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Brown Goods and PC Competitor Analysis: Toshiba

CONFIDENTIAL. Brown Goods and PC Competitor Analysis: Toshiba. SAMSUNG ELECTRONICS CHINA (SEC China). August 20, 2001.

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Brown Goods and PC Competitor Analysis: Toshiba

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  1. SEC China010821BJ-Toshiba CONFIDENTIAL Brown Goods and PC Competitor Analysis: Toshiba SAMSUNG ELECTRONICS CHINA (SEC China) August 20, 2001 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.

  2. SEC China010821BJ-Toshiba OVERVIEW OF COMPETITOR ANALYSIS FRAMEWORK • 1. Background information • 4. Value chain strategy • Location • Registered capital • Managementteam • Equitystructure • Focus on • Marketing, advertising and promotion • Distribution (channel and sales force) • Starting year • Number of employees • Era analysis • 2. Strategy • 5. Organization and ownership • Mission • Vision • Corporate strategy • Organization structure • Ownership structure • 3. Product/market • 6. Financial performance • Key product offerings • Market position • Sales • Profit

  3. SEC China010821BJ-Toshiba BACKGROUND INFORMATION • 1. Background information • 4. Value chain strategy • Location • Registered capital • Managementteam • Equitystructure • Focus on • Marketing, advertising and promotion • Distribution (channel and sales force) • Starting year • Number of employees • Era analysis • 2. Strategy • 5. Organization and ownership • Mission • Vision • Corporate strategy • Organization structure • Ownership structure • 3. Product/market • 6. Financial performance • Key product offerings • Market position • Sales • Profit

  4. SEC China010821BJ-Toshiba BACKGROUND INFORMATION – TOSHIBA • (As of September 30, 2000) • 1875 by Hisashige Tanaka • Established: • Tadashi Okamura • President & CEO: • US$51,578 million • Total Assets: • Shareholders’ Equity: US$10,054 million • Number of employees: 190,000 worldwide • Domestic Plants, • Branches Offices • And Other Facilities: • Production facilities: 25 • Branch offices: 35 • Sales offices: 23 • Overseas Plants, • Branches Offices • and Other Facilities: • Offices: 10 • Manufacturing companies: 42 • Subsidiaries & affiliates: 72 Source: Toshiba website, Lit search

  5. SEC China010821BJ-Toshiba BACKGROUND INFORMATION – DALIAN TOSHIBA TELEVISION, LTD • Location: • Dalian, Liaoning Province • Starting year: • 1996 • Registered Capital: • US$30 million • Products: 21’ – 34’color TV (CRT, Projection, Flat) • Unit Sold: color TV 1 million sets, 50% export (Year 2000) • Number of employees: 2,000 • Joint Venture Partners • Type • Toshiba • Foreign Juristic Person's Shares • Toshiba (China) Co. • Foreign Juristic Person's Shares Domestic Juristic Person's Shares • Dalian Daxian (Group) Co., Ltd. Source: Company website, Lit search

  6. SEC China010821BJ-Toshiba TOSHIBA’S CORPORATE MANAGEMENT TEAM iValue Creation Company CEO: Tsutomu Kawada e-Solutions Company CEO: Hiroo Okuhara Corporate project Social Infrastructure Systems Company CEO: Tsuyoshi Kimura Digital Media Network Company CEO: Atsutoshi Nishida Corporate staff Mobile Communications Company CEO: Tetsuya Mizoguchi Power Systems & Services Company CEO: Toshiyuki Oshima Semiconductor Company CEO: Takeshi Nakagawa President & CEO Tadashi Okamura Display Devices & Components Company CEO: Eisaburo Hamano Corporate support services Medical Systems Company CEO: Masamichi Katsurada Home Appliances Company CEO: Makoto Nakagawa Source: Company Report, Lit search

