Nikon 2003 Annual Report Download - page 6

M E S S A G E ฀ F R O M ฀ T H E ฀ C E O
A฀Sudden฀Shift฀in฀the฀Business฀Environment
Business฀conditions฀for฀manufacturers฀such฀as฀Nikon฀have฀
changed฀significantly.฀The฀slowdown฀in฀the฀United฀States฀
economy฀has฀led฀to฀stagnant฀economic฀growth฀worldwide.฀
The฀war฀in฀Iraq฀and฀the฀ongoing฀tension฀in฀the฀Middle฀
East฀underscore฀the฀instability฀of฀the฀international฀picture.฀
Intensified฀price฀competition฀is฀producing฀an฀accelerated฀
shift฀toward฀manufacturing฀in฀offshore฀locations.฀An฀extend-
ed฀slump฀in฀the฀IT฀sector฀has฀hit฀the฀semiconductor฀industry฀
hard.฀These฀various฀factors฀have฀all฀had฀negative฀repercus-
sions฀for฀us.฀In฀addition,฀greater฀competition฀around฀the฀
world฀in฀the฀area฀of฀intellectual฀property,฀especially฀patents,฀
is฀just฀one฀aspect฀of฀the฀ongoing฀march฀of฀globalization.฀The฀
challenge฀for฀us฀is฀to฀find฀ways฀of฀responding฀to฀these฀new฀
and฀altered฀forms฀of฀competition.
Our฀business฀is฀concentrated฀in฀three฀main฀business฀
segments:฀Precision฀Equipment,฀Imaging฀Products,฀and฀
Instruments.฀Although฀business฀conditions฀differ฀markedly฀
between฀these฀three฀areas,฀they฀do฀have฀one฀thing฀in฀com-
mon—an฀extremely฀rapid฀pace฀of฀change.฀The฀reality฀is฀that฀
in฀each฀of฀these฀segments฀we฀have฀to฀develop฀business฀
against฀the฀background฀of฀a฀highly฀unstable฀environment,฀
in฀which฀a฀new฀revolution-inducing฀factor฀could฀appear฀at฀
any฀time.
The฀challenge฀facing฀Nikon฀is฀to฀construct฀operational฀
systems฀capable฀of฀responding฀quickly฀and฀agilely฀to฀these฀
kinds฀of฀change.฀This฀requires฀us฀to฀invest฀our฀limited฀
resources฀to฀maximum฀effect฀in฀growth฀sectors฀while฀also฀
ensuring฀that฀we฀conduct฀all฀our฀business฀at฀the฀highest฀lev-
els฀of฀efficiency.฀Decision-making฀processes฀must฀obviously฀
display฀similar฀agility.฀Not฀only฀must฀we฀put฀in฀place฀the฀
management฀systems฀that฀will฀help฀us฀reform,฀we฀must฀all฀
individually฀make฀major฀changes฀in฀the฀way฀we฀think.
Progress฀in฀Implementing฀Fundamental฀Structural฀
Reforms
We฀have฀already฀implemented฀a฀number฀of฀measures฀
designed฀to฀create฀fast-response฀reactive฀operational฀sys-
tems.฀We฀introduced฀an฀in-house฀company฀system฀in฀1999฀
and,฀a฀year฀later,฀we฀formulated฀“Vision฀Nikon฀21,”฀a฀policy฀
document฀for฀the฀first฀decade฀of฀the฀21st฀century฀that฀sets฀
out฀our฀foremost฀business฀priorities.฀In฀2001,฀we฀introduced฀
an฀executive฀officer฀system.฀All฀these฀initiatives฀have฀collec-
tively฀laid฀the฀groundwork฀for฀reform.
We฀undertook฀various฀structural฀reform฀measures฀across฀
the฀Nikon฀Group฀in฀the฀year฀ended฀March฀2003฀in฀a฀con-
certed฀attempt฀to฀reinforce฀our฀earnings฀structure.฀We฀made฀
further฀headcount฀adjustments฀at฀the฀consolidated฀level฀
through฀an฀expanded฀early฀retirement฀program฀for฀employ-
ees,฀which฀helped฀to฀lower฀fixed฀costs.฀We฀pursued฀the฀
liquidation฀and฀reorganization฀of฀unprofitable฀operations฀to฀
promote฀the฀more฀effective฀distribution฀of฀resources฀within฀
the฀Nikon฀Group.฀We฀worked฀to฀reduce฀variable฀costs฀within฀
each฀business฀unit.฀All฀these฀structural฀reforms฀formed฀part฀
of฀a฀major฀restructuring฀initiative.
