Corporate Governance and Business Challenges: A Toshiba Case Study

This case study analyzes the corporate governance failures of Toshiba Corporation, a multinational electronics company. The introduction provides background information on Toshiba, including its diverse product offerings and historical acquisitions. The study highlights the 2015 accounting scandal and the US nuclear construction liabilities as major issues. Key events, including governance failures, are described, focusing on ethics, risk management, and corporate social responsibility (CSR). The case analysis includes company information, an organizational audit, environmental scanning, and stakeholder analysis. It identifies company issues and analyzes alternative strategies. The study recommends improvements in corporate governance to prevent future financial and reputational damage. The conclusion summarizes the findings, emphasizing the importance of ethical conduct and effective risk management for organizational success.

Action Plan

Contents
SECTION 1- CASE STUDY...........................................................................................................1
INTRODUCTION...........................................................................................................................1
BACKGROUND.............................................................................................................................1
DESCRIPTION OF KEY EVENTS................................................................................................3
Governance Issue.........................................................................................................................3
SECTION 2- CASE ANALYSIS....................................................................................................5
Company information..................................................................................................................5
Organisation Audit of Toshiba....................................................................................................6
Environmental audit.....................................................................................................................8
Stakeholder analysis..................................................................................................................10
Company Issues Identification..................................................................................................11
Analysis of Alternative strategies..............................................................................................12
Justification for choosing strategies...........................................................................................14
Resources which needs to be taken care....................................................................................14
RECOMMENDATIONS...............................................................................................................15
CONCLUSION..............................................................................................................................16
REFERNCES.................................................................................................................................17

SECTION 1- CASE STUDY
INTRODUCTION
Corporate governance is stated to be a system that is developed on the basis of rules and
processes that are controlled by organisation directly and indirectly. It is a concept that is
concerned with balancing each and every aspect that concerns a company’s stakeholders like
shareholders, suppliers, customer’s government, community and financiers. It acts as a
framework that allows an organisation in attaining its objectives in a desired manner. It
encompasses each and every sphere of management, from action plan to internal performance
control variables as well as disclosure of corporate. It is vital for the implementation of right
plans and policies within organisation so that they can attain their goals and objectives in a
stipulated time frame (Yang, 2017). This report is being prepared with an aim of understanding
issues and problems that are faced by companies in managing their operations and resources. For
this assignment, Toshiba has been chosen as an organisation on which whole study will be
conducted. It is one of the leading electronic and hardware companies that is having a highly
diversified product offerings in the market. This report will be discussing the way in which
various issues and problems have their impact upon organisation’s success and failure. It will
assist individuals as well as management in analysing all the aspects that are needed to be
analysed and changed for improving performance.
BACKGROUND
Toshiba is a multinational organisation which is based in Tokyo, Japan. It is a Japanese
conglomerate that has a massive product range. It deals in information technology,
communication equipment, electronic components, materials, power systems, industrial and
social infrastructure, consumer and household appliances, medical and office items as well as in
the field of logistics (He, Páez and Liu, 2017). Company was established in 1939 when a merger
took place between two organisations (Shibaura Seisaku-sho and Tokyo Denki). In the year
1978, its name was officially changed to Toshiba Corporation. It is an organisation that has made
numerous acquisition in their entire history to boost capabilities and market influence. Company
is formally divided into 4 different parts which are:
 Digital product group
 Electronic devices group
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 Home appliances group
 Social infrastructure group
The company is listed on Tokyo Stock Exchange where it is a part of Nikkei 225 and
TOPIX indices as well as Osaka Securities Exchange and Nagoya Stock exchange. It is a public
company operating since 142 years. The area which it serves is worldwide with few exceptions
such as North Korea and Cuba. It is also one of the biggest employers in world as it has a
workforce of 187,809 individuals. Company is very famous due to its engagement in each and
every field. It is also known for its corporate social responsibility where it focuses on enhancing
the standard of living of people.
There have been many reasons behind its expansion and growth and one of them is
company focus on organic growth while also driving on acquiring the blue-chip. It had bought
heavy engineering technologies in their primary industry organisations which has boosted
capability of manufacturing more products (Das, 2017). It also holds the tag of being inventor of
things that were not being sold commercially before such as Radar, TAC digital computer,
transistor television, microwave oven, colour video phone, Pc and laptop, NAND EEPROM,
DVD, Notebooks, MRI systems, etc.
Although in the past there had been few controversies related to organisation and out of
all the infamous accounting scandal has made the headlines, where company bears allegations of
revising and presenting false profits and financial reports (Berlin, Berglund and Lindskog, 2017).
