Group 1Apoorva Srivastva

Bhuvan BajajDebdeep Chatterjee

Rakhi JainTushar Panjwani

Hitachi Retrenchment Program

Hitachi background

Hitachi, Ltd. is both Japan's largest electronics manufacturer and one of the largest conglomerates in the world.

1964: Hitachi builds the first cars for Japan's bullet train1974: Company produces its first IBM-compatible computer1982: Hitachi and 11 of its employees are indicted on charges of stealing confidential design secrets from IBM1988: Company forms joint venture with Texas Instruments to develop a 16-megabyte DRAM chip1989: Hitachi acquires controlling interest in National Advanced Systems, a U.S. distributor of mainframe computers; National is renamed Hitachi Data Systems1991: Through an alliance with IBM, Hitachi begins reselling IBM notebook computers in Japan under the Hitachi name1999: Company announces a ¥336.92 billion ($3 billion) net loss for the fiscal year ending in March; major restructuring efforts ensue.

Root cause analysis

This model helps in identifying the cause of problems the reason for the occurrence of the problem and how can these problems be prevented

Poor Business Performance

Manufacturing

Operations Finance

HR

High Fixed Cost

Excess Employee Strength

Deterioration in Operating Environment

High Procurement Cost

High DistributionCost

High DebtHigh Accounts

Receivables

High Investments

High Inventory Days

RCA -Fish Bone Diagram

Retrenchment

Retrenchment is a corporate-level strategy that seeks to reduce the size or diversity of an organization's operations

Retrenchment is also a reduction of expenditures in order to become financially stable

When do Companies use Retrenchment Strategy

•Clear distinctive Competence but failed to meet its objective and goal.

•Plagued by inefficiency , low profitability , poor employee morale and pressure from stake holders to improve performance.

•Failed to capitalize on external opportunities, minimize external threats, take advantage of internal strength and overcome internal weakness.

•Grown so large so quickly that major internal reorganization is needed

Business Process Re-Engineering

• The model proposed by Hammer and Champy

• The model deals with fundamental re-consideration and radical re-design of the organizational processes in order to achieve drastic improvement of current performance in cost , service and speed

• Information Technology often plays a an important enabling role in the BRP process

BRP – 5 Step Process for Hitachi

Step1• Develop the business vision and

process objectives• Cost reduction at Hitachi and

improve business results

Step2

• Identify the business processes to be redesigned• Subsidiaries belonging to segment s

where the results are particularly sluggish such as Electronic Devices and High Functional materials and Components.

• Re structuring of Semi Conductor Group and Display Group.

BRP – 5 Step Process for Hitachi

Step3

• Understand and measure the existing processes.

• Top to Bottom Review of the Planned Investment in Plant and Equipment to reduce the investment items to the minimum required.

Step4 • Identify the IT levers.• Implementation of MIS

Step5• Design and build the prototype for the

existing process.• Double the sales of product and

services by 2002

After Retrenchment

www.hitachi-c-m.com/global/pdf/ir/FR20050127165601162_pdf_url1.pdf

Hitachi current situation

• Long term debt in 2010 has been reduced by 14.35% as compared to 2001.

• Even after Restructuring in 2002, the company didn’t see any substantial profit till 2010 , made a loss of 107 billion yens in 2008-2009

• Hitachi profit in financial year 2009-10 is 238.9 billion Yen.• 17% of revenues come from the Information &

Telecommunications Systems