  7. SEC China010821BJ-Toshiba HISTORY OF TOSHIBA Source: Company website, Literature Search

  8. SEC China010821BJ-Toshiba TOSHIBA’S DEVELOPMENT WENT THROUGH THREE STAGES 1875-1939 1939-1978 1978- PRESENT Becoming Industry Leader Meeting worldwide competition Business Building Organization structure Corporate strategy Product Development & Technology • Two Japanese electrical equipment manufacturers merged in 1939 to create Toshiba. • Technological innovation accounted for the companies’ successes. One of the founders was the so-called Edison of Japan. • Main products included transformers, electric motors, light bulbs, radio receivers, and cathode-ray tubes. • The company grew rapidly and became a market leader in the electrical and electronic industry. However, the organization became more bureaucratic. • The company continued to be innovative in the early years, producing many firsts in the industry. However, It lost its innovator image in the 70’s . • Numerous leading products in the electrical and electronics areas. Examples includes Japan’s first vacuum cleaner, first fluorescent lamp, first radar, etc. • Toshiba shifted direction by investing heavily in IT segment. The organization became increasingly global, employing 190,000 employees world-wide with annual sales over ¥ 5 trillion. • IT focus, diversification, innovation and globalization are four key elements of Toshiba’s corporate strategy. • Toshiba is intensively focusing on IT-related business (i.e. telecom and internet), meanwhile, leveraging its legacy businesses to generate stable income Source: Literature Search; McKinsey Analysis

  9. SEC China010821BJ-Toshiba DEVELOPMENT OF DALIAN TOSHIBA’S TV BUSINESS IN CHINA 1996-1997 1998-2000 2001 Establishing Leadership in PJTV Market Becoming Toshiba’s Key Global TV Production Base Business Building Key initiative Key results • Founded as a joint venture in 1996, construction was completed in 1997. • Conducted accurate market forecast and implemented just in order inventory management. • Inventory turn-over less than two days. • Made profit the next year. • Focused on high profit margin PJTV segment, and competed on technology, service and management rather than price. • Strengthened customer service • Revenue and profit grew 50% annually. Became the No. 1 market share leader in PJTV segment. • Toshiba decided to relocate its digital TV production to Dalian and invested ¥300 million to expand capacity from one million units to 1.5 million units • exported 800,000 units to Japan. Source: Literature Search; McKinsey Analysis

  10. Invested companies in China • Total investment • Chief representative • Total number of employees • Importance of China • Future investment plan • 23 • RMB 6 billion • Pintianxinzheng (pinyin) • over 10,000 • “Apart from Japan, Toshiba divides global market into four regions, America, Europe, China and the rest of Asia. China is the only region made up of one single country" • Chief representative of Toshiba in China • "To support China's 10th 5-year plan, we will enlarge our investment in IT industry…. Toshiba has the world-leading LCD related and semiconductor technology. The amount of each investment will exceed I billion USD." • Chief representative of Toshiba in China SEC China010821BJ-Toshiba TOSHIBA WILL FURTHER INVEST IN IT INDUSTRY IN CHINA • Background information Source: literature research, interview Source: Literature research, interview

  11. SEC China010821BJ-Toshiba TOSHIBA IS THE LEADING PLAYER IN NOTEBOOK MARKET BOTH IN CHINA AND GLOBALLY • Era analysis of Toshiba in Notebook • Time • Key milestones • 1985 • 1990 • 1993 • 1994 • 1999 • 2000 • Introduced the first notebook in the world • Introduced STN notebook • Introduced color TFT notebook • Introduced Pentium-empowered notebook • Ranked number one in China notebook market for 4 years • Ranked number one in world wide notebook market for 7 years Source: literature research, interview

  12. SEC China010821BJ-Toshiba STRATEGY • 1. Background information • 4. Value chain strategy • Location • Registered capital • Managementteam • Equitystructure • Focus on • Marketing, advertising and promotion • Distribution (channel and sales force) • Starting year • Number of employees • Era analysis • 2. Strategy • 5. Organization and ownership • Mission • Vision • Corporate strategy • Market position • Organization structure • Ownership structure • 3. Product /market • 6. Financial performance • Key product offerings • Sales • Profit

  13. SEC China010821BJ-Toshiba TOSHIBA’S MISSION AND VISION • Corporate mission • “We, the Toshiba Group companies, based on our total commitment to people and to the future, are determined to help create a higher quality of life for all people, and to do our part to help ensure that progress continues within the world community" • Corporate vision • “To grow with excellence as the leading-edge, internet-ready enterprise globally by accelerating innovation with agility, and to create a 21st century of success hand in hand with our customers" Source: Company website, Lit search.

