Tuesday, November 13, 2012

No. 33: The target is the global market (November 14, 2012)

Hitachi Materials and Hitachi Cable, each of which is a subsidiary of Hitachi, will merge next April to create a company with sales of 1 trillion yen to compete successfully in the global market. Hitachi Metals has about 40% share in the world market of high-performance metals for electric vehicles. The company has a strong competitive edge in high-quality metallic materials for autos, electric appliances, and industrial infrastructure. Hitachi Cable has a strong presence in the market of cables for electric power companies, but it has been in the red for five consecutive years because of dwindling sales. The company enjoys competitive advantage in the construction of social infrastructure including railway network and transmission network that has great demand in developing countries.

Hitachi has been placed importance on independence of each subsidiary. Each of Hitachi’s subsidiaries has a great presence in the domestic market, but Hitachi’s subsidiaries are mostly not big enough to compete in the global market. Hitachi acquired five of its subsidiaries through TOB as part of its strategy to focus more on the IT and social infrastructure business. This strategy improved Hitachi’s results dramatically and allowed Hitachi to recorded net profit of about 350 billion yen in the fiscal year ended in March 2012. However, GE of the U.S. and Siemens of Germany are far ahead of Hitachi in the social infrastructure business. Needless to say, the strategy to pursue economies of scale is one of the most critical factors to compete successfully in the global market. 

Hitachi Metals and Hitachi Cable merge to increase 
presence in the world social infrastructure market

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