(FORTUNE Magazine) – IT'S A FEW MINUTES before the morning shift at a Matsushita Electric Industrial Co. semiconductor plant. Workers are shuffling toward locker rooms to don ''bunny suits'' and other sanitized apparel. So strict are the cleanliness guidelines that salespeople, secretaries, janitors, cafeteria workers, and even the top brass must change into geeky white shoes around the , place. Shortly, the rousing company anthem rises throughout the complex. Outside, the imposing silhouette of one of the world's most majestic mountains provides the perfect backdrop to this typical Japanese factory scene.

But this isn't Japan. The mountain is Rainier, the town Puyallup, Washington, and the factory is the home of Matsushita Semiconductor Corp. of America, one of the Japanese company's more than 150 overseas industrial outposts. Each workday, the Matsushita song can be heard as its factories crank up in 38 countries, from Malaysia to Brazil, from Austria to China, from Iran to Tanzania. Like the old British Empire, Matsushita can claim that the sun never sets on its holdings. Matsushita provides sound lessons for any company thinking of going global. The overseas network of factories is one of the company's most valued assets as well as one of its toughest management challenges. A methodical, 30-plus- year effort to internationalize has made Matsushita's Panasonic and National brands almost as well known around the world as Nestle, IBM, Coca- Cola, and Kodak. Moreover, the overseas plants have become valuable product- and market-development tools, helping the company tailor its home appliances and electronic devices to the idiosyncrasies of consumers in dozens of countries. Best of all, Matsushita's global presence has cushioned the double whammy of the strong yen and Japan's listless economy. The muscle-bound yen has made Matsushita's Japanese-made products less competitive overseas, and the long recession at home has stifled the company's long history of steady growth. The numbers tell it all: In the fiscal year that ended in March 1994, fully 49% of Matsushita's $64.3 billion in sales came from overseas, with foreign factories supplying two-thirds of the goods sold abroad. (In 1989 overseas sales accounted for 42%.) In the current fiscal year, overseas sales most likely will surpass 50% for the first time. BUT all this success abroad creates a quandary for Matsushita. Many overseas plants are beginning to compete with the company's factories back in Japan. Already the company is importing a lot of the TVs, air conditioners, VCRs, and electronic components it sells in Japan. While that may be great for Japanese customers and for the country's trade surplus, it puts a lot of pressure on Matsushita's managers and engineers to devise other, more advanced products to keep its 254,000 Japanese employees gainfully busy. (Matsushita employs 99,000 outside Japan.) President Yoichi Morishita, 60, acknowledges the dilemma but contends that it's part of becoming a truly global enterprise. Says he: ''Our success manufacturing abroad helps us in more ways than it hurts us, because that is where the fastest-growing markets are and because it gives us even more incentive to develop new products and technologies back here in Japan.'' Besides, he adds, ''it is our responsibility to help other countries develop. Japan benefited from transplanted Western technology, which has resulted in our own well-known productivity and manufacturing strength. Now we have to trade places.'' Altruism aside, going global is no cakewalk, especially in the electronics industry. First there are the obvious complications of doing business in a panoply of cultures, languages, currencies, voltages, time zones, and political and economic systems. And lately the rules of the international manufacturing game have been roiled by ever-escalating trade tensions between Japan and the West, and by the growing influence of regional trading blocs like NAFTA and the European Union. Meanwhile, in practically every corner of the world, Matsushita is no longer alone. But if there's a single company that should write the book on how to transplant high-level manufacturing skills anywhere on earth, it is Matsushita. The 76-year-old concern made its first move overseas in 1961, in Thailand. That venture was the first of dozens around the world that would come to be called mini-Matsushitas -- jack-of-all-trades factories that churn out relatively small lots of irons, rice cookers, heaters, washers, radios, televisions, vacuum cleaners, and the like for a particular country. Over the next two decades, Matsushita roared into the U.S., Europe, the Middle East, Latin America, and even Africa. In addition to making sound business sense, building more factories overseas was a good way for Matsushita to give older production systems from Japan a second life. The company still often picks up an entire Japanese assembly line and moves it, lock, stock, and robots, to some faraway subsidiary or joint venture. Tadakazu Yamamoto, Matsushita's ebullient senior managing director of overseas operations, has watched the company grow ever more sophisticated and ambitious during his 35-year international career. Says he: ''In the old days each foreign subsidiary worked in one country and designed its sales and manufacturing efforts for that market. Now, with all these new trading blocs, more competition, and the strong yen, that's all changing.'' By the late 1980s, rather than just duplicate what Matsushita made in Japan, some of the overseas plants formed engineering departments to modify and adapt products to meet local demands and for export to still other countries. Says Tsuneo ''Terry'' Takahashi, now back in Japan after eight years as a marketing specialist for microwave ovens in Europe: ''British people like crispy fat on top of meat, so you need a stronger heating element in their ovens. Germans like their potatoes overcooked, but the British like them almost crunchy, so you have to design the cooking controls differently. It's hard for product engineers sitting in Japan to understand all that.'' Lately Matsushita has begun adding full-fledged R&D labs to many of its overseas operations. They have authority to redesign any product or component from the ground up. It's part of a larger strategy to create what Matsushita calls export centers for certain commodity products like TVs and air conditioners that can be priced more competitively if they are produced -- from the drawing board to the loading dock -- with lower-cost labor and parts from outside the land of the rising yen. Yamamoto based his export center gamble on a 1988 internal company prediction that the yen would rise in value more than 30%, to 100 per U.S. dollar by 1994. Currently it is trading at about 104 to the dollar, and the export centers are booming. Not a bad call. MALAYSIA is the showcase export center, producing nearly a quarter of Matsushita's air conditioners and televisions. Another new strategy is to invest in a big way in China and, later this decade, in India and Vietnam. Finally, the emergence of trade blocs like NAFTA is forcing Matsushita to recast the way its subsidiaries in various countries divvy up the business. Says Yamamoto: ''Until now we thought of each NAFTA country as a distinct market. Now we have to decide: Should we make car radios in the U.S. or in Canada or Mexico? What about TVs, telephones, audio equipment? These days, this is what I worry about most.'' To see how Matsushita manages its offshore empire, take a tour -- from the massive TV and air-conditioner export complex outside Kuala Lumpur, Malaysia, to a TV-tube joint venture in Beijing, to a rehabilitated semiconductor factory in the U.S. In all these places, and more, Matsushita must deal not only with manufacturing and marketing strategies and business challenges, but also with cultural complications that would daunt a diplomat.

