Creating a New Strategy

Transcription

1 Creating a New Strategy ORIX s Unique Strategies Respond to the Changing Operating Environment 1 Domestic Strategy From Finance to Finance plus, and entry into new areas such as the environment and energy Creating new products and services in addition to its finance business based on the policy of enhancing the synergies and expertise of business areas in which ORIX excels. 2 Overseas Strategy Localization and Partnership Expanding operations in China and other Asian countries that show high growth potential based on the policy of promoting strategic business alliances with ORIX s prominent local partners. ORIX Corporation Annual Report

2 Domestic Strategy From Finance to Finance plus, and entry into new areas such as the environment and energy Latent Demand is a Goldmine for ORIX ORIX will achieve sustainable growth not only by providing customers with what they want now, but also by creating new services and businesses that they will want. Hiroaki Nishina Director, Deputy President, Group Corporate Sales, Investment Banking, Group Osaka Representative, Chairman, ORIX Real Estate Corporation, President, ORIX Baseball Club Co., Ltd. The worst seems to have passed for the domestic operating environment surrounding ORIX. Do you still feel that you cannot be optimistic toward the future outlook? The business climate is clearly a tough one for lending and other forms of finance. In the finance business, where competitiveness is based on the ability to get funding and reduce funding cost, I don t think that the demand for funding in Japan has recovered sufficiently to allow for adequate growth in the financial industry excluding banks. However, ORIX s position is basically different from that of major financial institutions and other players in the finance industry. ORIX has utilized its nationwide sales network of 1,098 locations to focus on business with major SMEs throughout Japan. Only a minority of our clients want us to simply provide financing. The majority appreciate the extras that they cannot usually get from major banks, such as services, business management, and related expertise. I see these extras as the lifeline of the ORIX Group a veritable gold mine that will be the source of our sustainable growth going forward. Looking at the operating environment in terms of this Finance plus concept, I think that there is unlimited demand that is waiting to be met. company vehicles, including arranging for insurance, maintenance, issuing cards for fuel and the ETC (electronic toll collection) system, as well as assessing fuel efficiency and other aspects of environmentally-friendly driving. We provide these services and have commercialized them. ORIX Rentec, which provides rental services for IT equipment and precision measuring equipment, is also highly regarded for providing additional services ranging from user support to equipment calibration that really meets our clients needs. Today, ORIX Rentec has the largest market share in the industry, with 675,000 pieces of rental equipment. One example of Finance plus easily visible to individual customers is the aquarium operation business performed by ORIX Real Estate. In 2004 we renovated the aging Enoshima Aquarium utilizing a private finance initiative (PFI) scheme. As a result of in-depth market research, we successfully revitalized the facility into a new popular aquarium that combines elements of education and entertainment. ORIX Rentec Tokyo Technology Center Can you go into more detail about this Finance plus concept? Probably the clearest example is ORIX Auto s Automobile Management Outsourcing. Through this business we provide not just vehicle leasing, but all conceivable related services for Where will you develop the next Finance plus additional services? One example is logistics. It is not widely known that ORIX Real Estate is in fact one of the industry s major investors in logistics 14 ORIX Corporation Annual Report 2010

3 facilities. The company draws on the site selection capabilities it has acquired through the residential housing development and other businesses to place tenants best suited to a particular region or that fit with local needs, following a local production for local consumption format. We will continue to develop extremely efficient logistics facilities throughout Japan. For logistics, commercial facilities and other areas of the leasing business, the ability to place tenants is the factor that has the greatest influence on future earnings. ORIX differentiates itself from major investment banks and pure real estate firms by having dedicated tenant promotion teams within its sales departments and we will adopt an integrated, crossfunctional sales approach that connects this high-level expertise with our domestic sales network. What are the important factors involved in accelerating the spread of the Finance plus concept? Also, what measures are you taking to accommodate it? The two most important factors are reforming awareness and improving the framework for conveying information. As you have probably surmised, the plus component of Finance plus is ultimately additional services and businesses. The expertise and skills in particular fields that are vital to developing such services and businesses already exist within ORIX. However, while certain areas have been exploited, some areas are still dormant. In this sense, it is first of all important to reform awareness by uncovering these capabilities. Also, no matter how great the awareness, it is useless if information cannot be acquired smoothly, and that information is not passed along to key functions of each business. In order to avoid this, ORIX integrated its sales headquarters in January 2009, which had previously been separated along regional lines such as Tokyo, Kinki and other areas, into a single Domestic Sales Administrative Headquarters. This consolidation has created a framework for central management of information obtained from each field, and for channeling such information to the business unit that has the ability to utilize it most effectively. This system is now up and running. Looking ahead, we plan to expand the role of the Domestic Sales Administrative Headquarters to the greatest extent possible, making it a sales hub and platform for acquiring revenues for Group companies. Other areas where ORIX is focusing on future growth are new areas such as the environment and energy. We have been involved in the environment-related business since the mid- 1990s, and today are nurturing many new young and growing businesses such as car sharing and sales of electricity. We will integrate businesses in these new areas across the organization as quickly as possible. Simply responding to what the customer wants is not enough for us to differentiate ourselves. ORIX intends to provide services and businesses that customers may not have been aware of, but will find useful and be appreciative of. Such demand may represent niche businesses individually, but when combined they can become something huge, and this is a goldmine for ORIX. Capitalizing on ORIX s Sales Network to Propose the Best Match Retail Store Development and Promotion Department, Domestic Sales Administrative Headquarters ORIX s construction and leasing of retail facilities is one example of Finance plus. ORIX capitalizes on its nationwide sales network for real estate information to propose sites that suitably match the client s needs. One example is the O2-Park Commercial Complex in the Inage ward of Chiba city. This project got off the ground when the Energy and Eco Services Department contacted the Retail Store Development and Promotion Department with the information that a major corporation with which it was dealing was having difficulty developing a retail facility on property that it owned. Both ORIX s proposal and its ability to promote the business were well received and ORIX took charge of planning, tenant selection and invitation, and negotiating layout changes with existing tenants. The facility opened for business in May The combination of a prime location along a major highway in addition to synergies between the tenant companies has resulted in a bustling shopping center. ORIX aims to increase revenues by creating unique services through this combination of corporate credit, financial and legal know-how accumulated in the finance industry with expertise in location and business evaluation, planning, and tenant invitation. O2-Park Commercial Complex in Inage ward, Chiba city (Opened in May 2009) O2-Park is a leased commercial complex consisting of a K s Denki electronic store, GEO Multimedia rental store, Gokurakuyu Bath & Spa, Sega Game Center, Daiichi Kosho Karaoke and four restaurants including a Saizeriya Italian Restaurant. Floor space: 30,712m 2, Parking lot: 400 parking spaces. ORIX Corporation Annual Report

