the dentsu group's future management · pdf filejanuary 2010, will further pursue...
TRANSCRIPT
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• I am Tatsuyoshi Takashima, President & CEO of Dentsu. In this
presentation, I would like to summarize the fiscal 2009 results, while
sharing with you the progress we have made under the Medium-term
Management Plan.
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• Let us start with an overview of fiscal 2009.
• Japan’s prolonged recession, triggered by the collapse of Lehman
Brothers Holdings Inc. in 2008, recently started to show some gradual
signs of recovery. The advertising market also appears to have bottomed
out, with TV spot sales marking positive growth.
• In the 2nd half, the Dentsu Group also witnessed some signs of recovery,
particularly with our clients in the general consumer goods sector, such as
food and beverages. Better still, we capitalized on various communication
opportunities, such as the Vancouver 2010 XXI Winter Olympic Games.
At the same time, everyone in the Dentsu Group has been more cost-
conscious than ever. All this has allowed us to achieve an increased
operating income in the 2nd half.
• That said, the outlook of our business environment still remains severe.
Therefore, we will continue to steadily implement the key agenda issues
addressed in the Medium-term Management Plan in July 2009.
• I would now like to outline the progress we have made so far in three key
domains of our Medium-term Management Plan—namely in the digital,
promotions, and global domains.
• In the digital domain, we achieved positive results on a non-consolidatedbasis in the 2nd half.
• We promoted collaboration with cci (cyber communications inc.) and Opt—with two objectives in mind. The first was to strengthen the ability of theclient services teams, our business frontline, to make appropriate proposals toclients for their digital-related businesses. The second was to strengthen ourcapability to provide integrated solutions incorporating mass media, ourforte.
• As a result, we succeeded in winning a wide range of new accounts includingseveral major clients in the 2nd half of fiscal 2009. Sales in the mobile andSEM-related service segments grew markedly as well as those in the PCmedia segment.
• We plan to carry this momentum to the entire Group, particularly to the localdomestic brand agencies.
• Moreover, Dentsu Digital Holdings, a new holding company established inJanuary 2010, will further pursue resource concentration and expertisesharing on a Group-wide level. This should help each Group membercompany further hone its expertise, while allowing the Group as a whole tofurther fortify its capacity to deliver integrated solutions
• While the net sales of Dentsu Inc. and other digital-related subsidiaries andaffiliates totaled 150 billion yen for fiscal 2009, we will aim to reach theDentsu Group’s medium-term goal for the digital domain—net sales of 250billion yen in fiscal 2013.
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• To strengthen the Group’s overall capability to deliver integrated solutions,
we believe it is essential to further invigorate our promotions domain.
• In order to enhance our ability to respond to client needs in this domain, we
established the Dentsu Promotion Center at our Shiodome Head Office in
May 2009. By assigning professional staff members of this Center to the
frontline of each client services team, we increased promotional mobility and
succeeded in promptly attending to client needs. This resulted in our
receiving increased orders.
• Also, in order to further promote the collaboration of our highly reputed
creative capabilities with our promotional services, we established the
Solution Creative Office within the Promotion Business Division. This move
has enhanced the quality of the services we offer our clients.
• As a result of these efforts, our promotion-related sales exceeded the market
average in both the 1st and 2nd halves of fiscal 2009. This is a positive sign
that our capability to make comprehensive proposals to our clients has
increased.
• Furthermore, in order to carry out a thorough control of sourcing and
business processes, and thereby ensuring improved quality of services and
profitability, we newly established the Outsourcing Management Department
as well as the Business Process Management Department within the
Promotion Business Division.15
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• In the global domain, we have made progress primarily in two areas—localization
and range of services.
• In the first area of progress, locally hired, talented staff members participated
proactively in their own markets, and the localization of management was further
promoted. This has led to the acquisition of new accounts, including the winning of
new global and local accounts as well as the expansion of existing local accounts.
• Specifically, we were able to acquire new brand accounts such as Kraft, Verizon,
Pfizer and Dr Pepper in the United States. In recognition of such achievements,
McGarryBowen was named Advertising Age’s 2009 Agency of the Year, and
Dentsu Inc. was named Media Agency of the Year at the 56th International
Advertising Festival (Cannes Lions 2009).
