group reorganization and business portfolio...
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Group Reorganization Group Reorganization and Business Portfolio Management and Business Portfolio Management gg
"Diversifying to concentrate" "Earnest shift to high-level services company"Earnest shift to high level services company
May 21, 2008AOKI Holdings Inc
Bridal EntertainmentFashion
AOKI Holdings Inc.
AOKIVALICRAVIS
AOKIORIHICA
MX
Maturing suits retail market, and trend in sales by business division
(Millions of yen) (Billions of yen)120 000 900
80,000
100,000
120,000
500
600
700
800
900AOKI Holdings' sales (LHS) Suits retail market (RHS)
20,000
40,000
60,000
100
200
300
400
500
0FY3/90 FY3/91 FY3/92 FY3/93 FY3/94 FY3/95 FY3/96 FY3/97 FY3/98 FY3/99 FY3/00 FY3/01 FY3/02 FY3/03 FY3/04 FY3/05 FY3/06 FY3/07
0
100
Source: AOKI Holdings and Yano Research Institute Other (ANNIVERSAIRE, etc.)
FY3/02
FY3/99 Men’s and Kids Retail Business
Men’s and Kids Retail Business
99.0
87.9 12.1Anniversaire and Bridal Business
Anniversaire/Karaoke
Entertainment Business
1.0
FY3/08
FY3/05 Fashion Business
Fashion Business
72.0
68.7
15.6
16.0
12.4
15.3
Anniversaire and Bridal Business
Anniversaire and Bridal Business
Entertainment Business
Entertainment Business
2
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Business portfolio synergies
Group reorganization allows for operation of multi-facetedGroup reorganization allows for operation of multi-faceted businesses under a pure holding company
To bring about full-fledged business portfolioTo bring about full-fledged business portfolio management…
Conditions necessary to achieve positive synergies
Link all businesses to a clear value chain in fields with absolute core competencies
The financial characteristics of each business complement
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each other
Value chain linking diversified businesses
Casual wear Men’s wear Bridal Karaoke Café complex
F t th t li k h t t fi t l t b l t d b i
‘Hard’ value chain: business skills leveraging chain store theory I
Factors that link what appears at first glance to be unrelated businesses
Chain store management know-how including detailed investment recovery schedules and standards for business withdrawal
‘Soft’ value chain: ‘inspiring customers’II
A thorough focus on providing quality products and services to satisfy and inspire customers, and a training system for implementation
"AOKI: Where Each Thread Counts": Vertical merchandising know-how and
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gexperience from raw materials manufacturing up through selling to customers
Business domains based on concept of “To enrich people’s lives”
Bridal BusinessThe ultimate
‘extraordinary day’
Off (extra-
ordinary
Karaoke facility operation
Café complex operationyaffairs)
Café complex operation
Casual Business Fitness
Suits Business
On (ordinary affairs)
(including casual wear in AOKI and ORIHICA stores)
Core flagship business
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Generation 20 80
Business development from standpoint of "spreading business opportunities"
AOKI Group Business Portfolio
Will continue to expand the business portfolio to incorporate a wide range of business opportunities
Customers AOKI GroupMen
Women P fit bilit
Entertainment
Income strata
Will commit ourselves to the total
And at the same time…
Women Profitability
Age Time
lifestyles of customers, not just selling suits, in order to move close to achieving our corporate ideal Weather Image
Conditions for business development
Diversifying to concentrateEnvironment Season Competition
Growth prospects
Market
pFocus on fields where the AOKI Group can maximize its management resources of "growth skills in chain store management" and "providing quality products and services to inspire customers"
Focus on fields where the AOKI Group will definitely be a ‘winner’ For example: A market on the cusp of growth with no dominant players and in which the AOKI Group
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For example: A market on the cusp of growth with no dominant players and in which the AOKI Group could immediately establish a dominant position after investing capital
Business development from the standpoint of financial characteristics
Characteristics of each businessFY3/08 l
Fashion business-- High shareholders’ equity ratio, cash-rich,
High operating profit margin, low ROA
A nniversaire/Bridal
16.0%
Entertainment15.3% Fashion
68.7%
FY3/08 sales
Bridal business (RAVIS)
*Parent figures of AOKI Holdings have been used for the Fashion business
-- Capital investment needs still strong; operating profit margin nearly as high as in the fashion business; high ROA
285.9
147.5150
200
250
300
35076.6
35.740
50
60
70
80
90Asset turnover Inventory turnover Shareholders’ equity ratio
0.69
1.23 1.25
0 6
0.8
1.0
1.2
1.4
1.6
Entertainment business (VALIC)-- Basically second to the bridal business
