History and Evolution of Hitachi

By Wilson. Wilsonfish58@outlook.com
From its humble beginnings as an indigenous electric motor manufacturer in Japan, Hitachi has grown
into a multinational conglomerate with business concerns around eleven business segments: Information
and Telecommunication Systems, Electrical Systems, Social and Industrial Systems, Automotive Systems,
Electronic Component Devices, Construction, and Financial services.
Hitachi was founded in 1910 by Namihei Odaira to produce electric motors in Japan. Hitherto to this
period, most electric motors used in Japan were imported from overseas. The frustration of Odaira, then a
recent graduate of Science and working at his first job with Kuhara Mining played an important role in
the formation of the company. He embarked on development driven by a strong desire to produce
electric motors using his teams own technology developed locally in place of foreign technology. After
overcoming future challenges, the result was the 5-HP motors produced in 1910. This was the beginning
of Hitachis activities in the field of electric motors as well as its starting point in motor technology
development (Mikami et al, 2011: 38).
By 1920, the founder incorporated the company and named it after the town where it made its first sales.
The years in-between the world wars were remarkably successful for the company. It was during this time
that the company started expanding its product lines to include pumps, blowers, and other mechanical
equipment. However, the second world war and adversely affected the company as many of its factories
were destroyed by Allied bombing raids, and after the war, American occupational forces tried to disband
Hitachi altogether. The founder was removed from the company. However, following three years of
negotiations, Hitachi was permitted to maintain all of its manufacturing plants but 19. Hitachi's
reconstruction efforts were hampered by the cost of the production shutdown and a three month labour
strike. The Korean War however saved the company from complete collapse as Japanese industrial firms
benefited from defence contracts offered by the American military. It was during this period in 1949 that
Hitachi went public (Anonymous, n.d.).
Odaira was succeeded by Chikara Kurata as president in the 1950s, and guided the company into a period
of market expansion. Through a visionary leadership he anticipated the future of electronic engineering,
establishing technology exchanges with General Electric and RCA. He also initiated a number of
licensing agreements which allowed Hitachi to compete, through affiliates, in the worldwide market. In
the 1960s the firm also began marketing consumer goods, introducing its own brand of household
appliances and entertainment equipment (Anonymous, n.d.).
In the 1950s, Hitachi made a bold step which proved to be an important milestone in the companys
evolution. It ventured into computer research. Its entrance into the high-tech age was marked with the
manufacturing of its first computer in 1957.
In recognition of the weak competitive position of most Japans electronics companies to their competitors
in the United States such as IBM, the Japanese Ministry of International Trade and Industry funded a
cooperative research and development effort which involved most of Japan's major technical firms in a
bid to narrow the disadvantage. Hitachi benefited greatly from this program, and ended its overseas
policy of non-confrontation. From that point forward, the high-tech competition between America and
Japan and between IBM and Hitachi in particular, was underway (Anonymous, n.d.).

Ever since, Hitachi has witnessed tremendous transformation, expanding its products and services, market
influence and reputation.
Table 1: Milestones in the Evolution of Hitachi Ltd

Year

Milestone

1910

Hitachi, Ltd. Founded

1920

Elevator research begins

1932

First elevator delivered

1937

First escalator delivered

1949

Hitachi goes public

1961

Moving walkway delivered

1963

Fully automatic group control system developed

1964

Hitachi builds the first cars for Japan's bullet train

1966

Hitachi Elevator Engineering Co., (Hong Kong) Ltd

founded

1967

Construction of a 90-metre research tower for

elevators in the Mito plant completed

1972

Hitachi Elevator Engineering (Singapore) Pte. Ltd.

Founded

1974

Company

produces

its

first

IBM-compatible

computer

1973

9 mps high-speed elevator delivered

1988

Company forms joint venture with Texas Instruments

to develop a 16-megabyte DRAM chip.

1989

Hitachi acquires controlling interest in National

Advanced Systems, a U.S. distributor of mainframe
computers; National is renamed Hitachi Data
Systems.

1991

Siam-Hitachi Elevator Co., Ltd. Founded in Thailand

1993

13.5 mps ultra-high-speed elevators released

1998

Three affiliated companies in China merged to found

Guangzhou Hitachi Elevator Co. Ltd. (renamed as
Hitachi Elevator (China) Co. Ltd.)