Due to this, Toshiba had to face severe damages in its brand value, market position and damages
to financial condition. The second issue which was the US nuclear construction liabilities that
was there on its subsidiary Westinghouse. This was there due to changes in laws and corporate
environment that led to cost overrun and delays.
Company is focusing on controlling their financial flow of resources so that they can
reduce its reliance on shareholders and external funding. They are trying to clear losses by
enhancing efficiency and overhauling their business model as per the requirements (Liu and et.
al., 2017). This is the reason; they are investing on R&D units which are 39 in numbers. The aim
behind this investment is to ensure that each factor is properly managed. Also, they are trying to
develop Corporate Governance that will enable them in establishing a framework that can be
used for enhancing organisation’s effectiveness. Any type of variance that exists in the system is
being removed by using the stated concept and better level of productivity is attained as well. It
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will allow them in ensuring that company is using an ethical framework to accomplish the tasks
while sharing exact information with all stakeholders.
There are more problems that exist within the system of company which needs to be
rectified by understanding and analysing each and every aspect that is immediate to organisation.
it is important for company to ensure that each task is completed in a set time period so that
better effectiveness is there in final results (Huang, Fischer and Xu, 2017). Today, there are
certain factors that have changed the environment and led company in doing things which
damaged its image in market.
Toshiba was known as an organisation that has kept its stakeholders on priority and focused
on developing society with growth for organisation. But in recent years due to changes in market
environment they got diverted from their ethical values and did things that have resulted in losses
and damages. The whole case is based on how issues related to Corporate Governance can
impact organisation and its profitability in market space (Crook, 2017). There are different
aspects that comes with cited heading. The cited issues costed company more than 8.8 billion
dollars and also it has lost its position as being one of the blue chip companies.to understand as
how these problems took place, there is requirement of understanding few issues related to
governance.
DESCRIPTION OF KEY EVENTS
Governance Issue
There are different types of issues which are faced by the organisation. These need to be
managed by company for making sure that each task is completed within a set time period. The
prime issue which acts as a core behind every other problem being faced by Toshiba is its
corporate governance where it failed miserably. The management has to ensure that organisation
is using right type of framework for conducting its operations and sharing information with
stakeholders (Shiue, 2017). There was no ethical ground which was followed and it led to
accounting scandal in company. They had presented misleading information regarding their
profits and other financial aspects. This is the reason; they have lost their brand value ($8.8
billion) in last two years. They need a framework which will reduce such type of activities and
ensure that all right factors are used for implementing any procedural or policy change. Toshiba
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is a worldwide known brand. It has established their image in developed as well as developing
countries. This allows organisation in exploring the markets in an effective way. But it has to use
a corporate framework that will distribute the work between various departments and ensure that
each task is completed in a set timeframe as well as with higher rate of efficiency. There are
various issues which are the part of Corporate Governance:
Ethics:
They are the values and principles that act as a core for human conduct. An organisation
is made up of various elements out of which people are the prime components that are
responsible for managing each and every task. Today, organisations need to focus on developing
an infrastructure that will assist them in keeping their activities as per the ethical requirement of
a place, region, country. Basically, it is important for company to follow ethical grounds for
making sure that people who are employed are happy as well as other external stakeholders are
satisfied (Imoniana and Dias, 2017). Toshiba uses ethics as a basis for ensuring that its people
are safe and sound, as well as they are not being discriminated in any way. This has assisted
people in building confidence in the company management and work in more efficient way to
attain its objectives. It is important for an organisation to ensure that they are following all the
ethics as to ensure that there are less issues and it is able to serve each party in an effective way.
Risk management:
Business these days are operating in an environment which is highly dynamic in nature.
Risk management is a systematic approach which is used by organisation for managing resources
that are highly dynamic in nature. It assists in ensuring that each activity is completed without
any issue or hindrance. The approach that is employed by company is used is as per the size and
scope of organisation (Schmidt and Fahlenbrach, 2017). In case of Toshiba, is important for
them to make sure that they use government guidelines as a basis to reduce risk factors and
control activities which are unethical in nature. For example, they need to follow all the
legislations and laws that are stated by regional authorities. The best case that will assist in
understanding the statement is C.2 Risk management and internal control states. According to
the principle, Board of directors or top management need to conduct meeting as to review risk
and internal control systems.
