Shanghai Matsushita Microwave Oven Co., Ltd. (abbr. SIMMC) was founded in Aug. 1994. It is a joint-venture investment by Shanghai Yangtze River Investment & Development Co., Ltd. (a joint corporation of SVA Electron Co., Ltd., Nanjing Sanle General Electric Corporation and Chengdu Guoguang Electric Co., Ltd.) with the Japanese enterprise Matsushita Electric Industrial Co., Ltd., specialized in microwave ovens and designed to have a production capability of 300,000 units annually.

For ten years, SIMMC has made cheering achievements: over 11 million units accumulated sale, more than 950 newly invented products, 76 million RMB profits, 500 million USD export value. Successively over years the corporation has received various honors, being titled as “Shanghai Top 100 Exporting Enterprise”, “National Double-Excellence for Foreign Invested Enterprise”, “Shanghai Advanced Unit” etc., and already become the global production base for Matsushita microwave ovens.

Actively probing the genuine value of “Made in China”

At time of foundation, SIMMC devoted its faith in traditional operation concept of “noble brand”: high quality, high cost, high price, high-fed spinster. Negative annual profit continued through to 1999. Accumulated sale over the half-decade only reached 850,000 units, yet loss, as much as 37.74 million RMB.

Year 2000, SIMMC grasped the opportunity of transformation in Matsushita’s global microwave strategies. The FC (Frequency Conversion) microwaves, which have richer technology contents, were made the pioneers in taking steps to actively exploit the international markets. The annual sale of that particular year was hence boosted to 980,000 units, generating a profit of 16.6 million RMB. However, the table of low cost-effectiveness and the further declining market share wasn’t so easily turned.

As a globally well-known brand, Matsushita (Panasonic/National) has always indubitably represented out-standing quality and position in the white appliance industry. Nevertheless, due to the fierce competitions, SIMMC market share has been lost and is still being lost. This made the company’s administrative levels to counter ponder. They managed to breach the original concept, and proposed a new strategy guide line of “Seek the true values of ‘Made in China’, develop and produce popularized, low price microwaves.” Fellow employees were advised to give suggestions, and creatively explore the actual cost of producing low price microwaves in China. “High class doesn’t necessarily mean high price, low price has to retain high class” – the battles of decreasing cost and increasing effectiveness broke out. Based on broad survey and research, careful analysis and calculation, and following the principles of backward market pricing, an audacious opinion proposed to keep the cost of each popularized low price microwave under a target cost RMB 250. This target was further made into an important “Project 250” of the company. This meant literally a 50% cut from the material cost of the microwave products. Hardships and difficulties of this task are imaginable.

Facing the fierce competitions, rocketing material costs, falling sale prices, and consumers’ increasing demand in styles and technology content, SIMMC exerted itself in accelerating localization of materials, models and parts, as well as optimizing product designs. The company also tried every possibility to lower sourcing price of raw materials, component processing costs and modeling costs. In early days, microwaves’ core enginery components and exterior parts were all imported. The primary source was Japan, followed by Taiwan, Korea and other areas; there were only few packaging, plastic injection parts from domestic sources. However with the country’s development in technologies and economics, many mainland enterprises were able to reach Matsushita’s standards. Consequently, the company claimed a clear principle of “Fair Competition and Equivalent Usage” to localize material sourcing. Whether from a Matsushita-relative enterprise or from a local enterprise, SIMMC uses materials of lower prices as long as their quality and service reach a Matsushita standard. In the mean time, this principle also regularized sourcing procedures in three aspects: 1, invite public biddings to decide venders; 2, perform strict cost analysis on vender’s biddings to take control of vender production location, quality and pricing; 3, help vender to improve techniques, efficiency and quality. With tough efforts, domestic venders have now an 80% out of all; localized components reached nearly 70%; material cost reduction for each oven is reduced by 120 RMB, accounting for 73% of the total cost reduction. Especially modeling, which depended totally on import in the past, now is 100% local designed and manufactured, achieving a 50% expense cut down. Compare to the situation before implementation of Project 250, relevant oven types laid a 40% cost decrease. Savings in popularizing oven types also benefited products of middle and top grades, resulting in a total average 8% deduction.

