References

Guth, Robert A. “Toshiba Plans Strategic Shift to Fast Growth” The Wall Street Journal.

February 17, 2000. Pp. A12 and A16.

www.toshiba.com

Nishiroga, Haitzo. E-mail correspondence