KoN Ni Chi Wa Check your fly What

Ko’N Ni Chi Wa ! Check your fly ! What is the brand of the zipper ?

YKK A quiet success Group 2 B FT 2005 Simone Huijs Suraj Basnet Ken Kodaka Piercarlo Oddone Joan Moreau Eugene Kolesnikov

Agenda 1. 2. 3. 4. 5. Overview Key success factors Structured analysis Contemporary issues and strategies Strategic recommendations

Overview Success factors Analysis Current issues Future From small shop to global company ¢ ¢ Tadahiro Yoshida President of YKK ¢ ¢ ¢ Founded : January 1, 1934 to produce zippers – a new fashion product Assets $ 6. 3 bn 31% owned by Yoshida family Remaining owned by key partners and employees Subsidiaries : 132 in 60 countries Production : 75 plants producing 7. 2 bn zippers Research : 4 R&D centers Number of employees : 36, 200 (October 2003) Sales : $ 3. 9 bn, 193% growth during 1994 -2003 Always profitable

Overview Success factors Analysis Current issues Future History of YKK Tadao Yoshida at 20 founded San-es Shokai company in Tokyo 1934 Zipper supply contracted with military WWII First overseas affiliate in New Zealand, followed by US, Malaysia, Thailand Costa Rica Automated production 1950’s 1959 Captured 95% of Japanese zipper business 1960’s Changed name into YKK Diversified into aluminum building products 1973 Tadao Yoshida died and his son Tadahiro Yoshida took control of the company 1993 1994 Doubled revenues since 1994 2003

Overview Success factors Analysis Current issues Future Corporate structure ¢ ¢ Headquarters in Japan 2 main entities (fastening and architectural products) l Supported by machinery & engineering divisions ¢ Regional structure l Six regional blocks l Each block is managed as a profit center ¢ International marketing group l Deals with multinationals l Coordination

Overview Success factors YKK Products ¢ Fastening products l 41% of revenue l Market share : 45% l Zippers, etc… ¢ Architectural products l 58% of revenue l Aluminum storefronts, entrances, windows, sliding doors etc. Analysis Current issues Future

Overview Success factors Analysis Current issues YKK fastening market ¢ 1, 500 styles in 427 standard colors and in as many special colors as customers require ¢ Consumer and industrial applications l Apparel and accessories l Special clothing and accessories (safety, space, military) l Other applications (safety belts, tents, artificial turf in stadiums) Future

Overview Success factors Analysis Current issues Why YKK is successful ? ¢ Key success factors l l Leadership and strategic intent Product leadership Global strategic management Service leadership and information technology Future

Overview Success factors Analysis Current issues Future Leadership and strategic intent ¢ ¢ Andrew Carnegie, Tadao Yoshida and the “Cycle of goodness” In product development In business development In relations with local communities “It starts with our single-minded dedication to perfection in everything we do” Tadao Yoshida

Overview Success factors Analysis Current issues Future Product leadership - 95% added value - Superior products - Attractive price ¢ Total vertical integration ¢ Proprietary manufacturing machines Innovation ¢ ¢ Total vertical integration l 95% added value rate Proprietary manufacturing machines l Technological advantage Innovation l R&D investment started in 1950 s – four R&D centers functioning today l Discoveries in materials and products (e. g. GIGAS) Product quality and variety l 27 trademarks

Overview Success factors Analysis Current issues Future Global strategic management ¢ ¢ ¢ ¢ End of 1950 s – 95% market share in Japan 1959 – first overseas affiliate in New Zealand 1960 – enter US market, first production facility in New York in 1964 1972 – first Japanese company to open a factory in the UK Maintaining Japanese management principles and strong links with headquarters l Overseas postings for 10 -15 years l First foreign executive, Alex Gregory, in US in 2001 Taking local culture into account Local input procurements

