Epson Establishes New Corporate Vision and Mid-Range Business Plan

Seiko Epson Corporation (TSE: 6724, "Epson") today announced the establishment of a new long-range corporate vision and a new mid-range business plan. The Epson 25 Corporate Vision outlines the path the company should follow over the next decade, from the 2016 fiscal year ending March 2017 to the start of the 2025 fiscal year. Meanwhile, the Epson 25 Mid-Range Business Plan (FY2016-2018) is a three-year plan for the first phase of work toward achieving the vision.

1. SE15 Corporate Vision and SE15 Mid-Range Business Plan (FY2013-2015) review

Under the SE15 Corporate Vision that began in FY2009 and the SE15 Updated Mid-Range Business Plan the company has followed since FY2013, Epson focused on its strengths and transformed its business portfolio by shifting to new business models and product lineups in existing businesses and by opening up new business domains. On the other hand, we were unable to fully advance in some new business areas.

Epson identified issues in these areas that it must address to secure future growth. Specifically, we will have to acquire knowledge in these new areas. We will have to expand and upgrade our sales and support organization here and in other priority areas. On the whole, however, the actions taken under SE15 are yielding results in each business. The company is now structured to generate a steady flow of cash and, with exchange rates acting as a tailwind, Epson has achieved a solid financial turnaround.

2. Epson 25 Corporate Vision

The Epson 25 Corporate Vision, which is formulated based on considerations such as changes in the business environment and mega trends, describes how Epson wants to be in 2025. Epson 25 includes the vision statement and financial targets below.

(1) Vision statement

"Creating a new connected age of people, things and information with efficient, compact and precision technologies"

* Creating a new connected age
Epson aims to help free people from repetitive manual work and from unnecessary wastes of effort and time. Epson's goal is to heighten people's creativity, and to create a sustainable and affluent society in which people enjoy safe and healthy lifestyles.

* People, things, and information
Advances in information and communications technology will mean increasing amounts of information will become available on the internet, causing cyber space to continuously expand. As a company that specializes in generating value in the real world, Epson will refine its technologies, and will work with IT companies to increase the value of its technologies it provides to customers.

* Efficient, compact and precision technologies

Epson will leverage its efficient, compact and precision technologies to generate value in three areas: smart technologies, the environment and performance. Smart technologies: Use advanced products and software so customers can easily, conveniently, and securely use Epson products anywhere and anytime. 

     Environment: Contribute to the development of a sustainable society by leveraging its technologies to reduce the environmental impact of its products and services across their life cycles.

     Performance: Create new and higher value by providing outstanding products that contribute to customer productivity, accuracy and creativity.

(2) Financial targets in the Epson 25 Corporate Vision

 * Business profit is calculated by subtracting cost of sales and selling, general and administrative expenses from revenue.

(3) Business strategy in each innovation area

* Overall strategy

     Epson 25 identifies four areas where it will drive innovation: inkjet innovation, visual innovation, wearables innovation, and robotics innovation. Microdevices are seen as supporting these areas of innovation. Epson will generate value in the form of smart technologies, the environment, and performance across these four areas of innovation. The company will also strengthen IT and business infrastructure in human resources, technology, manufacturing, sales & support and environment to support the achievement of the Epson 25 Corporate Vision.

* Strategy in each business domain

     Printing: Inkjet innovation

     Refine Micro Piezo technology, and expand into high-productivity segments. Improve environmental performance and create a sustainable printing ecosystem.

     Visual communications: Visual innovation

     Refine original microdisplay and projection technologies, and create outstanding visual experiences and a natural visual communications environment for every aspect of business and lifestyles.

     Wearables: Wearables innovation

     Leverage our watchmaking heritage, refine timekeeping and sensing accuracy, and offer a sense of status and fashion.

     Robotics: Robotics innovation

     Combine our core technologies with sensing and smart technologies in manufacturing, expand applications, and create a future in which robots support people in a wide variety of situations.

