Essential strategies and projects of the mid-term plan

Toshiba's execution of its mid-term business plan rests on three essential strategies:
  • growth through IT, centering on mobile applications and networking;
  • establishing a solid profit base for long-term slustainable growth; and
  • establishing an advanced management style for the age, for a fast changing business and to surpass the competition.
  1. Growth through IT
    In the next three years, all of Toshiba's business groups are expected to enhance their business activities through the application of advanced IT capabilities. With high growth and profitability as goals, all of the in-house company will maximize resources devoted to IT, in order to deliver solutions combining cutting-edge technology with services that maximize customer satisfaction.

    With its main focus on all aspects of mobile applications and networking, Toshiba will concentrate resources on the key product areas where it can expect the greatest gains and achieve its greatest market impact. These embrace system solutions and Internet services--B2B and B2C activities and software and content, led by Information and Industrial Systems and Services Company and iValue Creation Company; information and communications equipment, AV and network products, in which Digital Media Network Company take the key initiative; and leading-edge electronic components, such as semiconductors and LCDs, promoted by Semiconductor Company and Display Devices Company.

    The corporate center will take the initiative in integrating these activities in an inter-company value chain that will promote cross-company cooperation and optimized resource sharing with a view to maximizing value-creating synergy. The value chain will initially concentrate capabilities in six core business areas: mobile applications; network consumer products; media cards; digital broadcasting; Internet services; and Intelligent Transport Systems (ITS) and automotive electronics.

(1)Expanding Internet services and system solutions businesses

  • In Internet business, the iValue Creation Company will lead the way in developing consumer-oriented Mobile Internet services, and also promote a synergy with the content businesses with which Toshiba has been laying the foundations for its activities in the digital age. Toshiba will initially focus on exploitation of B2C Internet business in Japan, reinforcing its "Eki-mae Tanken Club" portal and promoting Fresh Eye, one of Japan's most popular search engines.

    In content, Toshiba will seek to further its partnership with AOL-Time Warner, Warner-EMI, Kadokawa Publishing, and Nippon Television Network.

  • In the B2B field, the Information and Industrial Systems & Services Company will set up the e-Net Division on April 1st to promote full fledged outsourcing and ASP services to Toshiba's customers. The company will also direct 20 billion yen to reinforcing its Server Center.

  • In digital data broadcasting, Toshiba will exploit the new business area of e-commerce over broadcasting, using the Media Serve Company Ltd. to take the lead in developing a new business model utilizing the Internet.

In fiscal 2003, Toshiba aims to generate total sales of 500 billion yen in B2B and B2C Internet-related businesses, up sharply from the 100 billion yen expected for fiscal 1999. The iValue Creation Company targets total sales of 150 billion in fiscal 2003 and the rest is accounted for by B2B business initiatives by the Information and Industrial Systems and Services Company.

A total of 250 billion yen will be directed to Internet-related R&D and investment from fiscal 2000 through 2003.

  • Toshiba is targeting expansion of its system solutions and services businesses as the key to growth in the information systems field. The company will seek to become a leading source of e-system solutions for government, and to utilize advanced capabilities in front-end processing technology to provide sophisticated system solutions for the retail, manufacturing and financial sectors as well as ITS.

  • Toshiba is also reinforcing its capabilities as a system solution provider of full-support services, across the range of consultation, system construction, operation and maintenance of information systems and electronic commerce platforms.

(2)Focusing on mobile and network related businesses

  • In the notebook PC business, currently Toshiba's leading profit stream, the company will continue to introduce attractive new products geared to market needs while expanding the services side of the business to secure growth and stable profitability. Cost competitiveness will be reinforced through productivity enhancement programs, including expanded outsourcing.

  • Simultaneously, the company will continue to define the market for portable PCs by developing a new concept of hybrid information terminals that introduces advanced wireless and networking capabilities and allows easy communication of high grade graphic data and sound.

  • The company will enhance its activities in the booming cellular phone market and unlock the potential of next-generation terminals to become a front-runner in the global market. W-CDMA is expected to come into its own during the period of the mid-term plan, and Toshiba is accelerating product development and preparing to extend marketing activities.

  • In network consumer products, expansion plans center on mobile AV network products and fully utilizing Toshiba's market-leading strengths in wireless technology, including Bluetooth, SD and other media cards, and MPEG4, the leading-edge video compression technology.

Toshiba aims to more than triple sales in Mobile AV network products and related businesses, from 150 billion yen in fiscal 1999 to 400 billion yen in fiscal 2002.

  • The SD memory card, a new breed of flash-memory card, will build on the success enjoyed by SmartMedia(TM), the Toshiba-developed card that has quickly become the de facto standard in removable memory card for portable devices. Toshiba will accelerate the card business in close cooperation with application products businesses and by promoting the content businesses.

  • Toshiba has already established a strong position in BS digital broadcasting equipment by winning five orders for new broadcasting facilities in Japan, and will build on this to win orders from digital data broadcasters and future terrestrial digital broadcasters.

  • Key fields in networking include Free Wireless Access (FWA), which allows construction of flexible wireless communication network and equipment for submarine optical fiber cable network, a field where Toshiba is the technology leader.

(3)Furthering its Edge in Components Business
Toshiba is a world-class presence in electronic components, a business area that has long nourished growth and is capable of generating substantial profit. A key resource for supporting Toshiba's continued development, the business will continue to cultivate core competences that support development of the advanced products that drive breakthroughs in the global IT industry.

Under the new plan, the Semiconductor Company will direct its capabilities to achieving high growth and profitability in the mobile and networking fields by fiscal 2002. Consolidated sales of 1,570 billion are targeted for fiscal 2002, 170 percent up on the 920 billion yen projected for fiscal 1999.

