NEC Innovates its Corporate Structure for the Internet Age.TOKYO--(BUSINESS WIRE)--Sept. 28, 1999-- Following its pledge on February 19th that it will innovate in·no·vate v. in·no·vat·ed, in·no·vat·ing, in·no·vates v.tr. To begin or introduce (something new) for or as if for the first time. v.intr. To begin or introduce something new. its corporate structure to turn-around the company's financial results, NEC (NEC Corporation, Tokyo, www.nec.com, www.necus.com) An electronics conglomerate known in the U.S. for its monitors. In Japan, it had the lion's share of the PC market until the late 1990s (see PC 98). NEC was founded in Tokyo in 1899 as Nippon Electric Company, Ltd. Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : NIPNY) today announced that it will accelerate these plans. In an all-out effort to set its businesses on the path to growth, NEC will implement a fundamental innovation of its corporate structure aimed at becoming the leader in value added Value Added The enhancement a company gives its product or service before offering the product to customers. Notes: This can either increase the products price or value. solutions for the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the age. Through these innovations, business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets make the Internet their focus while aiming to be the leading player in their respective fields by optimizing their business structures to these objectives. To create these business structures, the use of external resources, tie-ups and business-strengthening alliances will be promoted, and the further advancement of management disclosure and an open management structure are also planned to increase corporate value. 1. Concentration of Businesses -Becoming an Internet Solutions Provider (1) Focus on the Internet NEC will concentrate its mobile communications, digital broadcasting Digital broadcasting is the practice of using digital data rather than analogue waveforms to carry broadcasts over television channels or assigned radio frequency bands. It is becoming increasingly popular for television usage (especially satellite television) but is having a and home networking operations as the basis for the next-generation Internet. From this base, NEC intends to come together with the businesses and communities on the Internet in an effort of mutual creation to support the development of an open network society through NEC's concept of an "Invitation to the Internet". Through this concept, NEC will focus the management resources of the company on becoming a wide-ranging solutions provider to meet the variety of needs the company's customers will have in their interaction with the Internet. As the Internet business field expands, and as customers become more specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. and pursue their business directions, value creation will lie in providing solutions that meet the specialized needs of customers. In order to effectively utilize the strengths of NEC, three approaches are necessary to develop its business and strengthen its core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
(mathematics) trillion - In Britain, France, and Germany, 10^18 or a million cubed. In the USA and Canada, 10^12. Yen of the approximately 5 trillion Yen it anticipates in consolidated sales for the current year (through to March 31, 2000), to come from Internet-related businesses. Furthermore, NEC expects that figure to jump to 3 trillion Yen for the fiscal year ended March 31, 2002. i) Development and Strengthening of BIGLOBE to Leverage Core Competencies of In-house Companies. To strengthen NEC's Internet Service business, BIGLOBE, the company will develop open forums for individuals and companies aimed at building communities and markets of at least 10 million people by 2002. In order to build those value-creating forums, NEC will provide a variety of services to support participation in the Internet and not limit itself to a "one business field, one company" policy, allowing its in-house companies to enter into global business relationships with a range of partners. ii) Restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of Businesses to Focus on the Internet To restructure its existing businesses to focus on the Internet, NEC will promote expansion of Internet business in three directions: - Internet solutions business oriented o·ri·ent n. 1. Orient The countries of Asia, especially of eastern Asia. 2. a. The luster characteristic of a pearl of high quality. b. A pearl having exceptional luster. 3. to corporations, individuals and government/public sectors - Internet solutions business oriented to network operators - Electron device solutions business oriented to the Internet industry This will expand NEC's Internet business while ensuring the company meets the specialized needs of its customers, and strengthen its core competencies to create a structure that raises the profitability of all business operations. iii) Equipping e·quip tr.v. e·quipped, e·quip·ping, e·quips 1. a. To supply with necessities such as tools or provisions. b. NEC's Internal Structure to Focus the Company on the Internet a) Company-wide Promotion and Construction of Internet Business Strategies For a concerted effort in the Internet domain, an "Internet Business Development Office" will be established on October 1, 1999 under the direct authority of the President. It will be responsible for proposing Internet strategies, identifying synergies between BIGLOBE and NEC's other businesses, and promoting possible tie-ups between businesses. b) Focus of R&D on the Internet The Research and Development Group will be reorganized re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. to focus on the creation of key devices and services for the next-generation Internet. Through the identification and selection of research themes, NEC plans to develop corporate-wide core competencies on the Internet. In particular, the "Internet Information Service Laboratory" will be established in the corporate R&D Group to strengthen R&D efforts in next-generation information distribution services. c) Construction of US Venture Capital-style, Speedy Business Structure Utilizing the intellectual property of NEC's R&D efforts, as well as to effect early market entry and