-- MALAYSIA. Matsushita had modest aims when it first broke ground in 1965 for a mini-Matsushita. At the time, it was only the third Japanese manufacturer to invest in what then was a sleepy Southeast Asian nation. (Even today, Malaysia, with only 18.5 million people, is a tiny market by Asian standards.) Business grew slowly but steadily, and during the 1970s Matsushita opened four other Malaysian ventures to make and service air conditioners, appliances, and consumer electronics. Then came the 1980s. The combination of the ever-strengthening yen and the prospect of labor shortages back home convinced top managers that they had better start producing more offshore. They considered Singapore and Thailand, where Matsushita had larger operations, but opted for Malaysia because the country had more open land, a better industrial infrastructure, and a supportive government. It also helped that almost everyone speaks and reads a little English, the language the company uses in most of its offshore operations. Since 1987, Matsushita has set up 13 new subsidiaries in Malaysia. Employment has more than quadrupled, to 23,500 people -- a fifth of the company's entire foreign payroll. (Only 230 employees there are Japanese.) Last year, Matsushita produced 1.3 million TVs and 1.8 million air conditioners there, 90% of which were shipped overseas, mostly to other countries in Southeast Asia, to Japan, and to the Middle East. The company accounted for 3% of Malaysia's exports and 4.8% of its $50.8 billion GDP. Matsushita's plants reflect Malaysia's cultural mosaic of Muslim Malays, ethnic Chinese, and Indians. Company cafeterias offer Chinese, Malaysian, and Indian food. To accommodate Muslim religious customs, Matsushita provides special prayer rooms at each plant and allows two prayer sessions per shift. Managing director Hiroyuki Shirafuji diplomatically declines to compare the traits and strengths of different races, except to say that Malay women have particularly sharp eyes and good dexterity. Even so, he says, ''there's one unexpected benefit from Malaysia's different races. They are used to accommodating other cultures, and so they think of us Japanese as just another culture. That makes it much easier for us to manage them than some other nationalities.'' What really distinguishes Matsushita's Malaysian plants from those of other Japanese companies in the country, though, is their up-to-date manufacturing technology. For the TV production line, which can assemble 60 different models simultaneously, Matsushita engineers came up with a computerized control system that was more versatile than any in the company's TV plants in Japan. (It has since been duplicated back home.) Ikuo Miyamoto, the energetic young managing director of the air-conditioning operation, likes to brag that its slogan -- ''Let's catch up with Japan'' -- is already outdated. Malaysia frequently outperforms Japan in both quality and efficiency.

