Matsushita: First Through the Looking Glass

In 1978, when China had yet to open its doors to the outside world, Deng Xiaoping—the father of China's market-reform movement and then the vice president—traveled to Osaka, Japan, to visit Konosuke Matsushita, founder of Matsushita Electric Industrial Co. Deng asked for Matsushita's assistance in modernizing China's electronics industry. According to Matsushita executives in Beijing, Konosuke Matsushita was the only Japanese electronics industry leader approached at that time. [see photo, "Building a Foundation"].

At first, Matsushita acted as a mere industry advisor, setting up 150 technological cooperation agreements and sending engineers in production, quality control, and product development to China to modernize manufacturing. In the process, Matsushita slowly built relationships with the Chinese government and Matsushita's industrial counterparts, says Yukio Shohtoku, executive vice president in charge of overseas operations.

Such relationships, key to building businesses anywhere in the world, are even more essential in China, with its culture of guanxi—through which personal favors are given and returned as arrangements are made through informal channels. Cultivated patiently over time, such relations are like the proverbial Chinese mulberry leaf that turns into a silk gown.

Today, Matsushita has 47 manufacturing operations in China, six R and D centers, a corporate headquarters, and a number of businesses doing sales and support. These operations employ some 66 000 people and generated 734 billion Japanese yen, or about US $6.8 billion, in fiscal 2004. The company hopes to double total revenues from its Chinese operations this year and to score 1 trillion yen next year, or about $9.3 billion, in sales in China's home market alone.

Matsushita launched its first research efforts in mainland China in 1996, with a tiny corporate research group in Beijing. In January 2001, the company began sharply expanding its R and D in China, establishing a much larger research center in Beijing, then one in Suzhou, near Shanghai. Now the company's six R and D centers in China employ about 1000 engineers. In fact, in the past five years, Matsushita has launched more new research operations in China than in Japan, says Morio Iwazaki, president of Panasonic Research and Development (China) Co., the parent of two of the six R and D centers.