While depressing the cost in materials, the company also worked hard on administration and manufacture costs. In managerial aspect, advancements focusing on the key point of “Zero storage” produced favorable benefits. Simply floating assets period of Resource Department was reduced by a third. Though production greatly rises every year, increase in components monthly storage expenses is merely a 16% of the production increase, and for finished product storage, 30% of the production increase only. In the aspect of financing, fund management had been strengthened, successfully performed a “zero loan” company operation, and tremendously decreased the cost of finance.

Technology Exploitation is The Source Power of Enterprise Development

At early stages of the corporation, there was no department specialized in technology exploitations, but only department for technology quality guarantees. There were just two employees in charge of design work. Everything including oven designs and respective quality evaluations were done by Matsushita Japan Department of Projects; the two were only involved with design paper translations and simple modification work. In order to cope with international market demands, and to put more efforts in new products development, the corporation set up a Department of Technology. Aiming at a long-term target of localizing design works, increasing amount of personnel and hardware resources have been continuously allocated to this department. Rate of newly developed production value has remained between 80% and 100%. Department of technology now has employees, except two Japanese staffs, over the number of 40. It is also equipped with several laboratories of different functions to confirm respective designs. These functions include product design, structure design, programme design, instruction booklet design, legal certifications, technology management, etc. Except the core elemental which still requires Japan HQ to develop, this department is now capable of design work for new products selling to 300 different destinations every year. In 2002, the department was recognized as “Pudong District Enterprise Technology Development Centre”. Now it has overtaken Japan HQ and become Matsushita’s main research facility responsible of all structural designs except cavity developments, and also the design evaluation department for Shanghai-manufactured microwaves. Level and frequency of assistance from Japanese technology staff has decreased phenomenally, respective technology development payments to Japan have also decreased by tens of millions RMB, which means the technology department is providing firm supports to help the corporation in realizing independent management and operation.

According to the need of market exploitation, designers learned laws, regulations and design standards of various countries. Along with the work of technology managers, designers made the products passed various safety and electro-magnetic compatibility tests of different areas, home and abroad, such as CCC, UL, CSA, CE, SAA, SASO, GOST-R, JET, RPA, PSB, PAI, etc., and won the entrance cards of international markets. In 1995 when the company started manufacturing, there was only 1 series, 4 model types; in 2000 there were 5 new series 91 model types being developed; in 2003, 8 series and 307 types. These newly developed products pushed the corporation forward. In 2001, the department of technology was titled by SVA (Group) Co., Ltd. as “Scientific Team”; in 2003, and this year again, titled with “Shanghai Model Team of Labor” of SVA-Electron and SVA (Group) Co., Ltd.

Training Talents before Manufacturing Products

 “Training talents before manufacturing products”, “Enterprise generating no profit does not deserve survival” and so on are the conceptual enterprise culture of Matsushita Japan. While advising localization of material sourcing, the Japanese General Manager took Chinese managers’ suggestion, proposed a similar principle of employment localization and promoted a few Chinese managerial personnel against conventions. The GM also modified and perfected a series of administrative regulations. During the efforts of lowering cost and raising efficiency, SIMMC has persisted in adopting a human-orientated human resource strategy.

I. Recruit with widened gateways. SIMMC recruits all kinds of talents with specialties, through tertiary institutions, human resource markets, internet and other various gateways. II. Train employees. The trainings include orientations for new employees, technique training for specialized positions, and other various studies for all sorts of personnel. As for specialized talents and high ranking administrative positions, the corporation provides them with opportunities of continuing education. Some of them were sent to Panasonic (China) for training, some were sent abroad. III. Perform assessments on the employees with respect to their particular positions and work, and integrate with salary, bonus and promotion, giving pressure and motivation at the same time. IV. Daringly promote and make use of outstanding human resources, provide them with opportunities. In recent years, the company not only assigned a group of monitor assistants and instructors, but also promoted a series of “monitors”, “faculty advisors”, “section advisors” and “department managers”. For example, a Chinese deputy manager of age less than 30 was unconventionally promoted to a principal position responsible for new product development and technology management. This kind of promotion does not have any precedent within the Matsushita Group.