  14. SEC China010821BJ-Toshiba THREE STRATEGIES PROPEL TOSHIBA TO BECOME A GLOBAL HI-TECH LEADER IN THE NEW MELLIMUM • Accelerate the speed of innovation • Management Innovation (MI2001) is a major initiative being promoted throughout Toshiba Group. It is aimed at advancing creative destruction and competitive superiority • Toshiba as a leading-edge, internet-ready global leader in hi-tech • Champion market-centric management • Customer Relationship Management and Supply Chain Management systems will be deployed to cover company-wide operations. • Be internet-ready • Digital Manufacturing, a new system, will be introduced throughout the Toshiba Group • An IT infrastructure for collaborative engineering will be established Source: Lit search, external interviews: Toshiba Annual Report

  15. SEC China010821BJ-Toshiba ASSESSMENT OF TOSHIBA'S CURRENT STRATEGIC POSITION – SWOT • Strengths • Weaknesses • Broad and diversified product portfolio • Strong presence in Asia • Strong R&D and manufacturing capabilities • Less customer focused • Weak brand name in cutting-edge information technologies • Unbalanced global presence • Opportunities • Threats • Global digital convergence • Emerging technologies, i.e., Internet, 3G • China joining WTO opens doors to foreign companies • Bureaucratic management style • Its core semiconductor business is a cyclical commodity business • Behind the curve in key IT developments

  16. SEC China010821BJ-Toshiba THERE ARE TWO SUCCESSFUL MODELS IN THE CHINA CTV MARKET, DALIAN TOSHIBA FOLLOWS THE SONY MODEL • The Konka Model • The Sony Model • Capital intensive, aggressive growth through economies of scale in manufacturing and in the sales force • From 1993 to 1998 Konka acquired TV manufacturers: North east Du Dan Jian, San Xi, An Suo, Chong Qing factories to bulk up • Grew capacity by 2 million units from 1993 to 1998 • Through economics of scale and aggressive pricing Konka was able to grow market share from 3% to 11% from 1995 to 2000 • Zero in on the high end, high profit segment of CRT TV market with a strong brand able to command price premiums • Not in a strong presence in unit market share, but the top brand when consumers respond for the brand quality and reliability • Corporate philosophy unwilling to sacrifice profits for larger market share (vast different from Chinese players) • Future target focused on higher end, cutting edge technology TVs e.g. PJTV, Digital TV, LCD and PDP which have significantly higher profit margins. Source: Lit search, McKinsey analysis

  17. SEC China010821BJ-Toshiba TOSHIBA SHIFTS ITS STRATEGIC FOCUS TO APPLICATION SOLUTION AND CUSTOMER SERVICE IN CHINA NOTEBOOK MARKET • Toshiba notebook strategy* in China • Mission • To be the most responsible IT product application solution and service provider • Strategy evolvement • Time • Strategic focus • 1996 • 1997 • 1998 • 1999 • Product itself • Channel development • Application • Customer service • 2000 • VIP certification focusing on core customers • Channel development into 2nd tier geographies • Application solution of "mobile office" concept * Toshiba notebook strategy in China is co-developed by Digital China, Toshiba’s exclusive notebook chief-distributor in China Source: literature research, interview

  18. SEC China010821BJ-Toshiba PRODUCT/MARKET • 1. Background information • 4. Value chain strategy • Location • Registered capital • Managementteam • Equitystructure • Focus on • Marketing, advertising and promotion • Distribution (channel and sales force) • Starting year • Number of employees • Era analysis • 2. Strategy • 5. Organization and ownership • Mission • Vision • Corporate strategy • Organization structure • Ownership structure • 3. Product /market • 6. Financial performance • Key product offerings • Market position • Sales • Profit

