Kunio Nakamura
1939–

President, Matsushita Electric Industrial Company

Nationality: Japanese.

Born: July 5, 1939, in Shiga, Japan.

Education: Osaka University, 1962.

Career: Matsushita Electric Industrial Company, 1962–1965, various posts; 1985–1989, director of Tokyo Special Sales Office, Corporate Consumer Sales Division; Panasonic Consumer Electronics Company (U.S.), 1989–1992, president; Panasonic UK, 1992–1993, president; Matsushita Electric Corporation of America, 1993–1996, president, director, chairman of the board, and director of the Corporate Management Division for the Americas; 1996–1997, managing director; AVC Company, 1997–2000, senior managing director and president; Matsushita Electric Industrial Company, 2000–, president and CEO.

Awards: Businessman of the Year for Asia, Forbes , 2003.

Address: Matsushita Electric Industrial Company Ltd. (MC), 1006, Kadoma, Kadoma City, Osaka, 571-8501, Japan; http://www.mei.co.jp.

■ Kunio Nakamura took over in 2000 as president and CEO of Matsushita Electric, best known for its Panasonic brand name and a worldwide leader in the development and manufacture of electronics products for consumer, business, and industrial needs. Many doubted whether Nakamura could revitalize the stodgy company into a fleet-footed megacorporation in the new technology age. Nevertheless, within three years Nakamura had led Matsushita to the number one spot in the electronics business, outperforming Sony, one of its leading competitors, in terms of sales and profits. Analysts observed that Nakamura achieved this feat partially by revitalizing Matsushita's creaky, overly bureaucratic management system. Colleagues and analysts noted that the media-shy Nakamura, unlike many Asian business leaders, focused on rewarding talent and achievement in management rather than age or seniority. At the same time, he kept in line with the company's traditional philosophy of emphasizing that business must operate for the public good.

TAKES COMMAND

After graduating from Osaka University in 1962 with a degree in economics, Nakamura joined Matsushita Electric. Over the next 25 years he would hold a number of management posts, primarily working in the area of marketing. Little public information is available about Nakamura's early career with Matsushita. In November 1985 he was appointed director of the Tokyo Special Sales Office, Corporate Consumer Sales Division. Two years later he came to America to serve as president of Panasonic Consumer Electronics Company in the United States. Except for one year heading Panasonic UK in Great Britain in 1992–1993, Nakamura would spend about eight years in the United States, gaining a stellar reputation for building strong businesses through massive restructuring of companies. From 1993 to 1997 he served as CEO of Mat sushita Electric Corporation of America.

Nakamura returned to Japan in 1997 to head AVC Corporation, which was Matsushita's largest in-house electronics company. During his time at AVC he also was a senior managing director of the company and oversaw turning around its Chinese subsidiaries from money-losing to profitable businesses in less than two years.

Throughout his career, Nakamura had been acquiring extensive experience, especially in the United States. It was his overseas and technological expertise that caught the attention of corporate headquarters as consumer electronics moved into interactive services and Internet-related devices. Matsushita, founded by Konosuke Matsushita in 1918, was still essentially a family company. The company's development of a lightbulb socket that also had a plug for other devices set Matsushita on its course. In 2000 the company's chairman, Masaharu Matsushita, made ready to step down at the age of 87, and the company began looking for a new direction in management.

Matsushita's son, Masayuki Matsushita, was working in the company and was considered a potential candidate to become the new president, his father having moved up to become chairman of the board. But not all analysts were surprised when the board bypassed family tradition. Instead, Nakamura was named company president, a move that industry insiders and analysts saw as greatly reducing the influence of the Matsushita family over the company's day-to-day operations and strategic planning. The AsiaPulse News quoted the retiring Matsushita as saying, "Mr. Nakamura has an excellent record as a person in charge, both in Japan and abroad. It is my opinion that he will be a man of action capable of carrying out changes quickly" (April 26, 2000).

