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Matsushita’s Management Strategy and Role of CFO
MatsushitaMatsushita’’s Management Strategy s Management Strategy and Role of CFOand Role of CFO
September 12, 2007
Tetsuya Kawakami, DirectorMatsushita Institute of Finance
Global CFO Meeting
2
ContentsContentsContents
Performance Changes before 2000Performance Changes before 2000
Management ReformsManagement Reforms
Overview of the Matsushita GroupOverview of the Matsushita Group11
22
33
ConclusionConclusion44
3
Founder’s business philosophy
Contributing to social development through electronics businesses
Founder Konosuke Matsushita
Management Philosophy Management Philosophy
Management philosophy = public entity (of society)
Customer comes first
Start anew every day
4
vs. FY2005
SalesDomesticOverseas
102%
Operating profit 459.5 111%
9,108.2
Results
4,616.54,491.7
100%
105%
Domestic 282Overseas 371
FY2006: Achieved increased sales and profit for five consecutive years.
Group PerformanceGroup Performance
Profit ratio 5.0%
Acct. of consolidated co. ６５３
billion yen
billion yen
Total employees ３２８，６４５4
5
ContentsContentsContents
Performance Changes before 2000Performance Changes before 2000
Management ReformsManagement Reforms
1
22
33
ConclusionConclusion44
Overview of the Matsushita GroupOverview of the Matsushita Group
6
（%）
Performance Changes before 2000Performance Changes before 2000Performance Changes before 2000
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
70 75 80 85 90 95 00
0
2
4
6
8
10
12
14
16
(%)
Consolidated operating profit ratio (%)Consolidated operating profit ratio (%) Consolidated sales (trillion yen) Consolidated sales (trillion yen)
(FY)
(trillion yen)
Era of VHS VCR
7
Why Did We Succeed?Why Did We Succeed?Why Did We Succeed?
Economic boom: Rapid economic growthDivision system: Maximum respect for autonomy and thorough
management Establishment of sales routes: Network of a maximum of 27,000 dealers
(c.f. Lawson shops: 7,800, post offices (incl. contract offices): 24,700)
Great success with VCRs: Contributed over 15 years, achieving sales of ¥10 trillion and making a profit of ¥1 trillion
Economic boom: Rapid economic growthDivision system: Maximum respect for autonomy and thorough
management Establishment of sales routes: Network of a maximum of 27,000 dealers
(c.f. Lawson shops: 7,800, post offices (incl. contract offices): 24,700)
Great success with VCRs: Contributed over 15 years, achieving sales of ¥10 trillion and making a profit of ¥1 trillion
Super-excellent management up to 1990Super-excellent management up to 1990
8
1) Arrogance
2) Compliance
3) Inward arguments
4) Afraid of friction
“Matsushita is a leading manufacturer”But its business is ranked sixth in the industry“Matsushita is a leading manufacturer”
But its business is ranked sixth in the industry
“We make quality products. It’s the consumers’ fault if they do not understand our quality.”“We make quality products. It’s the consumers’
fault if they do not understand our quality.”
Meetings without conclusions; Proliferation of “committees”
Meetings without conclusions; Proliferation of “committees”
Understanding without practicingUnderstanding without practicing
Characteristics of declining businessesCharacteristics of declining businesses
Why Did We Decline?Why Did We Decline?Why Did We Decline?
Our successful experience in the 20th century held back adaptation to environmental changes
Era of global mega competition (USA, Europe, China, South Korea)
We had all of these characteristicsWe had all of these characteristics
9
ContentsContentsContents
Performance Changes before 2000Performance Changes before 2000
Management ReformsManagement Reforms
1
22
33
ConclusionConclusion44
Overview of the Matsushita GroupOverview of the Matsushita Group
10
Establishing business domain-based organizations
Manufacturing reforms and shift to cell-based production
Deconstruction Creation
Five wholly-owned subsidiariesGroup business reorganization
Restructuring initiatives at each business domain company
Initiated new organizationsCCM and cashflow-based
management
2001
2002
2003
Reform of home appliance distributionEmployment structural reform;
Site reorganization
Owned Matsushita Electric WorkSold Matsushita Lease & Credit
Promoting collaboration with MEWPowerful products released in series2004
Sold Universal and Matsushita KosanRestructuring of CRT and Overseas