4 Overseas Strategy Localization and Partnership ORIX will capitalize on growth in Asia while maintaining its traditional overseas business platform with a main focus on China. Makoto Inoue Director, Deputy President Global Business & Alternative Investment Headquarters Why are you focusing on Asia now? We aren t looking to expand business simply because of the high economic growth in Asia in recent years. We have aimed for overseas expansion when the company was established in 1964, and we entered into Hong Kong in 1971, less than 10 years after ORIX s foundation. Since then, we have mainly developed the leasing business with local partners in ASEAN and other Asian countries. Over the last 40 years, we have responded to differences in regulations, culture and client needs, and have built a solid revenues base by focusing on our strategy of providing financial services to local clients with local partners and local management. As the global presence of China and other Asian countries is dramatically increasing, ORIX will capitalize on this large potential to expand business. What is your basic policy of Asian business expansion? As I have just mentioned, there is potential, but this alone is not a reason to increase investment in the region. We need to exploit this potential by using the expertise we have accumulated in Japan to differentiate our financial services and equity investments after thoroughly considering the risks. Furthermore, Asia is a difficult market to enter from the outside and start a business from both a regulatory and business practice standpoint. Our inside approach using local partners and local management for each business in each region is key for business expansion that matches the distinct identity of each country. Local management of ORIX METRO Leasing and Finance Corporation in the Philippines. What challenges does ORIX face in Asia? ORIX s business in Asia was severely impacted by the Asian Currency Crisis during the late 1990s. Although many Japanese financial institutions withdrew from Asia, we managed to maintain the majority of our operations. As a result, we became strong enough to maintain a stable revenue base even during the current financial crisis and global recession. Presently, our current operating base in Asia focuses on small-scale finance. Although we intend to organically capitalize on the economic growth of Asian countries, there is a limit to the growth possible only by conventional small-scale finance. In order to fully capitalize on economic growth in Asia, we need to shift from finance to equity investment and change our focus from small scale businesses with an investment size of several hundred million yen to medium-scale businesses with an investment size of several billion yen. 16 ORIX Corporation Annual Report 2010

