Matsushita Case Aanalysis
...kable consumer products for the home and mobile user. Home networkable consumer products include digital TV set-top boxes and interactive information services. Mobile networkable consumer products include mobile visual communication equipment such as graphics-enabled mobile phones. The short-term product development strategy includes R&D investments into Intelligent Transport Systems (ITS), broadband communication technologies, energy related fields and Internet software and hardware. In order to achieve this the corporation is planning to invest heavily in R&D (US$5.1 Billion in 2001) and capital (US$ 4.62 Billion in 2001). In addition, the company believes that for long-term success, increased competence in manufactured equipment is necessary but more importantly, areas such as intellectual property, components and devices, and systems and services must be expanded. Therefore, the company is forming alliances with many high-tech companies to form de-facto industry standards and is also undergoing organizational changes so that the company can move positively towards the digital era and support employee innovation. The above paragraph is only an overview of Matsushita’s corporate strategy. In the following sections two analysis tools will be used to detail corporate strategy as well as analyze the effectiveness of the strategy. Analysis of Strategy: The VRIO analysis was used to look at the Matsushita’s resources and corporate strategy to determine whether a stable framework exists for effective strategy implementation. The analysis looks at the company’s resources from four different perspectives: Value, Rareness, Imitability, and Organization. Matsushita has several valuable resources. First of all, in terms of technology, Matsushita is a leader in audiovisual goods, household appliances, and industrial machinery technologies. In addition, the extensive experience and learning curve effect from past accomplishments and failures gives Matsushita a good resource for future planning. Another valuable resource is the company’s brand name and corporate image, especially in Japan, where Panasonic and National products are synonymous with words like “high quality” and “good value”. Moreover, customer loyalty is a key factor. Finally, another valuable resource, which Matsushita is currently developing, is de-facto industry standards. These are valuable because not only are they adopted as the industry-wide standard, allowing Matsushita to become a pioneer company in the field, but it also shows innovation, which leads to a greater competitive advantage in the industry. Currently, Matsushita is attempting to position the SD memory card as the de-facto standard with the help of strategic partners such as Toshiba (Japan) and SanDisk (U.S.). The majority of the company’s more visible products are not rare. Many similar products for consumer goods such as DVD players, CD players, and televisions are available on the market and therefore the company cannot take advantage of the rarity aspect. In addition, competing companies can easily imitate most of the products Matsushita develops. However, Matsushita holds many patents for many of its products and therefore protects itself from losses resulting from imitated products. Furthermore, research and development investments allow the company to take advantage of pioneer profits for products that are quickly embraced by consumers. Organizational resources are also a key factor in company profitability because a good organizational structure will allow the company to exploit the full competitive potential of its resources and capabilities. Recently, Matsushita neared completion of the Project 2000 Plan, which focused on strategic business restructuring through the prioritization of key business areas and concentrating resources. With the advice from the internally organized Corporate Internet Strategy Council, the company decided to emphasize five key business areas: digital television systems, semiconductors, mobile communication equipment, optical discs and display devices. Furthermore, the company established several internal divisional companies as business clusters. This allowed the divisional company to serve as a management unit to coordinate the operations of each related product and this enabled greater strategic investment of managerial resources than is possible with a single product division. This restructuring also increased the operational efficiency of the company. Furthermore, beginning Fiscal 2000, the company plans to promote more inter-business cluster collaboration to optimize the Matsushita Group’s organizational structure so that new business models for the digital networking age are created. The resultant effect is the formation of new divisions and business models that are efficient and effective for the ever-changing Internet revolution. For example, similarities and collaboration between the Video Systems Division in the AVC company as well as the Broadcast Systems Division of Matsushita Communications Industrial Co., Ltd. led to the formation of the Broadcast Systems Division of the AVC company enabling it to meet all broadcasting industry needs through one outlet of the company. In addition, the company is currently developing Internet-based business models such as an electronic music distribution service. Moreover, the company is streamlining its operations with the use of IT technologies in areas such as e-commerce and electronic procurement. Finally, the company is reviewing the salary structure in order to make the system based more on an individual’s performance rather than on their age. This, they say, will hopefully spawn innovation and creation as well as give an incentive for success in the corporate environment. Strengths and Weaknesses of the Corporate Strategy: As shown from the above VRIO Framework analysis, Matsushita has several strengths, which the company must take advantage of in the future. For example, the company