Make Provision for Future Growth under Adverse Circumstances

Abstract

The deterioration of corporate performance is inevitable, and generally, corporations choose measures such as curtailing investment and reorganizing personnel. However, in the case of Kyoritsu Electric Corporation, the company's subsequent core strategy was determined amidst deteriorating performance, and aggressive investments were made in human resources, facilities, and M&A, which were deemed good opportunities. These decisions led to industrial adaptations and peripheral expansions using core technology, overseas expansion, and organizational growth in subsequent periods of economic recovery. Furthermore, before experiencing the downturn in performance, the company engaged in activities such as exploring customer-driven ideas, searching for industries with potential technology adaptation, internally retaining funds, securing procurement methods, developing an internal organizational structure, eliminating vertical organizations, and delegating authority. In other words, the company conducted organization building as a “provision” for withstanding such situations. Although Chandler (1962) advocates “structure follows strategy” for periods of organization building after growth in boom periods, the company turned recession into a turning point for growth by choosing a behavior pattern opposite to that advised by Chandler.