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Citizen Global Plan 2018
February 13, 2013
Toshio Tokura, President and CEO
(Medium-Term Management Plan Briefing)
2
� Market condition and our tasks
� Targets of the New Medium-Term Management Plan
� Address the tasks
� To achieve the corporate growth
Contents
(1) Watch and clock product business
(2) Machinery product business
(3) Precision component product business
3
Current Medium-Term Plan
Mid-term Plan FY2010-2012
Target indicators
Operating
margin
8%
Operating
income
25 billion yen
Establish steady growth business corporations
through “strengthening corporate structure”
Operating Results
Medium-term operating income targets not
achieved
242
72
167 165
7.2%
0.5%
2.9%
5.9% 5.9%
4.0%
0%
2%
4%
6%
8%
0
70
140
210
280
FY07 FY08 FY09 FY10 FY11 FY12 (forecast)13
110
Operating income
Target: 25 billion yen
4
Operating income (100 million yen)
Operating margin (%)
Operating margin
Target: 8.0%
5
� Market condition and our tasks
� Targets of the New Medium-Term Management Plan
� Address the tasks
�To achieve the corporate growth
(1) Watch and clock product business
(2) Machinery product business
(3) Precision component product business
Market : Commoditization of product
(low-end consumers)
Change of needs from focusing on functionalitytoward brand value (watch and clock)
Competition: Price competition with Asian manufacturers
Increase growth through investment in
advertising/ expanding sales channels
Standardization (low price) ⇔ Differentiation (brand loyalty)
Business environment:
Economic stagnation in leading countries/
economic growth in emerging countries
Steep rise in labor costs/ raw material costs in
emerging countries 6
Changes in business environment and
Lack of Transparency
7
Competitive environment
Only solid and stable business will
survive in global competition.
Get ahead of the global competition
= Generate profit
Standardization (low price) ⇔ Differentiation (brand loyalty)
“Value” we provide, to meet the conflicting market needs
8
(1) Clarify the business portfolio
(2) Strengthen the production capability
(3) Enhancement of the human resources and
promote efficiency in productivity
(4) Strategic marketing to meet the Asian market
needs
Citizen Group’s tasks - Summary
The following to be achieved to
increase Citizen Group’s profit:
9
�Market condition and our tasks
�Targets of the New Medium-Term Management Plan
�Address the tasks
�To achieve the corporate growth
(1) Watch and clock product business
(2) Machinery product business
(3) Precision component product business
10
1. Focus on the business area using the strengths developed
and accumulated on years of experience of watch and clock
business and Aim to establish an industry leading business
group with global competitiveness
2. Considering China and other emerging countries as our
strategic marketplace, we accelerate growth in profit through
boosting sales concurrently with promotion of streamlining
Medium-Term Management Policy
Aiming to be a “Solid Global Company”- business group with speed and dynamics -
Solid Global Company
⇒ consistently provide “value” required in the global market
Overview of stages in New Medium-Term Management Plan
Overcome the unresolved
business tasks
Achieve FY2018
goals
Aim to become a “solid
global company ” so as to
survive against
international competition
Enhancement of business
performance with
aggressive investment
(FY2016 - FY2018)
Thorough structural reform and
improvement
(FY2013 - FY2015)
To achieve FY2018 goals, we will carry out thorough structural reform
for cost-effectiveness and growth investment
11
12
Target Indicators of
Medium-Term Management Plan
Operating
income
FY2012 forecast FY2018 target
40 billion yen
FY2015 target
30 billion
yen
6.0%5.0%-
12 billion
yen
Target indicators: Operating income and
ROA
ROA
13
(1) Watch and clock product business
(2) Machinery product business
(3) Precision component product business
� Market condition and our tasks
� Targets of the New Medium-Term Management Plan
� Address the tasks
� To achieve the corporate growth
14
(1) Clarify the business portfolio
(2) Strengthen the production capability
(3) Enhancement of the human resources
and promote efficiency in productivity
(4) Strategic marketing to meet the Asian
market needs
Address the tasks
15
(1) Clarify the business portfolio
Increase profits and Achieve stable
management(1) Strengthen the business structure
(2) Focus on the competitive products
(3) Enhance business alliance with others
Device/Electronics
product business
To be developed as the second core
business to Watch and clock businessMachine tool business
Reaffirm our principle
our core business to develop the group’s growth
Watch and clock
business
Growing business with great
potentialPrecision component
business
16
� Breakaway from the self-manufacture
� Identify our “strength”
� Domestic production ⇔⇔⇔⇔ Overseas
production
� Re-strengthen the capabilities of domestic
development and improvement ability
� Cost reduction by overseas production
� Risk-adverse by pulling out of excess
concentration of business in China
(2) Strengthen the production capability
Citizen
Heiwa
Watch Co.,
Ltd
Citizen
Tohoku
Co., Ltd.