  19. SEC China010821BJ-Toshiba TOSHIBA’S GLOBAL NET SALES BY BUSINESS SEGMENT • Yea 2000 (¥ billion) Others ¥473 Information & Communications & Industrial Systems ¥1,858 Home Appliances ¥660 Electronic Devices & Components ¥1,477 Digital Media ¥1,518 Power Systems ¥571 Source: Toshiba web site, Lit Search

  20. SEC China010821BJ-Toshiba DALIAN TOSHIBA's KEY TV PRODUCT OFFERINGS • Color TVs (inch, model no.) • Projection TV Series: 43’ – 61’ • 61D9UXC • 50D9UXC • 43D9UXC • 50D8UXC • 43D8UXC • Flat TV Series: 21’ – 34’ • 34D8UXC • 34D6DC • 29D8UXC • 29D6DC • 29D3XC • 25D6XC • 21AF6C • CRT TV Series: 21’ – 29’ • 29D2DC • 29D2XC • 25D2XC • 25E3DC3 • 21D2NC Source: Company website, Lit search

  21. SEC China010821BJ-Toshiba DALIAN TOSHIBA’S MARKET POSITION IN CHINA’S CONVENTIONAL CRT TV MARKET: NO. 5 MARKET SHARE LEADER Market share by sales, % • 100% • 100% • Key trends • Rationale Others Rowa 1.9 2.0 LG • Top five players in the market –Changhong, TCl, Konka, Hisense, Skyworth,controlled 41.6% of the market in 1999 grew to 43.7% in 2000 • Local players increased market share from 65% in 1999 to ~67% in 2000 Panda • Industry undergoes further consolidation • Foreign players lose market share to local players Jinxing Skyworth-RGB Xoceco Philips Haier Panasonic Hisense Toshiba TCL Changhong Konka Sony 1999 2000 Source: GFK, McKinsey Analysis, External interviews: Konka, Sony, Toshiba

  22. SEC China010821BJ-Toshiba DALIAN TOSHIBA’S MARKET POSITION IN CHINA’S PJTV MARKET: NO. 1 MARKET SHARE LEADER • Market share by sales • Percent • Key trends • Rationale • Established MNCs, Toshiba, Sony will continue to dominate market • Local players start establishing themselves by 2005 • High-end producers with superior technology in pixel resolution and brightness • Local players expected to acquire key PJTV technologies as of 2003 • As comparison, Changhong alone now controls ~ 20% of large screen CRTV market, local players likely to gain similar share in PJTV market • Local (Konka • Changhong, etc) 100% • 100% • Other MNCs • Hitachi • Panasonic • Samsung • Sony • Toshiba • 1999 • 2000 Source: GFK, internal interview, literature search, external interviews: Sony, Panasonic, Toshiba

  23. SEC China010821BJ-Toshiba PJTV PLAYERS’ STRENGTHS AND WEAKNESSES • Company • Strengths/weaknesses • Toshiba • Strong brand name • Aggressive sales and marketing • Sony • No. 1 brand name • Premium market with highest industry profits • Samsung • Strong quality in resolution and brightness • Solid position in the market • Comparable technology with Japanese counterparts • Other MNCs: Panasonic, Philips, etc. • Possess the technology, but yet to establish themselves in market • Local companies: TCL, Konka, Hinsense, Haier, Changhong • Lack the key technologies for PJTV components – tubes and screen • Low-end brand have resulted in low sales volume • Will fill up the technology gap by about 2003 Source: Lit search, McKinsey analysis

  24. SEC China010821BJ-Toshiba TOSHIBA HAS A FULL-LINE PROUCT OFFERING IN NOTEBOOK, COVERING LOW-END TO PREMIUM SEGMENT • Key product offerings • Satellite Series 2800 (13.3", 14.1", 15.0") • Portege Series (7220CT, 3480CT, 3490CT) • Tecra Series (8100H, 8000J, 8200) • Satellite 1750 (13.3") • New satellite 2800 (13.3", 14.1",15.0") • Satellite Pro 4600 (13.3", 14.1", 15.0") • New Satellite Pro 4600 (14.1") • Satellite 3000 (13.3") Source: Literature research Source: literature research