Cell Phone Compressing gross assets
Improved net cash2006
"Nothing is excluded from 'deconstruction' except for our management philosophy"
20th century-style model 21st century-style model
15
Overview of Our ReformsOverview of Our Reforms
11
(1) Reforms of Organizations and Systems(1) Reforms of Organizations and Systems(1) Reforms of Organizations and Systems
1217
Domestic Distribution Reforms of Home AppliancesDomestic Distribution Reforms of Home Appliances
Brand/product-based organization directly linked to the marketBrand/productBrand/product--based organization directly linked to the marketbased organization directly linked to the market
Div
isio
n
Dev
elop
men
t M
anuf
actu
ring
Div
isio
n
Dev
elop
men
t M
anuf
actu
ring
Div
isio
n Sa
les
Div
isio
n Sa
les
Adv
ertis
emen
t D
ivis
ion
Adv
ertis
emen
t A
dver
tisem
ent
Div
isio
nD
ivis
ion
Cor
pora
te S
ales
D
ivis
ion
Cor
pora
te S
ales
C
orpo
rate
Sal
es
Div
isio
nD
ivis
ion
Div
isio
n
Dev
elop
men
t M
anuf
actu
ring
Div
isio
n
Dev
elop
men
t M
anuf
actu
ring
Cor
pora
te
Mar
ketin
g D
ivis
ion
(P &
N)
Cor
pora
te
Cor
pora
te
Mar
ketin
g M
arke
ting
Div
isio
n (P
& N
)D
ivis
ion
(P &
N)
Sale
s C
ompa
nies
Sale
s Sa
les
Com
pani
esC
ompa
nies
Mas
s m
erch
andi
sers
&
reta
ilers
Mas
s m
erch
andi
sers
&
reta
ilers
Mas
s m
erch
andi
sers
&
reta
ilers
Mas
s m
erch
andi
sers
&
reta
ilers
販売会社
販売会社
販売会社
販売会社
Sale
s C
ompa
nies
Sale
s Sa
les
Com
pani
esC
ompa
nies
Cus
tom
ers
Cus
tom
ers
Bef
ore
New
sys
tem
27,000 outlets
8,000 outlets
Halved number of employees
to 5,000
“Reforms of the home appliances business shall be our primary goal.”
13
Structural Reforms of EmploymentStructural Reforms of Employment
18
Nihon Keizai Shimbun, August 1, 2001 Nihon Keizai Shimbun, July 14, 2001
14
Five group companies were delisted and became fully owned
subsidiaries.
Five group companies were delisted and became fully owned
subsidiaries.Mergers and split-upsMergers and split-ups
Demolition of the Division System
October 1, 2002 January 1, 2003
Shift to a domain-based management system
Matsushita ElectricMatsushita Electric
Matsushita Communication
Matsushita Communication
Kyushu Matsushita Kyushu
Matsushita
Matsushita DensoMatsushita Denso
Matsushita Kotobuki
Matsushita Kotobuki
Matsushita Seiko
Matsushita Seiko
Drastic reorganization
19
15
ＧｌｏｂａｌＧｌｏｂａｌ
・・・・・・
ＦａｉｒＦａｉｒ ・・・・・・
ＯｐｅｎＯｐｅｎ
・・・・・・
２０
Introducing New Management Systems Introducing New Management Systems
Review investment & Review investment & dividend systemsdividend systems
Introduce newIntroduce new
dues systemdues system
Revise performance Revise performance appraisal standardsappraisal standards
RevisionRevision ofof ｔｈｅｔｈｅ
ＭａｔｓｕｓｈｉｔａＭａｔｓｕｓｈｉｔａ
CCｏｎｓｔｉｔｕｔｉｏｎｏｎｓｔｉｔｕｔｉｏｎ
16
Systems are changed
Process of ReformsProcess of Reforms
Awareness changes
Activities change
Outcomes change
17
(2) Reforms of P/L(2) Reforms of P/L(2) Reforms of P/L
18
308.5414.3
459.5
4.7%4.7%
2000 2001 2002 2003 2004 2005
0
200.0
400.0
-200.0
194.6
-211.8
126.6195.5
2006
55..00%%
Operating Profits Operating Profits Operating Profits Achieved a 5.0% of operating profit ratio
through V-shaped restoration Achieved a 5.0% of operating profit ratio
through V-shaped restoration(billion yen)
(FY)
19
0
-100.0
100.0 41.5
-427.8
42.1 58.5
-500.0
154.4
-300.0
2000 2001 2002 2003 2004 2005 (FY)2006
217.2
-19.5
Net ProfitsNet ProfitsNet ProfitsIncreased by ¥66.4 billion over seven yearsIncreased by Increased by ¥¥6666..44 bbillion over seven yearsillion over seven years
(billion yen)
20
(3) Reforms of B/S(3) Reforms of B/S(3) Reforms of B/S
21
3/31/2001 3/31/2002 3/31/2003 3/31/2004 3/31/2005 3/31/2006 3/31/2007
1,047.6
761.9
Inventory CompressionInventory CompressionInventory CompressionReduced inventory by ¥285.7 billionReduced inventory by ¥285.7 billion
(excl. MEW and PanaHome)
(billion yen)
22
2000 2001 2002 2003 2004 2005 (FY)
345.8374.3
271.3251.5320.1
504.4
Devices & PDP
Capital Investment Capital Investment Capital Investment
(billion yen)
23
6
7
8
3/31/2001 3/31/2002 3/31/2003 3/31/2004 3/31/2005 3/31/2006
Compressed gross assets by approx. ¥1.1 trillion from Mar. '01 to Mar. '06
(excl. MEW & PanaHome)
Approx. ¥8.2 trillion
Compression of Gross AssetsCompression of Gross AssetsCompression of Gross Assets
(trillion yen)
Approx. ¥7.1 trillion
24
(billion)1,462.5
352.4
1,159.9
Improvement in Net CashImprovement in Net CashImprovement in Net CashIncreased net cash by approx. ¥ 1.1 trillion from Mar.
