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Mitsubishi Electric Corporation Business Information, Profile, and History

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History of Mitsubishi Electric Corporation

Even though it shares a name and common heritage with nearly a dozen of Japan's largest industrial concerns, Mitsubishi Electric is an independent company. Like Mitsubishi Chemical, Mitsubishi Heavy Industries, and the Mitsubishi Bank, Mitsubishi Electric is often confused as a subsidiary of Mitsubishi Shoji, the giant trading company. Although legally and organizationally separate, the Mitsubishi companies do form a group whose partners share market information and often extend preferential terms to each other in business dealings.

The original Mitsubishi company (the name means "three diamonds" in Japanese) was originally founded shortly after the Meiji Restoration in 1868 by Yataro Iwasaki, an enterprising samurai who gained control of shipping in Tosa prefecture in the first years of Japan's industrial expansion. Japan grew into a major economic and military power in the western Pacific, in many ways as a result of Mitsubishi's ambitious maritime activity. The company connected Japan with foreign markets and succeeded in establishing a shipping monopoly, despite a powerful challenge from rival Mitsui.

By the mid 1910s, Mitsubishi was one of the largest companies in Japan, with diversified interests in heavy manufacturing, mining, real estate, banking, and trading. In order to attract investor capital, the Iwasaki family created several independent companies out of Mitsubishi's subsidiaries. Mitsubishi Electric was one of them, created in 1921.

Mitsubishi Electric originated in 1905 in the parent company's Kobe shipyard as a manufacturer of electrical equipment for ships and mining. Five years later, the division constructed a large-capacity induction motor (the first in Japan) and a turbine generator.

As a victor in World War I, Japan gained recognition as a legitimate naval power in the Pacific. In order to preserve and enhance its position, Japan expanded its navy and merchant marine, creating even greater demand for new ships equipped with generators and other electric devices. As the major shipbuilder in Japan, Mitsubishi engineered a merger between the electric-machinery departments of Kobe Shipbuilding & Engine Works and its own Mitsubishi Shipbuilding company. Shares in the new company, Mitsubishi Electric, were sold to investors, and the capital raised was used to acquire new manufacturing space and equipment.

Mitsubishi Electric, however, was unable to develop devices technologically competitive with those manufactured by foreign companies. Like NEC, which had negotiated an extensive cooperative agreement with Western Electric, Mitsubishi Electric became closely associated with another American electronics manufacturer, Westinghouse Electric. Their agreement, concluded in 1923, provided Mitsubishi Electric with Japanese marketing and licensing rights for a number of Westinghouse products and designs. As a result, Mitsubishi Electric successfully built a large 2300-kVA vertical-axis-type hydraulic generator.

Mitsubishi Electric remained the favored supplier of large and small electrical devices to all the various Mitsubishi companies while maintaining its expertise in maritime electronics and gaining new strengths in other fields like communication, power transmission, lighting, and consumer appliances. In 1931 Mitsubishi Electric began commercial production of passenger elevators and started exporting fans to China and Hong Kong. Two years later, reacting to greater domestic demand for home appliances, the company began marketing refrigerators.

The 1930s were a difficult period for Japan's zaibatsu conglomerates like Mitsubishi. The 12 major Japanese companies had become inextricably linked to the government through a 50-year industrial modernization program. But the government had recently been taken over by a quasi-fascist element in the military whose aim was to establish absolute Japanese supremacy in eastern Asia. In their effort to modernize and arm Japan for war, the militarists called upon industrial concerns such as Mitsubishi Electric to provide a vast array of equipment.

While Mitsubishi Heavy Industries eventually became the principal manufacturer of warplanes, particularly the notorious Zero, Mitsubishi Electric developed radio sets for the Zero and other aircraft, and later became deeply involved in additional military projects.

With World War II well under way, Mitsubishi Electric came under increasingly strict control by the government. The company was compelled to follow all military directives and, as a result, in 1944 established a research laboratory whose goal was to develop new instruments for naval and aerial battle management. By August, 1945, however, the war was lost, and Japan's battered industries came under the control of government agencies directed by the occupation authority.