1999

Machine room-less elevators released

2000

Environmentally friendly eco- elevators released

2005

Hitachi Building Equipment Manufacturing

Co., Ltd. (Tianjin, China) founded.

2007

Hitachi
Founded

2008

Sources: Hitachi Group; http://www.fundinguniverse.com

Elevator

(Shanghai)

Co.,

Ltd.

2008Hitachi Lift India Pvt. Ltd. Founded

Hitachi Product Lines and Services

In the category of information technology, Hitachi has a wide range of products, such as,
BLADESYMPHONY, MIDDLEWARE and platform software , data storage products and solutions,
telecommunication and network systems, finger vein authentication technology, document scanners,
micro device, digital imaging systems.
Hitachi ltd was also involved in HOME APPLIANCES, such as kitchen equipment, refrigerators,
microwaves, induction cooking heaters, etc. The company produces HOME LIFE equipment, for
example, washing machines, vacuum cleaners, electric irons. They have products under beauty and health
sectors, hair dryers, face shavers and hair clippers. Hitachi is into air conditioning business as well.
Hitachi ltd is famous in products of electric devices/materials; the company produces electronic devices,
semiconductors, automotive equipment, chemical materials, components and magnets.
Public/urban/transportation is another sector they have specialties, public administration, education, social
systems, building/condominiums/stores. Logistics services, traffic management systems, automobile
instruments and railroad solutions. They are also in industrial systems, plants, constructions,
machinery/equipment materials. Hitachi equipments for environment protection management,
construction related recycle systems, medical technology analysis machines, medical image diagnoses
machines, solutions for pharmaceutical industry and accessible information equipment and many others.
(Hitachi ltd. 1994)
The Corporate and Business Strategies of Hitachi Ltd
The group adopted the management philosophy of sustainable growth, respect for human dignity and
implementation of corporate ethics. The firms action guidelines are, aiming for reliable and trusted
management, trying to cultivate their own services and products, and achieving customer satisfaction
taking pride and joy in our work. Hitachis management policies are basic and the right path, stand
on ones own and coexistence and quality and development (Hitachi Group, 2011)
Their financial services are based on products and will involve operating leases and credit with
residual value besides finance lease. Commission services of the company focused on management
and consignment of products and include services leveraging on their goods management know-how
acquired from lease transactions, as well as outsourcing business and credit guarantee business. Also,
supply and sales services business of the firm are focused on the utility value and circulation of goods,
which include rental, auto lease and recycle and reuse transactions. Another important business strategy
of Hitachi is overseas business. Finance leases and auto leases of overseas subsidiaries (ibid).
The message from the president and CEO, Kazuya Miura, with regards to the Hitachi capital group
consolidated results for fiscal 2011,ended march 31, 2011 in which the group recorded losses of 7,975
million yen identified three key strategies that was responsible for high volume of business and operating
income. The implementations of these strategies helped the company in surpassing of their initial
projections in fiscal 2011 as against 2010. These three strategies entail, creating new domestic businesses,
increasing profitability in fundamental domestic businesses and expanding overseas businesses (ibid).
In creating new domestic business, Hitachi were able to deliver strong results in the four areas of
receivable collection business, credit insurance business, businesses in cooperation with regional
banks, and cloud computing business. Increase profitability in fundamental domestic businesses, they
pursued further profitability through flexible development in corporate and local government/public
domains within the three major metropolitan areas of Japan. An example of this is their business and

