Inside Toshiba Corporation, Toshiba Corporation Company Profile

Statistics: Public Company Incorporated: 1896 Employees: 175,000 Sales: ¥4.63 trillion (US$44.96 billion) Stock Exchanges: Tokyo Osaka Nagoya Kyoto Hiroshima Fukuoka Sapporo Niigata London Paris Amsterdam Düsseldorf Frankfurt Luxembourg SICs: 3500 Industrial Machinery & Equipment; 3571 Electronic Computers; 3800 Instruments & Related Products; 5040 Professional & Commercial Equipment; 5060 Electrical Goods; 5080 Machinery, Equipment & Supplies; 7373 Computer Integrated Systems Design Company History:

Toshiba Corporation is one of Japan”s oldest and largest producers of consumer and industrial electric products. The company also ranks as the world”s largest manufacturer of DRAM (dynamic random access memory) computer chips. Toshiba, a family of over 200 consolidated and affiliated businesses, is one of Japan”s second-tier keiretsu or conglomerates. These corporate groups are linked through history and tradition, as well as cross-shareholdings, interlocking directorates, and personal contacts. With a history that dates back to the nineteenth century and a product line that extends from semiconductors to nuclear power plants, Toshiba has played an active role in Japan”s rise to the forefront of international business.

Toshiba was formed through the 1939 union of two manufacturers of electrical equipment, Shibaura Seisakusho Works and Tokyo Electric Company, Ltd. The older of the two, Shibaura, traced its roots to Japan”s first telegraph equipment shop, Seizo-sha. Hisashige Tanaka, who has been called the “Edison of Japan,” established the business in 1875. The business climate in which the company began, however, was far from the atmosphere in which it later operated. During the late nineteenth century, Japan lagged far behind Britain, France, Germany and the United States in industrial development. Besieged with economic problems resulting from the overthrow of the Tokugawa government in 1869 and a tremendous influx of imported goods and machinery which threatened her fledgling industries, Japan was vulnerable to colonization. Confronted with the task of strengthening its faltering industries, the new government was quick to respond.

In October of 1870 the Ministry of Industry (Kobusho) was formed and subsequently acted as a catalyst for the country”s industrial development. In its attempt to integrate contemporary technologies into Japan, the government concentrated on hiring foreign engineers, technicians, and scientists to instruct domestic engineers in operating imported machinery; the government also sent its own engineers abroad to inspect manufacturing techniques with the intent of selecting machinery and manufacturing techniques for use in Japanese industries.

The integration of foreign technologies was first put into practice by Seizo-sha, which had adopted the name Shibaura Seisakusho Works in 1893. The company”s 1,300 horsepower steam engine, copied from blueprints of an English counterpart, was successfully constructed in a plant in Kanebo, Japan. This venture convinced Japanese industrialists of their potential for technological advancement through the adoption of foreign technology and its adaptation to domestic skills and resources.

Shibaura embraced this concept in the 1880s, determining that paying outright for technological knowledge was the most expedient means to upgrade its technological capabilities. This strategy helped the company expand into the manufacture of transformers, electric motors, and other heavy electric equipment in the 1890s.

Shibaura made its own discoveries as well during this period, originating Japan”s first hydroelectric generators in 1894. By 1902 Shibaura”s own technological capabilities had produced a 150-kilowatt 3-phase-current dynamo for the Yokosuka Bay Arsenal, marking one of the initial transformations from foreign to Japanese-based technology, and the beginning of the company”s rise to the forefront of international business. The company developed Japan”s first X-ray tubes in 1914.

While Shibaura and other Japanese corporations were growing in strength and increasing their capabilities, they were deeply debilitated by the advent of World War I. As the war began, Japanese manufacturers were cut off from Germany, England, and the United States, major suppliers of machines, industrial materials, and chemicals, forcing them to turn to one another for necessary materials and machinery to keep their fledgling industries alive. The hardships experienced during this period had long-term advantages however, for they forced Japanese industry into self-sufficiency and paved the way for the country”s industrial advancement.

Shibaura continued to grow in the interim between world wars, and merged with the Tokyo Electric Company, Ltd. in 1939. Tokyo Electric had also been established before the turn of the twentieth century. Originally known as Hakunetsusha & Company, the firm was founded by Dr. Ichisuke Fujioka and Shoichi Miyoshi. Hakunetsusha had distinguished itself as Japan”s first manufacturer of incandescent lamps. The newly merged company, named Tokyo Shibaura Electric Company, Ltd., soon became widely known as Toshiba. The company”s pre-World War II Japanese innovations included fluorescent lamps and radar.

