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

Ko’N Ni Chi Wa !Ko’N Ni Chi Wa !

Check your fly !Check your fly !

What is the brand of the zipper ?What is the brand of the zipper ?

YKKYKKA quiet successA quiet success

Group 2B FT 2005

Simone Huijs Piercarlo Oddone

Suraj Basnet Joan Moreau

Ken Kodaka Eugene Kolesnikov

Agenda

1.1. OverviewOverview

2.2. Key success factorsKey success factors

3.3. Structured analysisStructured analysis

4.4. Contemporary issues and strategiesContemporary issues and strategies

5.5. Strategic recommendationsStrategic recommendations

From small shop to global company

Founded : January 1, 1934 to produce zippers – a new fashion product

Assets $ 6.3 bn31% owned by Yoshida familyRemaining 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 FutureCurrent issues

0

100000

200000

300000

400000

500000

600000

1994 1996 1998 2000 2002

Total Sales (Million yen)

Tadahiro YoshidaPresident of YKK

History of YKK

WWII

Zipper supply contracted with military

Zipper supply contracted with military

1959

First overseas affiliate in New Zealand, followed by US, Malaysia, Thailand and Costa Rica

First overseas affiliate in New Zealand, followed by US, Malaysia, Thailand and Costa Rica

1960’s 1973

Diversified into aluminum building products

Diversified into aluminum building products

19931950’s

Automated production

Automated production

1994

Changed name into YKK

Changed name into YKK

1934

Tadao Yoshida at 20 founded San-es Shokai company in Tokyo

Tadao Yoshida at 20 founded San-es Shokai company in Tokyo

2003

Doubled revenues since 1994

Doubled revenues since 1994Captured 95% of

Japanese zipper business

Captured 95% of Japanese zipper business

Tadao Yoshida died and his son Tadahiro Yoshida took control of the company

Tadao Yoshida died and his son Tadahiro Yoshida took control of the company


Corporate structure

Headquarters in Japan 2 main entities (fastening and

architectural products) Supported by machinery &

engineering divisions

Regional structure Six regional blocks Each block is managed as a profit

center

International marketing group Deals with multinationals Coordination


YKK Products

Fastening products 41% of revenue Market share : 45% Zippers, etc…

Architectural products 58% of revenue Aluminum storefronts,

entrances, windows, sliding doors etc.

Overview Success factors Analysis FutureCurrent issuesGlobal Zipper Market share

Talon7%

Optilon8%

YKK45%Others

40%

YKK fastening market

1,500 styles in 427 standard colors and in as many special colors as customers require

Consumer and industrial applications Apparel and accessories Special clothing and accessories

(safety, space, military) Other applications

(safety belts, tents, artificial turf in stadiums)


Why YKK is successful ?

Key success factors

Leadership and strategic intent Product leadership Global strategic management Service leadership and information technology

Success factorsOverview Analysis FutureCurrent issues

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

Product leadership

Total vertical integration 95% added value rate

Proprietary manufacturing machines Technological advantage

Innovation R&D investment started in 1950s – four R&D

centers functioning today Discoveries in materials and products

(e.g. GIGAS) Product quality and variety

27 trademarksTot

al v

erti

cal i

nteg

rati

on

Innovation

Proprietarymanufacturing

machines

- 95% added value- Superior products- Attractive price


Global strategic management

End of 1950s – 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 Overseas postings for 10-15 years First foreign executive, Alex Gregory, in US in 2001

Taking local culture into account Local input procurements


Service leadership and IT – 1/2

US 1960s – “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 Delivery dates by suppliers are being met with a success

rate of 97%


Service leadership and IT – 2/2“Our goal is to create a ‘Virtual Company’ that brings us together with our partner companies”


Porter analysis

Buyers

High bargaining power for low cost producer

Medium for global customers (high switching costs )

New entrants

High threat in low cost sectorZipper patents expired, Lower-end technology

and cheap labor available in high demand areasMedium threat in mature markets -

economies of scale

SubstitutesLow threat

Other fastening products are available (e.g. Velcro) but did not take market

share

Suppliers

Low bargaining power

Raw materials such as zinc and copper, plastics, are in good

supply

Industry rivalry

High due to large number of competitors and significant growth in li

ght industries in Asia

AnalysisSuccess factorsOverview FutureCurrent issues

SWOT today

StrengthsStrengths

• 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

WeaknessesWeaknesses

• Less flexibility in raising capital due to private ownership• Leadership succession problem • Less flexibility in labor force scaling due to culture and ownership structure

OpportunitiesOpportunities

• New markets in developing countries • New fastening products with new technologies• Further integration with key customers• New distribution channels (portals)• Standardization of production

ThreatsThreats

• Low cost competitors• Increasing cost of raw material• Counterfeiting• Trends in the fashion industry• Increasing vertical integration of main customers


Value, cost & speed

Value: High variety / High quality Customer relationship including e-customer relationship

Cost: Assumed fairly low costs due to economies of scale, superior

manufacturing technologies, and vertical integration Speed:

Fast manufacturing and delivery enabledby IT and proximity to customer

Innovation and fast time to market

Customers

Valu

eSp

eed

Spee

d Value

Speed

Speed

Company CompetitorsCost

SpeedSpeed


Layers of competitive advantage

It may be easy to imitate the zipper, it is difficult however to duplicate the complete model Innovation Superior technology Total vertical integration Product variety Staff experience and loyalty


Innovation

LowerUnit Costs

HigherUnit Prices

Efficiency

CustomerResponsiveness

QualityInnovation

LowerUnit Costs

HigherUnit Prices

Efficiency

CustomerResponsiveness

Quality

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)

Current issuesSuccess factorsOverview FutureAnalysis

Contemporary issuesYKK responds

Shifting production to new manufacturing countries (Bangladesh, China, Russia, Romania, Poland, Czech Republic) Factories in China will provide 17% of global capacity vs. 10% US capacity with fall by 22% to account for 10% vs. 14% 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

Current issuesSuccess factorsOverview FutureAnalysis

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 $ 194m on sales of $ 5.4bn

““To ensure mid- and long-term growth for the YKK Group in an To ensure mid- and long-term growth for the YKK Group in an increasing difficult business environment, we must focus on increasing difficult business environment, we must focus on specific goals that reflect the overall mission of our group specific goals that reflect the overall mission of our group

activities”activities”

Tadahiro Yoshida, President

FutureSuccess factorsOverview Current issuesAnalysis

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

FutureSuccess factorsOverview Current issuesAnalysis

NoNoquestions ?questions ?

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

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