1994 Volume 3 Issue 1 Pages 55-74
This research is focused on the divisionalized management systems of Nippon Telegraph and Telephone Corporation (NTT) as an exceptional precedent of decentralized profit management.
In 1985, Nippon Telegraph and Telephone Public Corporation was reorganized into a private company in line with Japan's new telecommunications industry liberalization policy. This move was made not only to end the monopoly of Japan's telecommunications industry by NTT as a public corporation, but also to improve the efficiency of NTT. Soon after privatization, NTT replaced its functional organization with a divisional one.
However, NTT as a private company faces two major problems in organizing itself as a system of divisions. First, the company must still operate under government regulations with a mandate to serve as a public utility. And second, the telecommunications business itself with its network operation structure is not conducive to being managed under a divisional organization. For a division seeking to enhance its profitability, these factors pose constraints not usually faced by the typical private company.
The aim of this paper is to examine the constraints faced by NTT in this environment, highlighting: the problems division managers face in operating under a regulated tariff system; lower controllability on its expenses stemming from a higher proportion of fixed costs; and their ensuing effects on a division manager's ability to control profit.