  25. SEC China010821BJ-Toshiba TOSHIBA IS STRONG IN EDUCATION, LARGE AND MEDIUM BUSINESS, BUT PARTICULARLY WEAK IN GOVERNMENT • Sales by customer segments • Percent of units shipment (000s), 2000 • 100% = • 73 • 484 • Small office • 3.8 • 3.5 • 3.7 • Home • Education • Small business • Large business • Medium business • Government • Toshiba • Market average Source: IDC

  26. SEC China010821BJ-Toshiba TOSHIBA IS GENERALLY A MEDIUM TO HIGH-END PLAYER, PARTICULARLY STRONG IN USD 2.5-3.5K PRICE BRAND • Sales by customer segments • Percent of units shipment (M), 2000 • Toshiba's market share • 100% = • 0.11 • 0.12 • 0.17 • 0.08 • Others • 0.1 • 0.1 • 1.4 • Founder • Dell • 3.5 • 0.7 • Acer • 2.2 • Toshiba • IBM • 0.9 • Legend • Low(0-2k) • Medium (2-2.5k) • High (2.5-3.5k) • Premium (>3.5K) Source: IDC

  27. SEC China010821BJ-Toshiba VALUE CHAIN STRATEGY • 1. Background information • 4. Value chain strategy • Location • Registered capital • Managementteam • Equitystructure • Focus on • Marketing, advertising and promotion • Distribution (channel and sales force) • Starting year • Number of employees • Era analysis • 2. Strategy • 5. Organization and ownership • Mission • Vision • Corporate strategy • Organization structure • Ownership structure • 3. Product/market • 6. Financial performance • Key product offerings • Market position • Sales • Profit

  28. R&D • Manufacturing • Marketing • & Sales • Distribution • After-Sales • Services SEC China010821BJ-Toshiba TOSHIBA CHINA TV BUSINESS HAS A PRODUCT LINE ORIENTED VALUE DELIVERY SYSTEM Digital Media Network Co. Dalian Toshiba TV Co. • Digital media • Toshiba Digital Media Network Company is responsible for Color TV R&D • Dalian Toshiba and its 4 subsidiaries in Dalian, Beijing, Shanghai and Guangzhou are responsible for marketing and sales • Dalian Toshiba is responsible for TV production. 30% parts come from China • Dalian Toshiba primarily uses sales forces in its four subsidiaries to sell TV products directly to retailers. It also uses distributors in certain regions such as Chongqing. • Toshiba (China) helped set up the after-sales service network, and Dalian Toshiba is running the network and responsible for PNL. Source: Literature Search, Konka web site, team analysis

  29. SEC China010821BJ-Toshiba DALIAN TOSHIBA’S TV DISTRIBUTION CHANNEL • Dalian Toshiba TV Co. • Manufacturing Plant • Consumers • Retailers: • Hyper/super-market: 10% • Designated Stores: 25% • Dept. Stores: 30% • Specialty Stores: 35% • Dalian Subsidiary • Beijing Subsidiary • Shanghai Subsidiary • Guangzhou Subsidiary • 70% • Subsidiary Sales Force • 30% • Distributors Source: McKinsey Literature Search, external interviews, McKinsey analysis

  30. R&D • Manufacturing • Marketing and branding • Sales and distribution • After-sales service SEC China010821BJ-Toshiba TOSHIBA ADOPTS THE NATIONAL CHIEF-DISTRIBUTOR PRACTICE IN NOTEBOOK BUSNIESS IN CHINA • OEM • Digital China • Toshiba • Toshiba • Dealers • Toshiba SH • Toshiba SH • Toshiba R&D • Toshiba SH • OEM: Renbao, a Taiwanese OEM player • Digital China • Digital China (for Toshiba notebook only) • Toshiba • Digital China • Centralize key accounts across different products • Centralize SI for key accounts (banking, tax) • Be in charge of channel develop-ment and management • Digital China • Major responsibility • Toshiba SH factory • Parts' inventory • Ancillary hotline Source: interview

