Kenwood 2003 Annual Report Download - page 7

outbreak of severe acute respiratory syndrome (SARS). As a result,
the Company showed a large profit while achieving a "V-shaped"
recovery in both non-consolidated and consolidated net balance,
which had posted a large loss for the third straight year.
These figures were all above the latest projections at the time,
and consolidated net income hit a record high.
Fiscal year ending March 2004 — Year of true rebirth
In the fiscal year ended March 2003, the Company completed its
management rebuilding, through a sweeping overhaul of business,
cost, management and financial structures. If the results are fully
reflected in its operations throughout the fiscal year ending March
2004, it can be said that the Company succeeds in rebirthing.
Earnings outlook will be discussed later in Business Results.
Enhancement of competitiveness through Production
Revolution
The following three factors appear to be the major reasons why a
corporation running chiefly traditional businesses, such as
Kenwood, suffers weak earnings.
1. Products and services are out of tune with market and customer
demand.
2. Business structure and management methods do not
correspond to the current business and market climate.
3. Net balance slipped into the red due to poor competitiveness,
which is caused by outdated manufacturing systems and
methods, and deep-rooted inefficiency in management
processes.
To solve these problems, the Company, which always strived to
strengthen its brand name and provide products that are suitable
for the brand, has strengthened its product competitiveness in the
deficit-ridden home electronics business as part of the above-
mentioned reconstruction measures, by reassessing its product
policy. As the Company also completed the overhaul of business,
cost, management and financial structures across the company, it
established in March 2003 the Production Revolution Headquarters
under which the entire group began to work on innovating
manufacturing systems. Through these moves, the Company
hopes to rapidly enhance corporate competitiveness and
profitability.
Production Revolution
• The Company has begun company-wide activities to transform it
into a unified "community" by integrating production, marketing
and technologies, in a bid to revive domestic plants, so that they
can outdo their Asian peers and to further boost competitiveness
at overseas factories.
• Under the slogan of Kenwood Quarter QCD Revolution, the
Company intends to slash overall costs by 30% and halve
inventories over the next two years. To this end, it will carry out
the following measures:
1. Reduce the defect rate for products to one-fourth (Quarter)
2. Reduce procurement and production costs, while cutting back
on administration expenses to one-fourth (Quarter)
3. Shorten the entire lead time from manufacturing to sales phase
to one-fourth (Quarter)
Formulation of the Mid-Term Business Plan
— 'Excellent Kenwood Plan'
— To truly become a company of global excellence in our
core business domains with operating income margin of
10%, ROE of 20%, resumption of dividend payments and
zero net-debt management
As a decisive step from reconstruction to a new leap forward, the
Company mapped out Mid-term Business Plan — 'Excellent
Kenwood Plan', a three-year mid-term business plan that lasts
from the fiscal year ending in March 2004 through the year ending
in March 2006.
The Mid-term Business Plan — 'Excellent Kenwood Plan' is
designed so that Kenwood will become a company of global
excellence in the field of Mobile & Home Multimedia Systems —
which is expected to be the most promising business in the 21st
century — in the three-year period as part of its vision of "Creating
Exciting through Surprising Ideas" by maximizing shareholder value.
By allocating 3-5 billion yen to be earned as a result of
manufacturing innovation efforts, we will reinvest in developing
attractive and competitive products, strengthening the brand name
and sharing profits among the employees, in order to dramatically
improve competitiveness and profitability, while enhancing our core
competence — audio and communications technologies — to the
greatest extent.
Setting of targets
Breaking with the past and reinventing itself, Kenwood will make a
great leap toward truly becoming a company of global excellence in
our core business domains, achieving an operating income margin
of 10% and an ROE of 20%, resuming dividend payments and
implementing zero net-debt business management.
We will dramatically improve competitiveness and profitability in
each business field by enhancing our core competence — audio
and communications technologies — to the greatest possible
extent. By doing so, we intend to become the prominent company
of global excellence in the field of Mobile & Home Multimedia
Systems, which is expected to grow substantially in the 21st
century.
We will set the following targets for the fiscal year ending March
2004, the initial year of the Mid-term Business Plan — 'Excellent
Kenwood Plan', and the fiscal year ending March 2006, the final
year of the plan. Under the plan, we aim to resume dividend
payments.
05
KENWOOD Corporation Annual Report 2003