across various financial performance indices, and more funds are needed for capital16.0
5.90
50
100
Fashion RAVIS VALIC
18.1
0
10
20
30
Fashion RAVIS VALIC
25.0Operating profit margin ROA ROE
0.0
0.2
0.4
0.6
Fashion RAVIS VALIC
18.0 and more funds are needed for capital investments
Portfolio of businesses with 7.3
10.510.3
4.0
6.0
8.0
10.0
12.0
14.0
5.1
19.4
15.5
10.0
15.0
20.0
5 0
7.2
12.7
9.3
6.0
8.0
10.0
12.0
14.0
16.0
8 0
7
: designates medium-term targets for each business
complementary financial characteristics
0.0
2.0
Fashion RAVIS VALIC0.0
5.0
Fashion RAVIS VALIC0.0
2.0
4.0
Fashion RAVIS VALIC
Business portfolio diagram: already a ‘winner’ in most diversification businesses
M Traditional flagship businesses formLocal brand
Market size
Casual
Businesses with strong growth potential
businesses form core of earnings
Local brand
e growth potential
Simultaneous achievement of higher market share
and growth in scale Men’s formal wear
Winner
Karaoke Guesthouse wedding
Top group Top group
Niche focus
Café complex
Fitness Winner
Growth market
Mature market
Market growth potential
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What ties all the businesses together is a spirit that aims to satisfy and inspire customers with comfortable lifestyles
‘Hard’ value chain: chain store management know-how
Chain-store management skills refined over half a century Enormous data and know-how regarding chain store development Formulation of store formats to maximize efficiency at each locationFormulation of store formats to maximize efficiency at each location Planning of detailed investment recovery schedules and standards for business withdrawalKnow-how to unearth problems at struggling stores and provide coaching Just-in-time logistics management
"Chain stores are not about retail or sales but aboutChain stores are not about retail or sales, but about successfully producing an environment for the provision of
consumables." (Japan Retailing Center)
The AOKI Group leverages its chain store management know-how
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to provide hospitality with the best service quality.
Product quality and service determines sales
‘Soft’ value chain: AOKI Group focus ‘1’
Product quality and service determines sales
We sell not ‘products’ but ‘lifestyles’
Example of thorough focus on product quality and style proposals
"AOKI: Where Each Thread Counts": refining the vertical merchandising modelAOKI: Where Each Thread Counts : refining the vertical merchandising modelConstant feedback and confirmation of policy
Customer satisfaction and opinions
Customer satisfaction and opinions
Sales activities at retail stores
Sales activities at retail stores
Design retail space centered on top quality
Design retail space centered on top quality
PR strategy through media
PR strategy through media
Materials development:
production lines starting with a single thread
Materials development:
production lines starting with a single thread
Information gathering
and product planning
Information gathering
and product planning
Pursue best quality and maximize
production efficiency
Mote Slim a big hit
Total coordinate proposals using
the stylist system
The crux of marketing begins
‘after the sale’
Shift from displaying products by type to
displaying products based on coordinated styles
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Complete involvement in all processes is core to the AOKI Group’s marketing strategy
‘Soft’ value chain: AOKI Group focus ‘2’
Management policies throughout the GroupManagement policies throughout the Group
Business Integrity
Specific recent corporate activities
Social Responsibility Community Service
Specific recent corporate activities
Maximizing customer satisfaction and inspiration through quality improvements and refined services
Specific methods of realization
Example of education and training structures in each business
A thorough employee education and training structure rare among competitors- Creation of added value through service quality
Business Career advancement plan Training period and content for new employees Features
Fashion business
Establishment of a six-stage career advancement plan from new employees up through sales division representatives
Six months: Introductory training, OJT, and follow up reviews
Education and testing for career advancement, and training system to cultivate skills as a stylist
Bridal business
Establishment of a career advancement plan starting from assignment to a specialized course up through management
Seven months: Basic education, customer service, on-site practice, and OJT according to job position
After the seven-month training course, employees are assigned to specialist courses based on suitability. Education and training is thorough because ‘human resources’ are the key to inspiring customers above and beyond the competition.
