Page 120 - Accelerating out of the Great Recession

DEFENSE FIRST

pharmaceutical company, and Nitto Denko, an electrical com-
ponents manufacturer.
The Japanese pharmaceutical industry performed very well
in the 1980s, growing 50 percent through the decade. But once
the Lost Decade began, the market stagnated: pharmaceutical
industry revenues grew by only 5 percent between 1990 and
2000. Accustomed to the quick growth of the 1980s, most
pharmaceutical companies (including Takeda) were highly
diversified and maintained high cost bases. Starting in 1992,
Kunio Takeda, Takeda’s CEO, recognized that lower growth
was a new reality that could not be avoided and initiated a
transformation of its cost base that lasted a decade. Takeda was
helped further by its ability to develop multiple blockbuster
drugs and by its strong position in the United States.
Takeda’s first cost-reduction initiative in 1992 was the
restructuring of its research and development program. The
company’s researchers had long focused on experimental scien-
tific research. Now, however, they shifted to more focused, busi-
ness-oriented research. Takeda found this approach to be not
only an effective way of achieving faster results but also a good
way to reduce costs.
After Takeda succeeded in reorganizing its R&D, it started
to offshore some of its production in 1995. By closing many of
its Japanese factories and opening new ones in countries with
lower labor costs, such as China and Ireland, Takeda was able to
achieve significant cost reductions. Over the following 10 years,
the share of labor in Takeda’s costs of goods sold declined from
38 percent to 17 percent.
Through its major restructuring moves—along with smaller
efficiency improvements—Takeda was able to reduce the num-
ber of employees by 47 percent between 1993 and 2003 and to

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