Mitsubishi Electric began the enormous task of rebuilding its business after the war. Helped by reconstruction loans but impeded by difficult labor regulations, supply shortages, weak domestic demand, and the dissolution of the zaibatsu, Mitsubishi Electric struggled to survive. By 1948 the company had resumed production of consumer and some industrial items, including straight-tube fluorescent lamps. Military production, once the primary source of Mitsubishi's profits, had been banned by the occupation authority.

Having reestablished marketing agreements with foreign manufacturers, Mitsubishi Electric began selling televisions in Japan in 1953. After completing several successful industrial projects, Mitsubishi resumed foreign operations in 1954 with the completion of a power substation in India.

As a result of the Korean War, the American government decided to end its extractive, punitive policies toward Japan. Instead, it encouraged the Japanese to build a large and modern industrial infrastructure that would allow Japan to serve as a bulwark against the expansion of communism in the East. Increasingly, in the name of efficient industrial organization, the Japanese government permitted the former zaibatsu companies to reestablish ties. The Mitsubishi logo, banned by the occupation authority, was readopted by all the Mitsubishi companies, including Mitsubishi Electric. With the benefit of freer association among the engineering, manufacturing, marketing, and financing wings of the Mitsubishi group, Mitsubishi Electric gained an increased ability to compete in the largely unregulated foreign markets.

The rich American and European markets, however, were already dominated by large electrical-equipment manufacturers like Westinghouse, General Electric, Philips, and GEC. In fact, the Japanese government had passed legislation to protect domestic manufacturers against these companies. Mitsubishi Electric recognized that it could not compete against the large manufacturers until it had first established a stronger base in consumer sales and industrial projects. The increased incomes of Japanese consumers, and the ability of Japanese companies to compete on price in middle-technology projects, provided Mitsubishi Electric with two important ways to achieve that goal.

In 1960 the company became one of the first in Japan to begin production of color televisions, marking a commitment to maintaining market share in the emerging high end of the market. After production of several electric locomotives for the Japanese railway system, Mitsubishi Electric exported its first one, to the government of India, also in 1960.

During the 1960s Japanese products gained a reputation for poor quality and simple technology. In electronics, however, the Japanese Ministry of International Trade and Industry (MITI) assisted companies by coordinating technological developments and protecting certain key markets. One of the earliest to show leadership in technological pursuits, Mitsubishi Electric unveiled a computer prototype in 1960, and the following year began production of its Molectron integrated circuit.

In order to reflect both a corporate reorganization and a more international view, the company's name was changed in 1963 from Mitsubishi Electric Manufacturing to Mitsubishi Electric Corporation, or Melco. The company made its first overseas investment in Thailand in 1964, and two years later concluded a sale of electric locomotives to Spain. In communications, Melco completed the first of several antenna designs for satellite earth stations and placed a remote weather station on the summit of Mount Fuji. Mitsubishi's development of communications technologies later led to its selection for government projects and electronics work with the U.S. Department of Defense.

Melco funded much of its industrial and high-technology research by cross-subsidizing: taking profits from the consumer and business markets and applying them to government and industrial projects with long lead times but large rewards. Among Melco's successes in the low-ticket markets were air conditioners, color televisions, and small office computers. In order to reduce costs in certain areas of research, Melco revived its technical-exchange agreement with Westinghouse in 1966. In later years, Melco began to sell technology to Westinghouse, marking a significant appreciation in Mitsubishi's status.

The increased quality of Japanese products and the continued production-cost advantages enjoyed by Japanese companies led to tremendous demand overseas. It was at this point, around 1970, that Japan's export-led expansion moved into a new phase of feverish growth. In 1972 and 1973 alone, Melco established sales companies in Great Britain, the United States, Brazil, and Argentina, and yet another was opened in Australia in 1975.

Predicting a gradual deterioration in production-cost advantages in Japan relative to other developing Asian nations, Melco began making substantial overseas investments, building a television plant in Singapore in 1974 and another in Thailand three years later.

Until then, Mitsubishi Electric had been primarily a manufacturer of industrial equipment. The oil crisis of 1973-1974, however, critically damaged the company's business in that field and, perhaps more than any other event, convinced Mitsubishi's president, Sadakazu Shindo, that the only way to maintain growth was through expanded consumer sales. One product, aimed directly at the domestic household market, was the futon dryer; 600,000 were sold in 1977 alone.