  • In system LSIs, games and automotive applications comprise an important element, in addition to mobile and networking applications, for growth.

  • In discrete business, where Toshiba owns the world's leading share and also secures highly sustained profits, we will introduce a stream of attractive new products, centering on mobile applications.

  • In memory devices, flash memories will be nurtured as a new business mainstay alongside DRAM, the latter accounting for a smaller share of the memory business. In DRAMs, Toshiba will seek further increases in productivity and cost competitiveness and expand outsourcing.

  • Business in other key components for mobile devices, such as polysilicon LCDs and rechargeable batteries, will be expanded.

(4)Services
The new plan places greater emphasis on increasing the scope and the scale of services, based on Toshiba's broad and solid customer base. The company's total sales from services, including ITS-related businesses, are targeted to rise from 1050 billion in fiscal 1999 to 1550 billion by March 2003.

  • Power systems will emphasize provision of comprehensive energy-system solutions. This will include the work of the Energy Service Company (ESCO), which provides consultancy services on power conservation and environmental protection technology; plant operation and maintenance (O&M) services; and Intranet-based monitoring and control systems in substations.

  • Among promising areas in industrial equipment are energy conservation systems for buildings and information systems supporting environmental protection.

  • Medical systems will give greater weight to such comprehensive solutions as hospital management systems and remote maintenance services based.

Sales from services, including those from IT-related revenues, are projected to reach 1550 billion yen in fiscal 2002, up from 1050 billion yen for fiscal 1999.

(5)Organizational reforms
To promote all these initiatives for growth, Toshiba is putting into effect a number of organizational reforms expected to bear fruit during the period of the plan.

  • The Information and Industrial Systems & Services Company will promote systems, solutions, and services through its new e-Net Division and ITS Automotive Business Planning Division, while the iValue Creation Company will start operation on April 1st to promote B2C businesses.

  • The Digital Media Network Company is supporting business in information and communications equipment and network AV products with new dedicated divisions. It recently established the Wideband CDMA Business Development Division (Jan.1) and Bluetooth Business Development Division (February 1) and the Media Card Division (March 1), and a new Mobile AV Network Division will start operation on April 1.

  1. Establishing a solid profit base for long-term sustainable growth

    (1)Structural change
    Toshiba's new mid-term plan clearly positions IT as the main focus for resource investment across the company's entire range of businesses. In support of this, all the in-house companies and business divisions have defined clear strategies designed to assure success over the company's competitors.

    In electric power systems, household appliances, medical systems, industrial equipment and elevator and escalator systems, Toshiba will vigorously reshape business structures and portfolios and seek a global presence through such moves as entering new businesses or establishing business and technical alliances with international partners, in order to improve business stability and profitability.

    (2)Accelerating IT-based management
    Strategic utilization of in-house IT is expected to provide enhanced customer service, achieve gains in productivity and more efficient use of assets, and to bring down procurement costs. In the latter area, all of the company's procurement and sourcing activities will be shifted to the Internet, a move that is expected to cut fiscal 2002 purchasing costs to a level 200 billion yen lower than in fiscal 1999.

    A drive initiated in fiscal 1996 to introduce enterprise resource planning (ERP) throughout the company is now reaching completion and exploitation on the business level. The Semiconductor Company will establish an advanced IT systems with a 20 billion investment integrating SCM, CRM (customer relationship management) and ERP, which is expected to halve inventory and lead times by fiscal 2002. With a view to solidifying its global leadership in notebook PC business, the Digital Media Network Company is now executing a 15-billion yen program to establish a global network of SCM, CRM and ERP systems for its PC operations, with completion scheduled for fiscal 2002.

  2. Establishing a management style for the age

    (1)Strengthening group management
    As the evolution of the in-house company system gives rise to a differing organizations and business structures, and as they fully exploit their business capabilities and those of their affiliated companies, Toshiba will also promote centripetal consolidated management of Toshiba Group.

    Strategic cooperation among the corporate center, in-house companies and Group companies will emphasize business focus and selection that strengthens overall capabilities and consolidated management.

    The effective use of resources across the Group by as a whole will be enhanced improved financial management and exchanges of human resources between group companies.

    (2)Innovation in corporate culture
    As Toshiba reinforces its business through IT, Management Innovation 2001, a group-wide initiative is bringing an analytical and statistical approach to bear on reorienting corporate culture. The goals are a commitment to IT-based solutions and achieving total customer satisfaction. The fruits of the MI 2001 program, which will see over 20,000 projects conducted in the parent and its Group companies every year, are expected to translate into 560 billion yen in savings during the course of the mid-term plan.

    (3) Focus on environmental protection
    A core management objective is sound environmental management The company is working towards realization of a resource-recycling society that fully utilizes limited global resources. Toshiba will initiate a mid-term plan for environmental activities in fiscal 2000. It will promote creation of environmentally-friendly products; the introduction of zero-emission programs at all facilities by 2003; introduce company-wide green procurement; and introduce a Pollutant Release and Transfer Register (PRTR) to all production facilities. Toshiba invests 8 billion yen annually in environmental protection.

    (4)Merit based personnel remuneration
    In another move to vitalize its corporate culture, Toshiba will introduce performance-based human resources evaluation and management in Japan. It will do this while prizing the individuality of its employees, and cultivating a creative corporate culture.

    More flexible and dynamic payment systems will be investigated. Future possibilities include allowing the in-house companies to build their own superstructure on a basic remuneration structure, in order to offer salaries and rewards geared to the characteristics of different businesses and markets. New companies established in emerging business fields will have greater freedom to adopt flexible systems, including stock options and annual-salary based remuneration.


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