Although analysts had given the company's former president, Yoichi Morishita, overall good marks for his performance as president, many thought that the company lacked a clear strategic vision. They pointed out that top rivals—Sony, Hitachi, and Toshiba—had all forged new strategies for the Internet age while Matsushita lagged behind. Furthermore, unlike Sony, with its Walkman portable audio player, Morishita never had an overwhelming hit. The company's operating profit fell 18 percent to $1.8 billion in 1999, and Morishita was struggling to keep up with Sony, the world's number one electronics firm at the time. Matsushita's stock also under-performed in 1999 compared to the broad market and the electronics sector.

While serving as a managing director, Nakamura had spearheaded a drive to compete head-on with Sony, and Morishita valued Nakamura's vast knowledge of the U.S. computer and consumer electronics markets. First, however, industry analysts noted that Nakamura had to fix the company's creaky bureaucracy by restructuring its vast number of business divisions, which totaled 140 in Japan alone. The consumer electronics analyst Kazushige Hata told BusinessWeek , "He carried out drastic restructuring in the U.S. and China. He should be able [to] do it here, too" (August 7, 2000).

INTENDS TO LEAD

Nakamura wasted no time in establishing his leadership role. The day after he took over, he made a videotaped speech to employees in which he pledged to "empower" them by rewarding proven talent rather than age or seniority. But Nakamura also expected hard work. He gave five hundred senior executives Net-ready cell phones so that they could be reached at any time. The AsiaPulse News also quoted him as saying, "Young talented people tend to dislike being controlled. I would like to run the company in such a way that my staff voluntarily tackle assignments, without feeling they are being told to do so by the boss" (April 26, 2000).

But Nakamura needed to do more than make speeches and hand out cell phones. He had to make changes. An encounter with an engineer egged on a quick change. With his vast experience in marketing, Nakamura was astounded when he asked why Matsushita's televisions lacked flat screens, and a technician replied that the middle part of the picture looked sunken in. Competitors like Sony had a growing market for their flat-screen televisions, and here was an engineer telling Nakamura that the market was wrong. He quickly transferred the product planning power to marketers and away from engineers. In the process, Matsushita redesigned its televisions.

Nakamura also kept his promise to the young, up-and-coming workers. For example, he transferred much of the power in the company's designing efforts to women designers and other employees in their thirties and forties. He reasoned that women could best design home appliances used by other women.

Nevertheless, Nakamura had to trim the company's sails. By December 2000 he had announced that the company was closing 30—or 23 percent—of its domestic factories in Japan, including major battery and television factories. In the process he cut one thousand marketing jobs and sold a huge portion of the company's assets. Matsushita had not lost money, but its profit margins were considered thin for a large company. Analysts noted that its return on equity for the year ending March 31, 2000, was 2.9 percent, far under the 15 to 20 percent returns most American companies were recording.

With investors and others looking closely over his shoulder, Nakamura wasted no time in giving senior executives a deadline for completing a massive restructuring plan. They had until the end of November 2000. Even though consumer electronics had been falling, Matsushita gave investors high expectations; the stock rose about 20 percent from early June 2000, when the announcement was made, to that November.

The restructuring would eventually lead to the elimination of 13,000 of 290,000 employees, primarily middle managers in Japan. (Industry analysts noted that they received generous early retirement packages.) In the process, Nakamura also shrank the company's management pyramid from 13 layers to three. Going back to his early experience, Nakamura paid special attention to the marketing divisions and consolidated them under two roofs—one for Panasonic brand electronics and the other for national brand products, such as refrigerators, in the Japanese and Asian market. Nakamura told Peter Landers of the Wall Street Journal , "The marketing divisions were so complicated that a lot of time was spent in internal company coordination" (December 1, 2000).

