The Success or Failure of US Corporations Decided by Structural Changes

Major U.S. corporations are expediting the conversion of their industrial structures. Japanese corporations, which compete with U.S. corporations all over the world, should not rest comfortably with the recent upturn in business performance; rather, they need to be increasing profitability.

Overall business performance for U.S. corporations is in good standing. According to Thomson-Reuters, it would seem that 2013 net profits for the top 500 companies in the October to December period have increased by 7 percent when compared with the previous year. However, with sales coming to a halt at an only marginal increase of less than 1 percent, it cannot be said that the wind is blowing favorably for the business world.

It is often the case that business performance is determined by various changes in the circumstances surrounding the industry. The finance industry is a prime example.

With tightened regulations following the Lehman shock, it became more difficult for U.S. financial institutions to take part in high-risk transactions. Because of this, institutions such as the Bank of America, which minimized management risks in their securities and banking business, saw an increase in profits, while Goldman Sachs — and other institutions for whom the trade of securities became a source of revenue — witnessed a large-scale drop in profits.

Beyond finance, the business performances of corporations related to IT (information technology) also branch in both favorable and unfavorable directions.

Sales are up nearly 40 percent for major semiconductor producer Advanced Micro Devices; its net profit/loss summary was in the black by the end of the year. It is pouring its efforts into the production of semiconductors for image processing in video game consoles, rather than continuing with business geared toward personal computers. This management strategy, one focused on the change in customer demands, has certainly proven to be fruitful.

By contrast, IBM — suffering from a slump in the hardware industry — has been in decline for seven consecutive fiscal quarters. The sale of Chinese Lenovo Group’s low-cost server business is undoubtedly a sign of the impending sense of crisis that expedited its structural changes.

The balance sheet of U.S. corporations exemplifies the solemn reality: Even business models or management strategies that were successful in the past are likely to lose their competitive edge in the short term. That trend is spreading beyond merely IT, finance and retail industries.

In Japan, there are endless examples of formerly successful corporations that now hold lesser standings, such as Nintendo’s sudden announcement that they expect to fall into the red. Japanese corporations need to look long and hard at the trends of U.S. corporations, and they should be constantly reconsidering their business structure and polishing their competitive edge.