(1) Basic Corporate Management Policy
The NEC Networks & System Integration Corporation Group is a communications system integrator with unique strengths stemming from (1) ICT technology that enables the Group to provide a complete package of services from system planning and introduction to operation and outsourcing across a broad range of areas, including office ICT systems for enterprises and ICT infrastructure for telecommunications carriers and public organizations that must be extremely reliable; (2) a comprehensive construction technology that allows the Group to cover everything from telecommunications construction work to the construction of electrical and air-conditioning facilities and other office facilities, in addition to ICT indispensable for communication; and (3) a nationwide support system/platform for a variety of systems and services, including operation centers for operation, monitoring and maintenance services of networks, with help desk function, and a comprehensive technical center that conducts a series of supply chain management including the procurement and storage of networking equipment and ICT products, the configuration, repair, revaluation, verification and delivery of systems. We continue to bolster these unique strengths of ours, whilst at the same time strategically promoting the use of external resources though M&A and alliances and open innovations with other companies, to further enhance our business agility and growth potential.
According to the NEC Networks & System Integration Corporation Group Statement, which describes a set of values and the DNA the Group has cultivated, as well as its far-sighted aspirations and corporate vision, “The NEC Networks & System Integration Corporation Group enables communities throughout the world to enjoy a safe, secure and plentiful tomorrow by continually facilitating more welcoming and convenient communications, and supporting a connected society, from the floor of the ocean to the far reaches of outer space, with proven technologies and reliable services cultivated over many years.” Based on this statement, we aspire to continue being a company that will be trusted by society and customers in all eras by contributing to creating an enriched society with more user-friendly and convenient communications. We strive to provide even more satisfactory services to our customers by being indispensable to them as a partner, whilst at the same time aiming to increase our corporate value.
(2) Management Targets
Our key management strategy is to profitably expand our business while making active investments, taking advantage of our solid financial foundation.
In this fiscal year (the fiscal year ending March 31, 2019), favorable conditions are generally expected with an increase in companies’ investment appetite centered around work style reform and the recovery of capital spending on network infrastructure mainly in the base stations among telecom carriers. On the other hand, in central and local governments and the public interest market, investment in broadcasting, CATV, disaster prevention, etc. is expected to increase with low investment in some areas where fierce competition will continue and in the off-demand season of projects. In addition, overseas business conditions will remain both favorable and unfavorable.
In this environment, 2019, the Company aims to post net salesof 280 billion yen for this fiscal year, strengthening of the actions for the business under focus in the medium-term business strategy, especially the business related to work style innovation, and the business directed at telecom carriers with the expectation of the recovery of capital spending as well as the steady conduct of the large-scale projects whose orders were received in the previous fiscal year.
On the profit front, the Company will make active investments for growth, including response to digital transformation and other new technologies and the development of human resources, with an eye toward future growth in the medium to long term. Given the effects of the improvement of Social Infrastructures and an increase in earnings, among other factors, the Company targets operating income of 11.5 billion yen in this fiscal year.
(3) Medium- to Long-Term Management Strategies and Issues the Company Faces
In domestic ICT-related markets, investment in the development of ICT infrastructure and advanced networks in pursuit of even greater convenience and efficiency is expected in the corporate and social/public sectors. In addition, in line with changes in customer needs and the increased convenience and reliability of ICT services, investment is expected to shift to the services area. Overseas, investment to develop more sophisticated, faster telecommunication networks and investment in social infrastructure such as roads, railways and airports is expected to expand at a high rate, especially in the ASEAN region.
Under such conditions, our basic strategy for medium-term business growth is to strengthen and further develop our Service, Infrastructure and Global businesses with the aim of achieving further evolution and expansion.