capital alliance aimed at forming a leading company group in auto leasing, for which a basic agreement
was signed in March 2011. The third strategy was expansion of overseas businesses. The president said,
The group will develop more localized businesses in Europe and America. This is aimed at
strengthening management structures, and in Asia, where volume of business is growing steadily. Hitachi
will establish no.1 position in information and communications equipment leasing in Hong Kong as well
as achieve the targeted 10.0 billion yen in volume of business in China two years ahead of schedule (ibid).
Analyzing the corporate and business strategies of Hitachi group based on their fiscal 2011 annual report
considering the three strategies quoted and implemented. Going back to their performances of fiscal 2009
and 2010, the obviously did better than 2011 result. These strategies were drafted in order to apply
dynamic capability so as to renew the competence of the group at face of changes in business
environment. The note attached to the financial statement, the president blamed the losses on the damage
caused by the great East Japan Earthquake that struck on March, 2011. In the first strategy, the group tried
to alter their domestic resource competence by creating second order competence, in other words adding
new competence to an existing competence. As a result, it increased the volume of businesses transacted
domestically in fiscal 2011 as against previous years.
The third strategy was expansion of overseas businesses, this where Hitachi implemented the mode of
external resource in dynamic capability in renewal of resource competence by sorting for third parties in
order to renew its competences. The group implemented the strategy of localizing their businesses in
Europe and America buy way of outsourcing to local companies to expand their businesses overseas.
However, accessing the performances of these strategies Hitachi group implemented to forestall more
losses or trying to adjust to the changing business environment, I will look at the first and third strategies.
The first strategy so far so good has proved to be potent in the sense that it has helped in the increase of
business volumes recorded in fiscal 2011 but didnt impact on the net income of the group. I think I will
agree with the judgment of the president that the losses were affected by the Earthquake that means the
strategy of creating new domestic businesses would have done better in the absence of the East Japan
Earthquake. The third strategy also contributed to the volume of businesses recorded in fiscal 2011, but I
think should have done better if the group focused more fewer countries than expanding their businesses
in so many countries. This is because Hitachi exposes its self-more in trying to have more presence in all
the countries of the world. For example, they have businesses and plant in Thailand and the floods that
ravaged that country in 2010 also created economic losses to the group.
Based on my analysis, am recommending another strategy to the company for future purposes. Hitachi as
a group have tried three important modes of dynamic capabilities, but I still think the company is missing
another important one which is releasing or dropping resource as a mode of dynamic capability. This
mode entails compacting of assets, resources and operations in order to cut cost of operation and also to
avoid too many risk exposures. Hitachi as a group have businesses and plants that cut across the entire
continents of the world. Japan is their headquarters, the group has businesses in, China, Taiwan, Malaysia,
Indonesia, and Vietnam, and in fact they have presence in 12 countries in Asia. Hitachi group are in 5
Americas countries, 21 countries of Europe, they are also in North Africa and South Africa as well as
Oceania. In the short term bases, shrinking these businesses around the world will help the company save
cost and overcome their plight financial position now. In the long term, maintaining the key strategic
businesses around the world will someday be their success story.
External Business Environment
Hitachi operates in a very competitive business environment. Right from its early years, it has come to
compete in a market dominated by American firms particularly IBM. The inferiority of Japanese

technology to those of the United States implied that Japanese firms had to compete from a position of
weakness. However, the drive of the founder to develop indigenous technology together with the will of
the Japanese government to close the technology gap with the United States proved vital to the companys
transformation. After the Second World War, Hitachi, like everyone else, turned to foreign technology in
an effort to close the technology gap. Gaining access to such basic technologies as those used in
semiconductor manufacture, computer production, television manufacture, and nuclear power generation,
Hitachi worked hard to improve upon these technologies and to develop the ability to compete
successfully (Anonymous, n.d.)
In contemporary times, Hitachi has had to contend with a number of international and global issues.
Notable is the impact the global financial crisis had on the company.
In 2008 Hitachi reported its financial results posting the largest ever loses by a Japanese firm. Hitachi,
posted sales of 10 trillion yen ($102bn), down by 11 per cent from the previous financial year, and had a
net loss of 787.3 billion yen ($8.03bn). The company primarily blamed the financial crisis that started
from the United States, contending that the crisis in global financial markets and the decline in spending
across most sectors of the economies of the world were the drivers of that huge loss for the year
(Morgan, P.T., Financial Times, 12 May 2009). The Hitachi Group expressed that "The overall business
environment going forward is filled with increasing uncertainty, with financial markets remaining
volatile. This underscored the vulnerability of Hitachi to global economic crises and more so its linkages
to the American consumer market.
In response to the Situation, Hitachi cut jobs and reduced its subsidiaries. The company projected that it
would have to cut expenses by 200bn yen by the end of fiscal 2009 and that it would do so by exiting
unprofitable businesses and shutting down product lines that had "no hope for earnings improvement."
The cost cutting also includes consolidating factories and cutting about 8,000 jobs in its automotive and
consumer business groups. The company is also hoping to shave 300bn yen in procurement costs in fiscal
2009 and to increase efficiencies by dropping the number of subsidiaries from 910 to fewer (sic) than
800 (Morgan, 2009).
Corporate Governance Structure
Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a
corporation (or company) is directed, administered or controlled. Corporate governance also includes the
relationships among the many stakeholders involved and the goals for which the corporation is governed.
The principal stakeholders are the shareholders, management, and the board of directors. Other
stakeholders include employees, customers, creditors, suppliers, regulators, and the community at large.
Hitachi and its subsidiary companies adopt the Committee system of corporate governance under the
Japanese Company Law. It is a corporate governance system where a board of directors makes basic
policy decisions and oversees the execution of business by executive officers, while the executive
officers, appointed by the board of directors, execute the companys business affairs (Hitachi Group,
2011) .The committee system ensures more effective management of oversight by bringing in outside
directors and to speed up decision making by giving executive officers broader powers. The company
also employs a Group-wide system of internal controls, strengthened governance and management
efficiency to earn the trust of all stakeholders (Hitachi Group, 2010).