Citizen
Micro Co.,
Ltd.
Citizen
Watch
Miyota
Co., Ltd.
Citizen
Watch
Kawaguchiko
Co., Ltd.
Citizen Watch
manufacturing
functions
Citizen Watch Co.,Ltd.
Set up New company “Citizen Watch Manufacturing Co., Ltd.”
Our Aim To re-strengthen the domestic production
capability(creation of added value)by concentrating and combining the skills and craftsmanship held among
individual citizen group companies
� In Watch and clock business:
Restructure the domestic primary manufacturing functions
17
(2) Strengthen the production capability
18
� Improve the efficiency of
administrative division
� Flattening of corporate structure
� Streamlining the overlapping
services/business
(3) Enhancement of the human resources
and promote efficiency in productivity
19
� Change the compensation structure to performance related/individual
assessment system
�Cultivate human resources those to be supporting our business for medium to
long term period
�Develop human resources those to be working in international fields
(3) Enhancement of the human resources
and promote efficiency in productivity
20
*The figures are index numbers measured from the FY2001 figures set as 100.
GDP growth by country
(Source) International Monetary Fund, World Economic Outlook Database, September 2011
(Note) Calculated based on the purchasing power parity (PPP) evaluation of GDP by country
(4) Marketing strategy in Asia
21
Restructuring
expense
Approx.
20 billion yen(arrocated in FY2012)
Expected
benefit(cost reducing)
Approx.
10 billion yen
(from FY2015)
� Reduction in workforce
(approx. 10% of domestic workforce)
� Restructure of domestic/overseas production systems
� Shifting production overseas
� Conduct a review of unprofitable business
� Other scheme including streamlining
administrative operations
Enhancement of the scheme of
business structure and expected benefit
22
(1) Watch and clock product business
(2) Machinery product business
(3) Precision component product business
�Market condition and our tasks
�Targets of the New Medium-Term Management Plan
�Address the tasks
�To achieve the corporate growth
From “Product” to “Brand”
- Achieve to become a global company to survive against international competition
➢ Lead the Group’s growth by increasing sales and profit.
➢ Execute the growth strategy focusing on the CITIZEN
brand products.
➢ Implement structural reforms to improve efficiency and
pursue increase of profitability
Watch and Clock Business:
Basic outline
23
➢ Establish a continuous investment cycle to achieve
business growth and improvement of efficiency
Watch and Clock Business:
Forecast of Market size Transition
• World Assembled Watch Market Size in 2011 (estimated by Citizen): 2.9 trillion yen (wholesale basis)• The growth trend of the watch and clock market is linked to the world economic growth and estimated to
grow 3% - 7% annually mainly in Asia. • In sales volume, it remains flat or declines while the average unit price has risen together with the increase
in the rate of high added-value products. 24
Unit: 100 million yen Unit: Million yenQuantity
1,4001,325
1,268
1,374 1,3941,420
1,700
2,000
213
91 92
145
130120
200
300
0
50
100
150
200
250
300
0
1,000
2,000
FY2007 FY2008 FY2009 FY2010 FY2011 FY2012
(forecast)
FY2015
(target)
FY2018
(target)
Sales
Watch and Clock Business:
Target
25
[FY2018 Target]
Operating income: 30 billion yen
Operating margin: 15%
Operating income
FY2018 Operating income: 15 billion yen
Operating margin: 15%
➢ Strengthen the corporate brand marketing
Watch and Clock Business:
CITIZEN brand product business
26
➢ Create business structure capable of
generating high profit margins
➢ Strategic market for sales expansion :
China and other markets in Asia
[Business policy]
[Sales plan]
[Main scheme]
Watch and Clock Business:
CITIZEN brand product business
27
➢ Product strategy‐Further improvement of Eco-Drive, the distinctive technology of Citizen ‐Enhancement of the brand image by promoting the global model products
➢ Price strategy‐Ensure reasonable profit margins by price controlling over international markets
‐Improve the brand image, and growth of ASP by increasing added-value products
➢ Distribution strategy‐Increase the impact of brand image through direct investment on distribution system
‐Consolidate the impact on distribution by multi-brand strategy
➢ Advertisement strategy‐Capture consumer attention by investment in effective advertisement
‐Enhance the consumer interface by expanding flagship/directly-owned stores
28
“CITIZEN” brand watch and clock – Business in China
Significant increase in sales and
operating income
• Improvement of product mix effect
• Active advertisement
• Improvement of the distribution structure
➢ Continuous effort in improvement of the corporate brand value.