During the late 1940s, Japan rapidly passed from a period of self-isolation and self-reliance into a period of largely benevolent occupation and advocacy. With the assistance of the Japanese government and its citizens, the American Occupation Authority instituted social and economic reforms, and poured resources into post-war financial markets. Japan”s readmittance into the international trading community gave it access to overseas markets for manufactured goods and raw materials. The glut of raw materials available at the time enabled Japan to obtain necessary commodities in large quantities at favorable prices and, consequently, to regain its financial and industrial strength.

In this more favorable climate, Toshiba once again began to flourish. The company”s shares were first listed on the Tokyo Stock and Osaka Securities Exchanges in 1949. Backed by the powerful trading house of the Mitsui Group, the company”s financial status was well secured. Starting in the 1950s, Toshiba began a program to strengthen its competitiveness in both the domestic and international markets. The company produced Japan”s first broadcasting equipment in 1952, and launched digital computers in 1954.

Yet it would be some time before modern business policies affected the company in any fundamental way. Toshiba executives were criticized for their rigid adherence to a feudal system of hierarchy and status. Top officials maintained lax working hours and were far removed from any operational business. An indisputable separation between a superior and his subordinates made the exchange of ideas virtually impossible. To reduce the burden of responsibility on any one executive, numerous signatures were needed to approve a document. Thus innovation was easily stymied in a chain of bureaucracy.

In the early 1960s, these internal problems were compounded by an economic recession. In one year Toshiba”s pre-tax profits slid from $36 million to $13 million. To halt any further erosion, a radical change was in order. For only the second time in Toshiba”s history the company sought an outsider to aid the ailing business. The company”s board hired Toshiwo Doko to take charge of the company. Doko had won acclaim as the architect of the 1960 merger of Ishikawajima Heavy Industries and Harima Shipbuilding & Engineering Company, which formed the world”s largest shipbuilder, IHI.

When he joined Toshiba as president in 1965, Doko retained his title as chairman of IHI. The combined status ranked Doko as Japan”s leading industrialist. These two companies had shared interests prior to Doko”s appointment at Toshiba; IHI owned over ten million shares in Toshiba and Toshiba controlled over four million shares in IHI. After Doko became president, Toshiba raised its stake in IHI as both companies shared executives on their boards and established trade agreements. This exchange, a keiretsu hallmark, strengthened Toshiba”s financial standing.

Doko”s other corrective measures included the reduction of Toshiba”s dependence on borrowed capital. This was aided by the U.S.-based General Electric Company”s agreement to purchase all of Toshiba”s capital issue. General Electric”s interest in Toshiba dated back to before World War II, but had declined in the intervening years. The infusion of capital enabled Toshiba to expand and modernize its operations.

The new company president also initiated a comprehensive campaign to export Toshiba products around the world. By establishing independent departments, the company could better facilitate the export of consumer and industrial goods. Major contracts were finalized with U.S. companies to export generators, transformers, and motors, as well as televisions and home appliances.

Other streamlining efforts took the form of expanding the sales force, hiring new management, and consolidating operations. By 1967 Toshiba controlled 63 subsidiaries and employed upward of 100,000 people; the company ranked as the largest electronic manufacturer in Japan and the nation”s fourth largest company. But in light of the dramatic expansion of domestic competitors like Sony and Hitachi in the 1970s, Toshiba”s performance was generally considered mediocre.

In 1980, a new president, Shoichi Saba, brought renewed vigor to the company. Trained as an electrical engineer, Saba funneled vast resources into research and development, especially in the areas of semiconductors, computers and telecommunications. In October of 1984, Toshiba formed an Information and Communications Systems Laboratory to develop and integrate office automation products. That same year, Toshiba was responsible for the world”s first direct broadcast satellite. The company”s R&D investment paid off handsomely in 1985, when Toshiba won the global race to develop the first one-megabyte DRAM memory chip. By 1987 the company was producing almost half of the world”s one-megabyte chips.

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Utilized in equipment from stereos to computers, semiconductors soon became an important part of Toshiba”s portfolio. In 1986 alone, Toshiba”s semiconductor facilities experienced a 55 percent increase due to contracts in France and West Germany, as well as burgeoning domestic demand. For the first time in its history, Toshiba surpassed its closest competitor, Hitachi, Ltd., to become the second largest semiconductor manufacturer in the world, behind NEC Corporation.

