Matsushita’s Management Strategy and Role of CFO1 Matsushita’s Management Strategy and Role of...

1

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




1

22

33


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

http://prodb.matsushita.co.jp/product/info.do?pg=04&hb=NV-HV90B

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




1

22

33



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

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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

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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)

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(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

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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

ＡＡＡＡＡ＋ＡＡＡＡ－Ａ＋ＡＡ－

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

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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

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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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