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Keiretsu and NEC Corporation

Keiretsu and NEC Corporation. Stephanie Hilgeford Charlotte Ford-Cunningham Al Renner. Zaibatsu. Pre-World War II Goal = realize economies of scope Manufacturing, distribution, and banking industries 4 major zaibatsu Matsui, Mitsubishi, Sumitomo, and Yasuda. Zaibatsu Characteristics.

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Keiretsu and NEC Corporation

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  1. Keiretsu and NEC Corporation Stephanie Hilgeford Charlotte Ford-Cunningham Al Renner

  2. Zaibatsu • Pre-World War II • Goal = realize economies of scope • Manufacturing, distribution, and banking industries • 4 major zaibatsu • Matsui, Mitsubishi, Sumitomo, and Yasuda

  3. Zaibatsu Characteristics • Family-controlled monopolies • Holding company at the top of hierarchy • Wholly owned bank subsidiary • Supplied military forces

  4. Keiretsu • Post – World War II • Dissolution of zaibatsu • Removal of decision-making executive • Modified zaibatsu 1950s = keiretsu • Occupation force support because of Mao’s communism and the Korean War • Benefit • Solution to last-period problem • Issue • Monopolistic

  5. Keiretsu • 2 forms • Horizontal • Vertical • 6 major keiretsu • Mitsubishi, Mitsui, Sumitomo, Fuyo, Dai-Ichi Kangyo, and Sanwa • 4 pillars of keiretsu • Lifetime employment, seniority wages, enterprise unions, and consensual capitalism

  6. NEC Corporation • 1899 – company was incorporated • Early 1920s – involvement with Sumitomo • 1925 – ISE transferred 15% of ownership to Sumitomo • 1943- Sumitomo took full control • 1945- Sumitomo ordered to dissolve • Mid-1950s computer industry • 1960s- Honeywell collaboration • 1977- C&C initiative • 1996- Merger with Packard Bell • 2003- NEC goes public

  7. NEC Corporation Today • President: Kaora Yano • Senior Executive Vice Presidents: • Botaro Hirosaki and Masatoshi • Major operations • IT service, IT products, and network systems • 166,800 employees • 328 consolidated subsidiaries • Operation in 44 countries

  8. NEC’s Problems & StrategiesPost WW II • No demand for products • Strategies • President Watanabe’s vision • Public works contracts • Adapt military technology to civilian market • Laid off 2,700 employees • Closed 3 plants and R&D facility Outcome - Recovered in 50s due to new telecom markets

  9. NEC’s Problems & Strategies 60s & 70s • Telecom market saturation • Strategies • President Kobayashi’s vision • Future success in knowledge based products • Total Quality Control movement • Zero-Defect movement • Restructured to 14 autonomous divisions Outcome - Global expansion

  10. NEC’s Problems & Strategies 80s & 90s • Performance hurt by: Japanese recession, strong yen, US competition • Strategies • Expand global markets • PCs sold in Europe • Joint manfacturing ventures in Asia • Merger - Packard Bell NEC PCs Outcome - FY 96: • Net worldwide sales $41 billion • 89 domestic & 38 overseas subsidiaries • 152,719 employees

  11. NEC’s Problems & Strategies98-00 • Packard Bell NEC fails, $1.5 billion net loss • Strategies • Investments: 97 - $285 million, 98 - $225 million • NEC is majority owner • Pulls plug on US retail PC market • Closed CA plant, laid off 2,100 workers Outcome - FY 00: $10 million net income

  12. Summary • Kerietsu system emerged after WW II • Incentivize cooperation, minimize risk, & maximize future profits • NEC a member of Sumitomo since 20s • Kerietsu are less centralized and integrated • NEC’s future: IT service/products, network systems, personal solutions, and electron devices

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