Toshiba Corporation

Toshiba Corporation

1-1 Shibaura 1-chome
Minato-ku, Tokyo 105
Japan
(03) 457 2104/5

Public Company
Incorporated: 1896
Employees: 120,000
Sales: ¥2.511 trillion (US$15.774 billion)
Market Value: ¥1.914 trillion (US$12.026 billion)
Stock Index: Tokyo Osaka Nagoya Kyoto Hiroshima
Fukuoka Sapporo Niigata London Paris Amsterdam
Düsseldorf Frankfurt Luxembourg

Toshiba Corporation is one of Japan’s largest producers of consumer and electric products. Established in 1904 as Shibaura Engineering Works, Toshiba has promoted the development of a technology which yearly supercedes itself, and has played an active role in Japan’s rise to the forefront of international business.

The company had its origins in 1875 in Tokyo, as the first telegraph equipment shop in Japan. The framework in which Toshiba began, however, was far from the climate in which it now operates. During the late 19th century, Japan lagged far behind Britain, France, Germany and the United States in industrial development. Beseiged 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 at her most vulnerable. 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 Japanese engineers in operating imported machinery; the government also sent government 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 Toshiba, then known as Shibaura Seisakusho, whose 1,300 horsepower steam engine, copied from blueprints of an English counterpart, was successfully implemented in a plant in Kanebo, Japan. This venture convinced Japanese industry of its potential for technological advancement through the implementation of foreign technology onto domestic skills and resources.

As a result, in the 1880’s an agreement trading technological expertise for payment was adopted by Shibaura as the most expedient means to upgrade its technological capabilities. This process allowed the business to expand and begin manufacture of heavy electrical equipment in the following decade.

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. In 1909 Shibaura had direct access to those technologies and grew to be a leading manufacturer of electrical equipment.

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 US, 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, by forcing Japanese industry into self-sufficiency and paving the way for the country’s industrial advancement.

In the interim between world wars, the company continued to grow. By 1939, Shibaura had merged with the Tokyo Electric Company, Ltd. to form Tokyo Shibaura Electric Company, Ltd., or Toshiba, and became established as a central power in the manufacture of electric lighting and broadcast equipment. This corporation was the first to develop 16” color television, television phones, and hundreds of other innovations responsible for the automation revolution in offices and factories.

With the outbreak of World War II, Japan was once again forced to look to herself for survival. After the devastation of war, the country rebuilt itself with the aid of occupying U.S. forces under the terms of the San Francisco Treaty. With the assistance of the Japanese government and its citizens, the American Occupation Authority instituted social and economic reforms, and poured resources into financial markets. As Japan was readmitted into the international trading community, access to overseas markets for manufactured goods and raw materials was facilitated; 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. By 1949 Toshiba shares were first listed on the Tokyo Stock and Osaka Securities Exchange. Backed by the powerful trading house of the Mitsui Group, the company’s financial status was well secured. Starting in the 1950’s, Toshiba began a program to strengthen its competitiveness in both the domestic and international markets.

Yet it would be some time before modern business policies affected the company in any fundamental way. Citing the use of “archaic management practices,” 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.

By 1963 management problems were compounded by a 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 rectify the ailing business. Toshiwo Doko, chairman of IHI, the world’s largest shipbuilder, was hired to fill the position. By facilitating a merger in 1960 between Ishikawajima Heavy Industries and Harima Shipbuilding & Engineering Company, Doko was credited with creating a highly profitable enterprise.

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 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 been neglected in the intervening years. With this new infusion of capital Toshiba could expand and modernize 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.

Over the next years Toshiba focused its energies on research and development of new products, slowing entering the nascent computer industry and perfecting consumer electronic products. In the 1970’s, Sony, Hitachi and Toshiba began to establish a presence in the consumer electronics market, creating a newfound respect for the superiority of Japanese technology with well-made, costeffective items.

Within the past three decades, Toshiba has continued to expand through a series of joint ventures and agreements with both Japanese and foreign corporations. In October of 1984, Toshiba’s growth was augmented with the formation of its Information and Communications Systems Laboratory. The Lab serves to develop and integrate office automation products such as 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 now markets these systems throughout Japan, as well as assisting that corporation with technological insight.

Toshiba’s interest and involvement continue to grow as new markets develop. In the computer field, Toshiba has expanded through a series of agreements with American companies, among them Motorola and IBM. In 1986 Toshiba entered into a joint venture with Motorola for its Japanese production of computer memories and microprocessors. The two companies are involved in joint development of microcomputer and memory chips based on exchange of technology, and development of a manufacturing facility in Japan.