Melco was one of several companies that elected to develop a home video-recording system based on Matsushita's VHS design. The VHS, although it entered the market a full year after Sony's rival Betamax system, became established as the industry standard. Companies that developed the Beta system--particularly Sony--lost not only a great deal of money in sales but, more important over the longer term, market share. Melco's rising acceptance in the home-video market was complemented by the introduction of such other new products as large-screen projection TVs.

Mitsubishi Electric added sales organizations in West Germany and Spain in 1978, and in Canada in 1980. In order to reduce transportation costs and hedge against rising protectionist sentiment in foreign markets, Melco established television-production facilities in the United States and Britain in 1980, and in Australia in 1982. The following year, Melco opened an integrated-circuit plant in the United States, a cathode-ray-tube plant in Canada, and a VCR plant in Britain. The new plants created thousands of jobs in these countries and revitalized several local economies. By 1985 Mitsubishi Electric's sales had reached ¥2 trillion, double the amount just five years earlier.

Mitsubishi Electric's unusual corporate personality is largely derived from the years Sadakazu Shindo has presided over the company. Later succeeded as president by Nihachiro Katayama and then by Moriya Shiki, Shindo has remained the guiding force at Mitsubishi Electric. Among his strongest legacies are a commitment to frank discussion, honest criticism, and individualism. He was known to have favored the hiring of high school graduates over college graduates, contending that they are only slightly less knowledgeable, but much more willing to ask questions and work in teams.

Mitsubishi Electric is well diversified within the electronics industry, deriving approximately equal amounts of profit from communications, consumer products, heavy machinery, and industrial products. In its effort to overtake competitors such as Hitachi and Toshiba, the company has concentrated its resources on new-product development. The task of selling the products is handled through Mitsubishi Shoji, its former parent trading company, and much of that sales effort is concentrated in the Middle East in an attempt to retrieve what are called oil yen.

Maintaining close relations with both Westinghouse and General Electric, Mitsubishi Electric has bet much of its future success on the integrated microcircuitry that makes possible everything from simple industrial robots to artificial intelligence. Mitsubishi becomes more firmly established as an industry leader as it finds new applications for these technologies in its existing product lines and broadens it product mix in the process.

Principal Subsidiaries: Ryoden Service Co., Ltd.; Ryoden Unyu Co., Ltd.; Mitsubishi Electric Service Engineering Co., Ltd.; Ryoden Estate Co., Ltd.; The Kodensha Co., Ltd.; SPC Electronics Corporation; Toyo Electric Co., Ltd.; Nakayama Kikai Co., Ltd.; Tada Electric Co., Ltd.; Shiga Bolt Co., Ltd.; Melcom Business Machines Co., Ltd.; Ryowa Shoko Co., Ltd.; Ryoden Engineering Co., Ltd.; Ad. Melco Co., Ltd.; Mitsubishi Space Software Co., Ltd.; Ryoden Elevator Construction Co., Ltd.; Ryoreisha Co., Ltd.; Mitsubishi Electric Home Appliance Co., Ltd.; Mitsubishi Electric Credit Co., Ltd.; Ryoden Kasei Co., Ltd.; Mitsubishi Electric America, Inc.; Mitsubishi Electric Sales America, Inc.; Mitsubishi Electronics America, Inc.; Mitsubishi Consumer Electronics America, Inc.; Mitsubishi Semiconductor America, Inc.; Horizon Research Inc. (U.S.); Mitsubishi Electric Manufacturing Cincinnati, Inc.; Mitsubishi Electric Sales Canada Inc.; Mitsubishi Electronics Industries Canada Inc.; Melco do Brazil Com. e Rep. Ltda; MELCO-TEC Rep. Com. e Assessoria Tecnica Ltda.; Melco Argentina S.R.L.; Mitsubishi Electric (U.K.) Ltd.; Mitsubishi Electric Netherlands B.V.; Mitsubishi Electric Europe GmbH; Mitsubishi Electric (Scandinavia) A.B.; Middle East Electric Co. W.L.L. (Kuwait); Melco (Middle East) Ltd. (U.A.E., Iraq and Iran); Mitsubishi Electric Australia Pty. Ltd.; Melco Iberia S.A. (Spain); Mitsubishi Electric Singapore Pte. Ltd.; Melco Sales Singapore Pte. Ltd.; Melco Sales Latin America, S.A. (Panama); Mitsubishi Electric (H.K.) Ltd.

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