has recognized the opportunities in digital technology and networkable products and therefore the company must continue to invest in R&D, form strategic alliances with high-tech companies and strive to set the de-facto industry standards to suit their products. However, the company falls short in several areas. The most important aspect, which the company must improve, is the organizational structure of the company. Although, through plans such as the Project 2000 Plan, Matsushita is restructuring the company to make it more performance-based, the company has to further show efforts and implement incentives to improve the company’s operational efficiency so that new product development can occur quickly and smoothly. Furthermore, from analyzing the corporate strategy, although environmental preservation is mentioned early in the annual report, it is clear that these activities are on the backburner and therefore not integrated into the main part of the corporate strategy. This is probably due to the massive profit potential of the digital era. However, Matsushita has been concentrating hard on developing an Environmental Management System for the entire company as well as producing environmentally friendly consumer goods. The following section takes a look at the environmental strategy of Matsushita and analyzes the potential possibility of full integration into corporate strategy. 3. Matsushita’s Environmental Strategy Overview: In June of 1991, Matsushita drew up the Matsushita Environmental Charter, which is the basis for their Environmental Management System. This charter defines Matsushita’s approach to environmental preservation and sets guidelines for business activities. Matsushita’s basic philosophy towards the environment is summed up in their Environmental Statement and their Code of Conduct. Environmental Statement: Matsushita’s environmental statement is a good measure of what the company’s objectives for the environment are in the future. It states: “Fully aware that humankind has a responsibility to respect and preserve the delicate balance of nature, we at Matsushita acknowledge our obligation to maintain and nurture the ecology of this planet. Accordingly, we pledge ourselves to the prudent, sustainable use of the Earth’s resources and the protection of the natural environment, while we strive to fulfill our corporate mission of contributing to enhanced prosperity for all.” Code of Conduct: 1) Social Responsibility 2) Establishment and Improvement of Environmental Management Systems 3) Environmental Targets and Objectives 4) Compliance with Legal Requirements 5) Environmental Management Program 6) Environmental Assessment, Auditing and Management Review and Correction 7) Education and Training 8) Public Outreach Along with these basic guidelines, Matsushita began holding The Environment Conference on a half yearly basis beginning in November of 1997. The conference was established to formulate environmental policies and measures and the aim was to implement these in environmental offices around the world after the Conference. 4. Analysis of Environmental Strategy: These aforementioned components form the basis for Matsushita’s environmental strategy. In order to analyze the strategy in terms of the entire industry, the ROAST Scale as well as a SWOT analysis was conducted. ROAST Scale Analysis: When the ROAST scale is used to determine how successful Matsushita has been at implementing an approach and the effect on the environment, several issues arise. By analyzing Matsushita’s environmental record since the inception of their Environmental Management System in 1991 it can be concluded that the company is at a level between Stage III and Stage IV on the ROAST scale. Stage III is the "accommodation" stage and Stage IV is the "seize and preempt stage". The reason for the company being placed above Stage III is because of their voluntary setting of proactive environmental agendas through their Environment Conference. Appendix III and IV describe the environmental awards received and the history of environmental efforts of the company. Some examples of Matsushita’s efforts to be proactive and improve the environmental sensitivity of the company are outlined below: From the 1995 fiscal year to the 1998 fiscal year Matsushita obtained ISO 14001 certification for 221 of their manufacturing sites, seven non-manufacturing sites and one third sector site. Matsushita is developing environmentally conscious products and is continuing to improve existing products so that they are also environmentally friendly. The areas in which they are making efforts to improve in are energy consumption, reduced pollution emission levels, and increased end of life recyclability. For example, the company is using lead free solders on their PCB boards in order to reduce toxic end-of-life effects. In addition, the company is improving energy efficiency in all its products and recently the company received the Energy Star Award from the USEPA. In addition, the company is making a concerted effort to increase the recyclability of its home appliances. Matsushita is currently developing the Matsushita Product Assessment Process, which is a system that evaluates the environmental impacts of the product life cycle. This process assesses the use of energy, chemicals, as well as the environmental impacts and recyclability of products. In March of 1999, Matsushita established their Green Procurement Standards. The standards encourage the procurement of higher environmental quality materials through purchasing materials from environmentally sound suppliers (i.e. supplier that also implement an environmental management system such as the ISO14001) and also by educating suppliers about environmental performance. Furthermore, these standards has introduced the Chemical Management Rank Guidelines, which ranks and groups chemical substances into three categories; prohibited, reduction required, and appropriate control required. Green Procurement and the