In the same year, Toshiba entered into an agreement with IBM-Japan to market their general purpose computers domestically. Through this arrangement, Toshiba markets its own communications equipment with IBMJapan’s computers, selling to governmental agencies, local governments and other institutions to which IBM 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.

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 the 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 suggest Toshiba’s technological foresight in solving global and domestic problems. In 1984 Toshiba was responsible for the world’s first direct broadcast satellite, launched in January of that year. Additionally, 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.

Other major markets within the company have seen substantial growth in recent years, particularly in the areas of semiconductors and consumer products. Utilized in equipment from stereos to computer memories, semiconductors are an important part of Toshiba’s portfolio. In 1986 alone, Toshiba’s semiconductor facilities experienced a 55% increase due to contracts in France and West Germany, as well as domestic production. Perhaps the greatest indicator of Toshiba’s potential lies in the fact that, for the first time in its history, it has surpassed its closest competitor, Hitachi, as the second largest semiconductor manufacturer in Japan.

In the light of the preceding accomplishments, the area for which Toshiba is best known remains its consumer products division. In acquisition and innovation, this segment is growing at a rapid pace. 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 VCR’s, compact disc players, televisions, and personal cassette recorders continue to grow, Toshiba has been quick to capitalize on new markets. In 1986 Toshiba entered the home video market, creating a wholly-owned subsidiary and introducing 110 new video titles to the Japanese market; in the same year, it entered an agreement for the provision of cable equipment to American Television and Communications Corporation.

Perhaps the most exciting and opportunity-charged advances made by Toshiba in recent years involve its entry into the global markets. Toshiba will soon begin provision of its integrated circuit technology to the Chinese Electronics Import and Export Corporation to assist in development of television production. Additionally, Toshiba has accepted a ¥12 billion contract for a color television assembly plant in Russia, marking Moscow’s first agreement of this nature with a Japanese company.

Recent events, however, have found the company attempting to mollify a scandal surrounding one of its subsidiaries. According to Washington sources, the subsidiary sold machine tools to the Soviet Union that would help build quieter submarine propellers. This makes detection more difficult and will force NATO to modernize its antisubmarine detection equipment. While Toshiba claims it is 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. Amid a growing protest by a rightwing extremist group in Tokyo, the company president, Sugiichiro Watari, issued a public apology to the United States.

On July 1, 1987, however, both Watari and Chairman Shoichi Saba announced their resignations from the Toshiba Corporation in the wake of a U.S. Senate vote to ban the import of Toshiba products for two years. The Toshiba Corporation is planning its own investigation into the events that led to the sale. While Saba’s replacement is as yet unknown, Joichi Aoi, a former senior executive vice president, will assume Watari’s position.

In the meantime, two executives at Toshiba Machine, the subsidiary under investigation that is 50% owned by Toshiba Corporation, were arrested and four top-ranking officials resigned. The Japanese government has prohibited the subsidiary from exporting products to the Soviet Union for one year as well as repealed the company’s right to sponsor visas for visiting personnel from Eastern-bloc countries. Many industry analysts have noted, however, that these positive measures will not compensate for the loss of the U.S. market over the next two years.

Principal Subsidiaries

Toshiba Electric Equipment Corp.; Tokyo Electric Co., Ltd.; Toshiba Electric Appliances Co., Ltd.; Onkyo Corp.; Toshiba Credit Corp.; Toshiba House and Living Industry Co., Ltd.; Toshiba Heating Appliance Co., Ltd.; Shibaura Engineering Works Co., Ltd.; Kitashiba Electric Co., Ltd.; Marcon Electronics Co., Ltd.; Toshiba Components Co., Ltd.; Toshiba Medical Systems Co., Ltd.; Toshiba Tungaloy Co., Ltd.; Tokyo Optical Co., Ltd.; Toshiba Glass Co., Ltd.; Toshiba Seiki Co., Ltd.; Iwate Toshiba Electronics Co., Ltd.; Nikko Sitsugyo Co., Ltd.; Toshiba Battery Co., Ltd.; Minato Building Co., Ltd. The company also lists subsidiaries in the following countries: Australia, Brazil, Canada, France, Italy, The Netherlands, Panama, Singapore, Sweden, Taiwan, Thailand, United Kingdom, and the United States.

Further Reading

Industry and Business in Japan edited by Kazuo Sato, New York, Croom Helm, 1980.