Supplementary Explanation
Strategies for strengthened management system (1) Evolution of the in-house company system and enhanced corporate governance
- Evolution of the in-house company system
Toshiba is concerned to promote agile management and to increase Toshiba group's corporate value, while it promotes the autonomy of the in-house companies and develops objective means for evaluating corporate management. In these respects, the company will promote the following strategies.
- Reorganization
Operations in two promising growth areas will be reorganized into dedicated in-house companies, giving them greater functional integration and management autonomy. The e-Solution Company will integrate IT-related business units while the Mobile Communications Company will concentrate on the rapidly growing mobile equipment business. Both companies will start operation on April 1.
- Introduction of Toshiba Value Created (TVC)
Toshiba understands that the basic reason for its existence is to increase corporate value and emphasizes this as a central management issue. With this in mind, we will introduce Toshiba Value Created (TVC) as a core management index. TVC measures capital returns against the cost of capital. Each in-house company will use its own target TVC to evaluate business results, providing criteria for investment and a framework for investment budgets.
- Setting up a corporate strategic framework
75% of Toshiba's free cash flow will be devoted to capital investment by the in-house companies. The remaining 25% will provide funds for strategic corporate actions necessary to improve financial statements and increase corporate value.
- Management advisory committee
In order to provide the potential for fresh insights into management and operations, Toshiba will also establish a management advisory committee of distinguished people from outside the company.
- Enhance corporate governance
Toshiba will take a series of steps designed to raise management efficiency and transparency, to boost corporate value from the stockholder's point of view, and to assure that the board observes all legal requirements in its decision making and policy execution.
- About one third of the members of the board will be elected from outside candidates and candidates who are not executive officers of the in-house companies.
- A Nomination Committee and a Remuneration Committee will be established to select candidates for the board and to make proposals on compensation for the directors and executive officers, respectively.
- Executive officers will be responsible for executing the business strategy of each in-house company, a role that differentiates them clearly from directors, and their rewards will be linked to their business result.
- The term of office for directors and executive officers will be shortened to one year, to assure flexibility in a changing business environment.
- Introduction of new executive remuneration system
A new personnel system will reflect contributions to increased corporate value and flexible in-house company management.
- A 'Position-linked Reward System' will be adopted in July for executives managing businesses, including executive officers, company presidents and vice presidents, and for corporate staff general managers. Their annual salaries are decided in advance according to the scale of organization or TVC-based contribution to corporate results.
- Toshiba will also introduce an 'Executive Stock Increase Plan' in July, as an incentive for improved results and to underline responsibility of business performance. The plan will require top executives to make regular purchases of Toshiba stock, at a level determined by rank and title.
- Toshiba is also consider giving each in-house company the autonomy required to propose the personnel and remuneration systems that best serves its area of business, business model, level of performance and market position.
(2) Cultural change to become a market-centric company
- Promote MI2001
- In order to promote the deep penetrate of the concepts of "agile" and "change" into the, we will further promote use of DMAIC (define, measure, analyze, improve and control) methodology to reinforce management quality.
- This will be reinforced by the introduction of DFACE (define, focus, analyze, create and evaluate), T oshiba's version of "Design for Six Sigma." This will assure that production planning starts from the VOC and accelerate the production and provision of VOC-based products and services.
- The group-wide numbers of MI-trained Quality Experts (QE) and Senior Quality Expert (SQE) are expected to increase to 3,200 by fiscal 2003. The 15,000 projects and cost-saving benefits before taxes of 131.7 billion yen achieved in fiscal 2000 are to climb to 28,000 projects and 210 billion yen in fiscal 2003.
- Promote in-house IT
- Group-wide IT-related investment with a value of 310 billion yen is planned for the three years starting fiscal 2001, and an in-house IT-usage rate of 40% in December 2000 is expected to climb 100% by 2003. IT-usage is determined by the degree of use of supply chain management (SCM), product data management (PDM), customer relationship management (CRM) and knowledge management (KM). systems
- In achieving the goal of an Internet-Ready Toshiba Group, IT penetration will be maximized, and a system of collaborative commerce established by extending IT business processes to business partners, including all business customers and dealers.
