168 CHAPTER 3 STAGE Ill SYSTEMS FOR LEARNING AND IMPROVEMENT

was to considerably reduce the number of people in- taken into consideration. The displaced work force had
volved in watch movement production. In 1972. 2,952 guaranteed lifetime employment. so Citizen was re.
people were-required; by 1980 it was down to 2,520. sponsible for finding them new positions within the
and by 1990 ithad fallen to 1.542, which was an overal firm. Fortunately. the diversification program was able
reduction of almost 50%, though the number of units to absorb all of the displaced work force.
produced and subcontracting to subsidiaries must be
(5)
EXHIBIT 1 198 —19 0 Revenues by Major Product Lines
(in Mil ions of Yen)
1988 1989 1990
Watches 161.745 164,186 200.835
Clocks and Jewelry 35.580 38.606 41.940
Information and Fine Mechanics 84.374 112.428 147.166
Other 19.057 19.193 19.215
SUMI'I‘OMO ELECTRIC INDUSTRIES, LTD.: THE KAIZEN PROGRAM
Surnitomo Electric Industries, Ltd. (SEI) was by taking advantage of the distinctive competencies it
founded in 1897 as Sumitomo Copper Rolling Works. a had developed in the manufacture of electric wires and
manufacturer of bare copper. Manufacture of insulated cables. These competencies included metal drawing.
wire began in 1900 and trial production of communica- coating and insulation. and general metal urgy. Relying
tion cables in 1909. Since its founding, SE1 continued upon these core competencies. the firm had branched
to produce electric wires and cables, and was the out into optoelectronics. new materials. and systems.
world’s third-largest manufacturer of these products af- Starting in 1974. 551 began to invest heavily in opto-
ter the French firm Alcatel and the UK firm B.I.C.C. electronics (the fusion of optics and electronics) By
Over the years, the firm expanded the range of wire and 1992, it was producing a wide range of optoelectronics
cable products it produced to cover a variety of uses, products. including a variety of optical fibers and cables
ranging from large ultra-high-voltage power transmis- and a range of light-emit ing- and photo-diodes. The
sion lines to tiny wiring harnesses that were used in au- firm had entered the optoelectronics market when itdc-
tomobiles and airplanes. cided to produce the light-emit ing- and photo—diodes
SEI’s top management considered the firm to be one that were used at the ends of fiber-optics cables to con-
of the most highly diversified in Japan. Sumitomo’s di— vert the signals between optical and electrical formats.
versification program. which began in 1931 when the In 1981. $531 expanded its involvement in the optoelec-
firm started to manufacture its own extrusion dies, was tronics field by commencing production of fiber-optic
considered extremely successful. In 1992, wire products data links and local area networks for computers
only accounted for about 50% of revenues, though this SEI's second major area of diversification was new
percentage was misleading because wire products in- materials, including compound semiconductors, first
cluded numerous new items, such as flexible circuit manufactured in 1970; synthetic diamonds. first manu-
boards. that were not part of the firrn’s original core factured in 1985‘, and new forms of alloys, fine ceram-
business. The firm diversified along technological lines
Professor Robin Cooper of the Peta F. Drinker Graduate Management
Carter at in: 01mm Graduate School prepared this case.
Copyright 0 1994 by the President and Fellow: of Harvard College Har—
vard Basins; Sdtoal case 195-078. ,