Toshiba Corporation announced that it would reshape its portable personal computer (PC) business and implement a series of strategic measures designed to restore the business to profitability. The wide-ranging program revealed today covers all aspects of the company's PC business, including enhanced product development, reorganization of manufacturing and supply, intensive cost reduction measures, and changes in sales and marketing.
The restructuring was in response to the loss Toshiba reported in its consolidated results during the first quarter of fiscal year 2003 (April to June 2003). Toshiba blamed the loss on an overemphasis on a wide product line-up, the impact of price erosion, and a shift in market demand from large-sized businesses to home-use and small-to-medium-sized businesses.
To regain profitability, the company is now reorganizing its domestic and overseas sales structures, reducing the number of platforms and motherboards, reviewing product strategy to improve development efficiency, expanding production at its facilities in the Philippines and China, and outsource some of its manufacturing.
Reorganization of Sales Structure
Toshiba said it will direct more sales and marketing resources to the home and small-to-medium-sized business markets. This, it said, will be accompanied by reorganizations to enhance sales structures in the U.S. and Europe. In the Japanese market, alongside efforts to increase sales to the consumer market, part of the domestic sales function will be transferred to Toshiba Information Equipment Co., Ltd., a sales subsidiary, which will seek to reinforce sales to the corporate market segment. In China, Toshiba will reinforce its marketing capabilities and cultivate increased sales, the company said.
Toshiba also plans to reduce the number of motherboards by 30 percent and the component count by 20 percent in order to boost development efficiency, shorten product development times, and cut costs by encouraging greater use of common parts. To enhance overseas R&D capabilities, the company plans to increase the number of engineers at its plant in Hangzhou, China to 150 from 100. The company will also outsource its commodity models, another move expected to enhance development efficiency.
Toshiba will raise monthly output at its Philippine plant from 180,000 units to 200,000 units in the second half of FY2003, and will push production at Hangzhou from 70,000 units to 120,000 units in the same period. Monthly production at the company’s Ome Complex in Japan will be reduced from 80,000 units to 50,000 units in the second half of FY2003.
The company also announced that it will also review the production at its PC facilities in the U.S. and Germany, which will gradually be shifted to the Philippines and China. In line with this move, the company said more of its products produced in Asia will be shipped directly to customers in the U.S. and Europe. Outsourcing of manufacturing will grow to approximately 30 percent of all production in the second half of FY2003, up from 20 percent.
Cost Reduction Effort
Toshiba said its cost reduction efforts will cover everything from product development to sales and marketing. Sales and general administrative expenses will be reduced by reorganization of sales structures. Toshiba plans to reduce the workforce in PC operations in Japan and overseas by approximately 500. Development costs will be reduced by streamlining the number of platforms and increased utilization of design outsourcing. Additionally, procurement costs will be reduced by component count reductions and greater use of common parts, while reformation of manufacturing and supply will reduce manufacturing costs.
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