Six months: Introductory training Two training courses for newly accepted hires. The
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Entertainment business
Establishment of a six-stage career advancement plan starting from ‘general employee’
Six months: Introductory training, OJT (retail operations and management), target setting, follow up
main feature is the use of a mock facility to provide hands-on training. A licensing system has been adopted for different stages of career advancement, and concentrated ‘skill-up’ programs are obligatory.
Synergies from the value chain
Total business developmentTotal business development Efficient and speedy business development from utilizing and sharing chain store management know-how
Cost reductions as business diversification brings about economies of scale and greater information volumes
Promotion of marketing and sales Promotion of marketing and sales by utilizing customer lists and point systems from each business
Store development Information gathering on properties; securing properties suitable for each business; and utilization of unprofitable stores within the Group
Pe sonnelPersonnelEnhancing motivation through personnel exchange; career advancement for employees
Securing talented human resources and improving efficiency through joint hiring across the Group
MerchandiseMerchandiseEfficient procurement leveraging economies of scale
SystemC t d ti th h h i f d i i t ti t ( ti l t )
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Cost reductions through sharing of administration systems (accounting, personnel, etc.)
Current position of each businessBusiness segment
(relevant company) Category Founding period Current position Management resources and features
Fashion business (AOKI, ORIHICA,
M/X)
Men’s wear1958: The Group’s flagship business since founding
Dominates market together with Aoyama Trading, the largest company in the industry
Chain store management know-how accumulated over half a century supports growth in scale. Solid customer base created by not just selling suits, but proposing lifestyles.
Casual
1935: Launch of Furuya Tailor Shop 2007: Brand-name stores rooted
i l l
‘On-site’ strengths of discerning top-selling products and appropriate pricing based on over 70 years of casual store management. Brand t th t d i l l t d Y hi N dCasual 2007:
AOKI Holdings takes capital stake
in local area strength rooted in local areas centered on Yamanashi, Nagano, and Shizuoka prefectures; also strong in making coordinating proposals.
Bridal business (RAVIS)
Guesthouse wedding
1986: Press Work Inc. established 2002: AOKI International (name at the time) takes capital stake
Third largest company in the industry
Business know-how accumulated from involvement in house weddings since market’s inception. Acquired chain facility development know-how from inclusion in the AOKI Group. Pursues added value through focus on enhancing human resources quality; high ratio of successful contracts proof of human resource strengthsthe time) takes capital stake proof of human resource strengths.
Café complex
2005: AOKI International (name at the time) acquired the company
Industry top
Operates mostly in suburban residential areas. Recreates the image of a resort hotel to provide a relaxing atmosphere far different from the ‘hangout’ image common to city-center ‘comic cafes.’ Wide customer base from younger to older generations. Employee training differentiates the business from the competition.
The facilities help customers relax using designs based on the image of
Entertainment business (VALIC)
Karaoke
2000: AOKI International (name at the time) spun the company off
Fifth largest in the industry
The facilities help customers relax using designs based on the image of resorts in southern France, and yet the layout enables low-cost operations. Space is provided to a wide range of customers as the facilities meet diverse communication needs. Sophisticated employee training at mock stores ensures high quality service, differentiating the business from the competition.
The facilities create a relaxing atmosphere through wood grain interiors.
Fitness
2005: AOKI International (name at the time) acquired the company
Focuses on niche markets
The business specializes in fitness clubs with only machine rooms and studio programs in order to minimize investment costs and provide customers with lower monthly fees. This differentiates the business from major fitness clubs which also offer pools and baths but charge higher monthly fees.
AOKI Group DNA shared by all businesses
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Know-how to expand profits through building a chain of stores following establishment of a business model. Thorough focus on product and service quality to satisfy and inspire customers. Propose optimal styles for different life stages rather than simply sell products. Achieve growth in scale through chain store development, but at the same time focus on human resources training and growth in quality.
