TOKYO NEC Corp.'s newly appointed president, Koji Nishigaki, promised to remake the struggling electronics giant into a profit-generating machine over the next several years by recasting its divisions as separate in-house companies in order to nurture individual creativity and strengthen NEC's global competitiveness.
In a speech to employees Tuesday (March 30), Nishigaki said the new measures aim to help the company return to profitability, regain the trust of shareholders and bolster its public image. He called on employees and management to help him reach his goal of $50 billion in net sales and $2.5 billion in operating income for NEC by the fiscal year ending March 2002.
Nishigaki's comments came at the close of a fiscal year marred by a $1.3 billion financial loss and a defense agency procurement scandal that has tarnished NEC's image in Japan.
Among the steps the company will take is the reorganization of its business groups into in-house companies that will execute and take responsibility for their own business plans. This approach resembles work in progress at several other major Japanese electronics companies, including Hitachi, Sanyo and Toshiba.
Nishigaki said NEC's management will become accountable for the company's financial performance as it shifts to a "proft-oriented mindset." Financial performance will be measured by global standards, such as return-on-equity and cash flow. Unprofitable businesses will be jettisoned. New businesses with good profit potential will be pursued. And all investment decisions will have to follow strict plans for profitability.
At the same time, Nishigaki said management will be given the flexibility and decision-making power to keep up with the ever-changing information technology industry and the Internet. The company must also learn to anticipate demand, earn customer trust and focus on areas where it can compete globally.
Another key part of NEC's strategy is to create an environment to motivate individual employees and encourage the specialization of skills a concept Nishigaki called "fanning the sparks of individuality."
More details on how the company will restructure are expected to emerge in the coming months and should be in place by September.
Last week, NEC announced plans to reorganize its System LSI business unit by dividing it into separate market-focused groups that will concentrate on the consumer, communications and PC areas respectively.