Dialogue with the Top Management
Business Environment (Reflection and Strategies)
We disclosed the financial results of the nine segmented businesses. We will accelerate this management style.
―First of all, Chairperson Yamada, please look back on fiscal 2017.
In fiscal 2017, the domestic economy continued recovering gradually by the economic measures of the government and monetary policy of the Bank of Japan, while the prospects of the world economy are uncertain due to the trend of the US's policy and the EU's political situation, each of which is quite unsteady, and also due to the geopolitical risk of Asia and fluctuation of the capital markets. In the home appliance distribution industry, the demands for TVs, refrigerators, washing machines and smartphones were in a favorable trend, but the demands for PCs and other digital equipment were sluggish.
Under such severe conditions, Yamada Denki Group's structural reform is coming to fruition and contributed to the sales expansion.
―Please explain concrete efforts for promoting the structural reform.
It is said that the number of customers visiting stores and demand for home appliances are unlikely to increase in our industry because of the declining birthrate and aging population. However, Yamada Denki Group has been promoting structural reform for several years and expanding its business fields. Specifically, we have developed housing, housing equipment, renovation, real estate, financial service, support service and environmental businesses around the home appliance sales, which is still our core.
As one of such new challenges, we are expanding a new type of store, "Kaden Sumairu Kan", in which we deal with interior goods and furniture as well as home appliances to aim to increase demand.
―How has the Medium-term Business Plan been implemented?
Regarding the Medium-term Business Plan, it can be highly evaluated that the structural reform, which is the basis for achieving the goal, has progressed steadily. I, as Chairperson, take charge of the creation of new businesses, ICHIMIYA , a s Vice Chairperson, promotes the structural reform and implementation of the Medium-term Business Plan, and President KUWANO (at that time) takes responsibility for existing businesses and human resources development. Under this management system, we set up target issues respectively and have been tackling them. We faced difficulties on the way, but we have been yielding results with a sense of urgency since the second half of fiscal 2017.
In fiscal 2018, which is the fourth year of the mid-term business plan, we aim to meet the target profit one year earlier. In the first-half result of fiscal 2017, we started to publicize our performance as nine segmented businesses. Until then, we had received some opinions criticizing the lack of transparency of the business or strategy of Yamada Denki Group because we couldn't disclose each business performance separately. The new publication is being highly evaluated and helps us clarify the targets of our business units. We will strengthen this management style.
―Could you tell me the prospective for fiscal 2018?
We set up the management slogan "Challenge the New Stage" for fiscal 2018 and announced six matters that we should tackle. We intend to implement various measures for the structural reform without loosening the reins. Regarding "Kaden Sumairu Kan", which is our new concept store, employee training has progressed and it is scheduled to open 100 stores in fiscal 2018 so that our business model grows stronger. Also, we have invested in a venture developing electric vehicles (EVs) and aim to start selling EVs in three years. It is necessary to combine these activities organically and seek to produce systematic effect. We will enhance synergistic effect in collaboration among the activities.
We are required not only to expand business but also the management capacity. It is also necessary to strengthen our corporate governance system.
Corporate Governance System
The most powerful governance is one where the philosophy set up at the time of the foundation can be held by each and every employee.
―Mr. Nakamura served as an external auditor of Yamada Denki until 2017. Please explain the characteristics of Yamada Denki's governance system.
Firstly, I was surprised when I learned how speedily Yamada Denki rotates the PDCA cycle organically with the board of directors as its axis. It is typical for companies to have a board meeting once a month, which is 12 times a year. But the board meetings in Yamada Denki were held every week, which is 52 times a year, and diverse meetings for various situations were also held to rotate the PDCA cycle. In addition to such speedy implementation of the PDCA cycle, a cross-sectional network had been developed so that information can be easily disseminated throughout the company and it was very fast to grasp and share what was happening, when and where.
Secondly, many executives understood the stores and workplaces very well and they gave opinions from the actual situations. In other words, another characteristic of Yamada Denki is the discussion with the opinions collected from the stores and workplaces.
I think these two are the strength of Yamada Denki's governance. I was an external auditor but was allowed to join various meetings in addition to the board meetings. I remember that I could obtain information easily to understand the process.