- Establishing development and production structures for the IT era
- In the period to fiscal 2002, Toshiba will establish an operations-wide digital manufacturing system designed to achieve shorter development times, greater flexibility in switching between production items and enhanced production efficiency. Once proved, it will be introduced throughout Toshiba group. The company's goals include virtual modeling to obviate the need for trial manufacturing; real time tracking of production progress, of product quality data and orders received; enhanced production technology through remote management of global production; and quality control to achieve halved lead times and a 30% reduction in manufacturing costs.
- In order to meet changing VOC and fast changing technology and to increase the value of products, Toshiba will establish an IT infrastructure for "c-Engineering," a corporate-wide common infrastructure that includes planning, development and engineering. c-Engineering promotes sharing of best practices in respect of VOC, leading-edge technology and development tools, in such areas as R&D, design, procurement, manufacturing and sales and service. Its realization will allow Toshiba to realize shorter lead times in developing VOC-oriented products, enhanced development abilities and reduced costs in procurement and design.
- The construction of an enhanced production structure that facilitates full utilization of Toshiba's production technology will maintain cost competitiveness in the global market, foster the ability to respond to ever shortening product cycles and allow the company to promptly meet diverse customer needs. Central to this is the separation of production into three stages.
- An integrated structure for manufacturing, sales and engineering (basic structure)
Products that require uniform and agile management in response to customer needs, and of development, manufacturing and sales.
- Manufacturing center structure
Knowledge-intensive products that require in-depth expertise in both product development and manufacturing, such as system related products, will be supported by the establishment of a manufacturing center. This will integrates engineering departments that serve individual in-house companies and link them with each company's the marketing, business planning and customer relations functions, such as maintenance and services.
- Electronics Maintenance System (EMS)
For mass-production products that demand low cost operations, such as printed circuit boards and control panels, we will combine operations common to all in-house companies and introduce EMS to effectively manage the production system.
- Promoting brand strategy
Toshiba will set up a Corporate Brand Management Division in April 2001. Its mission is to enhance brand image by promoting understanding of the company as Internet-Ready, in addition to the images of a high tech, highly reliable company that the company has stressed to this point. Through unitary management with corporate communications, advertising and customer services divisions, Toshiba will target recognition as the No.1 services company.
(3) Proactive strategies for future growth In IT, the most promising future growth area, Toshiba will reinforce it key components businesses, including electronic devices, concentrate resources on mobile- and network-related equipment, and expand and reinforce solution services to enhance customer satisfaction with all Toshiba products. The combined impact of these strategies will be to position Toshiba as a totally Internet-Ready company in the fields of industry, society and the home. 90% of sales growth in fiscal 2003 is expected to derive from IT-related business. a) Core strategies for IT
- Proactive investment in IT related
- Consolidated corporate-wide investment of 1,240 billion yen for the three years to 2003 is planned, approximately 1,000 billion yen of which will be directed to IT-related fields.
- R&D investment will reach approximately1,200 billion yen over the next three years, with 70% (900 billion yen) directed to the IT field.
- Extend the Inter Company Value Chain (ICVC)
- Toshiba will enhance corporate value and expand business by reinforcing penetration of the ICVC. This will promote cooperation among companies in such core businesses as mobile products and seek optimized resource-sharing that maximizes value-creating synergies.
- This strategy includes bringing together development engineers working in the core product areas of mobile applications and networked home appliances at a new technology center at Ome Operations, and establishing an engineering center that work on digital, mobile, telecommunications and visual-products in October.
- VOC-oriented products will be promoted by making full use of Toshiba's advanced technologies in such areas as Bluetooth, MPEG-4, voice recognition and synthesis and LCDs.
- Concentrate resource to software and services businesses.
- The newly established e-Solution Company and the Power Systems & Services Company will take the lead in reinforcing and expanding software and services businesses.
- The iValue Creation Company will support and enhance Internet-related services.
With e-commerce coming into its own in 2002, mobile and broadband products will drive the market. In order to secure market leadership, the iValue Creation Company will seek to become No.1 in mobile Internet services by reinforcing ASP businesses, e-commerce management, hotel and travel reservations and Mobile Multi-protocol Service (MMS). In the content business, the company will enhance its alliance with Toshiba-EMI Limited in music distribution, reinforce visual-related businesses with Toshiba Digital Frontiers Inc. and promote movie production with TOWANI Corporation.
