Overseas business accounts for less than 50% of Hitachi’s Y9665 trillion revenues. Domestically Hitachi is seen as a “winner” but globalization is an urgent issue. Takashi Kawamura, current chairman and former President, points out that compared to GE or IBM or Siemens, Hitachi’s market capitalization is still very low. When he became president in 2009 he emphasized that Hitachi needed to look more like a truly global company. “There was a tendency just to compare ourselves to ourselves, so it seemed as if our performance was better, compared to the past, but this was just inward looking.”
Kawamura had experienced the strength of GE and Siemens as competitors when he was in charge of the power systems business, as did his successor as President, Hiroaki Nakanishi, when he was running the hard disk drive business in the USA, competing with the global top 1 or 2 companies. “The people working in Japan for Hitachi don’t feel this pressure, but the Japanese domestic market is shrinking, and if Hitachi does not compete in the rest of the world, it will become a loser.” This is a problem faced by many Japanese domestic giants – most of their employees are focused on the company and its DNA surviving, and globalization does not seem imperative for this, if business is going well domestically, in fact globalization might even risk the long term survival of the company.
Kawamura gives a couple of what he calls “model cases” of globalization at Hitachi – the UK rail business and the data storage business in the USA.
Hitachi competed against Siemens, Alstom and Bombardier in July 2012 to win the bid for the UK’s Intercity Express Programme – the construction and leasing of trains from 2017 for 27 years. Together with a further order this July, this represents 866 carriages, for which Hitachi has invested Y9.6bn in a factory in County Durham.
Hitachi was only known for TVs and domestic appliances in the UK, and had no history of train business in the UK at all. Kawamura says it was not enough just to keep saying that Hitachi’s technology was superb – so at their own cost, they set up their own control equipment in an old carriage and gathered data by running the train at night.
Then with the 2010 election, the new coalition government launched a spending review, and froze the awarding of the contract, so Hitachi Rail Europe made its own proposals on how to cut expenditure and this led to Hitachi regaining preferred bidder status. Kawamura believes their success was due to appointing a strong local leader, the CEO of HRE, Alistair Dormer, formerly of BAE and Alstom, who had been at Hitachi since 2003. A British sales team was put together and given a large degree of freedom too, so that they knew the local market well and were able to address any needs.
Kawamura says that Hitachi changed tack with their 2012 Mid Term Plan, to focus not just on developing countries but also matured markets like the UK, because it was felt that developed markets also had big infrastructure challenges, and this was how Hitachi could build up its strength in solution businesses.
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