Joint ventures and agreements with both Japanese and foreign corporations facilitated technology exchange. In 1986 Toshiba entered into a joint venture with Motorola for its Japanese production of computer memories and microprocessors. The two companies became involved in the collective development of microcomputer and memory chips based on the exchange of technology, and also developed a manufacturing facility in Japan. Efforts of this type facilitated the development of voice recognition systems and digital private branch exchange systems (PBXs), which transmit telephone calls within private buildings. Through a 1986 agreement with AT&T, Toshiba began marketing these systems throughout Japan, as well as assisting that corporation with technological insight.

In the same year, Toshiba entered into an agreement with IBM-Japan to market their general purpose computers domestically. Through this arrangement, Toshiba marketed its own communications equipment with IBM-Japan”s computers, selling to governmental agencies, local governments, and other institutions to which IBM (as a foreign interest) had previously been blocked. An additional marketing contract with IBM introduced the first PC-compatible laptop computer, the TJ3100, to Japan, and met with great success. By 1991, Toshiba had garnered over one-fifth of the laptop market.

The area for which Toshiba is best known remains its consumer products division, which grew at a rapid pace in the 1980s through acquisition and innovation. In April of 1984 Toshiba reorganized the production, marketing, and research and development sections of its video and audio products, incorporating them into one centralized location. While sales of standard consumer products such as VCRs, compact disc players, televisions, and personal cassette recorders continued to grow, Toshiba was quick to capitalize on new markets as well. In 1986 the company entered the home video market, creating a wholly-owned subsidiary and introducing 110 new video titles to the Japanese market. That same year, it inked an agreement to supply cable equipment to American Television and Communications Corporation.

Although Toshiba is best known in America for its computer-related and consumer products, it has a wide range of additional business ventures. Among Japanese corporations, Toshiba is a leader in the production of advanced medical electronic equipment. In 1986 the corporation initiated the supply of blood chemical analyzers, used to detect liver and kidney disease, to Allied Corporation, a leading U.S. chemical manufacturer. Other accomplishments suggested Toshiba”s technological foresight in solving global and domestic problems. Toshiba has begun production of equipment for uranium fuel enrichment for use in nuclear power plants, marking an important step towards Japan”s acquisition of a domestic nuclear fuel supply.

These many successes realized under Shoichi Saba were overshadowed by a 1987 scandal involving Toshiba Machine, a subsidiary half-owned by Toshiba. According to Washington sources, the subsidiary sold submarine sound-deadening equipment to the then-communist Soviet Union. The equipment made detection more difficult and forced NATO to modernize its antisubmarine detection equipment. While Toshiba claimed that it was not able to control the subsidiary”s daily operations, the sale broke a Western law concerning the sale of technologically advanced equipment to Communist countries. Two executives at the subsidiary under investigation were arrested and four top-ranking officials resigned. The Japanese government prohibited the subsidiary from exporting products to the Soviet Union for one year and repealed its right to sponsor visas for visiting personnel from Eastern-bloc countries. Amid growing protests in both Japan and the United States, Toshiba President Sugichiro Watari issued a public apology to the United States. Then, on July 1, 1987, both Watari and Chairman Shoichi Saba tendered their resignations from the Toshiba Corporation in the wake of a U.S. Senate vote to ban the import of Toshiba products for three years. Joichi Aoi, a former senior executive vice-president, assumed Toshiba”s presidency.

Ironically, the anti-Japan mood roused by this episode may have revitalized morale at Toshiba. Perhaps to compensate for the loss of the U.S. market, Chairman Joichi Aoi led the company”s energetic expansion into global markets. In the latter years of the 1980s, Toshiba began offering its integrated circuit technology to the Chinese Electronics Import and Export Corporation to assist in development of television production. A 1991 joint venture with General Electric furthered this effort, with a special emphasis on large home appliances. The company also won a contract worth ¥12 billion to build a color television assembly plant in Russia, marking Moscow”s first agreement of this nature with a Japanese company. Thus, in spite of losing up to ¥5 billion as a result of the U.S. embargo, the company”s net income nearly doubled, from ¥61 billion in 1987 to ¥121 billion in 1990. Toshiba”s fiscal triumphs were capped with the 1991 naming of chairman Joichi Aoi as Asia”s CEO of the Year.

But with the new decade came new economic imperatives, especially those created by a global recession and the rising value of the yen. While Toshiba”s annual revenues remained essentially flat from 1990 to 1994, the electronics giant”s profits declined over 90 percent to ¥12 billion, their lowest level in well over a decade.