  31. SEC China010821BJ-Toshiba TOSHIBA HAS POSITIONED CHINA AS A KEY R&D BASE • R&D • Three-layer structure of Toshiba R&D • First layer focusing on technology trends in the next 3-5 years • Second layer focusing on multi-media technology and technology trends in the next 2-3 years • Third layer focusing on product development • Toshiba R&D in China • Established "R&D department" in Beijing, April 2001 • Plan to develop it into "Toshiba (China) R&D center” in October 2001 which will be the third overseas R&D center of Toshiba • Plan to have 250 people this year and expand to 500 people in R&D center in 2005 *The other two R&D centers are in the UK and the US respectively Source: Literature research

  32. Digital China • Customization for big-batch order according to customers' individualized demand for hardware configuration SEC China010821BJ-Toshiba TOSHIBA HAS OUTSOURCED THE MAJOR PART OF NOTEBOOK MANU-FACTURING AND ITS DISTRIBUTOR IS CAPABLE OF CUSTOMIZATION IN CONFIGURATION • Manufacturing • Parties involved • Responsibilities • Toshiba SH • Assembling production to cover total volume sold in China • Assembling production for expert • OEM (Renbao) • Major part of notebook manufacturing Source: Literature research, interview

  33. SEC China010821BJ-Toshiba UNDER STRONG COST PRESSURE, DIGITAL CHINA AND TOSHIBA ARE PUSHING TOWARDS MORE FLATTENED CHANNEL STRUCTURE • Channel strategy • Pay sufficient attention to fast-growing customer segments, such as education and home, as well as major segments, such as government and business • Expand into 2nd-tier geographies and enhance channel • Channel Structure • Channel Cost • Percent of retail price • Digital China • >> 10 • Industry distributors • Core distributors (~ 50) • Specialty shops (over 100) • Direct • >10 • 8-10 • 5-8 • Second tier dealers (hundreds) • End users • Before 1997 • 1997-1998 • 1999-2001 • Future expecta-tion of manu-facturers Source: CCID, interview

  34. Key initiative • Build up a nation-wide logistics system • Total investment • RMB 65 million • Three-tier structure • 3 first-tier centers in Beijing, Shanghai and Guangzhou • 7 second-tier centers • Third-tier components • Detailed practice • Providers deliver to three first-tier centers • Inventory is distributed among all the three tiers with inventory cycle shortening from first tier to the third • SCM management is through IT network SEC China010821BJ-Toshiba DIGITAL CHINA IS BUILDING UP AN ADVANCED NATION-WIDE DISTRIBUTION NETWORK TO FURTHER CUT DOWN COST • Distribution Source: Literature research, interview

  35. SEC China010821BJ-Toshiba DESPITE CONTINUOUS IMPROVEMENT, TOSHIBA NOTEBOOK’S CUSTOMER SERVICE STILL LAGS BEHIND IN CERTAIN ASPECTS Customer service • VIP certificate For A-class customers, Toshiba notebook guarantee includes response within 10 hours, and repair finished within 20 hours, otherwise offering a backup notebook • On-site service On-site service is offered in Beijing, Shanghai, and Guangzhou • Dell and Acer offer 4-hour response commitment • Dell offers on-site service in major cities in China Major initiatives Competitor’s offerings * Footnote Source: Source Source: Literature research, interview

  36. SEC China010821BJ-Toshiba ORGANIZATION AND OWNERSHIP • 1. Background information • 4. Value chain strategy • Location • Registered capital • Managementteam • Equitystructure • Focus on • Marketing, advertising and promotion • Distribution (channel and sales force) • Starting year • Number of employees • Era analysis • 2. Strategy • 5. Organization and ownership • Mission • Vision • Corporate strategy • Market position • Organization structure • Ownership structure • 3. Product /market • 6. Financial performance • Key product offerings • Sales • Profit

  37. SEC China010821BJ-Toshiba TOSHIBA’S CORPORATE STRUCTURE Foreign Country Japan iValue Creation Company Other JV e-Solutions Company Corporate project Social Infrastructure Systems Company Statutory Auditors Dalian Toshiba TV, Ltd Digital Media Network Company Corporate staff Board of Directors Mobile Communications Company Power Systems & Services Company President & CEO Semiconductor Company Display Devices & Components Company Other Subsidiaries Corporate support services Medical Systems Company Home Appliances Company Foreign Country Japan Source: Lit search, team analysis