These฀structural฀reforms฀are฀generating฀positive฀results฀
slowly฀but฀steadily.฀Unfortunately,฀they฀did฀not฀make฀a฀suf-
ficiently฀major฀impact฀on฀our฀financial฀results฀in฀the฀year฀
ended฀March฀2003.฀While฀continuing฀with฀these฀efforts,฀
we฀will฀therefore฀put฀in฀place฀additional฀measures฀to฀boost฀
operating฀efficiency฀and฀thereby฀implement฀fundamental฀
improvements฀in฀our฀earnings฀structure.
Focus฀on฀Strengthening฀Core฀Businesses
The฀most฀important฀issue฀for฀us฀as฀we฀undertake฀these฀
reforms฀is฀to฀strengthen฀the฀competitiveness฀of฀our฀core฀
operations.฀Although฀conditions฀do฀differ฀between฀sectors,฀
our฀common฀aim฀is฀to฀take฀measures฀that฀will฀establish฀
Nikon฀as฀the฀top฀manufacturer฀in฀each฀industry฀in฀which฀we฀
operate฀so฀that฀we฀can฀magnify฀the฀future฀potential฀of฀all฀
our฀businesses.
The฀first฀aspect฀of฀this฀competitiveness฀drive฀is฀to฀rein-
force฀the฀power฀of฀our฀products฀to฀lead฀markets.฀This฀means฀
that฀we฀must฀capitalize฀on฀our฀strengths฀to฀launch฀ahead฀
of฀our฀competitors฀the฀advanced฀products฀that฀will฀gener-
ate฀growth.฀Just฀as฀we฀have฀become฀the฀pioneering฀market฀
innovator฀in฀SL R-type฀digital฀cameras,฀our฀greatest฀mission฀
as฀a฀manufacturer฀is฀to฀supply฀society฀with฀products฀packed฀
with฀the฀high฀value฀that฀only฀Nikon฀can฀add.฀Indeed,฀this฀
mission฀is฀one฀thing฀that฀has฀not฀changed฀at฀all.
In฀digital฀camera฀image฀sensor฀and฀lens฀units,฀we฀plan฀to฀
manufacture฀more฀components฀in-house฀so฀that฀we฀can฀add฀
greater฀value฀to฀these฀key฀items.฀This฀sort฀of฀action฀helps฀to฀
leverage฀the฀strengths฀of฀Nikon฀as฀we฀work฀to฀build฀up฀the฀
competitiveness฀of฀our฀product฀range.
Next,฀we฀are฀working฀to฀make฀our฀businesses฀more฀cost-
competitive฀and฀more฀profitable.฀When฀business฀conditions฀
remain฀as฀harsh฀as฀they฀are฀now,฀our฀challenge฀as฀a฀manu-
facturer฀must฀be฀to฀speed฀up฀both฀product฀development฀
and฀production.฀We฀are฀therefore฀improving฀our฀systems฀
to฀supply฀our฀customers฀with฀products฀that฀meet฀the฀latest฀
demands฀in฀a฀timely฀fashion,฀both฀by฀reforming฀our฀busi-
ness฀processes฀from฀a฀value-engineering฀perspective฀and฀by฀
achieving฀drastic฀cuts฀in฀manufacturing฀lead฀times.฀This฀latter฀
initiative฀is฀of฀particular฀importance฀in฀our฀stepper฀business.฀
Since฀reduction฀of฀inventory฀and฀related฀assets฀is฀one฀of฀the฀
main฀keys฀to฀restoring฀profitability฀in฀this฀segment,฀we฀plan฀
to฀intensify฀efforts฀in฀this฀area,฀too.฀Once฀we฀have฀taken฀
these฀actions,฀I฀am฀confident฀that฀we฀will฀have฀built฀a฀value฀
chain฀that฀can฀add฀substantial฀value฀in฀every฀part฀of฀Nikon฀
operations,฀from฀manufacturing฀to฀sales฀and฀after-sales฀
services.
Expansion฀into฀China
China฀is฀an฀important฀production฀base฀for฀us฀as฀we฀seek฀to฀
improve฀cost- competitiveness.฀We฀have฀now฀established฀a฀
major฀manufacturing฀plant฀for฀digital฀cameras฀in฀the฀city฀of฀
Wuxi.฀At฀the฀same฀time,฀we฀also฀recognize฀that,฀in฀terms฀of฀
scale฀and฀growth฀potential,฀China฀represents฀an฀outstanding฀
opportunity฀as฀a฀market฀in฀its฀own฀right.฀We฀are฀establishing฀
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