In the Service Business, our policy is to concentrate on expanding service provision-type businesses and to implement growth strategies and make aggressive investments, including developing new businesses and services in areas where future market growth is expected such as workstyle innovation, IoT/M2M and cyber security, while nurturing and enhancing our resources. In the Infrastructure Business, we will seek to expand business and strengthen business agility, focusing on business areas where growth in demand is expected on the back of the Tokyo Olympic and Paralympic Games, initiatives for regional revitalization and building national resilience, and the revision of the Feed-In Tariff(FIT) Act, demand for the construction of solar power generation plants. We will also concentrate on the Global Business, meeting needs in the outbound market, including telecommunications infrastructure and social infrastructure business in the ASEAN region, and also expanding business in the domestic related markets, where demand is increasing due to the rapid increase in foreign tourists visiting Japan (the inbound market).
(i) Growth Initiatives
Enterprise Networks Business
As the domestic market matures and global competition intensifies, managers in the corporate sector are seeking proposals for ICT solutions designed to increase management efficiency, improve productivity and otherwise strengthen enterprise. Meanwhile, both for corporations and for government, development of the telework and ICT environments to support work styles not bound by time or place, and the establishment of internal management systems for diverse work patterns and new management methods such as an evaluation index for labor productivity have become urgent issues for promoting the utilization of diverse human resources, including women and seniors. In response to such needs, we will strengthen business and enhance our proposal and consulting capacity by implementing EmpoweredOffice across the board in our head office and all our regional offices to put workstyle innovation into practice ourselves, develop and verify new ICT environments, and translate this into specific proposals from the perspective of customers. At the same time, we will strengthen our business base and enhance our resources through the investment in growth mentioned earlier, thereby strengthening our overall service agility and cost competitiveness when supporting our customers in innovating business processes and making improvements in areas such as digital transformation and other new technologies (AI,cloud computing,cyber security,etc.).
Carrier Networks Business
In the Carrier Networks Business, restraints on capital spending for network infrastructure have bottomed out and the recovery of capital spending on network infrastructure mainly in the base stations. In this environment, in our business with telecommunication carriers, we will strengthen our ability to meet demand for All-IP networks, virtualized networks, and next-generation mobile networks, which are expected to expand in the future. At the same time, taking advantage of our system integration abilities in the carrier grade, nationwide maintenance responsiveness, and technical skills that can respond to an entire network from mobile base stations to the core network, which we have cultivated through our extensive business experience with telecommunication carriers, we will meet the needs for large-scale systems of other service providers and the public sector (education, medical service and local governments), such as data centers and cloud computing infrastructures.
Social Infrastructures Business
We position our Social Infrastructures Business, which mainly provides infrastructure installation and maintenance and operational services for central and local governments, broadcasters, railway companies and other public enterprises, as a business that must steadily respond to changes in public investment theme. In the medium-term, we expect demand for the development of various types of ICT infrastructure in the areas of broadcasting and CATV, disaster prevention systems, and we will expand business by responding appropriately to this demand in collaboration with the NEC Group.
In addition, to meet demand for infrastructure building for mobile communication overseas, particularly in Asia, we will make aggressive efforts, mainly at our overseas subsidiaries.
(ii) Strengthening of Business Capability
In management innovation activities, management and employees have worked together to improve business process efficiency and to lower our cost structure. As a result, we successfully made continuous improvements in the cost of sales ratio and strengthened profitability. Moving forward, while targeting higher profitability through sales expansion, we will continue to step up and undertake management innovation activities to further bolster profitability. For instance, we will seek to improve the efficiency of outsourcing costs, reduce equipment and material costs through standardization and centralization, promote standardization, and strengthen management to eliminate the costs of reworking.
(iii) Reinforcing Compliance and Internal Control
We believe that ensuring compliance is fundamental to all corporate activities and that compliance-oriented management holds the key to our sustainable business activities and business development. The Group, comprised of the Company and its consolidated subsidiaries, will strive as a whole to participate thoroughly in corporate activities based on corporate ethics and a law-abiding spirit, with priority placed on compliance.