commercialization, NEC will create a "Venture Development Center" in San Jose, California San Jose (IPA: /ˌsænhoʊˈzeɪ/) is the third-largest city in California, and the tenth-largest in the United States. It is the county seat of Santa Clara County. . The Venture Development Center will take NEC's R&D successes to venture capitalists Venture Capitalist An investor who provides capital to either start-up ventures or support small companies who wish to expand but do not have access to public funding. Notes: Venture capitalists usually expect higher returns for the additional risks taken. , construct business models for them and examine them locally in California, including the use of external resources, to develop businesses as rapidly as possible. Additionally, NEC is participating in a US$100 million follow-up fund to its first corporate venture capital fund established in April of 1997. The second fund was funded earlier this month and will focus specifically on Internet businesses. d) Promotion of Internal Internet Activity, and Business Competitiveness While NEC's procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. systems have already been transferred to the Internet, the Internet, the, international computer network linking together thousands of individual networks at military and government agencies, educational institutions, nonprofit organizations, industrial and financial corporations of all sizes, and commercial enterprises remainder of the company's internal systems will be converted to use of the Internet, accelerating the strengthening of NEC's competitiveness by promoting work efficiencies and a new business model. 2. Reorganization of the Organization Structure -a Leading Global Corporation (1) An In-house Company Structure The objective of the three approaches outlined above is a solid promotion of business focused on the Internet, and for this reason NEC will form an in-house company structure in April 2000 centered around the following three businesses: - NEC Solutions - to provide Internet solutions to Corporations, individuals and government/public sectors - NEC Networks - to provide Internet solutions to network operators; and - NEC Electron Devices - to provide electron device solutions for the Internet industry. Through these measures, NEC's corporate structure will allow each in-house company to increase its competitiveness to global levels and focus its capabilities to the specialized needs of its customers. At the same time, NEC will thoroughly orient o·ri·ent v. 1. To locate or place in a particular relation to the points of the compass. 2. To align or position with respect to a point or system of reference. 3. itself towards Internet solutions to provide a quicker, more detailed response to customer needs. For this, the integration of existing business units is seen as vital and a corporate structure that thoroughly promotes individual accountability and responsibility at all levels of operations (sales, development and manufacturing) will be instituted. Furthermore, each in-house company will include subsidiary and affiliate companies in a global consolidated structure for complete business management. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma for the change in company structure, each in-house company would have production sales and staff as follows for the fiscal year ended March 31, 2000 based on revised consolidated global shipments: - NEC Solutions: sales of approximately 2.2 trillion Yen / approximately 50,000 staff - NEC Networks: sales of approximately 1.5 trillion Yen / approximately 40,000 staff - NEC Electron Devices: sales of approximately 1 trillion Yen / approximately 40,000 staff On October 1, 1999 the "Office for the Promotion of Management Innovation" will be established to prepare the formation of the three in-house companies and to promote the implementation of new management measures company-wide. Under the supervision of the Office's General Manager, each in-house company will develop solid business strategies, and company-wide innovations and plans will be implemented. (2) Establishment of Independently Focused Companies i) Transfer of Wide-ranging Authority to the New In-house Companies With regards to the management of human and capital resources, a wide range of authority currently held by NEC's headquarters will be transferred to the new in-house companies. With the transfer of this authority, as long as the in-house companies act within the range of corporate guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. , they will have the ability to decide and implement policy. ii) Focus on Shareholder Value through Redistribution re·dis·tri·bu·tion n. 1. The act or process of redistributing. 2. An economic theory or policy that advocates reducing inequalities in the distribution of wealth. of Capital and Setting of Cost of Capital Targets for New Investment Focus on and selection of businesses will be accelerated through such measures as redistribution of capital among in-house companies, addition of cost of capital measurements, and setting of targets for return on capital. In the event in-house companies should see poor business results, or that they fall below established guidelines, they will be able to receive support for business restructuring. In more excessive situations, anything but thorough business restructuring will not be tolerated and strict responsibility will be implemented. iii) Focus on Capital Efficiency through New Evaluation of Corporate Results Attention to cash flow management will be heightened and each business will be evaluated based on the introduction of five new criteria: profit and loss on a global consolidated basis (including consideration of cost of capital), free cash flow, shipment growth rate, D/E D/E Depression/Elevation (Angle) ratio, and ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. . (3) Innovation of Corporate Functions - Increased Support for the NEC Group i) Corporate Headquarter head·quar·ter v. head·quar·tered, head·quar·ter·ing, head·quar·ters Usage Problem v.tr. To provide with headquarters: Divisions To promote the independent operations of in-house companies after the transfer to them of wide-ranging management authority, 900 of the current headquarters staff of 2,200 people will be transferred and their function shifted to