NRI Papers
No.88 April 1, 2005
  Business Structural Reform Needed for Electronics Companies  
Takayuki NAKAGAWA and Yasushi KONNO
      The winning formula of Japanese companies, which was observed in the past, has not been applicable to the Japanese electronics industry since the second half of the 1990s. It can be said that a contributing external factor is the electronics industry being caught up on the wave of product maturation or "commoditization."
      Internal factors that have brought difficulties to many Japanese companies are as follows: (1) business portfolios are not clearly defined and there are no original business areas; (2) emphasis is placed on market share, abandoning long-term business strategy; (3) product planning does not include marketing; (4) management decision making remains slow; (5) a new competition mechanism has emerged which causes a sharp drop in prices; (6) planning strategies and their implementation are weakened.
      In the electronics industry where commoditization is expected to develop even further in the future, the following measures are needed to maintain profitability: (1) to concentrate on business portfolios in the strongest business areas of each company; (2) to create new sources of earnings; (3) to establish a system to respond to the needs of users; (4) to make management judgments based on the phenomenon of commoditization of products; (5) to accelerate the management decision making process; (6) to take advantage of corporate acquisitions at the time of restructuring of business and industry.
      Old-style management would be unable to carry out the above-mentioned measures and to make business structure profitable. As Japanese companies are supposed to have high problem-solving abilities in general, it is important that corporate headquarters should enhance its ability to make drastic changes in corporate strategies and to set high business targets.
      At the same time, it is also important that headquarters should possess the ability to implement corporate strategies. As the promoters of corporate strategies, they have to review its role of the "muscular strategic planning" center and to strengthen its ability to implement corporate strategies as quickly as possible.
Contents
I Japanese Electronics Companies Failing to Make a Profit
II Why Do Electronics Companies Become Structurally Unprofitable at Maturity?
III Companies in Other Industries Continue Making a Profit at Maturity
IV Points to Be Strengthened by Electronics Companies
V Headquarters Should Play a Strategic Planning Function

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