The following is a record of Nagase & Co., Ltd. President Hiroshi Nagase’s New Year address for 2014.
Happy New Year, everyone.
I hope that you all have had a happy and healthy start to this new year.
The bold policies of the Abe administration in Japan last year have had an unprecedented impact on our economy. The so-called Abenomics had an initial impact on sentiment as reflected in a devalued yen and higher stock prices. This uptick in optimism has more recently spread to Japan’s small- and mid-sized businesses. And, politics have had a big influence on areas of our society beyond economics. The year 2014 promises to be a continuation of last year’s Year of Government. In the U.S. and across the world, we see the positive signs of more ventures being funded, despite some concerns of another bubble in the offing.
Meanwhile, I am concerned that the Nagase Group hasn’t been able to catch this big wave. While our second quarter (first half) earnings may look fine according to the numbers, we actually experienced lower revenues and profits when you consider the declining value of the yen. This is the second year of our Change-S2014 medium-term management plan. We expect to miss our initial earnings forecast by a significant margin. If we continue at this pace, we have no realistic hope of reaching the ￥30 billion in operating income that represents the goal in our final year of our business plan. While we see revenue growth overseas, we are experiencing revenue declines in our home market of Japan. Now, overseas sales account for nearly half of total revenues. While companies in related industries seem to be gaining in profitability, I can’t help but feel like our company is being left behind.
Our first task this year is for everyone to make a frank analysis of our present situation. What does it mean if our customers’ businesses are growing, but Nagase isn’t selling more to them? Doesn’t it mean we aren’t in touch with our customers’ goals? In improving our manufacturing functions, we are looking to create a unique business model that integrates with our trading company functions. Our competitive advantage should be our ability to come up with insightful, surprising proposals for our clients. Our ability to take decisive action that impresses our clients. Our tenacity in producing concrete results from our work in some form. Lately, I’ve been hearing that our employees are pretty sharp. My fear is that we are losing the competitive advantage that we should have. Ultimately, we have to foster rock-solid relationships of trust with our customers through our day-to-day interactions if we are going to understand their needs. By coming to our clients with new ideas, we will uncover the seed of new business opportunities. My concern is that we’ve hit an interruption in this basic cycle. Our Change-S2014 medium-term management plan was supposed to guide us in doing new things in a different way. We were supposed to build on top of the base of business that we created over so many years. I want everyone to take the time to reflect on our plan’s original purpose. To reflect on what we can do now, and what might be missing.
In the past, I had never focused too much on our plan or earnings figures. I believed that the most important thing was to change our business approach. I believed that if we did that successfully, then the earnings would follow. This year, however, I am focusing on the numbers. I want our employees to focus on the numbers. I want to appeal to our trading company divisions to improve their marketing, sales, and ability to see the needs of our customers. To our manufacturing divisions, I want to challenge you to create new developments, improve your sense of curiosity, improve efficiency, and improve safety?in a word, do better. I urge everyone to approach this new year with a sense of urgency. Show your mettle this year as we overcome our challenges.
Last, let me express my hope that this year is one in which we can show true growth to the market. Let me also express my wishes for the best of health and happiness for you and yours throughout the year.