Overview Success factors Analysis Current issues Future Service leadership and IT – 1/2 ¢ ¢ ¢ US 1960 s – “Delivery yesterday” – won over Talon and Optilon 1990 – Adidas as a global client 1993 – PARTNERS procurement system 1997 – electronic shop-floor control system “Now we can respond to important orders within the hour. Needless to say, our customers are delighted” 2000/2001 – internet based supply chain and customer management solutions l Delivery dates by suppliers are being met with a success rate of 97%

Overview Success factors Analysis Current issues Future Service leadership and IT – 2/2 “Our goal is to create a ‘Virtual Company’ that brings us together with our partner companies”

Overview Success factors Analysis Current issues Future Porter analysis New entrants High threat in low cost sector Zipper patents expired, Lower-end technology and cheap labor available in high demand areas Medium threat in mature markets economies of scale Suppliers Low bargaining power Raw materials such as zinc and copper, plastics, are in good supply Industry rivalry High due to large number of Substitutes competitors and significant growth Low threat in light industries in Asia Other fastening products are available (e. g. Velcro) but did not take market share Buyers High bargaining power for low cost producer Medium for global customers (high switching costs )

Overview Success factors Analysis Current issues Future SWOT today Strengths • Private ownership shared with employees and key business partners • Customer relationship management • Innovative and strong R&D capabilities • International management experience • Total vertical integration • The diversification in two key product lines Weaknesses • Less flexibility in raising capital due to private ownership • Leadership succession problem • Less flexibility in labor force scaling due to culture and ownership structure Opportunities • New markets in developing countries • New fastening products with new technologies • Further integration with key customers • New distribution channels (portals) • Standardization of production Threats • Low cost competitors • Increasing cost of raw material • Counterfeiting • Trends in the fashion industry • Increasing vertical integration of main customers

Overview Success factors Analysis Current issues Future Value, cost & speed ¢ ¢ Value: l High variety / High quality l Customer relationship including e-customer relationship Cost: l Assumed fairly low costs due to economies of scale, superior manufacturing technologies, and vertical integration Speed: Customers l Fast manufacturing and delivery enabled by IT and proximity to customer l Innovation and fast time to market e Company lu d Va ee Sp S p. Valu ee e d ¢ Cost Speed Competitors

Overview Success factors Analysis Current issues Future Layers of competitive advantage ¢ It may be easy to imitate the zipper, it is difficult however to duplicate the complete model l Innovation l Superior technology l Total vertical integration l Product variety l Staff experience and loyalty

Overview Success factors Analysis Current issues Future Contemporary issues ¢ ¢ ¢ Decline of older markets and dramatic global geographical shift in apparel manufacturing Growing size and power of the players in Asia and increasing price competition Substantial counterfeiting (e. g. 10% of zippers imported into the US are counterfeit, majority of them as YKK)

Overview Success factors Analysis Current issues Contemporary issues YKK responds ¢ ¢ ¢ Future Shifting production to new manufacturing countries (Bangladesh, China, Russia, Romania, Poland, Czech Republic) l Factories in China will provide 17% of global capacity vs. 10% l US capacity with fall by 22% to account for 10% vs. 14% l Output capacity in Japan will fall 13% and reductions will be made in the UK and Germany Competing on price by launching a new brand aimed at Chinese domestic market Offsetting pressures on fastening division by growth in aluminum construction sector Corporate restructuring (marketing, aluminum products) Standardization and cost cutting Fighting counterfeiting

Overview Success factors Analysis Current issues Future Looking ahead ¢ YKK Corp. expects group net profit to increase two-fold from the previous year ¢ For the next fiscal year beginning April, the company expects a healthy group profit of $ 194 m on sales of $ 5. 4 bn “To ensure mid- and long-term growth for the YKK Group in an increasing difficult business environment, we must focus on specific goals that reflect the overall mission of our group activities” Tadahiro Yoshida, President

Overview Success factors Analysis Current issues Future Recommendations ¢ Target cost buyers in developing countries beyond China by introducing basic low cost products under different product names ¢ Actively pursue global standardization and e-commerce applications to improve efficiency, reduce costs and improve customer service ¢ Identify and grow a successor to Tadahiro Yoshida

No questions ?