  38. SEC China010821BJ-Toshiba TOSHIBA’S MAJOR SHAREHOLDERS • (As of September 30,2000) • Entity • Percent Outstanding • The Dai – ichi Mutual Life Insurance Company • 3.94% • 3.88% • The Sakura Bank,Ltd. • 3.36% • Nippon Life Insurance Company • 2.55% • State Street Bank and Trust Company • The Chase Manhattan Bank NA London • 2.28% • The Sumitomo Trust and Banking Co.,Ltd. • 2.27% • Mitsui Mutual Life Insurance Company • 1.88% • Employees Stock Ownership Plan • 1.68% • The Mitsubishi Trust and Banking Corporation • 1.65% • The Nippon Fire & Marine Insurance Co.,Ltd. • 1.55% Source: Toshiba website

  39. SEC China010821BJ-Toshiba TOSHIBA HEADQUARTER HOLDS THE MAJORITY OF ITS NOTEBOOK MANUFACTURING JV IN CHINA • Ownership structure • Toshiba • Toshiba China Co., Ltd • Shanghai Jinqiao • 80% • 10% • 10% • Toshiba Computer (Shanghai) Co., Ltd Source: Literature research

  40. SEC China010821BJ-Toshiba FINANCIAL PERFORMANCE • 1. Background information • 4. Value chain strategy • Location • Registered capital • Managementteam • Equitystructure • Focus on • Marketing, advertising and promotion • Distribution (channel and sales force) • Starting year • Number of employees • Era analysis • 2. Strategy • 5. Organization and ownership • Mission • Vision • Corporate strategy • Market position • Organization structure • Ownership structure • 3. Product/market • 6. Financial performance • Key product offerings • Sales • Profit

  41. SEC China010821BJ-Toshiba TOSHIBA’S OVERSEAS SALES AND R&D EXPENDITURES R & D Expenditures Percentage of Net Sales • Overseas Sales • (￥billion) • R&D Expenditures • (￥billion) CAGR= 4.7% ￥2,235 ￥344 ￥2,116 ￥2,040 2,000 320 ￥323 ￥317 1,500 240 1,000 160 5.9％ 6.0％ 5.8％ 500 80 0 0 1998 1999 2000 1998 1999 2000 Source: Toshiba 2001 Annual Report, Lit search

  42. SEC China010821BJ-Toshiba TOSHIBA’S HISTORICAL REVENUES AND PROFITS Yen billion • Net Sales • Net Income • CAGR = 9.4% • CAGR = 1.9% • * • 1999 • 1998 • 1997 • 1999 • 2000 • 1998 • 2001 • 1997 • 2000 • 2001 Source: Toshiba 2001 Annual Report, Lit search

  43. SEC China010821BJ-Toshiba IN 2000, DALIAN TOSHIBA’S UNIT SALES IN CHINA WAS 7% OF CHANGHONG’S UNIT SALES, BUT DALIAN TOSHIBA’S GROSS PROFIT IN CHINA WAS 89% OF CHANGHONG’S GROSS PROFIT • Unit Sales • thousand • Gross Profit • billion RMB • Changhong • Dalian Toshiba • Dalian Toshiba • Changhong Source: 21st Century Economic report, March 19, 2001

  44. SEC China010821BJ-Toshiba DESPITE OF STRONG GROWTH OF TOTAL MARKET, TOSHIBA NOTEBOOK HAS EXPERIENCED STAGNANT GROWTH OF 4.4% ANNUALLY • Notebook revenue (RMB billions) • Total China market • Toshiba in China • 98-00 CAGR Percent • 98-00 CAGR Percent • 10.6 • 48.6 • 4.4 • 1.7 • 1.6 • 1.5 • 6.1 • 4.8 • 1998 • 1999 • 2000 • 1998 • 1999 • 2000 Source: IDC

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