Denso Analysis

2009

Rai Anod Kumar [email protected] Management Final ReportRitsumeikan Asia Pacific University5/25/2009

DENSO corporation analysis

Hi Friends!!! I am “A” let’s analyze DENSO together

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DENSO corporation strategic analysis

Table of Contents

I. Company Introduction..........................................................................................3

II. DENSO Analysis from strategic perspective.......................................................5

1. DENSO Strategic Management and Strategic competitiveness -...................................................5

2. DENSO External and Internal Environment..................................................................................6

3. DENSO Business Level strategy....................................................................................................7

4. DENSO Merger and Acquisitions strategy......................................................................................7

5. DENSO International Strategy.......................................................................................................8

6. DENSO Corporate Governance......................................................................................................9

7. DENSO’S future Challenges........................................................................................................10

Strategic Management Page 2


I. Company Introduction

DENSO Corporation (株式会社デンソー Kabushiki-gaisha Densō) globally renowned automotive parts manufacturer headquarter in Aichi Prefecture is Japan's leading producer of automobile components and the world's fourth largest . Established in Dec- 16-1949 with the name of Nippondenso Co. Ltd., DENSO was the member of Toyota group of companies manufacturing electrical components for Toyota Motor Corporation but segregated after world war-II by Supreme Command for the Allied Powers.

Mission: Contributing to a better world by creating value together with a vision for the future.

Management Principles: Customer satisfaction through quality products and services, global growth through anticipation of change, environmental preservation and harmony with society, corporate vitality and respect for individuality.

Individual Spirit: to be creative in thought steady in action, to be cooperative and pioneering, to be trustworthy by improving ourselves.

Key numbers for fiscal year ending March, 2008: Sales: $40,536.5MOne year growth: 32.4%Net income: $2,461.5MIncome growth: 41.5%

Officers:Chairman: Akihiko SaitoPresident and CEO: Auto Parts Manufacturing

Competitors:Delphi Corp.Robert BoschVisteon

Key Customers: As the second-largest member of the Toyota Group, more than half of DENSO's products go to Toyota Motor Corporation (TMC), which owns better than 20 percent of DENSO stock. DENSO also supplies nearly all other major Japanese automakers as well as numerous U.S. manufacturers, including Ford, General Motors, and Chrysler, and major European auto manufacturers such as Volvo, BMW, and Fiat.



Table 1 - Key Dates:

1937: Newly formed Toyota Motor Corporation builds starter and coil factory in Kariya.

1949: Nippondenso Company is formed from two existing Toyota plants.

1950: Quality control methods begin to be adopted.

1953: Nippondenso begins technical agreement with Bosch.

1957: Nippondenso refocuses on process control methods.

1959: Annual sales reach ¥10 billion.

1965: New plants open in Hiroshima and Ikeda.

1966: Nippondenso establishes offices in the U.S. and Canada.

1967: The company opens a starter and alternator factory in Anjo.

1968: Nippondenso opens auto industry's first integrated circuit research facility.

1969: The company's annual sales exceed ¥90 billion.

1971: International growth prompts the formation of overseas subsidiaries.

1979: The company's annual sales reach ¥500 billion.

1985: Nippondenso Technical Center is established in Southfield, Michigan.

1987: The company's sales pass ¥1 trillion and subsidiaries are established in Taiwan and Thailand. 1996: The company's name is shortened to DENSO Corp., reflecting global orientation. 2001: DENSO buys out the remaining interest in Purodenso Company


Long history!!!


II. DENSO Analysis from strategic perspective

1. DENSO Strategic Management and Strategic competitiveness - If we read the mission statement of DENSO “Contributing to a better world by creating value together with a vision for the future” it looks like company is aiming for growth and values for future by contributing to world. Denso strategic leaders Torao Hayashi and Tsuneo Ishimauru led Denso to true global company from just automotive parts supplier of Toyota. The company expended tremendously after its birth, Denso have presence in most part of the world today, their wide product portfolio includes electrical appliances ,automotive products, electronics , industrial robots and automation, even comfort related products like mosquito killer, seat heater and barcode reader. They even tried their hands in Mobile manufacture but it failed. They build their competitive advantage by doing collaboration with different companies in every region, venture with Purolator Products and Robert Bosch GmbH were few examples of their Joint ventures. Development of new disruptive technologies and convert it into core competency is main characteristics of the company. According to The Patent Board’s Automotive & Transportation Patent Scorecard™ published in The Wall Street Journal, Denso Corporation (Kariya, Aichi, Japan) continues to lead the Automotive & Transportation Industry. Denso has the largest number of patents issued in the industry totalling 835 for the period and maintains an Industry Impact 12% above the industry average which improved by 14%.

Year 2008

The Patent Board Scorecard Ranks Denso Corporation as #1 Innovator in Automotive & Transportation Industry

Top 10 Innovators in Automotive & Transportation Patent Scorecard™ | Quarterly snapshot – 13 week averages

Graph 1

19%

17%

13%10%8%

13%

8% 8%4% 0%

Patent Granted

Denso CorpHonda Giken KogyoGeneral Motors CorpToyota Motor CorpFord Motor CoRobert Bosch GmbHDelphi CorporationNissan Motor Co LtdMagna Intl IncFallbrook Technologies Inc



*(Automotive & Transportation patents only for the multi-industry companies)

If we observe the above table then we can understand how much effort company is putting into innovation to maintain its position as market leader.