support the new in-house companies. To support NEC's top management and to promote the management of the global consolidated NEC Group, the headquarters will be organized into a slim 300-person unit. To raise the level of operations at each in-house company, a specialized Business Service staff will be established with approximately 1,000 staff to provide them with specialized fee-based services. ii) Corporate Business Development Division To develop a new domain of corporate business, a "Corporate Business Development Division" will be established and functions included at divisions such as the Corporate Research & Development Group and the Internet Business Strategy Office, while also being linked with North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. business development functions at NEC USA. iii) Corporate Sales Division A top sales function will be established at a corporate level, for horizontal sales support across NEC and with regional representation to strengthen NEC by presenting a single window to customers. 3. Restructuring of Low-Profit Companies When NEC announced its intention to innovate its corporate structure on February 19th 1999, it announced restructuring plans for Packard Bell NEC (Packard Bell, The Netherlands, www.packardbell.com) A major PC manufacturer that is the consumer brand of NEC Computers International and the home computing market leader in the U.K. and much of Western Europe. and since then has announced various measures to improve the profitability of certain businesses, including: - An agreement with Hitachi for extensive cooperation in the DRAM business (June) - The sale of Nihon Denki Seiki Ltd. to NEMIC-LAMBDA K.K (March) - The sale of NEC Product Lease to ORIX Corporation (April) - The establishment of a joint-venture company with GE for medical equipment (July) - The integration of NEC's three defense-related businesses (Niko Electronics Ltd., NEC Wireless Electronics and NEC Electronic Equipment Engineering) into NEC Sensor and Network Systems (September). In addition to the restructuring of these businesses, NEC will restructure NEC Home Electronics, which is one business of particular concern. In order to cover the cost of these restructuring measures, NEC will compact its capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) through sale of shareholdings and the use of securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. to liquidize liq·ui·dize tr.v. liq·ui·dized, liq·ui·diz·es, liq·ui·diz·ing To make liquid. liquidize or -dise Verb [-izing, -ized] or its fixed assets fixed assets npl → activo sg fijo fixed assets npl → immobilisations fpl fixed assets fix npl → . The company aims to reduce its interest bearing debt by 600 billion Yen over the next three years. Due to the financial restructuring measures implemented this year, NEC is now forecasting it will pay down debt from free cash flow by 300 billion Yen this year, an increase from its original forecast of 150 billion Yen. 4. Strengthening of Corporate Governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. (1) Introduction of Company Officers and Company Boards With the introduction of an in-house company structure, a system of company officers will be introduced to create an independent business structure. Additionally, corporate decision-making will rest with a company board system to be established in preparation for independent management of the new in-house companies. Coming with the considerable authority invested in company officers will be appropriate incentives based on challenging criteria and evaluated by the business results achieved at in-house companies. As a result, NEC expects to create a company officer system that promotes its businesses in the ever-changing Internet realm. (2) Reform Board of Directors The NEC Board of Directors, which currently consists of 37 executives, will be reduced to one-half of this number for speedier decision-making and to concentrate on fundamental management strategy and overseeing the direction of business at in-house companies. Furthermore, retirement for the holders of the offices of company Chairman and President will be set at 70 years of age. (3) Reform Decision-making Process In executive decision-making on company-wide strategy, a reduced membership "Management Strategy Committee" consisting of the President and in-house company presidents will be established. In addition, executive decision-making regarding achievement of budgets will be taken at a "Business Progress Committee" that will also be established. (4) Disclosure of In-house Company Business Results From the business year beginning April 1st 2000, business results for in-house companies will be disclosed, and the responsibility of in-house company presidents and company officers made clear. Through the above actions, NEC intends to promote the creation of corporate value by establishing a management structure that maximizes customer value, employee satisfaction and shareholder value. To guarantee this increase in shareholder value over the mid-term, utilization of employee skills and intellectual property will be maximized and management focus will be placed on providing high quality products and services to NEC's customers. About NEC Corporation NEC Corporation (NASDAQ: NIPNY) (FTSE FTSE A company that specializes in index calculation. Although not part of a stock exchange, co-owners include the London Stock Exchange and the Financial Times. Notes: The FTSE is similar to Standard & Poor's in the United States. : 6701q.l) pioneered the concept of C&C, the integration of Computers and Communications, and is the only company in the world to be counted among top ranking corporations spanning the wide range of fields essential for this vision of multimedia: computers, communications and electron devices. Employing in excess of 150,000 people around the world, NEC saw net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight in fiscal year 1998-99 amount to 4,759 billion yen (approx. US$40 billion). For further information, please visit the NEC home page at: http://www.nec-global.com Editor's note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : Details of the development of Biglobe and restrucruting of NEC Home Electronics are available upon request. |
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