➢ Expand retail stores together with strategic investment in distribution.
➢ Launch and run our growth strategy succeed in China into other Asian markets.
Brand recognition
Consolidation of the business for growth
[Previous tasks (In FY2006-2011 plan ]
[New Medium-Term Plan FY2013-2018]
➢ Accelerate the growth and maximize brand presence in China and other markets in Asia
Watch and Clock Business:
CITIZEN brand product business
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2006 2007 2008 2009 2010 2011
Operating income index Sales index
ASP index Quantity index
Advertising expenses index
➢ Improvement of product mix effect • Promote distinctive and high added-value products including “Eco-Drive”watch,
“Satellite Wave” watch, and mechanical watch technology
• Enhance the corporate brand image and grow ASP by streamlining low-end products
“CITIZEN” brand watch and clock – Business in China
Watch and Clock Business:
CITIZEN brand product business
29
30
➢ Active advertisement• continuous investment in advertisement in major cities focusing on city center, airport, subway
• Conduct various promotional activities
“CITIZEN” brand watch and clock – Business in China
Watch and Clock Business:
CITIZEN brand product business
30
➢Improvement of distribution structure• Improvement of the quality of the sales network by streamlining distributors
• PR activities on consistent corporate brand image among flagship/directly-owned stores
“CITIZEN” brand watch and clock – Business in China
Watch and Clock Business:
CITIZEN brand product business
31
Watch and Clock Business:
CITIZEN brand product business
➢ Forward the multi-brand strategy focusing on the CITIZEN brand
➢ Take a progressive approach to work on potential growing areas through M&A
activities including buying out new brands
➢ Maximize the impact on the distribution channels, and maintain and expand
the existing distribution territory
➢ Pursuing synergy effect through promoting sharing the functions of
development, manufacturing and procurement within Citizen Group
32
➢ Increase profits by pursuing added value products from quantity output
- Re-strengthen productivity of added value products through structural reform
- Ensure appropriate profit margin by maintaining the largest share of the industry
➢ Consistent support to the basis for growth of the watch and clock business
- Contribute to maintaining and improving the value of watch and clock by leading the
supply of highly enhanced value products
- Assure consistent investment funds for growth
Watch and Clock Business:
CITIZEN brand product business
[Market overview and business policy]
33
➢ The market trend of watch movement is shifting from mass
consumption of standard movements to brand-conscious/ brand
differentiation and added value products
■事業ドメイン
Machine Tool Business
Target:
60 billion yen in FY2018 (breakeven sales volume: 30 billion yen) 34
Bar material processor (automatic lathe), forging process machinery and peripheral equipment
“Solution providing ability” on the assets and skills cultivated in the automatic lathe business
Provision of products and services to meet polarized different needs in emerging countries and developed countries
Product
Technology
Market
Domain
Strength:
Miniaturization/high-rigidity technology developed in watch
and clock part business
A wide range of customers based in Japan, U.S. and
Europe.
*Our compact size NC automatic lathes have leading share
in the global market (presumably by Citizen)
Our aim:
To secure stable position with leading share in the automatic lathe market
and continuous growth by expansion of the domain
CMUK
CME
SIRMA
HESTIKA
CCMCMJ
CMA
CMAS
Tsutoku
Shanghai CMTW
CMP
MCC
MCCB
Europe
China / Taiwan
Asia
Japan / Korea
North America /
Latin America
Expand the region-specific models and Establish
solution business by adding solution service and
technical service to the “5-region controlling system”
CMK
Enhancement of the regional marketing (direct marketing system) network
Machine Tool Business
35
Precision Component Business
Strength:
Integrated mass production ability for precision metal
processing, cultivated in watch and clock part business
(cutting, heat treatment, surface treatment)
Target:
Sales in FY2018 : 15 billion yen
(doubled compared to sales in FY2012)
<Tasks for growth>
(1) Expansion of existing products
and maintaining customers
(2) Development of new customer
(3) Development of new products and new technologies36
Our goal
Aim to be a
“ Global competitive Company”- business group with speed and dynamics -
We reward those who address the
tasks and achieve results(performance related/individual assessment compensation system)
Enhance corporate brand value → Achieve operating
income of 40 billion yen