Along with the viewpoint of Mr. Nakamura regarding our characteristic governance, we have been carrying out the idea that human resources are the key. I set up the management philosophy "Creation and Challenge" at the time of the foundation to let the employees develop themselves. At that time, I actually encouraged some employees to have their own store independent from Yamada Denki. As time went by, Yamada Denki was transformed into a mass merchandiser and I created our basic policies using practical expressions.
It is said that Yamada Denki's philosophy is unique. If subordinate employees understand the basic policies and follow them, that leads the employees to the management philosophy "Creation and Challenge." It is possible for middle managers to understand the philosophy by practicing as daily management, and that leads to optimization of management resources. Even though the times change, we have kept our management style with the philosophy and basic policies, and I believe that way has led to the open and efficient governance system in which human resources are centered.
Personally, I consider the most powerful governance is one where the philosophy set up at the time of the foundation can be held by each and every employee. As an organization expands, it becomes difficult to keep it and the seams come apart. It tends to be protected by some systematic control.
I have visited Yamada Denki's training institution "Soseijuku" several times. I believe that place lets the visitors understand the philosophy set by Chairperson Yamada at the time of foundation automatically, and plays a significant role in human resource development.
To inherit the corporate culture is one of the issues for us, and I built a training institution in Hakone. We have been providing training with the aim of being a company where employees work with pride, feeling like "It was a good decision to work at Yamada Denki". It doesn't matter if the company goes out of business in one generation, but companies must continue their business.
―What do you think are the problem points with Yamada Denki's governance?
The executives have full knowledge of stores and workplaces, and execution of measures or improvement has been proceeding. I have no worries about it. I would like to point out that Yamada Denki needs to consider measures for the risks of the global market in advance. As chairperson Yamada has said, Yamada Denki is expanding its business into new fields that used to be outside the company's scope. Overseas business is currently operated in Asia, but when it is expanded into the other areas globally, it is necessary to take measures for the possible related issues.
We are responding to the issues by human resource development. As we actively engage in new businesses and attract people's attention, thankfully we are acquiring talented human personnel naturally. I think there is nothing but human resource development to respond to various risks. We are proceeding with the development of existing personnel meanwhile involving new personnel.
I also think coping with such risks brings not only business growth but also the satisfaction of our stakeholders, and allows our employees to feel like It's really good to work at Yamada Denki.
Social Contribution Activities
We have been contributing to society by doing what we can do honestly and continuously even though we are not good at appealing to the public.
―Please introduce Yamada Denki's social contribution activities.
CSR activity is often recognized as ESG activity nowadays. I would like to look back on the CSR activities of Yamada Denki so far. Before I assumed office as external auditor, I had an impression that Yamada Denki is a company which pursues only profit and expansion of business. I remember that my impression changed when I became an insider. In 2007, the CSR Office was set up and the Code of CSR Ethics was established. Companies tend to be stagnant at this stage, and we often see there is a large gap between the idealistic theory and the actual status despite splendid comments. Yamada Denki was totally different from those companies. Soon after establishing the Code of CSR Ethics, the quantitative targets for 4 categories (compliance, environment, customer satisfaction and employee satisfaction) were put up. The progress of the targets was continuously reported to the board meeting held every week and the outcomes were publicized to the public. Yamada Denki sincerely considers the social contribution and pursues those activities honestly. That is the factor to keep the CSR (ESG) philosophy and practical activities combined and to keep making progress.
I was deeply impressed with the corporate attitude of Yamada Denki which is to continue what they can do honestly, that was different from the impression from the outside.
We have conducted our activities based on the philosophy that we sincerely contribute to society. I heard that ESG investors also highly evaluate our environmental initiatives.
It seems the public has just caught up to the policy of Yamada Denki.
―What do you think are the materialities for Yamada Denki to address through its business?
I looked into and considered various things to prepare for this dialogue and I just think keeping the current activities honestly is the way to meet the social demand. I think it is important to steadily go ahead as before.
Regarding the environmental initiatives, to keep following the current activities every week leads to achievement of management which is eco-friendly and symbiotic with the Earth. I don't think it is necessary to consider materialities as a new concept in an exaggerated manner.