• In other parts of the world, the Dentsu Group added new blue-chip clients such as
China Life Insurance Company Limited (China) and Aircel Limited (India) to its
client list.
• The growing presence of the Dentsu Group is generating a positive growth cycle—
e.g. securing excellent human resources, increased opportunities for mergers and
acquisitions, and greater attention from clients.
• In terms of performance figures, due in part to our cost control initiatives and
ongoing structural reforms, we were able to post an operating income in the 2nd
half, despite the severe environment.
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• With regard to the second area of progress in the global domain, we
extended our range of services in each overseas market.
• In the United States, we enhanced our competitiveness in the digital
domain by having Innovation Interactive—a leading U.S. digital agency
with strengths in SEM and the social domain—join the Dentsu Group.
• In China, we expanded our marketing services lineup in China by forming
a capital and business alliance with Suntrend Group, the largest sales
promotions network in China. We will also jointly establish Dentsu
BlueFocus Public Relations Consulting with BlueFocus Communications
Group, a major PR company in China.
• The Dentsu Group will continue to fortify its service strengths in
specialized domains, such as digital, media and promotions, through
M&A and other means.
• By doing so, we hope to establish a stronger and more extensive foothold
for our integrated solution services in the global market, and to further
develop both existing and new accounts, be they Japanese, global or local.
• In response to the increasingly diversified means of communication betweencorporations and consumers, creating new business models is a majorchallenge as we have highlighted in our Medium-term Management Plan.With the advent of new smart devices such as Kindle and iPad, competitionin this domain will become even more intense.
• Against this backdrop, we established the Platform Business DevelopmentOffice in January 2010 as a specialized team. Serving as a hub, this Office iscollaborating with media, telecommunications companies and other keyplayers in the communications field.
• The strength of the Dentsu Group lies in its marketing intelligence derivedthrough consumer analysis and insight as well as a wealth of creativity thatenables us to deliver the optimum method for communication withconsumers. With the advent of new media and devices which require novelcommunication methods for the new era, we believe the Dentsu Group hasthe capacity to present integrated proposals that prove its strengths.
• From a medium-to-long-term perspective, we hope to further developplatform businesses as new sources of revenue for the Dentsu Group.
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• Recognizing that increased profitability is also indispensable in achievingthe numerical targets specified in the Medium-term Management Plan, wecontinued to work on cost control measures throughout fiscal 2009.
• In the area of operating expenses, we defined items for substantialreduction—such as travel expenses and transportation expenses—and alsoset a quantitative reduction goal. As a result, we reduced the operatingexpenses for fiscal 2009 by 9.8 billion yen on a non-consolidated basis,and 12.7 billion yen on a consolidated basis. The ratio of operatingexpenses to gross profit also dropped from 29.2% in fiscal 2008 to 26.7%in fiscal 2009.
• At the same time, we strengthened our revenue management per client orproject to make sure that everybody understood the significance ofensuring operating income.
• We also optimized buy-ups and other forms of sourcing to secure grossprofit.
• All this started to pay off in fiscal 2009. In the 2nd half, in particular,despite a decrease in revenue, we registered a positive operating incomeboth on a consolidated and non-consolidated basis.
• In the future, we will continue to carry out appropriate businessadministration by implementing controls to prevent any backlash increasein operating expenses, while securing the strategic operating expensesrequired for further growth.
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• This concludes my summary of the progress we have made in
implementing the Medium-term Management Plan.
• At the beginning of fiscal 2009—Year One of the Medium-term
Management Plan—our forecast of the consolidated operating income for
the full fiscal year was 15.8 billion. The actual figure, however, turned out
to be 37.3 billion yen. There were certainly some signs of recovery in the
market, but this achievement is also due to the fact that we steadily
embarked on specific reforms under the Medium-term Management Plan.
• Looking ahead, we will continue to optimize our human resources system
in response to the changing business environment, while carrying out
reforms in each focus area.
• We will also remain vigilant in implementing the five innovations to
ensure the successful completion of our Medium-term Management Plan
by the end of fiscal 2013.
• Thank you for your attention.