SIMMC cares much about employers’ character progresses, and their intensive training. To cope with the demand of new product development, the company focused on improving technicians’ level of specialized ability, organizing planned training programmes for young technicians, sending them in groups to Japan, U.S. and other places for further studies. By face to face communicating with foreign experts and integrating advanced technologies of home and abroad, the capabilities of developing new technology and products have improved quickly. Currently, the structural designs have basically transformed from 2-dimensional to 3-dimensional designs. The company’s products have also received good feedbacks from the market. In resent years, either by independent development or based on some imported technologies, the company has always been the domestic industry’s pioneers in various techniques of “braise and steam”, “anti-biotic coating”, “smart and speedy thawing”, “microwave barbeque simultaneous heating”, etc. The FC stainless cavity microwave developed in 2000 won the third prize of “Shanghai Newly Product of Excellence”. In 2001, 250 structurally optimized projects accomplished global cost cuts, and hence received the Matsushita Group highest prize for designs – President’s Prize. News about these products were reported by NHK, which later triggered a discussion of “Chinese Manufacturing” within Japan. Year 2003, to satisfy the health safety demands of people after being hit by SARS, the human-oriented SIMMC finished developing the new mid/low-price microwaves with ultraviolet sanitation function, and released to the market just in time. After 1999 the company launched into North America market, several products were one after another being recommended by the American magazine CONSUMER, as best performed products over different seasons.

Unending Explorations and Creations

Year 2003, this was the situation SIMMC faced: a 10% average decline in microwave oven selling price, 34% steel price explosion, 14% resin price-up. These meant that the company profit would have been consumed by decreased selling price and increased material costs, or would even have to suffer the operation loss. Facing such a severe environment, the corporation principals lead the whole enterprise against this hardship. Focus point was made clearly that the company over the whole year should emphasize on intensified reduction in product material costs, to ensure the operation plan being realized.

 “Intensive reduction of product costs” was much easier just a talking. During Project 250, the corporation employees had already worked shoulder to shoulder to depress the material costs to the lowest possible level. An intensive reduction of costs? How much room is left? Where’s the breaching point? “Overcome adversities and challenge the utmost” were made the new slogan. The corporation from top to down, analyzed the reasons for operating loss level by level, actively sought with creativity, tried to grab precisely onto the breaching point of benefit. They spent much attention on the corporation with venders, actively discuss with the component venders about possible methods and targets of lowering processing costs. They did not only helped the venders to improve techniques, but also sought for breaching point in the aspect of venders operation modes. They even sent personnel to stay in the vender enterprises, and fed those venders with their own fine concepts of management; by helping the venders improving product quality and work efficiency to depress the processing costs. While SIMMC enjoyed benefits, venders’ interests were also insured. In the mean time, the company exerted more force in various cost cuts, proposed the fellow employees to make reasonable suggestions and small scaled reforms. The company also held activities to stimulate employers work efficiency to reduce costs, which later appeared to have good effects. In the end, the target of processing cost cuts were successfully reached, comparing to the beginning of the year, 32 million RMB processing cost was saved, basically redeemed the loss to steel and resin price-ups, accomplished cost cuts overwhelming the rising price of raw materials. Economics were kept in the positive circulations, and the annual operation target was able to be reached.

In the empire of Matsushita enterprises, microwave oven is a mere industry production – not the most high-tech, nor the largely invested. It is like the small stage in the big opera house. However, over the last two years of production operation, it was just on this small stage, played the one after another wonderful shows with theme melodies of lowering costs and increasing effectiveness. And proposal of creativity and persistency in human-orientation were the keys to the success of these shows.

Creativities in every day, creativities in every job, finally lead SIMMC to the genuine value of “Made in China”

After SIMMC’s lower-end microwaves being developed and launched, not only SIMMC’s domestic market sale increased by 38%, but its market share also increased by 2%, and furthermore, mid and high-end microwaves sales and international market shares were brought up too. SIMMC achieved joyful operation record. In 2003, it produced 3 million microwaves and 1.23 billion RMB total sale, generating profit 35.5 million RMB, created the best ever record since the foundation of the corporation a decade ago.