Table 2:

Source: Hitachi Group: Corporate Sustainability Report 2011

The Board of Directors sets basic management policies and supervises executive officers in carrying out
their functions while giving the executive officers a measure of responsibility to make decisions
pertaining to the organisations business affairs. It is made up of 13 directors five of whom come from
outside Hitachi. The executive officers execute the business affairs of the organization and decide on
matters pertaining to such in accordance with the division of duties as determined by the decisions of the
Board of directors (Hitachi Group, 2010). There are three statutory committees within the Board of
Directors namely:
Nominating committee: It reposes the authority to decide on the particulars of proposals submitted to the
General Share Holders Meeting for the appointment and dismissal of directors
Audit committee: It audits the performance of directors and executive officers and has the authority to
decide on proposals submitted to the General Meeting of Shareholders on the appointment or dismissal of
auditors
Compensation Committee: the responsibility is to determine the remuneration policies for directors and
executive officers and remuneration for individuals.
The compensation of members of the Board of Directors follows the stipulations of the law.
Remuneration for every director and executive officer is stipulated by the Compensation Committee in
accordance with the Japanese corporate law which governs companies with committees. Compensation
for directors and executive officers is made up of monthly salaries plus end of year allowances for
directors and performance-based bonuses due for executive officers. Directors compensation is generally
fixed, while performance-based bonuses for executive officers are stipulated at around 30 percent of
annual compensation. However, Bonuses are individually determined based on business performance
and the outcome of work carried out under the officers management (Hitachi Group, 2010).
Hitachis core values underpin its corporate governance culture. The values of kindness, efficiency and
effectiveness guide the principles of the organization. Such influences the actions of individual employees

