President & Chief Executive Officer, Ubiquitous Platform Systems Vice President and Executive Officer Kazuhiro Tachibana July 14, 2004 Activities of the Consumer Business S t r a t e g y D i v i s i o n The Consumer Business Moving Forward The Consumer Business Moving Forward All Rights Reserved, Copyright( C) 2004, Hitachi, Ltd Hitachi, Ltd.
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The Consumer Business Moving Forward - Hitachi … Mix From analog to digital Reorganize Businesses Reform individual businesses Expand Business Become top manufacturer of digital
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President & Chief Executive Officer, U b i q u i t o u s P l a t f o r m S y s t e m s
Vice President and Executive OfficerKazuhiro TachibanaJuly 14, 2004
Activities of the Consumer Business S t r a t e g y D i v i s i o n
The Consumer Business Moving ForwardThe Consumer Business Moving Forward
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
Hitachi, Ltd.
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
Changes in the Consumer Products Market and New TrendsMarket ExpectationsPast Structural ReformsConsumer Business StrategyFramework for Promoting Consumer Business Establishment of Consumer Business Group
Conclusion
Contents
11
22334455
6
6
Changes in the Consumer Products Market and New TrendsChanges in the Consumer Products Market and New Trends
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
Japanese Economy: Revival of the 3C Businesses1
Little technological innovation
e.g. TV: half century; video: quarter century
《Tax Revenue: Fiscal 2001 》
0
20
40
60
90 00
11
24
5010
19
OtherOther
Income taxIncome tax
19
51110 Consumption
taxConsumption
tax
Company taxCompany tax
59
Particularly
manufacturing
In 2001In 2001
*cars, color TVs and computers
Maturation of 3C businesses
A post-war economy centered on the 3C businesses
(Trillion yen/year )
Reasons
Maturation of basic industries
..
(Trillion yen/year )
02 03 04
1.0
2.0
3.0
4.0
Digital cameras (90%)
DVD recorders (90%)
Flat-panel TVs (80%)3.73.0
1.8
In 2003: Revival of 3C Businesses→Driving Force for Japan’s EconomyIn 2003: Revival of 3C Businesses→Driving Force for Japan’s Economy
『Made in Japan』・Commodity products・High-tech products
⇒ China⇒ Japan
《Demand for the 3 New Consumer Necessities 》
Parentheses show market share of Japanese companies
New International Production Paradigm
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
World Market: Rapid Growth in China and Elsewhere in Asia2
e.g. PDP TVs and large-sized LCD TVs: A market of approx. 14 million units by 2008, 20 times the 2003 level
Expansion in Asia vs WorldExpansion in Asia vs World
(1000 units/year)
03
10,000
20,000
30,000
40,000
50,000
004 05 06 07 08
U.S.
Europe
Other
Japan
Asia
48,615
(14%)
(14%)
6,869
6,898
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
Japanese Market: Advent of the Value-Added Market - Rapid Growth in “Niche and Big” Products3
Flat-panel TVs vs. TV
market
Flat-panel TVs vs. TV
market
(Unit: %)
PDP
LCD
CRT
(Source: Japan Electronics and Information Technology industries Association(JEITA) )
(Source: JEITA)
(Source:Hitachi)
DVD recorders vs. video market
DVD recorders vs. video market
Washer-dryers vs. washing machine market
Washer-dryers vs. washing machine market
DVD recorders
VTRs
01 03
20406080
Washer-dryers
Washing machines
100
0 01 03
20406080
100
0
Unit Base Monetary Base
01 03
20406080
100
0 01 03
20406080
100
0
01 03
20406080
100
0 01 03
20406080
100
0
1%
3% 14%
3%
1%
32%
22% 36%
11%17% 38%
24%
86%
36%
Note: Percentages are for the Japanese market
8%8% 20%20%
(Source: Japan Electrical Manufacturers’Association(JEMA))
Unit Base
Unit Base
Monetary Base
Monetary Base
(Unit: %)
(Unit: %)
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
Japanese Market: Growth of Service Businesses
The Size of the Service IndustryThe Size of the Service Industry
4
Growth of Service Businesses
≪ 2002 GDP Share of Output by Industry ≫
Size: Approx. ¥300 trillionPercentage of GDP: Approx. 60%
(Source: System of National Accounts (SNA))
59%59%Service industryService industry
Manufacturing and construction
26%
Government and non-profit
services 14%
Agriculture, forestry,
fisheries and mining
1%
Service businesses, financial services and insurance, real estate, wholesale and retail, transportation and communications
Number of people: 43 millionPercentage of Japanese workforce: 63%
(Source: System of National Accounts (SNA))
≪ Percentage of Workers in the Service Industry ≫
(%)
60
70
65
75U.S.
Japan
90 95 96 97 98 99 00
Rapid rise in demand for IT and greater efficiency in people’s livesDevelopment of business channels with consumers
Market ExpectationsMarket Expectations
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
5 Market Expectations
A clear commitment to the consumer business, establish a market presenceDevelopment of Hitachi-like businesses and products that leverage its strengths
“I would like to see Hitachi announce a comprehensive consumer strategy”
“I want Hitachi to come out with technologically advanced products that create new markets as only Hitachi can”
Market Feedback
Market Expectations of HitachiMarket Expectations of Hitachi
Digital consumer electronicsDigital consumer electronicsInformation and telecommunication systems
Information and telecommunication systems
Household appliancesHousehold appliances
Electronic devicesElectronic devices
Survey by Itoh Research Office,Hitotsubashi University
Consumers’ Expectations of Hitachi Businesses
“I expect Hitachi to deliver even higher quality and a stable supply by collaborating with companies in which Hitachi has made strategic investments”
79.8 %
38.8%
30.0 %
25.5 %
Closing the chapter on reforms, moving from defense to offense
Past Structural ReformsPast Structural Reforms
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
All Rights Reserved, Copyright(C)2004, Hitachi, Ltd
6Ubiquitous Platform Systems Group (UB)-Structural Reforms
Change the Product Mix
From analog to digital
Reorganize Businesses
Reformindividual businesses
ExpandBusiness
Become topmanufacturer of digital consumer electronics