The past several years have witnessed a great deal of progress in the field of information technology, primarily accelerated by the unlimited possibility and power of the Internet. The advent of the Internet, combined with the advanced new computer technology, has brought a tremendous amount of information flow within and outside to every single organization in the world. As a result, the importance of how to manage, organize and deal with this information flow has been increasing more and more to maintain the competitive advantage in the current business scene. This is the place where Verbatim Corporation, headquartered in Charlotte, can perform and penetrate, providing data storage solutions to its customers. The purpose of this paper is to paint a portrait of Verbatim from the standpoint of cultural, strategic and political dimensions of the organization and to portrait how the human dynamics interact with elements of the organization. This paper, as the first part of the two combined papers, concentrates on essentially the introduction and the conceptual framework of the organization.
- Metaphor -
“A wounded fighter, who has been in a dark cave for a long time, stopped the bleeding and is about to seize the light with his solid sprit, motivation and determination ~ Entrepreneurial Venture." This is the metaphor that fits to Verbatim. A paradigm shift has been occurring in terms of the way the company conducts its business. What is meant by a paradigm shift is that Verbatim, having suffered from a profit for a long time, has been shifting its conceptual business style from a manufacturing company to a sales and marketing company. The company had not turned a profit since early 1994, due to the declining margins and a global slide in sales of floppy disks, which used to be the main manufacturing products (Boraks). However, the company has turned in operating a loss to actually operating a profit since early this year. By changing to a sales and marketing company, Verbatim has become entirely a new company all over again, therefore, the company is operating a business completely different from what the company has ever operated before. This is why "Entrepreneurial Venture" fits to the company as its metaphor.
In 1969 Verbatim was incorporated in California as Information Terminals Corporation (changed to the current Verbatim Corporation in 1978), computer terminal manufacturer with production of high quality data cassettes. Hence, the company has been in the data storage industry for nearly 30 years as one of the most recognizable companies. During the 1970’s Verbatim was primarily involved in the field of different kind of floppy diskette markets along with the alliance with IBM and Shugart. The main products were 8" and 5 ¼" floppy diskettes during that time. Although, these floppy diskettes business was also Verbatim’s prime products during the 1980’s, the production was concentrated on 3 1/2" floppy diskette, which used to have almost 80% of the company’s sale. In the early stage of the 1980’s, Verbatim established a floppy disk joint venture with Mitsubishi Kasei Corporation in Japan ("About Verbatim: Verbatim Corporate History"). This strong connection with one of the Mitsubishi group corporations ended up to bring a major turning point in 1990.
Before that turning point, one thing is worth mentioning that Verbatim was acquired by Eastman Kodak Company in 1985. Kodak and Verbatim developed new digital cassette technology in tape business and small format optical disk program. The major turning point for Verbatim, occurred in 1990, was its purchase by Mitsubishi Kasei Corporation. Kodak wanted to concentrate on media products that were more consistent with Kodak’s electronic imaging strategy, which was to build and market image-intensive systems that would galvanize Kodak’s leadership in the electronic imaging arena. These systems required the massive storage capacity that can be achieved only with ultra high-capacity media ("Kodak To Sell Verbatim Subsidiary To Mitsubishi Kasei Corporation"). Since Mitsubishi Kasei found good business opportunities in the filed of floppy disk and digital cassette tape and matched with Kodak’s desire, Verbatim became a wholly owned subsidiary as a result of this acquisition.
Verbatim has focused on magnetic storage disks and advanced mass storage devices since the early stage of this decade. Although, Verbatim offers MO, CD and DVD media along with the tape, diskette and imaging products currently, it was not very attuned to the optical market when Microsoft moved to selling Windows 95. The last time Verbatim made a profit up to 1999 was when Microsoft was the largest customer that had been buying 3 1/2" floppy diskettes to sell Windows products. Nevertheless, Microsoft changed from floppy diskette to CD-ROM to sell Windows 95, having resulted in the termination of the relationship between Verbatim and Microsoft. Furthermore, because of the new technology coming up rapidly, the use of diskettes has given way to CDs and the required volume of diskettes is not what it used to be. Consequently, Verbatim got out of all floppy disk and tape productions and turned into a sales and marketing company primarily handling Mitsubishi products. With regard to Mitsubishi group, Mitsubishi Chemical Corporation was given birth by the merger of Mitsubishi Casei Corporation and Mitsubishi Petrochemical Co., Ltd. on October 1, 1994 ("Verbatim Corporate Information"). Accordingly, Verbatim has become a subsidiary of MCC since that merger.
- Position In Mitsubishi Group -
As a wholly owned subsidiary of Mitsubishi Chemical Corporation (MCC), Verbatim is one of the members of Mitsubishi group. MCC, Japan’s largest chemical company, heads a group of more than 350 subsidiaries and affiliates worldwide and also is one of the big concerns in the Mitsubishi Keiretsu, a collection of affiliated companies with no official status as a group ("Mitsubishi Chemical Corporation"). In spite of the fact that Mitsubishi group members began loosening their market presence due to the Japan’s recession of the 1990’s, MCC has been remaining as the leader in chemical related products among group members, as well as in the whole Japanese market. Verbatim is placed under one of the eight business groups that MCC operates, which is "Information and Electronics Company." More specifically, this Information and Electronics Company is divided into four business units and Verbatim is placed under Information Storage Products (ISP) Department (see Appendix). ISP Department operates basically in the field of optical disks, hard disks magnetic tape and floppy disks ("Verbatim Corporate Information").
