Daikin Philosophy and strategy

Message from Global Management

Today the waves of change are affecting the nations and regions of the world, and the corporate environment is rapidly evolving as well. This means that enterprises must observe carefully the latest trends and implement policies that anticipate new developments, resolutely and without delay.

Never before in our company’s history has our Group had such a great opportunity to make a quantum leap forward. Despite the prolonged economic slump in Japan, the Daikin Group has made significant achievements, as exemplified by our accelerated momentum resulting in a consolidated profit increase for 13 consecutive terms. We have worked to increase corporate value by strengthening our profitability and financial structure. We plan to accelerate these efforts in the years ahead by achieving our goal of becoming a Global top-tier Company by fiscal 2010.

In achieving this demanding goal it will be important to go still further with our efforts in the areas of Fast & Flat Management, management systems that emphasize total corporate value, and the Daikin Technology Statement. We must work to continuously implement innovative renewal as we strive to advance in our key fields of air conditioning and fluorochemicals to the number one and number two positions, respectively, worldwide. At the same time, we must continue to undertake challenges in new fields of business, both domestically and internationally.

The driving force of innovation is people. We have therefore adopted a Group Philosophy for everyone in the Daikin Group to hold in common. It forms the foundation for management and enables us all to advance together, on the basis of shared consciousness and aspirations. If we believe in the unlimited potential of each employee, if all Group members display their vibrant personalities and take flexible actions, then we will have come a big step closer to realizing our aims of becoming a premier first-class global corporate group - a Group in which employees can have pride and enthusiasm.

The advancement of our company benefits a wide variety of stakeholders, including customers, shareholders, employees, and local communities where we are active. At the same time, we strive to maintain an awareness of the importance of environmental efforts under the precept “environmental response is an important management resource.” We intend to continue being a leading company in the practice of “environmental management” as a good citizen of the earth.

We at Daikin are committed to working together as a united team to achieve the ambitious goals we have set ourselves, in the confidence that we will emerge as a stronger presence in the twenty-first century. We look forward to your continued support and encouragement in these efforts. The new age of people oriented management, based on an awareness that reforms cannot be accomplished except through people, and we must continue to refine the details in a constant quest for improvement.

We at Daikin are committed to working together as a unified team in order to achieve the ambitious goals we have set ourselves, in the confidence that our company will emerge as a strong presence in the twenty-first century. We look forward to your continued support and encouragement in these efforts.

Global management strategy

FUSION 10: Maximizing corporate value to become a truly global and excellent company.

Five Basic Policies of Next-term Strategic Management Plan

The next-term strategic management plan FUSION 10, targeting fiscal year 2010, builds on previous achievements and aims to expand business scale as well as comprehensively and substantively enhance Daikin's strengths in order to achieve great gains and realize "brilliant future creation".

At the same time, in its core businesses of air-conditioning and chemicals, Daikin is placing the highest priority on achieving concrete results in peripheral fields where business opportunities are unfolding and aims to reach new heights by continuing management reform. There are 5 key policies:

1. "Selection and concentration" to achieve development

Instead of exploring completely new business areas, translate business opportunities in peripheral fields into concrete results, at the same time as concentrating on fundamental enhancement of core businesses.

2. Rapid business creation through intensive use of flexible alliances and partnerships

Comprehensively pursue synergy through bold M&A, alliances and partnerships, including acquisition of OYL Industries, and accelerate realization of business achievements.

3. Enhanced management strengths to survive the new era

Amid the intensifying global competition, undertake challenging management issues that are broader and deeper in scope than ever before, including establishment of a financial strategy and risk management framework for the overall Group and development of unique CSR initiatives, aiming to establish management capabilities to enable maximization of corporate value and market capitalization.

4. Establishment of technological capabilities and infrastructure of the highest global standard

Enhance core technologies to reach the highest world standards as well as achieve technology fusion, including in-house technology fusion and cogeneration with outside entities.

5. Dramatic strengthening of HR capabilities

Develop Daikin's "people-oriented management," which has formed the foundation of growth thus far, on a global Group basis. At the same time, place utmost priority on strengthening and developing human resource capabilities as a management issue, emphasizing recruitment of diverse employees and professional development, to undertake bold challenges in new territory and realize imminent business opportunities.

Four principle targets to achieve our goal

The comprehensive sharing and practice of Our Group Philosophy is an absolute requirement to Daikin's goal of maximizing corporate value. Furthermore, Daikin has four principle targets to achieve this goal. The collective strengths of the global Group will be used to carry out concrete measures to realize these targets. 

1. World-leading No.1 Businesses

While business scale is obviously necessary to achieving the global No.1 position, Daikin also seeks to become the clear No.1 by offering the best products and services in the world. At the same time, Daikin desires to develop business in each region of the world as a welcomed and accepted presence.

Daikin aims to achieve the global No.1 position in 2010 with sales of more than ¥ 1.4 trillion in the AC field. Daikin will begin by comprehensively enhancing its strengths as a specialist in ductless air-conditioning at the same time as pursuing new business creation in areas peripheral to the core business. In addition, a flexible alliance and partnership strategy will be adopted to rapidly transform various business opportunities into concrete results.

