4. The effectiveness of Matsushita’s change agenda during the 1980s and 1990s.

In 1982, Matsushita’s President, Toshihiko Yamashita, implemented a change programme

known as ‘Operation Localization’ (Hill, p.527). This was as an attempt to give its overseas

subsidiaries more autonomy in the hope of improving their innovative capacity, and also to help

to develop firm specific advantages (Birkinshaw et al., 1998). By the end of this period

Matsushita was struggling after the Japanese economic recession of the early 1990s. Therefore,

was Matsushita able to manage change effectively throughout the 1980s and 1990s?

Under‘Operation Localization’, however, attempts to give its overseas subsidiaries more

autonomy were to prove challenging, as one of the main problems during this period for

Matsushita was the apparent inability of its overseas operations to become less dependent on the

Japan-based product divisions. This could be because implementing any change is

not always simple, as there are often various barriers obstructing the process. Johnson

(1992) highlights two main reasons for this:‘resistance to change’ and‘strategic drift’

(p.33). In terms of culture there is often a resistance to change, for instance at Matsushita

during Yamashita’s‘Operation Localization’ the problem of change initially seemed to

rest not with the overseas subsidiaries, but the product divisions as Hill cites:‘despite his

(Yamashita’s) four localizations, overseas companies continued to act primarily as the

implementation arms of central product divisions’ (p.528). This potentially indicates that

the product divisions found it difficult to limit their interfering in the affairs of overseas

subsidiaries. Whether the product divisions were actually opposed to change remains to be seen,

it could however be argued that the product divisions had been used to one system for so long it
was proving a challenge for them to change. Thus, it appears Matsushita failed to realise the

potential obstacles when attempting to change.

Furthermore, Yamashita’s successor, Akio Tanii, failed to respond adequately to his

predecessor’s inability to make the overseas subsidiaries more innovative. As Hill states:

‘he relocated major regional headquarters functions from Japan to North America, Europe, and

Southeast Asia’ (p.528). Nevertheless, the overseas subsidiaries continued to follow

orders from the product divisions (Hill, p.528). This could be owed to the fact‘that only

250 of the company’s 3000 R&D (Research and Development) scientists and engineers

were located outside Japan’ (Hill, p.529). If Matsushita wanted its overseas subsidiaries to

be more innovative they perhaps should have located more key R&D staff overseas in

addition to the responsibility delegated. Matsushita may have delegated responsibility to

its overseas subsidiaries to develop more products, but if the subsidiary does not actually have

the expertise to do so then it is likely to be unsuccessful. Thus, the strategy pursued by

Matsushita appeared to be inconsistent with its overall objective of achieving greater

innovative capacity in its overseas subsidiaries.

With the majority of the organization based in Japan, Matsushita undoubtedly suffered

when the Japanese economy went into recession in 1992 (Hill). Tanii failed to cut costs

sufficiently and was forced to resign (Hill). His successor, Yoichi Morishita, had the task of

restructuring. He began by decentralising more responsibility, but according to Hill‘the

management seemed unwilling to radically restructure its increasingly inefficient portfolio of

production facilities’ (p.528) in Japan. This could be seen as an example of resistance to change,

as the management were unwilling to drastically decrease production in Japan.

Moreover, it is also an example of strategic drift as the strategy pursued is not coherent

with its environment (Johnson). This inability to change has prohibited Matsushita

sufficiently recuperating from the economic crash in Japan.

It also seemed that Morishita had lost faith in the overseas subsidiaries to innovate and

develop new technology as he entered into partnership with the Chinese Academy of

Sciences and established the Panasonic Digital Concepts Centre in Silicon Valley (Hill).

Having appeared to be unwilling to invest in research and development at Matsushita’s

own overseas subsidiaries, he at least seemed to have acknowledged the need to invest in

new technology. Therefore, although Morishita looked unable to change the situation in

Japan, he was attempting to move the organisation forward.

Overall, it appears that Matsushita has failed to manage change effectively during the

1980’s and 1990’s. Although delegating responsibility, successive presidents did not

realise that if they wanted their overseas subsidiaries to be more innovative they needed to invest

in the expertise. Had they done this, the subsidiaries may have developed their own products,

which they could be responsible for selling and not have to be at the mercy of the Japan-based

product divisions. It was only Morishita, in the late 1990’s that realised this. However, he did not

restructure the Japan-based production facilities after the recession in the Japanese economy and,

thus the company was unable to reach the levels of profitability it was used to prior to the

recession.