'02 to Mar. '07
3/31/1990 3/31/2002 3/31/2007
25
(4) Reforms of Increased Product Power(4) Reforms of Increased Product Power(4) Reforms of Increased Product Power
26
Products successful in volume zones and that can make major a contribution
to business management
Creating V Products Creating V Products
32
27
(5) Additional Reforms (5) Additional Reforms (5) Additional Reforms
28
Dissolution of Pension Fund ShortageDissolution of Pension Fund ShortageDissolution of Pension Fund Shortage
3/31/2002 3/31/2003 3/31/2004 3/31/2005 3/31/2006
0
- 0.5
- 1.0
(trillion yen)
29
Sale of Matsushita Lease & CreditSale of Matsushita Lease & CreditSale of Matsushita Lease & Credit
-- History of Matsushita Lease & Credit History of Matsushita Lease & Credit
-- Background and aims of saleBackground and aims of sale
-- How Matsushita Lease & Credit was soldHow Matsushita Lease & Credit was sold
Matsushita Lease & Credit
Sumishin Matsushita Financial Services
30
Sale of Matsushita KosanSale of Matsushita KosanSale of Matsushita Kosan
-- History of Matsushita Kosan History of Matsushita Kosan
-- PostPost--bubble difficultiesbubble difficulties
-- Tough decision and subsequent Tough decision and subsequent negotiationsnegotiations
-- How Matsushita Kosan was sold How Matsushita Kosan was sold
Aaa/AAA
Aa1/AA+
Aa2/AA
Aa3/AA-
A1/A+
A2/A
93 94 95 96 97 98 99 0092 01 02
Moodys/S＆P7/92
2/95
2/99
9/01
3/02
4/93
11/01
Moodys
S&P
Moody’s: Aaa → Aa3 Down three scales, Aa3 → Aa2 Up one scaleS&P : AAA → A Down five scales, A → AA- Up two scales
03 04
2/04
Changes in RatingChanges in Rating
05 06
6/06
07
2/07
Reforms in the Value Creation and Leap Ahead Plans37
Ｓ＆Ｐ
ＡＡＡ ＡＡ＋ ＡＡ ＡＡ－ Ａ＋ Ａ Ａ－
ＡａａＧＥトヨタ
Ａａ１
Ａａ２キャノン 松下電器 松下電器 松下電工
Ａａ３シーメンス
Ａ１インテルＩＢＭホンダ
ノキアシャープサムスン
日立
Ａ２三菱電機ソニー
Ａ３フィリップス
Ｍｏｏｄｙｓ
Rating of Major CompaniesRating of Major Companies
Upgraded on February 9, 2007
Toyota
Canon MEI
Siemens
MEWMEI
Intel
HondaIBM
GE
SharpNokia
Samsung
Hitachi
Mitsubishi Electric
Sony
Phillips
Moo
dys
38
33
(6) Reforms of Corporate Climate(6) Reforms of Corporate Climate(6) Reforms of Corporate Climate
34
㋪ From Qualitative to Quantitative㋪㋪
From Qualitative to QuantitativeFrom Qualitative to Quantitative
Reforms of Corporate ClimateReforms of Corporate Climate
㋪ From Expansion to Plainness㋪㋪
From Expansion to PlainnessFrom Expansion to Plainness
㋪ From Parent Alone to Consolidated
㋪㋪
From From Parent AloneParent Alone to Consolidated to Consolidated
㋪ From Consensus Building to IT and Speed-based Operations
㋪㋪
From Consensus Building From Consensus Building to IT and Speedto IT and Speed--based Operations based Operations
35
ContentsContentsContents
Performance Changes before 2000Performance Changes before 2000
Management ReformsManagement Reforms
1
22
33
ConclusionConclusion44
Overview of the Matsushita GroupOverview of the Matsushita Group
What Is Expected of CFOWhat Is Expected of CFO
CFO
Management
Outside
Employees Accounting
Aid and proposals in management strategy
Instructions and systemsAdvice on efficiency
Disclosure
45
Essential Elements of CFOEssential Elements of CFO
46
CFO
Having business visions
Having global perspectives
Sticking to capitalist logic
38
My BeliefsMy BeliefsMy Beliefs
Making difficult things simple
Essential, mid- and long-term, and multilateral
A stitch in time saves nine.
"My Story"
Honest mind Readiness to learn
39
My CreedsMy CreedsMy Creeds
Clean HandsClean Hands
Cool HeadCool Head
Warm HeartWarm Heart
40
Thank you very much.Thank you very much.49
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