Corporate Strategy
In November 2006, Hitachi announced a new corporate strategy to promote collaborative creation and profits. With a rigorous focus on a market-oriented approach and profit creation as the basic policy, the aim is to establish a structure that stably generates high profits by the use of key initiatives such as the implementation of fully FIV* (Future Inspiration Value) based management, the creation of a business portfolio with higher profitability, moving forward with group management, and innovation in collaboration with partners and group companies.
In order to achieve this, Hitachi will focus on the business areas in which Hitachi can show its strength, will strengthen its social innovation business, which consists of its social infrastructure, industrial infrastructure, life infrastructure and information infrastructure businesses, and will endeavor to maximize the synergies with the infrastructure technology/products business that underpins social innovation business operations.
Corporate governance is being systematically strengthened, efficient group company management implemented and equity relationships reviewed, in order to raise earnings throughout the corporate group.With the emphasis on collaborations with partners and group companies, in the Hitachi Group diverse partnerships are being used to strengthen collaborative innovation business undertakings in various areas of operations.
Key management initiatives
High profitability through rigorously FIV-based management
(1)Rigorously FIV-based business management
- Move to substantially independent company system
Each business group will be given increased autonomy and will manage its own cash flows, further clarifying the profit responsibilities of each business group.
- Stronger business monitoring and risk management
Particularly in the case of businesses that have been cautioned due to a negative FIV, measures will include the appointment of an executive officer responsible for monitoring and risk management, and consideration of structural reforms from an objective standpoint.
(2)Restructuring and reappraisal, with no area sacrosanct
To strengthen competitiveness, any and all businesses of the Hitachi Group may be subject to restructuring and reappraisal, based on the rigorous application of the FIV rule, in order to strengthen business operations and improve profitability.
Establishment of stable, high profit structure
A shift to business areas in which Hitachi can utilize its strengths will be accelerated, by timely management decisions based on the rigorous application of the FIV rule.
(1)Social innovation business
The Hitachi Group has extensive experience and expertise in the area of social infrastructure systems, and a fund of leading-edge technology and knowledge relating to information systems services. These strengths are to be utilized to strengthen the social innovation business of the Hitachi Group. Specifically, the aim, with respect to the social innovation business, is to establish a stable, high profit structure that can respond to the anticipated growth in overseas social infrastructure markets, by providing strong products and systems, expanding related maintenance service operations, and giving priority to allocating resources to areas in which Hitachi is strong, such as storage systems.
(2)Infrastructure technology/products business
With respect to the infrastructure technology/products business, which possesses such distinctive technologies as high functional materials, Hitachi Group strengths will be utilized by maximizing synergies with the social innovation business.
Evolution to group management for high profitability
(1)Group governance system emphasizing collaborative creation
Hitachi Group governance is being enhanced by strengthening governance of the seven businesses of the parent company and some 40 principal companies. Moreover, consolidated management will be enforced with respect to the subsidiaries of the seven business groups and those of some 40 principal subsidiaries.
(2)Efficient management of consolidated subsidiaries
The number of consolidated subsidiaries, which stood at 932 as of the end of March 2006, was reduced to 885 by the end of September. The number of subsidiaries will continue to be decreased to around 700, increasing the efficiency of the management of consolidated subsidiaries.
(3)Flexible reappraisal of equity relationships to improve profitability
To improve profitability and bolster competitiveness, equity relationships will be reviewed and, in order to strengthen the profitability of the overall group, if necessary, consideration may be given to new-listing or de-listing, and changes of investment ratio of group companies
Innovation by collaborative creation
(1)Diverse partnerships
To further strengthen the businesses of the Hitachi Group, emphasis is placed on collaborative creation with partners. These diverse partnerships lead to innovations in various business areas. An example of such collaboration is the one with General Electric Company (GE) in the area of nuclear power. Group synergies are thus being utilized in other sectors. In automotive equipment systems, for example, an area to which the Hitachi Group is committed, in car information systems, Hitachi is strengthening its partnership with Clarion Co., Ltd. (Clarion); and, with a view to merging operations, Hitachi Metals made a tender offer for the remaining shares of NEOMAX, a subsidiary that manufactures magnets for hybrid car applications.
(2)Profitability-focused innovations
Hitachi is focusing on innovations in which the emphasis is on profitability. In fiscal 2005, sales of innovative products that are first or second in terms of market share accounted for 30% of total sales. The plan is to increase this to 40% by fiscal 2009. Also, in the case of research and development, Hitachi will increase the number of researchers and 15% of corporate researchers are being reassigned to business divisions to bring R&D closer to the business side of operations, and an R&D system is being put in place that will be directly linked to the generation of profits, enabling the quicker release of strong products by reducing development times by 30%. Another aim is to double the value of patents and other intellectual property held by the Company.