Verbatim’s fundamental mission is to develop and provide information storage products, computer and imaging consumables, as well as related accessories and services which deliver valuable solutions to customers and end users. Verbatim delivers products and services that exceed customer expectations by leveraging its technology leadership, in addition to its world class manufacturing, marketing, and distribution capabilities. The corporate vision is to become the most respected and admired company in the data storage industry, being the best at everything Verbatim does, while holding to its core values and guiding principles ("Verbatim Corporate Information"). Taking corporate mission and vision into account along with Verbatim’s new strategy to be a sales and marketing company, the goal is to buy quality products at the best possible price and turn them around immediately and sell them as fast as possible to get the backup door. Consequently, Verbatim is trying to move in a direction of having almost zero inventory, or going to Just-In-Time purchasing.
- Major Competitors -
Since Verbatim is involved in computer related industry, its major competitors are primarily located in either Japan or in the US. Verbatim operates in four major fields: optical, hardware, disk/tape and imaging. It is difficult to precisely distinguish each field’s competitors, given the fact that most of the companies in computer industry operate not only in one business, but also in several businesses. Therefore, competitors overlap in one or more business fields. Major competitors in optical and hardware fields include from big names such as Panasonic, Hitachi, Sony, Ricoh, Yamaha, Toshiba, Hewlett-Packard, Philips, to fast growing new companies such as Plextor, Hi-Val and Creative-Labs. Iomega, Fuji, TDK are the major competitors in disk/tape field and Hewlett-Packard is the foremost competitor in imaging field.
- Major Strategic, Political and
Cultural Challenge -
Thanks to severely fierce competition in data storage industry, it is extremely hard to gaining and sustaining the market share, as well as to operating business in profit. Even though Verbatim was once the largest floppy disk maker in the world, it sold floppy disk and tape plants in California and Tijuana, Mexico to Taiwan’s CMC Magnetic Corporation. CMC, currently the biggest manufacturer of floppy disk in the world, manufactures tape and floppy disk for Verbatim now ("Enhancement of CD-ROM Business"). One of the main reasons associated with the difficulty to sustain profitability is that the data storage industry is highly commodity based, so that the operating margin erodes very quickly. Another aspect that has contributed to this erosion is, by far, the never-ending story of new computer related technology. As a result, companies can appreciate the lucrative margin at the very beginning when they release new products, however, they end up struggling to make profit out of these new products. Therefore, the biggest strategic challenge Verbatim faces is how to be able to sell products at the highest possible price to get the highest margins and to keep expenses down. This challenge applies to all companies regardless of which industries they are involved, though, it particularly applies to the industry where competition is intense and products are very commodity based like data storage industry.
Another challenges come from much more cultural and political perspectives inside the company. Since Verbatim is wholly owned subsidiary of MCC and has a certain number of Japanese senior management, there has been a kind of conflict between Japanese management team and the US management team including the subordinate employees. At the very beginning of the acquisition by MCC, Verbatim was a very strong-willed company with employees who had worked for a long time. Naturally, there was a mentality that was set the way that Verbatim had been doing was the right way, which was not equivalent to Mitsubishi Japanese management philosophy. This led to a conflict that there was Japanese management team saying, "You need to make these changes since we’ve known they work well." On the other hand, there was US management team saying, "We don’t need you to tell us how to change." This conflict, which can be described as nationalism pride, evolved further when more of senior management became Japanese. Hence, the political challenge is to eliminate the conflict, moreover, to get the business to be aggressively more cohesive. The final challenge is derived from a cultural perspective of Verbatim’s history. Verbatim having been operating in loss for a long time reminds some management or employees not to forget how difficult times were in the past, even though Verbatim is operating in profit now. This harsh past still remains and lies at some people’s heart. Accordingly, the cultural challenge Verbatim faces is getting people to look to the future instead of looking to the past to move forward and learn how to conduct the new business as a sales and marketing company.
Conclusion
Due to the rapid progress and change in technological innovations, associated with a harsh competitive environment, Verbatim had to move from a manufacturing company to a sales and marketing company. Drastic steps have been conducted so far, such as closing down the manufacturing plants, selling business and laying people off, in order to survive and to make profit in data storage industry. Seeking additional customers through further penetration in the fast-growing data storage market is of the essence for Verbatim. More importantly, how fast Verbatim can adjust itself to the new business style with respect to organizational human dynamics is the critical factor of further prosperity. The second paper will be focused on profound analysis on five conceptual frameworks along with the strategic, political and cultural dimensions of Verbatim, which are primarily based on quantitative analysis.
List of References
"About Verbatim: Verbatim Corporate History." Verbatim Corporation. Online. Available: http://www.verbatimcorp.com/corp_overview.cfm. October 22 1999.
Boraks, David. "High-tech product line grows at firm that floppy disks built." 1996. The News-Times. Online. Available: http://www.newstimes.com/archive96/dec1796/cpc.htm. October 25 1999.
"Kodak To Sell Verbatim Subsidiary To Mitsubishi Kasei Corporation." PR Newswire. (1990). Online. LEXIS NEXIS / Academic Universe. October 25 1999.
"Mitsubishi Chemical Corporation." Hoover’s Company Capsules. 1999. Online. NC LIVE / EBSCO. October 24 1999.
[1]"Verbatim Corporate Information." Mitsubishi Chemical Media Co., Ltd.. Online. Available: http://www.mcmedia.co.jp/verbatim/body_mcc.html. October 25 1999.
[2]"Verbatim Corporate Information." Mitsubishi Chemical Media Co., Ltd.. Online. Available: http://www.mcmedia.co.jp/verbatim/body_vcorp.html. October 25 1999.