- Consolidated sales for software and services are expected to grow from 1,370 billion yen in fiscal 2000 to 1,920 billion yen in fiscal 2003, and are expected to account for 35% of total sales
b) Strategies for core businesses
- IT solutions business
- The e-Solution Company, will launch businesses that differentiate it from its competitors, placing emphasis on its SI and solutions business, e-Net business, digital broadcasting business and platform business.
a. SI and solutions business
- With the focus on solutions for real operations, the e-Solutions company will apply the know-how gained from SCM and PDM systems developed for its own in-house use as a template for enhancing its repeatable solutions businesses.
- The profitability of custom-made systems will be reinforced by concentrating resources in areas where Toshiba surpasses other companies.
- Consulting services for manufacturer and in transport and logistics will be reinforced.
- e-government business will be reinforced by positioning a basic model system and network security technology at its core.
b. e-Net business
- In its Internet-solutions business, the company will establish businesses that provide on-line market places. The company will provide procurement e-commerce (e-market place), an area where it is taking the lead, TV commerce and mobile commerce.
- Creation of new business models will increase the service lineup for ASP services.
- Cooperation with Lockheed Martin Integrated Business Solutions will support expanded overseas data center business.
c. Digital broadcasting service business
The company will target the number one in the domestic market for the broadband solution service business by positioning e-Platform-related businesses, TV commerce, broadcasting equipment and content as core activities. Platform business The platform business is indispensable for the SI solutions businesses. The company will concentrate all functions necessary to the business, reinforce the overseas wireless access system for the broadband era and promote the ITS business, including systems for vehicles
- Integrate engineering functions of Toshiba group
Group-wide engineering capabilities will be enhanced by the establishment of a new company specialized in system development. This will integrate the IT-related divisions of Toshiba Engineering Corporation, Toshiba Advanced System Corporation and Toshiba Systems Development Co., Ltd. On its establishment in October, it will have approximately 4,500 employees. In addition to providing engineering and services to Toshiba, the company will also work with third parties.
- Sales targets for the e-Solution Company
The consolidated sales target for fiscal 2003 is ¥750 billion, up from ¥600 billion in fiscal 2000.
- In order to expand business and reinforce profitability, Toshiba TEC Corporation will establish total solutions businesses for logistics, including systems for retail stores and offices and ASP businesses.
- Proactive development of mobile business
- The new Mobile Communications Company will establish a leadership position in the emerging mobile and PDA market, and proactively invest resources aimed at cultivating the next generation mobile phone market.
- This market is expected to see dramatic growth after Japan becomes the first country to launch W-CDMA the third quarter of 2001, followed by China in the first quarter of 2002 and Brazil one year later.
- In the European market, joint development with Siemens of a dual-mode mobile phone is expected to realize commercial products by the third quarter of 2002.
- Commercial introduction of a Toshiba PDA is scheduled for the third quarter of 2001.
- The mobile business will be promoted by increasing the number of engineers working in development to approximately 2,000 in 2002, including outsourcing.
- Sales of 550 billion yen are projected for FY2003.
(200 billion yen in FY2000)
- Reinforcement of the PC business
- Toshiba America Information Systems, Inc. (TAIS) will restructure its operations, including strengthening direct sales, through an approach stressing Toshiba's ability to provide products and services that reflect the VOC. enhanced efficiency in its global SCM operation, and revitalize the PC business.
- B2B business will be strengthened by enhancing emphasis on CS and by fully utilizing IT in an operation supporting fast decision making.
- Toshiba will differentiate its technological advantages through such capabilities as Bluetooth, miniaturization and low power consumption. Products developed in an agile response to VOC will be brought to market, particularly in the Japanese consumer market. Products designed to cultivate new markets will be developed as the PC domain extends into such areas as Wireless Internet Appliances (WIA) and home servers.
- Service and support businesses, including equipment upgrades and maintenance, will be reinforced.
- Sales of 1,000 billion yen are projected for FY2003.