Direction for each business through strengthening of group management
Business segment (relevant company) Category Outlook for industry
environment Conditions for growth Future direction and group synergies
Fashion business (AOKI, ORIHICA,
Men’s wear Contracting Focus more on product manufacture and human resources training than opening new stores
Will continue to open new stores to meet our 1,000 store target. With a change in environment from the days when the buzzwords ‘suburban’ and ‘motorization’ were popular, we will focus on opening smaller stores with concentrated categories in urban areas and shopping centers. Strengthening the Group structure will add diversity and flexibility to store opening plans.
M/X)
Casual Sustained growth,
but diversification of categories
Create added value through a focus on product manufacturing and differentiated services
Change direction from enhancing product lineup to focusing on select products and aim for greater added value. Target PB ratio of 50%. In addition to traditional ‘on-site’ strengths, leverage AOKI’s detailed strategic development know-how to optimize store development and improve gross profit margins.
Focus on maintaining andFurther raise position in the guesthouse wedding industry which continues to see high growth Continue to open quality facilities leveraging the
Bridal business (RAVIS)
Guesthouse wedding Stable high growth
Focus on maintaining and improving quality of human resources, the most important ‘soft’ element of the business
to see high growth. Continue to open quality facilities leveraging the funding and property procurement strengths of the AOKI Group. Avoid reckless expansion of the facility network without an accompanying increase in quality human resources; establish brand value through further quality improvements.
Café complex Ongoing high growth
Raise social awareness of the facilities as a ‘relaxation space,’
Continue to aggressively open facilities primarily in the suburbs. Diversify facility openings by uniting closer with the AOKI Group to leverage its
Entertainment business (VALIC)
Café complex Ongoing high growth and provide services to meet customer needs for true relaxation.
knowledge of roadside property development. Dominate the undeveloped industry and expand presence.
Karaoke Peaking somewhat Provide clean entertainment that is welcomed by a wider range of age groups
Provide karaoke, a healthy leisure activity, and multiple-use party space, to a wide range of age groups. Strengthen low-cost high-value investment by opening furnished facilities leveraging Group management strengths.
Provide attractive content toFitness Continues to expand
Provide attractive content to differentiate from comprehensive-type competitors
Plan expansion in niche markets with medium-sized, low-priced facilities
Merits of strengthening group management for all businessesSubstantial increase in property selection choices for integrated store openings with other businesses, etc. Reduction in developer selection costs materials procurement costs and other investment costs for new store openings
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Reduction in developer selection costs, materials procurement costs, and other investment costs for new store openings Greater shared use of customer information Reduction in administration costs due to greater sharing of know-how Stronger group credit; introduction of human networking and negotiation strengths
Ultimate goal: firmly establish brand value
Continue to enhance corporate value
InvestAmple funds from
flagship business of men’s wear sales
Diversification into businesses “to enrich
people’s lives "
Growth to top level of the
Firm brand establishment of AOKI as a Capture of excess
profits through brand
industry; enhancement of service qualityEventual expansion of
overall Group cash flow
high-level services company
Upward shift in f h
profits through brand value
Brand image channels back to the fashion
businessBreak out of standard
position!position in fashion
industry
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Establish brand centered not on men’s wear, but the concept of “to enrich people’s lives"
Management style as ‘high-level services company’Autonomy and independence Hybrid
Two a
balanEach business is given autonomy and independence, and the head of each business is responsible for growth.
AOKI Holdings provides human networking and negotiating strengths
yapparentnce w
ell grow
th istrengths.
The head of each business pursues strategies for growth in scale while employees pursue growth in quality through tly contr
to simul
in quality
scale, while employees pursue growth in quality through service quality improvements.
radictoryltaneousy and vo
Aim for earnings growth through chain store management, and satisfy and inspire customers by enhancing product
and service quality.
y dynami
sly achievolum
e
Pursue growth in scale, and guarantee future profits by securing ‘brand value’.
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ics ve
g
Hybrid & Independence management: growth as a “high-level services company"
Continue to pursue growth in both quality and volume to ultimately establish brand value
Growth strategyof business head
Improvement of
volume to ultimately establish brand value
p o e e t oemployees’ service
quality
Right turboCentripetal force
Management principles
Chain store management
Left turboGroup caretaker team
Right turboManagement
implementation teamAOKIORIHICAMX
Growth in
MXRAVISVALIC
AOKI Holdings
Satisfy and inspire customers
Growth in scale
brand value
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Group coaching Professional management
in each business
Growth in scale