Toshiba Chairman Aoi and President Fumio Sato employed a variety of strategies in the hopes of reversing this downward course. A 1993 reorganization focused on fostering interaction between and flexibility among the company”s hundreds of operations. In line with industry trends, the leaders worked to shorten product development cycles, lower production expenses, and more closely monitor consumer demands. They also moved to further diversify Toshiba”s consumer product line, 50 percent of which was still in color televisions. The company worked to shift its emphasis to such high-potential products as cellular communications, multimedia, and mobile electronics. Amid all these changes, however, the company planned to continue its liberal use of strategic alliances for mutual benefit.

Principal Subsidiaries: Iwate Toshiba Electronics Co., Ltd.; Kaga Toshiba Electronics Co., Ltd.; Kitashiba Electric Co., Ltd.; Kyodo Building Corporation; Marcon Electronics Co., Ltd.; Nishishiba Electric Co., Ltd.; Nogata Toshiba Electronics Co.; Onkyo Corp.; Shibaura Engineering Works Co., Ltd.; TIM Electronics Sdn. Bhd.; Tokyo Electric Co., Ltd.; Toshiba Air Conditioning Co., Ltd.; Toshiba America Consumer Products, Inc.; Toshiba America Electronic Components, Inc.; Toshiba America Entertainment, Inc.; Toshiba America, Inc.; Toshiba America Information Systems, Inc.; Toshiba America Medical Systems, Inc.; Toshiba America MRI Inc.; Toshiba Automation Co., Ltd.; Toshiba Battery Co., Ltd.; Toshiba Builders Appliance Co., Ltd.; Toshiba Building Corporation; Toshiba Ceramics Co., Ltd.; Toshiba Chemical Corporation; Toshiba Compressor (Taiwan) Corp.; Toshiba Consumer Products (Thailand) Co., Ltd.; Toshiba Consumer Products Europe GmbH; Toshiba Consumer Products (France) S.A.; Toshiba Consumer Products (UK) Ltd.; Toshiba Credit Corporation; Toshiba Dalian Co., Ltd.; Toshiba Device Corporation; Toshiba Display Devices (Thailand) Co., Ltd.; Toshiba Display Devices Inc.; Toshiba East Japan Life Electronics Co., Ltd.; Toshiba Electric Appliances Co., Ltd.; Toshiba Electronics Europe GmbH; Toshiba Electronics (UK) Ltd.; Toshiba Elevator Technos Co., Ltd.; Toshiba Engineering & Construction Co., Ltd.; Toshiba Engineering Corporation; Toshiba Europe (I.E.) GmbH; Toshiba Glass Co., Ltd.; Toshiba Home Technology Corporation; Toshiba Information Equipments Co., Ltd.; Toshiba Information Systems (Japan) Corporation; Toshiba International Corporation; Toshiba International Finance (Netherlands) B.V.; Toshiba International Finance (UK) Plc.; Toshiba Lighting & Technology Corporation; Toshiba Logistics Corporation; Toshiba (UK) Ltd.; Toshiba Medical Systems Co., Ltd.; Toshiba Medical Systems Europe B.V.; Toshiba Nishi Nihon Life Electronics Co., Ltd.; Toshiba (Australia) Pty, Ltd.; Toshiba Semiconductor (Thailand) Co., Ltd.; Toshiba Semiconductor GmbH; Toshiba Silicone Co., Ltd. TAE Holding, Inc.; Vertex Semiconductor Corporation. The company also lists 53 other domestic and 21 other international subsidiaries.

Further Reading: Abrams, Judith, “Toshiba Eyes New Media Frontier,” Dealerscope Merchandising, July 1994, pp. 24-25. Johnstone, Bob, “Industry: Quick as a Flash,” Far Eastern Economic Review, January 7, 1993, p. 57. Meyer, Richard, “Power Surge,” Financial World, April 3, 1990, pp. 42-46. ——, “Asia”s CEO of the Year: Joichi Aoi of Toshiba–“We Just Stay With It,”” Financial World, October 15, 1991, pp. 50-54. Sato, Kazuo, ed., Industry and Business in Japan, New York: Croom Helm, 1980. Schlender, Brenton R., “How Toshiba Makes Alliances Work,” Fortune, October 4, 1993, pp. 116-120. Tanzer, Andrew, “The Man Toshiba Hung Out to Dry,” Forbes, September 7, 1987, pp. 96-98. Uchida, Michio, “Toshiba Bounces Back,” Tokyo Business Today, June 1989, pp. 14-19. Young, Lewis H., “Why Toshiba Likes the Component Business,” Electronic Business Buyer, December 1994, pp. 52-56.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.

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