     Microdevices: Supporting the four innovations

     Contribute to Epson's finished products and to the development of smart communications, power, transportation and manufacturing systems with advanced Epson quartz timing and sensing solutions and low-power semiconductor solutions.

3. Epson 25 Mid-Range Business Plan (FY2016-2018)

(1) Objectives

Epson will take a three-phase approach to realizing the Epson 25 Corporate Vision. The Epson 25 Mid-Range Business Plan (FY2016-2018) is the plan for the first phase. In this first phase, we will sustain the achievements made based on the strategies executed to date, and will aggressively invest as necessary in product development and lay a solid foundation for achieving the Epson 25 vision.

(2) Basic policies

Epson will build a solid foundation for business growth by pursing the basic policies below under the Epson 25 Mid-Range Business Plan (FY2016-2018).

Basic policies of the Epson 25 Mid-Range Business Plan

     * In businesses where SE15 strategic initiatives were successful, continue to grow by honing our edge. In business domains where we were unable to fully advance, quickly address issues and establish a path to growth.

     * Ensure growth by creating products and services that deliver customer value in the areas of smart technology, the environment, and performance.

     * Invest management resources as needed to achieve Epson 25, while also taking into account short-term profit growth.

     * Quickly establish new business models, and strengthen sales, support, the brand, and operations.

(3) Financial targets in the Epson 25 Mid-Range Business Plan (FY2016-2018)

*1: Forecast as of January 29, 2016

*2: Assumed rates: ¥115/US$, ¥125/EUR

(4) Initiatives in each business

     * In the printer business, Epson will establish a competitive advantage in the home printer market by boosting the attractiveness of products, and get office market development on track with linehead models.

     * In professional printing we will establish outstanding competitive advantage with hardware, improve support and other organizational infrastructure, and achieve solid growth in new domains.

     * In visual communications we will further strengthen our presence in the projection market and will use laser light sources to pave the way to rapid growth in new markets.

     * In wearable products, we will lay the foundation for building wearables into a core business by refining watch resources and combining them with sensors to create families of differentiated products

     * In robotics solutions we will create a framework for growth on top of Epson's technology base.

     * In microdevices, we will create a stable business platform in the quartz business by building competitive strength. The semiconductor business, meanwhile, will create new core technologies and devices.

(5) Strengthening business infrastructure

     * Technology: Refine our efficient, compact, and precision technologies, advance our actuator, optical control, and sensor technologies, and bring in information and communications technology to continue to create new customer value.

     * Manufacturing: Provide timely products that others cannot easily imitate, and offer them at competitive costs and quality.

     * Sales & support: Strengthen the office and industrial domains, establish optimum area sales organizations, improve product quality with a market-driven (market-in) approach, and transform the brand image.

     * Environment: Expand initiatives to reduce environmental impacts across product and service life cycles and supply chains.

     * Basic policies of the Epson 25 Mid-Range Business Plan

(6) Strengthening management infrastructure

To realize the Management Philosophy vision, sustainable growth, and increased corporate value long-term, Epson will institute corporate governance that realizes transparent, fair, timely, and decisive decision-making. Specifically, Epson will adopt an Audit & Supervisory Committee governance structure and will introduce a performance-linked stock compensation plan for executive officers.

(7) Financial targets

* Cash flow and investing in growth

Epson will look to generate steady cash flow while strategically investing in future growth in an ongoing basis, with investment primarily geared toward research and development, increased manufacturing capacity, automation, strengthening information and communications technology, alliances, and mergers and acquisitions.

Investment in growth

* Cash use

Investment in growth will be the top priority, but cash will also be used to strengthen our financial structure and reward shareholders.

(8) Basic shareholder returns policies

Epson intends to be more proactive in providing shareholder returns.

* Calculated based on profit after an amount equivalent to the statutory effective tax rate is deducted from business profit, which shows profit from operations