5 How will you address these challenges? I would like to start by explaining what we have achieved so far. Korea is a good example. Korea and Japan have similar systems and this is partly why we have had successful investments such as our investment in Korea Life Insurance. Our investment in Korea Life Insurance gained ORIX recognition in Korea as one of the major players in the principal investment business field. We will continue to make achievements in other regions, but it will not be easy as each country has a different legal system. We need to capitalize on our existing business network in each region to cultivate reliable business partners who have a deep understanding of the local market movements. What is your strategy in China? We established our Chinese Headquarters in Dalian at the end of 2009, which has since become a holding company. As a holding company, it has improved credibility as it is a local company and the ability to raise funds in Chinese Renminbi has increased significantly. China is now opening its doors to the outside world and there are many opportunities where we can capitalize on our expertise such as leasing, ship- and aircraft- related finance, equity investment and the environment. However, we do not intend to conduct business 100% by ourselves since we as foreigners cannot handle everything alone when considering the risks involved. On that premise, we are currently in discussions with potential partners who are major players in each business area. How will you expand business in Asia going forward? Regionally speaking, China will be the top priority, followed by India, Indonesia and Vietnam. We need to prepare for new business opportunities including financial services and equity investments in India and Indonesia, where we already have a leasing base, in addition to Vietnam, which is a new region of focus. Business in Asian countries will not be successful unless local people play a central role. In fact, Korean staff played a central role in the equity investments that have shown a measure of success in Korea. The market in Asia holds unlimited business opportunities. Our top-class human resources have accumulated knowledge of the leasing business in each country, and we will build a system to capitalize on new business opportunities by training them to shift to financial services and equity investments. Putting Localization into Practice Global Business & Alternative Investment Headquarters, Corporate Finance Group, Korea Team The Korea Team was inaugurated in January 2008 and is made up of four Korean nationals. The hallmark of this team is its specialization in Principal Investment. It was ORIX s investment in Korea Life Insurance that raised the company s visibility in the principal investment field. ORIX and the Hanwha Group made a joint investment in the failed Korea Life Insurance in December 2002 and made an exit after rehabilitating the company. ORIX s presence in the industry has since increased with new transactions coming through various channels, leading to the investment achievement in the STX Group. The Korea team is under the direct control of the Head of the Global Business & Alternative Investment Headquarters and its greatest strengths are quick decision-making and flexibility. The team s achievements are a direct result of the comprehensive strength of the team members who are familiar with local business practices and regulations, and who are working to expand the business based on an understanding of ORIX s organization and business strategies. These achievements have created a positive cycle that leads to the next investment opportunity. ORIX aims to capitalize on this unique positioning to undertake distinctive investment opportunities in Korea. Global Business & Alternative Investment Headquarters, Corporate Finance Group From Left: Manager Park Jong Sun Managing Director Lee Jong Chol Senior Vice President Kim Shinwan Assistant Manager Kim Najeong ORIX Corporation Annual Report

6 Corporate Activities The following is a summary of recent corporate activities by segment (April 2009 June 2010). Please visit the ORIX website for additional press releases ( Segment Date Announced Details Corporate Financial Services June 4, 2010 May 7, 2010 ORIX acquired 95% of Tsukuba Lease Co., Ltd. shares ORIX established ORIX Electric Power P. 25 February 15, 2010 ORIX formed an alliance with Mercer Japan, Ltd. for the corporate pension business 1 October 1, 2009 Concluded distributor contract with Salesforce.com, Co., Ltd. Maintenance Leasing May 20, 2010 ORIX Auto car sharing members exceed 10,000 P December 21, 2009 September 30, 2009 April 30, 2009 ORIX Auto entered into a car sharing collaboration with convenience store chain FamilyMart Co., Ltd. ORIX Auto started Auto Bid service for corporate sales of automobiles ORIX Rentec and ORIX Eco Services launched Eco-Rental service business with Hewlett Packard Japan, Ltd. Real Estate June 1, 2010 Operations began for ORIX Real Estate s Minato Mirai Center Building P March 31, 2010 December 15, 2009 July 29, 2009 Construction began for advanced development of the Osaka Station North Yard project by ORIX Real Estate ORIX Real Estate announced the Sumida Aquarium (tentative name), an urban aquarium in the Tokyo Sky Tree complex P. 29 ORIX Real Estate announced the full-scale operation of the Sakai Logistics Center Investment Banking June 23, 2010 Master Servicer Primary Servicer Strong Special Servicer 4 March 23, 2010 May 22, 2009 April 16, 2009 Announcement Regarding Capital and Business Alliance between ORIX and The Tokyo Star Bank, Limited Standard and Poor s maintained Strong rating for ORIX Asset Management & Loan Services commercial loan primary, master and special servicers Merger of three condominium maintenance companies in which ORIX had invested (New name: Global Community Co., Ltd.) Collaboration with The Akita Bank, Ltd. to guarantee loans with cars as collateral Retail June 10, 2010 ORIX Life Insurance launched new family support insurance Keep January 25, 2010 ORIX Life Insurance launched new cancer insurance Believe P. 33 December 10, 2009 ORIX Trust and Banking announced Education and General Purpose loans 5 May 18, 2009 ORIX Trust and Banking began Corporate edirect Term Deposits Overseas Business June 8, 2010 May 10, 2010 DI Asian Industrial Fund L.P., a fund targeting promising companies in Vietnam, began operation ORIX USA purchase of RED Capital Group, a major U.S. loan servicing company P April 12, 2010 October 7, 2009 Strategic alliance in the environment field with the Chinese Academy of Science announced Business matching contract concluded between ORIX China and the Tokyo Branch of China Construction Bank Corporation 1 ORIX Electric Power website 2 Car sharing station in front of a FamilyMart convenience store 3 South Building, Sakai Logistics Center 4 ORIX Asset Management & Loan Services ratings 5 Cancer insurance Believe logo 6 Signing ceremony for the conference document promoting a strategic alliance with the Chinese Academy of Science 18 ORIX Corporation Annual Report 2010