(720 million yen in FY2000)
- Digital TV business
- The Japanese Digital TV market has emerged with the beginning of BS digital broadcasting and widening demand for DVD software. Toshiba, with its advantages of dedicated LSI and software technologies, is reinforcing the digital TV business with the aim of increasing market share.
- Toshiba places importance on the digital equipment business, including the DVD players and digital recorders that are expected to promote expansion of AV digital network.
- To promote efficient management of its TV business, Toshiba will shift TV manufacturing, including that of digital TVs for the Japanese market, into China and Indonesia from this April. Toshiba's global development center will remain in Japan, with manufacturing in China, Southeast Asia, North America and Europe, assuring an ability to provide optimized best products for each region.
- Electronics devices
*Semiconductor business
- Toshiba will maintain its position as the world's No1 supplier of discrete devices and continue to enjoy stable profitability. The focus will be on growth markets, such as communications and digital home appliances, and on cementing a profitable business organization.
- Well-balanced operations in flash, DRAM and SRAM memories will enhance a profitable growth surge. The company's NAND flash memory will maintain its No.1 position in a fast-growing world market, while DRAM competitiveness and business stability will be further strengthened as production continues to shift to high-value-added Rambus DRAM. Toshiba will differentiate its SRAM and NOR memories through higher densities and performance enhancements in advance of its competitors and by a focus on the rapidly growing mobile phone and network markets.
- System LSI business will be further reinforced by improved responsiveness to the VOC and enhanced development efficiency. The Semiconductor Company will proactively conduct strategic alliances covering next generation products, such as the broadband network processor to be developed with Sony Computer Entertainment Inc. and IBM Resources dedicated to mobile products and digital home appliance will also be increased.
- Sales of 1,650 billion yen are projected for FY2003.
(1,120 billion yen in FY2000)
*Display business
- LCD business resources will be focused on low temperature polysilicon TFT LCDs. A new factory in Singapore, a joint venture with Matsushita, will support Toshiba in achieving its target of becoming one of the top LCD suppliers by 2003.
- Organic EL panel will enter production in April 2002, with the first products directed at mobile phones and PDA.
- The sales of LCD in FY2003 is projected at 320 billion yen. (FY2000: 150 billion yen)
- In CRT business the resources will be focused on the next generation large sized display, SED, that Toshiba and Canon jointly develop.
(4) Legacy businesses
- Social infrastructure business
Toshiba will provide not only system and hardware for social infrastructure fields but facility solutions including services, leasing and finance. At the same time global competitiveness will be strengthened through alliances and by reinforcing environment-related businesses.
- Power systems business
The power systems business will continue to expand overseas, providing energy solutions that meet the additional needs following the liberalization of electric power. It will also direct resources and promote alliances in non-energy businesses in IT and the environment.
- Medical systems business
The hospital solutions businesses will be expanded by provision of dedicated ASP services and hospital information systems, while the visual diagnosis business will be supported by advanced medical sensor technology.
- Home appliances business
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In home appliances, overseas production will reduce costs and allow Toshiba to strengthen business in the growing Chinese and Southeast Asian markets. The business will also be expanded into business-use products and services. Competitiveness will be promoted by VOC-based product development. |
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In air-conditioning business, Toshiba Carrier Corporation will strengthen management by continuing to develop competitive products and cultivation of new overseas market and new fields. |
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Toshiba Lighting & Technology Corporation promote to built stable profitability in lighting system solution. |
- Elevator and building systems business
Toshiba Elevator Corporation, a dedicated company for the development, manufacture, sales and services of elevators and building systems, promotes market-centric management that will contribute to enhanced business efficiency.
What Internet-Ready means for Toshiba
- A business approach that makes use of the Internet in all activities, as befits a leading company in the global IT revolution
- Ready to connect with and work interactively with customers or partners through supply-chain management and customer-relations management networks and through e-commerce.
- The ability to listen to and hear the Voice of the Customer and to provide timely products and services
- Ready to meet changes in IT and flexible and untiring in changing business processes to meet the needs of collaborative commerce
- Competitive, dedicated to continuous growth and profitability by raising management efficiency through sharing information or know-how
To be Internet-Ready and share information or know-how provides improved management efficiency and speed, and strengthens corporate competitiveness with continuous growth and profit.
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