2- DENSO External and Internal Environment

SWOT Analysis


Weakness

Lack of business alliances Not innovative enough in emerging

technologies. Lack of innovation in emerging hybrid

automobile market.

Opportunities

Available technological innovations Expand customer base (Geographically

or through new products) Market Diversification Demand for latest technologies

education.

Threats

Competition from foreign markets Competitor's actions Foreign exchange rate changes affecting

imports/exports Innovative products/services of

competitors

Strength

Extensive Customer Base High quality products/services Innovative products/services Lucrative location Strong market position Strong online presence Strong brand Strong supplier relationships


3- DENSO Business Level strategy

DENSO is diversifying its business portfolio in many sectors to minimize the risk; they have the best Total Quality management in industry inherited from Toyota. Denso has implemented new SAP and CRM technologies to provide best services to its customers. By implementing the TQM and best supply chain management practices they were able to reduce the cost of their product at competitive level. Their unique integrated product differentiation and cost leadership strategies give them competitive advantage over others.

The reason behind DENSO’S consistently capturing a greater share of the global automotive component market? The answer lies in technologies, people, innovative problem-solving approach, and unique approach to manufacturing.

DENSO MANUFACTURING: A FORMULA FOR SUCCESS

Innovative manufacturing and processes at DENSO. Concurrent engineering Systemization, modularization and standardization Enhancing quality: advanced manufacturing equipment and skills Lowering costs: aiming to achieve a global minimum cost Reducing delivery time: initiatives begin at the design stage QCD: at the heart of efforts to boost global share The universal production system: uniform QCD performance The vital ingredient: investing in people

4- DENSO Merger and Acquisitions strategy

Year Major M&A by DENSO

1953 Technical cooperation with Robert Bosch GmbH of Germany.

1991 Start of a joint venture with AT&T Co. of the United States in regard to integrated circuit (IC) cards.

1999 Acquisition of Rotating Machines Division of Magneti Marelli S.p.A.

2001 Acquisition of Climate Control Equipment Division of Magneti Marelli S.p.A

2004 Partnership with Toshiba Information Systems (Japan) to develop software on TRON platform.



Product Diversification and developing global presence has never been problem for DENSO, most of the Joint ventures and acquisition DENSO did is to acquire new technologies and increase its learning. Agreement with market leader Robert Bosch GmbH not only armed them with advanced technologies and best processes but also opened their doors to European automotive market. Also DENSO is working on future technologies with Toshiba and already introduced some niche products in market developed together. Here we can observe the open innovation approach of DENSO.

5 – DENSO International Strategy

In 1953, with the technical agreement with Robert Bosch Inc. and In 1966 company’s first establishment of overseas facilities in Chicago and Los Angeles indicates there global orientation, DENSO aggressively invested in American, European and Asian subcontinents and they did Joint ventures, friendly agreements to enter into new market, DENSO has presence in 32 Countries, operating 219 subsidiaries and 140 Manufacturing companies all around the world. This kind of market penetration and strong global presence provided them with pool of resources and economies of scale that leads to above average return and makes them world leader.

Figure 1: DENSO world operations



6 – DENSO Corporate Governance

Figure 2: DENSO’S corporate governance system

Denso operates in global market characterized by rapid change. In this environment, enhancing the overall competitiveness of the group is essential to raising corporate performance over the long term. The overriding objective of the framework is to ensure sound, efficient and highly transparent management based on the continuous disclosure of information to shareholders, investors and other stakeholders. In a move to enhance corporate governance, In 2004 DENSO introduced a new management system based on a streamlined Board of Directors and a new system of non-board managing officers .Reduced number of board directors from 32 to 13 is intended to speed up the decision making process. The 24 non board managing officers are responsible of daily operation at their divisions, while a number of the 13 directors will oversee the operations of each of DENSO’s business Segments.DENSO’s Board of Corporate Auditors consists of two standing corporate auditors and three external Auditors. The board is responsible for monitoring the actions of the Board of Directors and auditing the operations and financial positions of all DENSO’s domestic and overseas subsidiaries.DENSO established a Corporate Ethics Committee in 1997. This committee is responsible for ensuring that DENSO’s operating activities are carried out in accordance with all relevant rules and regulations and with DENSO’s own ethical code. DENSO established a Risk Management Committee in May 2003. This committee works to prevent risk wherever possible, and provides risk detection, assessment and management in a timely manner.



7 – DENSO’S future Challenges

Graph 2: DENSO Sales

Although after looking at graph shows that DENSO is consistently performed well year after year but future is full of challenges maintaining this flow is going to be more challenging, due to emergence of new economies like BRIC countries DENSO needs to increase their presence in these countries specially China and Russia where DENSO presence is nowhere .Due to fast diffusion of knowledge between all industries it is really difficult to maintain differentiation and cost leadership strategy DENSO has to work on their innovation especially in hybrid car domain where Denso is not doing well in comparison to its competitors.Due to emergence of New player like Tata and Hyundai which are offering very low cost high quality cars collaboration with them is need of time.Future of Denso is safe if company can maintain its flexibility to adopt and innovate new technologies continually and providing value to its customers and maintaining good and long term relationship with them.


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Denso Analysis

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