Specifically, in addition to the 4 regional pillars of Japan, Europe, China and Asia/Oceania where it already markets products, Daikin will cultivate full-scale business entry in new markets, including North America, India, Central and South America, and the Middle East and Africa, to achieve its global 8-pillar strategy. At the same time, Daikin will expand from the ¥ 2 trillion ductless market into the¥ 8 trillion comprehensive AC market, which includes the ducted, applied (large-scale industrial AC), low temperature and refrigeration fields. 

With further expansion into peripheral markets such as heating and hot water supply, Daikin seeks to enlarge its business scope to become a comprehensive AC and refrigeration manufacturer offering a multitude of products and services to all types of customers around the world. 

2. Generate innovation and value through unique technologies as shift creation leader

The further acceleration of new product development to support business expansion is an obvious necessity. Going forward, Daikin aims to enhance its core technologies, including AC heat pumps, inverters and fluorochemicals, which have sustained business development up to now, as well as promote fusion with new, cutting-edge technologies in such fields as information, nanotechnology, functional materials and energy. Envisioning the world 10 years from now as a shift creation leader, Daikin will continue to generate the seeds of innovation through development of next-generation core technologies in pursuit of health, comfort and harmony with the environment. 

3. Robust fiscal structure and profitability with excellent capital efficiency

Daikin will implement a comprehensive financial strategy to execute timely investments aiming for further growth and development. While executing an aggressive investment strategy, Daikin will maximize operating cash flow to enable further growth investments and increase returns.

Furthermore, aiming to maintain and enhance an agile fiscal structure and realize rapid returns on large-scale investments, Daikin seeks to accelerate its cash generation cycle through more efficient use of operating capital and strict selection of investment targets.

4. Thoroughly implement "people-oriented management" throughout the global Group

Daikin has long believed in the infinite capacity of people and has implemented people-oriented management in the conviction that people form the basis of a company's competitiveness and that the cumulative growth of all members serves as the foundation of company growth. With FUSION 10, Daikin aims to further enhance its people-oriented management and thoroughly implement it on a global basis. Subsequently, Daikin aims to further strengthen and reform its corporate structure to that of a truly global and excellent company.

Full text can be found at: http://www.daikin.com/press/2006/060626/index.html

Corporate overview of Daikin Europe N.V.

Daikin Europe N.V. is the sales and manufacturing headquarter for Europe, Africa and Middle East for Daikin’s air conditioning, heat pump and refrigeration equipment. As a 100% subsidiary of Japan-listed Daikin Industries Ltd., its main mission is to respond to the evolving requirements of its customers for residential, commercial and industrial applications.

In 1972, Daikin Industries Ltd. intended to explore the European markets and established Daikin Europe N.V. as headquarter in Ostend, Belgium. Initially, Daikin Europe N.V. was mainly used as an assembly and distribution centre for Daikin Industries Ltd. Nowadays Daikin Europe N.V. has gradually developed into an advanced air conditioning, heat pump and refrigeration production facility that prides itself in being one of the most innovative players in the market.

In 1982, the company formed its first joint venture in Belgium. This was the start of an expansion process that transformed Daikin Europe N.V. over the years into a pan-European group. In 1987 Daikin Airconditioning France SAS became the first affiliate and between 1998 and 2008, Daikin Europe N.V. acquired 11 of its distributors, in order to build a powerful sales network throughout Europe.

In 2004, Daikin Industries Ltd. and Daikin Europe N.V. also decided to build a new production plant in the Czech Republic, Daikin Industries Czech Republic sro. In financial year 2007 the expansion of the sales network was continued through the acquisition of two distributors: Itho Airconditioning B.V. in the Netherlands and Svenska Daikin A.B. in Sweden. In addition a service branch and marketing company was set up in Turkey.

During 2007, the sales companies of Mc Quay in Italy, France and Spain were also merged with the Daikin companies in the respective countries. In financial year 2007, Daikin Europe N.V. achieved a consolidated turnover of over 1.9 billion Euro in more than 40 countries.

Corporate Governance

As global competition continues to intensify, we at the Daikin Group must meet the crucial challenge of accelerating our approach to rapid management in order to maintain our competitiveness. In working toward our improved corporate governance practices, we have followed four policies:

Renovating management systems in a way that promotes strategic management and speedier management decisions;

Using the virtual company system to promote strong management emphasis on corporate value and give divisional managers greater authority and responsibility; Implementing measures related to unique personnel and organizational management systems needed to realize a "fast & flat" Group management framework; andEnsuring that management emphasizes openness, transparency, and responsiveness to stakeholders.    

Our group cherishes its traditions, culture, implicit knowledge, people-oriented management, and management philosophy of valuing our employees, all of which have been cultivated throughout our history. We will build on this heritage toward our larger goals and pursue a great step to the future through successive reforms that will keep us at the forefront of our industry. We appreciate your continued support as we implement these management policies.