Omron 2009 Annual Report Download - page 17

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How will you reorganize the Company’s business domain?
Q
Restructuring Core Segments (IAB, ECB, and
AEC) to Consolidate Strengths
We have redefined our business domains as industry,
society, and lifestyle and will accordingly realign the
business structures of the three core segments— IAB
(Industrial Automation Business), ECB (Electronic
Components Business), and AEC (Automotive
Electronics Business)—, which in fiscal 2008 con-
tributed approximately 75% of Omron’s total sales.
Our aim is to enhance the usage efficiency of man-
agement resources and fortify the individual business
strengths of each segment by reorganizing the three
core segments in the industry domain. Specifically,
we will strengthen the marketing capabilities of IAB,
fortify the production and development operations of
ECB, and spin off AEC segment operations to enable
each business to develop to full strength.
Omron is a collection of diverse strengths and
weaknesses. While we are fully aware of our many
weaknesses, rather than seeking to shore up our weak
points, we are restructuring with a focus on making
our strengths even stronger. We are seeking to
strengthen IAB’s marketing capabilities, using distri-
imately ¥5 billion by reducing spending on raw materi-
als and other items.
We are also preparing to consolidate our large-
scale liquid-crystal backlight operations and have made
the decision to shut down six domestic and overseas
productions sites of semiconductor products,
automotive components, and other products. The
effects of these measures should begin appearing in
fiscal 2009 and contribute to further lowering fixed
costs and other expenses.
bution channels for general-purpose products and to
enhance our global production and technical capabilities
for control devices used in mechanical components
(relays, switches, connectors, and other electronic com-
ponents used in machinery), which are fundamental to
all three main control-based businesses.
We anticipate growing demand for mechanical com-
ponents in the BRICs and other emerging economies.
However, the market environment is changing and com-
petition is intensifying, particularly from Chinese
companies. We are therefore taking steps to fortify our
leading position now to ensure our continuing com-
petitiveness in the future.
Restructure
According to
Strengths
From To
Control equipment
Industry
Electronic components
Automotive electronic
components
Train station/
traffic solutions
Lifestyle
Society
Society
Health/medical care
IAB
ECB
AEC
SSB
HCB
Business Development
SSB
HCB
(Environment)
Omron will restructure its business domains into three categories: Industry, Society
and Lifestyle.
Looking to the future, Omron will implement business domain reform to standardize
the operations of its 3 control-based businesses and avoid dispersal of resources.
Business Domain Reform
O
a
L
t
Emergency Measures
(Generate profit in FY2009 through cost cuts)
Profit Generation
[1] Cost cutting
Advertising, R&D, indirect costs, etc.
[2] Withdrawal from underperforming businesses
Four businesses in Japan/abroad (ECB, AEC)
[3] Reduction of other fixed costs
Return of part of directors’, executive officers’,
and managers’ compensation, ban on overtime
work, etc.
Cash Flow Creation
•Freeze on large-scale investments
•Reduction in ordinary investments
Structural Reform
(Strengthen profit base over the medium term)
1. Business Domain Reform
Restructure 3 control-based businesses: IAB,
ECB, and AEC
•IAB: Strengthen front line and profit base
•ECB: Re-strengthen mechanical components
business
•AEC: Implement thorough efforts to improve
profitability
2. Operational Structure Reform
(1) Elimination and consolidation of production
bases, (2) variable cost structure reform, (3) IT
structure reform, (4) head office function reform
What other specific steps will be taken to consolidate strengths?
Q
Strengthening IAB Marketing Capabilities and
Fortifying ECB Production and Development
We have extensively discussed whether the best mar-
keting strategy for IAB would be to conduct direct sales
or use distributor sales channels. We believe a dis-
tributor-based sales structure is the most effective for
broadening sales of general-purpose products like
mechanical components to a large number of users.
Moreover, IAB uses this sales structure very effec-
tively and has become the industry’s top supplier of
mechanical components on a global scale. IAB is also
very strong in Quality, Cost, and Delivery (QCD), which
is essential to remaining a leading competitor in
mechanical components field.
From this perspective, consolidating our strengths
means shifting human resources to augment IAB’s
domestic sales and marketing capabilities and devel-
oping more deeply integrated operations with
distributors. We plan to fortify IAB operations prima-
rily by adding approximately 300 people, representing