-- CHINA. In a sense, the Malaysian export centers were a shakedown cruise for Matsushita's move into what could be the biggest market of all. While the Chinese government won't let it export much, Matsushita is following the Malaysian model to the extent that many of the 16 major joint ventures already under way will make specific items in huge volumes rather than the whole range of mini-Matsushita products. Ultimately, Matsushita may build as many as 30 manufacturing plants across China. Matsushita's pride so far is a joint venture with the city of Beijing to make color-TV tubes. Begun in 1989, the unit employs 2,600 and produces more than a million tubes a year, from 14 to 29 inches in size, on a recycled assembly line that Chinese employees dismantled in Japan and put back together in Beijing. The plant fired up for its first trial run the day before the Tiananmen Square massacre. President Yoshiya Kuse says he'll never forget the day: ''All the bus lines and subways were shut down, but 90% of our employees showed up anyway. Many came on bicycle or even on foot. We rented an entire hotel so those who lived far away wouldn't have to go home that week. Most had never even been inside a hotel before, so to them it was an adventure.'' A job at the joint venture is one of the most sought after in Beijing, not only for the relatively high salaries, but also because Matsushita generally provides housing. Xie Yin Kang, 26, an engineer, quit his job at a Nabisco cookie joint venture to work there so he could get on the waiting list for a company apartment. He also wanted to put his daughter into the company's preschool. Kuse, who has been in Beijing for five years, says that he's pleased with the way Chinese employees have taken to Matsushita's rigidly orchestrated approach to manufacturing. ''Of course there have been problems,'' he says. ''At first people weren't very punctual. And I've noticed that the Chinese are weak on teamwork -- they don't want to share their knowledge with co- workers. But we're working on that.''

-- U.S. Not all of Matsushita's offshore plants were built from scratch, nor aimed at opening or expanding new markets, nor at tapping cheap labor. In 1991, Matsushita paid National Semiconductor $90 million for its plant in Puyallup, Washington, and invested another $60 million for new equipment. Even the total outlay, however, was a fraction of the cost of a comparable new factory. The deal was good for everyone. The plant had been built in 1982 by Fairchild Semiconductor to make chips for military equipment. National Semiconductor took over the plant in 1987 when it acquired Fairchild, but neither owner ever made a profit, mainly because a market for their specialized chips outside the defense business never developed. Matsushita will make a little money this year on sales of $100 million because it now makes simpler chips that are cheaper to produce and have broader markets. It uses more than half the production in its own consumer electronics products. Just as important, Matsushita managed to find a job for every employee who wanted to stay. Says Takashi Suyama, the unit's president: ''Our founder, Konosuke Matsushita, always said, when you go abroad, don't eat another person's pie. So we grandfathered people at their existing salaries, even though some were assigned to lesser jobs.'' Frank Pfefferkorn, vice president of production and engineering and the plant's top-ranking American, says employees were suspicious of their new Japanese employers until they learned of the no-layoff policy. Still, there have been changes, beginning with the stricter cleanliness guidelines. Says Pfefferkorn: ''They also really watch the nickels. They ask us to use both sides of a piece of paper, vacuum our own floors, and turn out the lights when we're not in our offices. It can be frustrating until you realize that it's one big reason we're making a profit.'' For his part, Suyama says that his American workers have better technical skills than their counterparts back in Japan, but that they are less willing to change or tinker with the manufacturing process to make it better. Also, he notes, ''here five o'clock is five o'clock, and everyone goes home; in Japan, if the work isn't done, they stay to the finish.'' DESPITE Matsushita's obvious success overseas, the company is falling short of one of its loftier goals -- bringing the best of its foreign managers into the corporation's highest ranks. Its most senior foreign executive is a woman from Singapore who is executive vice president of Matsushita's regional headquarters there. Back in Osaka, gaijin are a rare sight. Says President Morishita: ''We recognize that to become a truly global company we have to have diversity in top management. That might be realized in the 21st century.'' Moreover, the company still faces the larger challenge of remaining profitable in slow-growth, high-cost Japan. Says Peter Wolff, a director and senior analyst at CS-First Boston in Tokyo: ''It doesn't matter how strong your overseas operations are if you can't keep your people busy at home. The problem is, any product you make in Japan nowadays has to have enough value added to justify the high costs of manufacturing. I don't know what those products are, and I'm not convinced Matsushita does either. '' Since taking over early last year, Morishita has instilled a new sense of urgency at Matsushita and has reorganized the entire corporation to speed up product development. He also has reassigned hundreds of managers and engineers to explore business opportunities in multimedia, software, and digital telecommunications. But it is too early to tell what kinds of products might result. Matsushita is doing a lot of things right overseas, and for the moment at least, any success abroad buys the company a little more time to get its house in order back home. Over the long term Matsushita needs innovative ideas for new products. Its overseas subsidiaries can help make it more creative. Be a good corporate citizen in every country, respecting cultures, customs, and languages.

Give overseas operations your best manufacturing technology.

Keep expatriate headcount down and groom local managers to take over.

Let plants set their own rules, fine-tuning manufacturing processes to match skills of workers.

Develop local R&D to tailor products to markets.

Encourage competition among overseas outposts and with plants back home.

BOX: MATSUSHITA'S LESSONS FOR GOING GLOBAL