Chemical Management Rank Guidelines are used to assess approximately 3,600 major suppliers, which cover 70% to 80% of the company’s annual purchasing amount. Matsushita is working towards reducing the environmental burden of production and manufacturing activities. For example the company is continuing to reduce CO2 levels and improving energy efficiency through energy conservation projects including working towards reducing energy use in factories. In addition, the company has developed energy-conserving industrial furnaces and cogeneration systems, which recycle waste heat and convert it into usable heat through steam turbines. Matsushita has reduced industrial waste considerably by converting waste material into reusable resources. Some of these efforts include; converting waste plastic into solid fuel and sludge into raw materials for cement; separating and refining waste oil, acids, and alkalis; and separating and recycling various types of papers. In addition, packaging processes have been remodeled to use reduced quantities of packaging material as well as phasing out Styrofoam packaging. Matsushita has developed products and processes to preserve air and water quality. For example in 1993, Matsushita stopped using CFC's in compressors and 1,1,1 trichloethane as a cleaning agent. Furthermore, the company has bought out stock from Matsushita Seiko to make Matsushita Environmental and Air-Conditioning Engineering (MEA) into a fully owned subsidiary. This step was taken so that the company can implement self-management standards of wastewater and air emissions internally. The new subsidiary currently installs industrial wastewater treatment facilities, and incineration facilities into existing and new manufacturing sites as well as implement remediation efforts on contaminated ground and groundwater. In addition to complying with or exceeding local standards, the company requires foreign subsidiaries and overseas manufacturing sites to implement company-wide standards in certain areas. These are several examples of what Matsushita has done to implement environmental reform into their company’s environmental strategy. However, by examining Matsushita’s different moves towards a higher level of environmental consciousness there are some instances where they are not necessarily being proactive for the sake of being proactive. In several cases the decisions Matsushita has made in the past decade to promote higher environmental standards have actually preceded legislation that would require future compliance. For example: Ceasing the use of CFCs. The reduction of CFC’s was eventually mandatory as a result of Japan’s ratification of the Montreal Protocol. Designing products, which have a greater end of life recycling potential. This can be partly attributed to the Electric Appliance Recycling Law, which will go into effect in April of 2002. Some implications of this law are that air conditioning recyclability must be at 60%, TV recyclability 55%, and refrigeration and washing machine recyclability must be at least 50%. Another factor in determining that Matsushita is below Stage IV on the ROAST scale is the extent to which the Environmental Risk Management Plan has been implemented. In other words the Plan has seen limited implementation throughout Matsushita’s facilities across the globe. Strength Weaknesses Opportunities Threats (SWOT) Analysis: To rate the quality and relative effectiveness of Matsushita’s corporate and environmental strategies the Strength Weaknesses Opportunities and Threats (SWOT) method of analysis was used. Strengths: The Environmental Risk Management Plan is a very comprehensive and forward thinking plan to deal with the environmental risks that Matsushita faces. It also addresses the pressures that a company such as Matsushita exerts on the environment. In addition to implementing the plan, Matsushita has developed products that improve the company’s reputation as a company in tune with the environmental impacts of their products. As mentioned before, Matsushita recently received the Energy Star award for their achievements in developing and commercializing energy efficient products. Furthermore, Matsushita has the capital and personnel resources to implement The Environmental Risk Management Plan on a global scale as well as to continue to be a leader in the design and production of environmentally sound products and production techniques. Another aspect of the company’s strengths is its corporate strategy. As mentioned in the corporate strategy section, the company is planning to invest heavily in digital technology and networkable products. This in itself indirectly reduces the use of materials in conventional transactions and thus reduces environmental burdens. For example, the proposed electronic music distribution system will in the long-run reduce CD packaging, as well as miniaturize portable music players. In addition, the streamlining of business transactions through Information Technology will reduce the use of paper. Weaknesses: From the above section, it can be said that a correlation exists between the company’s corporate and environmental strategies. However, as discussed in the ROAST scale section, there continues to be a great “disconnect” between the two. Recently Oekom Research, a German environmental rating company rated Matsushita to appraise their environmental performance. The criteria used to determine the final grade trend included analyses of environmental management, products and services and environmental data. The data was obtained through questionnaires sent directly to the company. In the analysis, Oekom Research gave Matsushita a final grade of “C” (although they mentioned that it was a high “C”, close to a “C+”). In comparison, the company’s main competitor, Sony, received a “B-”, which proved to be the industry leader. When broken down, Matsushita’s environmental management plan received a “B”. However, the Environmental Risk Management Plan has seen limited impleme...