MHI Consolidating and Reorganizing

MarineLink.com
Wednesday, July 31, 2013

Mitsubishi Heavy Industries, Ltd. has determined to shift to a new business structure by consolidating and reorganizing its current nine business segments into just four business domains: "Energy & Environment," "Commercial Aviation & Transportation Systems," "Integrated Defense & Space Systems" and "Machinery, Equipment & Systems." The reorganization initiative is intended to leverage commonly shared customers, markets, core technologies and business strategies.

The first phase, slated to take effect October 1, calls for the reorganization of operations in the four segments of Shipbuilding & Ocean Development, Power Systems, Nuclear Energy Systems and Aerospace Systems, together with select operations presently subsumed under the Machinery & Steel Infrastructure Systems and General Machinery & Special Vehicles segments, into the following three business domains: Energy & Environment, Commercial Aviation & Transportation Systems, and Integrated Defense & Space Systems.

The second phase will consist of reorganization of the present Air-Conditioning & Refrigeration Systems and Machine Tool segments, together with the remaining operations of the Machinery & Steel Infrastructure Systems and General Machinery & Special Vehicles segments, into a new Machinery, Equipment & Systems domain. Preparations are now under way toward target implementation in April 2014.

The content of the four business domains is planned as follows. The Energy & Environment domain will provide optimal solutions toward the creation and improvement of social infrastructure in the energy and environmental areas. The Commercial Aviation & Transportation Systems domain will supply advanced transportation systems and services for land, sea and air applications. The Integrated Defense & Space Systems domain will provide integrated defense systems encompassing land, sea, air and space applications as well as related equipment and services. The Machinery, Equipment & Systems domain will furnish highly efficient products and services to support key industries and areas involving advanced technologies.

The shift to a four-domain business structure has two aims: to promote swift, dynamic business operations through strategic business units (SBU), and to create the optimal companywide framework to enable synergy benefits in portfolio management to drive MHI's overall business growth and expansion. Specifically, by reorganizing into fewer, more inclusive business domains, the company looks to achieve greater freedom in the use of its management resources, permitting timely investments into high-growth, high-profitability areas that will drive overall business growth and expansion. In addition, with the new business domains each encompassing a broader scope of fields of operation, the company aims for more expansive and effective developments with respect to business strategies and activities to attract orders. Furthermore, it also plans to accelerate comprehensive measures such as shared service operations and shared factories.

In April 2011 MHI unified its business execution functions, which were previously performed by the headquarters of each segment as well as company works, into segment headquarters alone, as a way of strengthening its companywide business operation structure, and in April 2013 it implemented corporate reforms under which corporate divisions were reorganized companywide. These and similar initiatives have strengthened the powers of the business divisions and clarified their respective responsibilities (strengthening of vertically integrated functions), and also sought to enhance the corporate division's companywide strategy functions and business support functions (strengthening of horizontally integrated functions).

The shift to the new four-domain business structure, coming on the back of these reforms, is intended to elevate MHI's vertical (business) growth potential and, by achieving an optimal balance with its horizontal (corporate) initiatives, to enhance the company's growth potential as a global enterprise and boost profitability in a quest to become a highly profitable company with a business scale of 5 trillion yen.

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