CSR:
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Corporate social responsibility is a prime aspect of Corporate Governance. It is a concept
that focus on dual growth (where organisation tries to develop society with its own growth). The
business enterprise has to play a constructive role in developing systems for society that will
ensure higher level of effectiveness to them (Shi, Connelly and Hoskisson, 2017). there are three
main dimensions for CSR activities that are used for conducting them in an effective manner.
they are
 Community: Their development and growth.
 Sustainability: Environment friendliness and assistance.
 Reusability: Using resources again and again for reducing dependency on non-renewable
energy.
 Leadership: Setting an example in front of other organisation as stating about ways that
can be used for achieving better CSR.
At present, there are certain issues which are going on in these stated aspects within
organisation. They need solutions for them as to attain their objectives in a set period of time.
Toshiba requires to adapt things which will enable it in enhancing its ability to control variables
in a more effective manner (Ararat, Black and Yurtoglu, 2017). This is the whole case study that
states about issues concerning organisation and aspects that needs focus for improving its
capabilities.
SECTION 2- CASE ANALYSIS
This is a part where the whole case study will be analysed via using various theories and
methods. This will assist researcher and managers in finding out solutions to problems that exist
in the system. At present, there are different issues which have been cited for Toshiba in the case
study and needs to be analysed. This will ensure that each task is completed in a set time period
(Goranova and et. al., 2017). Organisation need to keep itself focused on aspects that are
dynamic in nature and this section will recommend ways that can be used for ensuring better
productivity. It will include organisation audit, environmental scanning, identification of
problems and potential changes and recommendations.
Company information
Toshiba is a multinational electronic and hardware services provider. It is present in every
country and aims to enhance its capabilities to a higher level of effectiveness. It is serving in
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each and every sector for which it has divided its operations in 4 dimensions. It is considered to
be an inventor organisation that has invented different technologies and made them commercial
success.
Organisation Audit of Toshiba
Toshiba is a world famous organisation that is present in different filed and ensures that it
is able to provide solutions to issues in an effective way. It states about its own capabilities in
tagline which is Leading Innovation. The Unique selling point of organisation is modern
technology that enables it in developing better profits (Griffin and et. al., 2017). It has been an
inventor organisation that has always focused on developing new technology and methods for
improving business capabilities. It is important for them to conduct organisation audit so that
they can understand where company stands in the market. It will also assist them in
understanding where they stand in terms of strengths and opportunities, as well as weakness and
threats.
The SWOT of TOSHIBA is stated below:
Basis Explanation
Strengths These are the capabilities which allows it in gaining competitive edge over
its competitors. As well as assist in overcoming threats and weakness.
They are stated below:
 Toshiba is one of the biggest manufacturer of wide range of goods
and services in whole world.
 There are large number of patents that are registered with
organisation in US, UK and other countries.
 It is also known to have one of the most effective Research and
Development department as it spends most of the money that is
earned on it.
 It has one of the biggest employee base of approximately 200,000.
 One of the leading supplier of distribution and power transmission
systems.
 It has one of the biggest product portfolio with itself.
 It has a very sophisticated and advance marketing department that
prefers to advertise through TVCs print method, internet and social
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media, etc that allows it in gaining higher level of brand recall.
Weakness These are the weakness that can hamper organisation effectiveness these
can be considered to be an issues that prevails within the system:
 There is a higher amount of debts that is there on company.
 The concentration of revenues is a major point of concern as it
leads to limited market share.
 Increasing competition
 Damages from Accounting scandal
 Loss making subsidiaries.
Opportunities These are the ones which needs to be used for gaining competitive edge
over other players in market:
 Company need to increase its usage of technology in its retail
stores or manufacturing.
 They need to hop on the growing demand of healthcare and power
services.
 There is a hype in trend of using NAND flash memories which is
its own invention. So it has an opportunity to explore this situation
and earn billions.
Threats These are the issues that can hamper organisation effectiveness in long
term:
 Competitors are increasing as well as their intensity.
 The economic slowdown in developed counties as well as in
developing ones is impacting organisation.
 Drastic changes in the field of technology
By going through internal and external analysis of company, it can be understood that there
are certain loopholes as well as opportunities which can be explored by organisation for gaining
better market effectiveness (Yermack, 2017). The strengths will be used to overcome weakness
and threats. They will also allow organisation in exploring opportunities that are lying in market
place.
