VG2020 - Omron

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28 Sales Expansion in Emerging Markets [Special Feature 2] Interview with the Heads of Business Segments Ando: Achieving growth during the “GLOBE STAGE” depends on capturing demand from emerging markets. I would like to ask the presidents of IAB, EMC, AEC, and HCB—all of which operate on a global basis, about this topic. Nothing Beats Frontline Power ——— How will IAB capture demand from emerging markets? Fujimoto (IAB): Contact with customers is most important. For this reason, in the next three years we plan to double our frontline staff in emerging markets, which will double the speed at which we can identify customers’ problems. In China, the largest emerging market, we will increase the number of sales and marketing sites by 20 in the year ending March 2012, to a total of 52. We will achieve this in just one year, not three. In the next three years, we will also make a sixfold increase in the number of engineers offering technical support. Establishment of an Automation Center in Shanghai China Three-Year “GLOBE STAGE” Calls for Strengthening Production and Supply Capabilities ——— What kind of strategy does EMC have in mind for consumer electronic components? Tada (EMC): In China, with a population of 1.3 billion, and India with 1.1 billion, the number of people in the middle-income group is rising annually. Accordingly, we imagine that the quality standard sought in emerging markets for commercial and consumer electronic components will become the same as that sought by middle-income earners in developed countries. Also, given that there are markets where “discontinuous evolution” occurs, as Mr. Fujimoto has said, we need to adopt a global perspective regarding strengthening supply capabilities and raising productivity. Of course, it is crucial that we waste no time in establishing what global standards are and what kind of specifications and applications are needed. Accordingly, we will also reinforce marketing activities to gather information. As for raising productivity, we will build a competitive advantage by reducing the materials we use and utilizing automation to lower manufacturing costs. In addition, because speed makes or breaks opportunities in an emerging market, we will strengthen our production and supply capabilities over the three-year period of the “GLOBE STAGE.” ——— What points will the Automotive Electronic Components Business focus on during the “GLOBE STAGE” with respect to emerging markets in particular? Suzuki (AEC): We have a fairly good idea of our business volumes through the fiscal year ending March 2014. This is because we are actively advancing production plans for clients from whom we have already received orders. They come from a variety of businesses and are part of a network that has car manufacturers at the apex. During the “GLOBE STAGE,” we will seek to establish an earnings structure that has an operating margin higher than the industry standard (5–6%). We will also focus on sowing seeds for growth in the next stage. Another strategy we are actively pursuing is to foster global human resources within an integrated production, sales, and development structure. One year since the spin-off of AEC and the transfer of all employees to the new company, we are fully prepared for our advance into a new stage. We will target growth while emphasizing our enduring advantages, which are the capabilities of employees and the strengths of Team Omron. Since we have finally achieved a return to profitability, we intend to invest around half of the company’s profits in growth areas. Sales Expansion in Emerging Markets approx. 160 FY2010 IA Business (IAB & EMC) +80 HCB, Other +30 Sales up ¥110 bn (Billions of yen) approx. 270 Sales in Emerging Markets* FY2013 * Emerging markets: Greater China, Southeast Asia (plus India), Latin America (Brazil, etc.), Eastern Europe, Russia, the Middle East, and South Africa est.
YOSHINORI SUZUKI AEC Current position: Managing Officer CEO & President, Omron Automotive Electronics Co., Ltd. Date of birth: April 27, 1952 (age 59) Words to live by: Benevolence, justice, courtesy, wisdom ——— What is AEC’s approach to emerging markets? Suzuki (AEC): The standard practice among the world’s leading automakers is to develop local models based on a standardized global platform. However, we are beginning to see a gradual shift toward building a separate platform for each area. You heard from Mr. Tada, president of EMC, of the increasing uniformity in quality standards for commercial and consumer electronic components. For finished vehicles, however, the opposite applies, as there is a growing trend toward customizing specifications, price, and design to meet the needs of a particular area. Evolution of China’s Automobile Industry Unlike Other Emerging Markets ——— What kind of strategies does AEC have in mind for the Chinese market? Suzuki (AEC): Amid this move toward customization, we need to approach China differently from other emerging markets in Asia. With the exception of China, there will be no significant changes in the industry’s main players. In China, many local manufacturers are becoming stronger, attributable in part to the government’s policy of providing assistance. On the demand side too, medium, large, and luxury cars are becoming increasingly popular in China, unlike in other emerging markets, which are about to enter a growth phase. This is why we are pursuing a policy of turning our production sites in China into autonomous bases that combine all stages, from development to production and sales. Even though local manufacturers are becoming bigger, they lack the know-how that enables cutting-edge global manufacturers to keep a firm grip on thousands, even tens of thousands, of parts, which they put together to make high-quality components. Conversely, this presents a business opportunity. Accordingly, we are cooperating with a variety of parts suppliers with a view to providing our local business partners in China with products that are easier to assemble. In addition to our electronic control units, these include seat belts, motors, and batteries. ——— What is the basic strategy of the Healthcare Business for business expansion targeting consumers? Miyata (HCB): Under “Value Generation 2020,” our vision is to make testing and health management more familiar to the average consumer. The basic strategy of HCB comprises three courses of action to improve such familiarity. The first is to improve customer accessibility. This entails increasing customer sales channels, in other words, broadening sales so that Omron products are available for purchase around the world. The second is to improve the accessibility of equipment. HCB has created a market by offering home-use products that perform testing and measurement functions—such as taking blood pressure readings—that are normally carried out at medical facilities. Our aim is to contribute to the early detection and treatment of ailments by accelerating the development of safe, reasonably priced equipment that is easy to operate. This will lead to improved accessibility to testing, as it shifts from medical settings to the home and from large hospitals to local clinics. The third course of action is to improve the accessibility of data services. This involves making healthcare and medical services more accessible by means of information services that store and analyze readings. Aggressive Efforts to Broaden Sales Coverage ——— What are HCB’s projections for emerging markets, and what growth strategy is it pursuing? Miyata (HCB): In the case of home medical equipment, the rule of thumb is that demand rises suddenly once GDP per capita exceeds $10,000. We have seen this happen in China, followed by Russia. Since the GDP per capita in Brazil was over $8,000 in the year ended March 31, 2010, we can expect to see growth in the near future. Higher incomes not only lead to economic development, but in emerging markets, they also result in expansion of the customer base. As incomes increase, meanwhile, lifestyles become more affluent, which is associated with an increase 29 [Special Feature 2] Interview with the Heads of Business Segments
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