Strategic Focus Areas
The Group’s long-term ambition is to evolve into a truly global network in the key strategic focus areas:
- Diversifying the portfolio on a global basis
- Evolving and expanding in the digital domain
- Re-engineering business processes and improving profitability
- Further reinforcing the business platform in the core Japanese market
Our international strategy is focused on:
- Increasing exposure to faster growing regions and segments;
- Building capability in the digital economy;
- Broadening its service offering across clients;
- Growing its international client and new business profile;
- Building leading positions in the top 20 markets, prioritizing the USA and China; and
- Continuing to develop a market-leading, scalable organization that is clearly differentiated.
Key Performance Indicators
In line with this policy, the Group has drawn up its new medium-term management plan, "Dentsu 2017 and Beyond," which started from FY2013.
The new medium-term management plan includes the following numerical targets for the fiscal year 2017.
- Organic gross profit growth of 3–5% (5 year CAGR)
- Ratio of gross profit from international (non-Japanese) business of 55% or higher
- Ratio of gross profit from the digital domain of 35% or higher
- Underlying operating margin* of 20% or higher
* Underlying operating margin under IFRS is defined as underlying operating profit as a percentage of gross profit, replacing the definition of operating margin as calculated under Japanese GAAP (operating income before amortization of goodwill and other intangible assets as a percentage of gross profit).
Addressing Our Corporate Strategy
The Group has formulated the following strategies to achieve these targets.
1. To establish a comprehensive global network that supports clients' businesses around the globe
The Group will use the client base it has built up as a stepping stone to roll out the Group's strengths in the digital sector and sports-content business on a global scale, while at the same time expanding its competitive global network worldwide through mergers and acquisitions.
Looking at the major regions, in the North American market which is maintaining stable growth, the Group will strengthen its partnerships with existing networks that have high growth potential, and create an improved, broader service lineup in order to capture new global clients and to increase billings. Furthermore, in the fast-growing emerging economies, the Group will lay the foundation for providing top-class solutions in each market through mergers, acquisitions, and aggressive investment in the Group's business. In the Japanese and Western European markets, where the Group already has a solid business base, the Group will pursue the benefits of scale and aim to create and offer new value going beyond the framework of conventional advertising business.
2. To reinforce competitive strengths in the digital space that plays a central role in all client solutions
The progress of marketing convergence is transforming clients' business processes, and digital solutions have become a key factor in business growth. Taking these factors into consideration, the Group will provide cutting-edge solutions that more directly support the success of its clients' businesses. At the same time, the Group will make investments as necessary, share knowledge within the Group, and integrate its R&D capabilities.
3. To make further innovations in the area of business process management so as to enhance profitability
The Group is pursuing sustainable growth by carrying out aggressive investments and business expansion worldwide. To this end, a revenue base that generates a stable cash flow is required, and the Group will remain tireless in its commitment to improving the profitability of its core business. In order to restructure its value chain to maximize profits, the Group will work to control costs on a global basis, and inventory capabilities of the Group's companies including the Company in each area of service to implement necessary reorganization. The Group will also review its asset holdings from the viewpoint of profitability to increase asset efficiency.
4. To reinforce the business platform in Japan, the Group's largest operating market
Although the acquisition of Aegis has given the Group a truly global network, the Group's solid business base in Japan remains its greatest strength. The Group will achieve sustainable growth in this market by making even more effort to increase its competitiveness and profitability.
Furthermore, Japan is the region where the Company has the most resources for supporting every facet of its clients' businesses, and has the strongest relations with its clients. The Company is therefore committed to becoming the Group's role model for building a business for the next generation by expanding its service domain in Japan.
5. CSR initiatives
In line with its global expansion, in April 2013 the Group formulated an updated Dentsu Group Code of Conduct, stating the Group's core principles for CSR. The Code of Conduct adopts as its framework ISO 26000, an international standard for corporate social responsibility. Under this framework, the Group uses the following seven core themes to guide its CSR efforts: Corporate governance; Respect for human rights; Ensuring a safe and civilized working environment; Environmental protection; Fair business practices; Addressing consumer issues; and Contributing to the community.
In the fiscal year ended March 31, 2014, the Group carried out continued support for recovery following the Great East Japan Earthquake through its cooperation with the Tohoku Rokkonsai (Six Souls Festival) and participation in the Michinoku Recovery Project Partners consortium. In the field of human rights, the Group is committed to raising awareness of human rights that is essential to communication, the core of its business, through initiatives that include continuing to run a Human Rights Slogans program. In the environmental field as well, where the Company received the Eco-First Company certification in 2008, the Group engages in various environmental activities aimed at achieving a sustainable society. Furthermore, in the business field, the Group strives to resolve the issues faced by Japan through measures such as FOOD ACTION NIPPON, an ongoing campaign aimed at boosting Japan's food self-sufficiency rate.
Going forward, by further deepening its collaboration with Dentsu Aegis Network Ltd., which carries out diverse CSR activities worldwide including the "30 Days of Green" environmental campaign, the Group will continue its commitment to CSR efforts both in Japan and overseas with the aim of contributing to resolve social issues as a leading global group in communication services. For more information about Dentsu's CSR activities, see the Dentsu CSR Report.