THE TORTOISE AND THE HARE

Despite the company's doing all the right things, analysts noted that Matsushita's stock had nearly halved from January to July 2001, falling below its book value and hitting an all-year low of ¥1,674 in late July. Like his competitors at Sony, Fujitsu, and NEC, Nakamura was facing an economic slowdown in the consumer market as well as dampening profits. Nakamura responded by moving into service-oriented businesses, including elderly medical care, selling such devices as a toilet that measures body fat. He also led the company's cellular phone subsidiary to be the first to offer mobile video phones. Nevertheless, Nakamura was quick to acknowledge that these efforts would not help the bottom line until 2002. In fact, in March 2002 the company announced its fiscal results and, for the first time in its history, had gone into the red by $3.4 billion, the company's biggest net loss on record.

Nakamura remained steady at the helm and organized a massive restructuring designed to cut redundancies and concentrate on the company's primary resources. He reorganized five group companies into 100 percent subsidiaries in order to run a more efficient operation. Nakamura told Yoshiko Hara of Electronic Engineering Times , "When the economy was growing rapidly, independent operations in the group encouraged good competition, but now we need to cut redundancy to cope with a digital consumer electronics era that requires a huge R&D cost" (January 14, 2002).

Industry analysts, however, pointed out that many of the markets on which Matsushita was focusing—including home electronics, such as plasma display panel TVs, DVD recorders, and cellular phones—were highly competitive markets. After a painful year of restructuring, Nakamura came out with more bad news. According to Nakamura, business was down so far that the parent company was taking control of five of its listed subsidiaries, including its star cell phone company, Matsushita Communication Industrial Company.

Three of the company's four main divisions—consumer electronics, home appliances, industrial equipment, and devices—lost money in 2001. Nakamura stood firm and said he was slashing costs by centralizing research, development, and marketing. Despite the difficulties, many analysts still liked Nakamura's reforms and thought that the company's future looked brighter. They noted that the initial hit taken by restructuring costs would lead to modest recovery, with $1.8 billion in savings in 2002 because of the reforms. One industry analyst was quoted in BusinessWeek as saying, "His strategy is to use any means possible to increase revenue in the coming year" (April 1, 2002).

SUCCESS AT LAST

Nakamura's emphasis on job cuts and business reorganization, as well as a change in the corporate culture, produced results far beyond many industry analysts' expectations. By September 2003 Matsushita had regained the leading spot as the world's biggest consumer electronics company. Overall it posted half-year sales for the 2003–2004 fiscal year of $32.3 billion and profits of $717 million, compared to the former number one Sony's respective numbers of $29.6 billion and $306 million.

Several strategic victories in sales helped spur the turnaround. Panasonic quickly mass-produced large, thin plasma displays at prices and quality levels that no one else matched. Matsushita also dominated new product categories, such as DVD recorders with hard disk drives. Industry analysts noted that Nakamura appeared to have turned the tide. For many years Matsushita had jokingly been called "maneshita," a pun translated as copysonic, referring to the company's tendency to follow Sony and others as they created new technologies rather than pioneering new technology itself. But, according to Forbes , the seasoned marketer Nakamura had helped the company regain its edge primarily through its flagship brand, Panasonic, and by taking over 50 percent of the new product category in DVD players. In 2003 Forbes magazine named Nakamura its global businessman of the year for Asia.

MANAGEMENT STYLE

Known for his lightning-fast makeovers of company operations by eliminating deadwood and creating new businesses, Nakamura never hesitated to shake up corporate structure through mergers, acquisitions, and layoffs. His emphasis on cutting the workforce and giving rewards based solely on merit largely dismantled the company's renowned lifetime-employment system, which was started by Matsushita's legendary founder and introduced to Japan before World War II.

Although Nakamura had earned this reputation for speedy makeovers for his work in the United States, he did not lose his touch as president of the Japan-based parent corporation. For example, over the first three years of his tenure, he invested a hefty $1 billion to boost Matsushita's information technology capacities. His cuts included top executive salaries, saving the company $385 million in 2002. He even forced his management teams, including the most senior, to summarize their reports in a few words or a sentence for faster communication and decision making.