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Environmental audit
It is an important thing that has to be done for gaining better level of effectiveness. Also, it
will allow company in understanding as how faster changes are taking place at global stage
which is led by shifts in regional factors. Market place is highly dynamic and needs to be
analysed so that its variables can be managed in an effective manner. If organisation fails to
analyse variables that exist in external environment, then there are greater chances that it might
get impacted by changes (du Plessis and Low, 2017). This will allow Toshiba in managing its
crucial resources in a highly effective manner. It will be done by using PESTLE analysis as a
tool that will evaluate six different elements that impacts company. they are the ones which are
inter-related and requires a specified approach for management and adaptation.
PESTLE for Toshiba is stated below:
 Political: There are different countries in which Toshiba is operating and offering its
products and services. it has to evaluate them so as to ensure that its effectiveness is
impacted by instability within political environment. at present, there is higher level of
instability within UK, Japan, USA, and EU which are its prime market. Also, its
secondary markets are the developing economy which are still not able to explore their
full potential. There is instability in south china sea as well as Korean peninsula which is
a threat to company.
 Economic: Company growth is directly proportional to country development rate. If an
economy is growing at a higher speed, then it will allow business houses in developing
their capabilities at the same speed. There are constant changes in variables that are
leading to recession and inflation (Al-Najjar, 2017). Toshiba primary markets are
developed nation and this assist it in expanding its capability and since there is a
slowdown in those nation, the company is suffering from losses. It needs to focus more
on developing countries to reduce risk. There are changes in Toshiba strategy due to
uncertainties that remain with this factor.
 Social: This is a factor that runs on the local belief of people and culture that is followed
by them. there are dynamic changes that are taking place within social elements anjd
need to be understood by company. If it does not prepare its strategies and approaches as
flexible as they should then it will suffer from drastic issues and breakdown. Because
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people are core of an organisation and it does not understand them then it will suffer
more.
 Technological: It is a threat to company as well as an opportunity. Toshiba is famous for
being an invention making and innovative enterprise. The mission of organisation has
always been limited to developing it and commercially using it for better effectiveness
(Whincop, 2017). The company is engaged in producing technological goods and this is
why it is more important for it to ensure that it does not lack behind in research and
developmental activities. it has to adapt and develop technologies that will make present
as well as future more comfortable for people and help it in boosting its own business.
 Legal: There are different rivals of company that are operating within nearest market
place, such as Samsung, they have different patents that cannot be used by any other
organisation. In many cases these rivals do use Toshiba technology which requires it to
use legal options as to get loyalty amount. Also, there are different changes in rules and
regulations of company which forces it to have a legal department that will assist
management in understanding variables.
 Environmental: There are different changes that are taking place within market and needs
to be adapted by Toshiba. The Paris submit concluded on the statement that counties will
need to reduce their carbon emissions so that world can have better environment for
future generations (Lauterbach and Pajuste, 2017). The company is engaged in
manufacturing which is the main cause of pollution according to scientist. This is why it
needs to change its patterns and systems so that it can improve its efficiency and reduce
pollution levels emitted by its units.
To understand the PESTLE and dynamic state of factor a table is given below:
Basis Dynamic nature
Political Instable
Economic Slowdown is a concern
Social Diversity needs to be used
Technological Being one step ahead is the only option.
Legal Changes need to be adapted and rivals needs to
be checked.
Environmental All treaties state about reduction in pollution
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which is only possible if organisation uses
right technique of producing goods and
services.
Stakeholder analysis
They are the parties which are impacted by activities that are conducted by organisation for
its own benefits and growth. Each and every company needs to satisfy the needs and wants of all
stakeholders as to ensure that it is able to get all permissions and resources to be used for its
working (Andrade and et. al., 2017). This is why it is important to conduct stakeholder analysis.
It will allow managers in understanding as which party has to be dealt with the amount of
information. Toshiba image got damaged due to accounting scandal where it lied to its
stakeholders regarding its financial condition. And to understand it condition better, there is need
to analyse as how it will deal with each party:
KEEP SATISFIED
(Highly interested, maximum power)
These stakeholders need to be informed
constantly and on time for their satisfaction.
They are immediate in nature
 Shareholders
 Employee's
 NGO/NPO
MANAGE CLOSELY
(Lower interest, more power)
These do not have interest level but require
power so that it can make changes. They need
to be informed with time requirements.
 Suppliers
 Government
MONITOR
(more interest, less power)
Financial and annual reports are used as a tool
to inform these stakeholders.
 Customers
 Financiers
KEEP INFORMED
(less interested, less power)
They need not to be disturbed on constant basis
and only informed when there is requirement.
 Local Community
The above mentioned matrix states as how various stakeholders off Toshiba are
functioning within organisation. the image below will state about company and its parties that
have interest in its business:
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