Needless to say, screening should be conducted to better meet the social demand. Yamada Denki may already conduct some sort of screening, but I would like to point out that it is important to select and list up the materialities while taking the external evaluation into account in that. This is also a personal opinion. A lot of duplication may be appearing in the current activities even when screening with the external evaluation is conducted.
It is important to make progress together with society. If a company only pursues their own profit, without such a mindset, not only society but also the company might head towards ruin. We should consider that it is good to gain a profit as a result of social contribution, and we should be aware of being in such a time and society.
―Please explain the characteristics of the social contribution activities of Yamada Denki.
I think Yamada Denki is not a company advertising what activities are conducted as social contribution in an exaggerated manner. The characteristic of its social contribution is doing what we can do continuously and honestly. I believe this will receive recognition gradually. Again, I would like to say that Yamada Denki and Chairperson Yamada do not purposely call attention to what they are doing.
We hold briefing sessions targeting individual investors in Tokyo and Osaka every year. Some investors came all the way from Gunma (which is the birthplace of Yamada Denki), and we have received opinions like "Yamada Denki is bad at public relations. You have been doing such activities in your hometown. You'd better publicize them." Actually, we may be bad at public relations, but it is a fact that we have supported cultural activities or have carried out activities of the foundation (Yamada Noboru Memorial Foundation) in various ways.
I know that some shareholders earnestly back up Yamada Denki. It is great that you hold briefing sessions gathering many individual investors. I think you'd better continue it. It was impressive for me that some attendees did not ask a question but offered their cheerful messages on how Yamada Denki contributes to the hometown or how they appreciate Yamada Denki in the Q&A session of the general shareholders' meeting.
It was tough at the time of the Great East-Japan Earthquake. We delivered products to our stores in the disaster area before roads were closed so that we were able to distribute them to the local communities. It was not on the news, but Yamada Denki Group have been conducting various activities.
―Do you have any idea what activities should be added?
You may have already considered it, but I think it is an option to develop the social aspect of the stores because they can be social bases. Yamada Denki has a nationwide network consisting of 12,000 stores all over Japan. They are available to be the core of communities and even shelters in case of an emergency.
Now, convenience stores are one of the infrastructures of social life. Even though the items we deal with are different from them, we have been considering enhancing the function as a social infrastructure like you just pointed out. For example, Yamada Denki has contributed to the expansion of Internet Technology. Specifically, we operated personal computer classrooms on our nationwide network and it helped the spread of computers. They used to be only available in Akihabara or Nihonbashi which was for specialists in the urban area. Yamada Denki started to disseminate computers from local cities. I believe that is one of the achievements of Yamada Denki regarding the spread of information technology in such a short time.
Additionally, we have commenced a new service regarding not only home appliances but all the things associated with living environments. It is available to serve everything needed when someone starts a new life. I believe the new concept stores, which are totally different from those in the past, are convenient for customers.
Also, we are not only focusing on the domestic market. Best Denki, one of the subsidiaries of Yamada Denki Group, is expanding its stores mainly in the Asian region. Although we still have many things to do in the domestic market, we will gain a firm foothold in overseas markets from a long-term perspective to expand the bases, which is available to be social infrastructure, steadily.
―To conclude this dialogue, I would like Mr. Nakamura to give a message as one of the stakeholders regarding what you expect from Yamada Denki Group, and would like Chairperson Yamada to give a message to the stakeholders.
As an ordinary citizen, I am anxious about various social issues such as the problem of aged people living alone or the declining birthrate and aging society. I think it is only "trusted" companies that will be able to provide support on those problems that are difficult to be solved by administrative services only in order to eliminate such anxiety. I mean it is only companies like Yamada Denki, who put up the corporate philosophy of "Appreciation and Trust" towards customers, that will be able to respond to the problems. I would be grateful if Yamada Denki would develop business leading to solutions for citizens to live comfortable and carefree lives.
I totally agree with what Mr. Nakamura has said now. It is important to contribute to society while we need to pursue profit as the management of a profitable business. We will operate our business that makes our stakeholders satisfied by management which suits its own size and matches the facts. I believe that what we are doing now is pioneering but in the right direction. It may take time to lead to profit, but we would like to grow while continuing to contribute to society.