Nakamura's approach to management at Matsushita also included completely changing the company's corporate culture, which was based in Japan and still clung to Asian corporate philosophies of rewarding people for seniority and age. Performance was king to Nakamura. He continually worked on the mentality of his management team and workers, telling Benjamin Fulford of Forbes , "We must never think we are the champions. We must always be the challengers" (February 2, 2004).

Nakamura not only rewarded younger employees who exhibited drive and new ideas, but he also emphasized the role of women. Nakamura once said that the best lesson he learned while heading Matsushita's American operations was that young people and women should have more responsibility. He immediately stopped the traditional practice of women serving tea at meetings. And he told Peter Landers of the Wall Street Journal , "These are simple things, but unless you get them right, you're going to fail as a leader" (July 26, 2000). He also told he AsiaPulse News that he wanted to run the company so that younger employees did not feel controlled and would "voluntarily tackle assignments, without feeling they are being told to do so by the boss" (April 26, 2000).

Despite the fact that much of his style incorporated the Western approach to business, Nakamura believed that capitalism in the United States had serious flaws. He noted that a corporation should be run for the public good and for the good of its employees. He told Fulford of Forbes , "The best-paid employee should not earn more than ten times more than the lowest-paid employee" (February 2, 2004).

SETS A GOAL

Despite Nakamura's success in guiding Matsushita to the top spot in the consumer electronics business, competition remained fierce. In 2004 Nakamura remarked that he would not step down from the company until he had reached a goal of improving the group's operating profit margin from around 2 percent for the 2003–2004 fiscal year to 5 percent. The Knight Ridder–Tribune Business News quoted Nakamura as saying, "We will definitely achieve it" (January 22, 2004). Nakamura also kept a keen eye on restructuring and setting new goals for his management teams. In 2004 he announced a plan that would shift the company's performance stage from, as he termed it, "creating" to "leaping ahead." He called the plan "Leap Ahead 21" and announced that the plan's ultimate goal was to achieve an operating profit ratio of 5 percent or more before he retired.

Nakamura continued to institute corporate reforms designed to streamline the business hierarchy. Always tinkering with the corporate structure, he announced that the purview of the board of directors and executive officers was changing in 2004, with the board focusing more on corporate strategy and supervision of business domain companies and the executive officers taking complete control of day-to-day business affairs. Nakamura also continued to consolidate efforts, as when he made Matsushita Electric Works Company a subsidiary, thus creating the biggest electronics and electrical equipment maker in Japan in terms of consolidated sales.

Little is known about Nakamura's activities outside of the company. Surprisingly, he liked to leave work early so that he could pursue his voracious reading habits. According to Ful-ford, writing in Forbes , Nakamura normally read around 200 books a year, most of them on history.

See also entry on Matsushita Electric Industrial Co., Ltd. in International Directory of Company Histories .

sources for further information

"A Bold Mechanic for a Creaky Machine," BusinessWeek , August 27, 2000, p. 58H.

Fulford, Benjamin, "The Tortoise Jumps the Hare," Forbes , February 2, 2004, p. 54.

Hara, Yoshiko, "Japanese Giant to See Red Ink for First Time in over 50 Years," Electronic Engineering Times , January 14, 2002, p. 12.

Landers, Peter, "Matsushita Electric New Official Starts with 'Simple' Steps," Wall Street Journal , July 26, 2003, p. 1.

——, "Matsushita to Restructure in Bid to Boost Thin Profits," Wall Street Journal , December 1, 2000, p. A13.

"Matsushita Elec Industrial Names Kunio Nakamura President," AsiaPulse News , April 26, 2000, p. 0240.

"Matsushita Electric to Achieve Profit-to-Sales Ratio Goal, President Says," Knight Ridder–Tribune Business News , January 22, 2004, p.ITEM04022022.

"Matsushita's Long March," BusinessWeek , April 1, 2002, p. 18.

—David Petechuk