in all facets of the organisations activities. The principles of transparency, integrity, accountability and
social responsibility are at the heart of Hitachis corporate governance ethos. The emphasis is laid on
individual responsibility, a voluntary and self-disciplining code, that ensures wilful compliance with
regulatory requirements. The needs of the customers are very central and incorporated into the ultimate
goal of the organisations pursuit.
Since 2009, the Hitachi Group has adopted October as its Corporate Ethics Month. This initiative
highlights the need for executives and employees to always consider compliance in their actions, with top
management taking the lead to enhance corporate ethics and adherence to legal requirements. In the past,
compliance officers were mainly stationed in sales divisions. Today, the general managers of all divisions
and presidents or directors of Group companies concurrently serve as such officials (Hitachi Group,
2010). In a similar way to strengthen its corporate governance, Hitachi, Ltd. formulated the Hitachi
Group Code of Conduct in August 2010 as part of a shift to a new Group management structure to mark
Hitachis centennial. The document prescribes specific requirements for all Hitachi Group employees
from corporate ethics and compliance perspectives. The code applies to all officers and employees of
Hitachi, Ltd. and its consolidated subsidiaries (ibid).
Hitachis corporate governance understands the need for business to maintain high ethical standards,
individual responsibility and accountability to stakeholders, including shareholders, partners, customers,
and society at large.
Ethical Dilemmas
Hitachis, and in fact Japans effort, to catch-up with IBM and American technology became its albatross
in the early 1980s and presented it with its first major scandal and corporate governance embarrassment.
This happened at the backdrop of intense Japanese and American economic rivalry in the technology
market and deep suspicion of American firms that Japanese companies were undercutting them in the
market (Mnookin, 2010: Punch, 1996). 1n 1982 it was discovered that some employees at Hitachi had
been stealing confidential design secrets from IBM so as not to lose ground in the intense race for
technological superiority. The FBI and the U.S. Justice Department arranged an operation that caught
Hitachi employees paying for IBM documents (Anonymous, n.d.) meant for exclusive IBM use.
Investigations revealed that many Hitachi employees were caught on video attempting to buy IBM
hardware design Manuals. Hitachi and 11 of its employees were indicted on charges of stealing
confidential design secrets from IBM. The indictment on copyright breach was met with a fine of $24,000
and two of its employees were handed jail sentences. The negative publicity caused by the scandal
damaged Hitachi considerably. News of the trial appeared just as the company was beginning a full-scale
marketing campaign for its products in the United States. Many American companies cancelled their
orders or refused to receive shipments. A civil suit brought by IBM won the American company at least
$24 million in annual royalty payments over the ensuing eight years and the right to examine Hitachi's
new software releases for five of those years (ibid).
The Scandal, reports Mnookin (2010: 150) was humiliating for both Hitachi and the Japanese nation: a
tremendous loss of face. This is underscored by the role played by the Japanese diplomatic mission in
the United States. Joyal (1996) says that what is most interesting to note, is that Hitachi spymasters in
Japan, who were supervising the espionage operations, transmitted their instructions to Hitachi case
officers in San Francisco through Japanese diplomatic communications. The Japanese consulate had
received telex instructions on how to proceed with the acquisition program after meetings between
Hitachi and the American agents had occurred in Tokyo. Once communication was received in the

consulate, the message was transmitted to the Hitachi man in Silicon Valley by the commercial
representative of the Japanese consulate.
The impact on Japanese image and those of its companies was enormous. Donald Woutat wrote in the Los
Angeles Times, 17 Nov. 1985, that the company has become a symbol of the dark side of Japan's image
here, which has Japanese companies stealing U.S. technology, "dumping" their high-tech gadgets on the
market, throwing Americans out of work and sapping our industrial strength. Hitachi's misadventures
seem to confirm the worst suspicions about Japan's trade strategies and motives
References
Anonymous
(n.d)
Corporate
Patent
Strategy,
Available
at
http://www.wipo.int/freepublications/en/intproperty/834/wipo_pub_834_ch4.pdf [accessed 10th May
2012]
Anonymous
(n.d.)
Company
Histories
and
Profiles:
Hitachi
Ltd,
available
at
http://www.fundinguniverse.com/company-histories/Hitachi-Ltd-company-History.html [accessed 10th
May 2012]
Joyal, M. (1996) Industrial Espionage Today and the Information Wars of Tomorrow, Paper Presented at
the 19th National Information Systems Security Conference, October 22 25 1996, Baltimore
Hitachi Group (2010) Corporate Sustainability Report 2010
Hitachi
Group
(2011)
Corporate
Sustainability
Report
2011
http://www.hitachi.com/csr/csr_images/csr2011e.pdf [accessed 8th May 2012]

available

at

Hitachi Capital Corporation (2011) Power of Solutions, Power to Customers, Annual Report 2011
Mikami, H. et al (2011) Historical Evolution of Motor Technology, Hitachi Review, Vol.60 (1)
Mnookin, R. (2010) Bargaining with the Devil: When to Negotiate, When to Fight, New York, Simon and
Schuster
Morgan,
T.
P.
(2009)
Hitachi
takes
losses,
chops
jobs,
Available
at
http://www.channelregister.co.uk/2009/02/03/hitachi_3q_f2008_numbers_layoffs/ [accessed 8th May
2012]
Punch, M (1996) Dirty Business: Exploring Corporate Misconduct: Analysis and Cases, London, Sage
Publications Ltd