2009

DENSO corporation analysis

BORN TO LEAD

Hi Friends!!! I am “A”
let’s analyze DENSO
together

Rai Anod Kumar

anod.rai@gmail.com
Strategic Management Final Report
Ritsumeikan Asia Pacific University
5/25/2009
 DENSO corporation strategic analysis
Table of Contents

I. Company Introduction..........................................................................................3

II. DENSO Analysis from strategic perspective.......................................................5

1. DENSO Strategic Management and Strategic competitiveness -..................................................5

2. DENSO External and Internal Environment.................................................................................6

3. DENSO Business Level strategy..................................................................................................7

4. DENSO Merger and Acquisitions strategy....................................................................................7

5. DENSO International Strategy.....................................................................................................8

6. DENSO Corporate Governance....................................................................................................9

7. DENSO’S future Challenges......................................................................................................10

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 DENSO corporation strategic analysis

I. Company Introduction
DENSO Corporation (株式会社デンソー Kabushiki-gaisha Densō) globally renowned automotive
parts manufacturer headquarter in Aichi Prefecture is Japan's leading producer of automobile
components and the world's fourth largest . Established in Dec- 16-1949 with the name of
Nippondenso Co. Ltd., DENSO was the member of Toyota group of companies manufacturing
electrical components for Toyota Motor Corporation but segregated after world war-II by Supreme
Command for the Allied Powers.

Mission: Contributing to a better world by creating value together with a vision for the future.

Management Principles: Customer satisfaction through quality products and services, global
growth through anticipation of change, environmental preservation and harmony with society,
corporate vitality and respect for individuality.

Individual Spirit: to be creative in thought steady in action, to be cooperative and pioneering, to

be trustworthy by improving ourselves.

Key numbers for fiscal year ending March, 2008:

Sales: $40,536.5M
One year growth: 32.4%
Net income: $2,461.5M
Income growth: 41.5%

Officers:
Chairman: Akihiko Saito
President and CEO: Auto Parts Manufacturing

Competitors:
Delphi Corp.
Robert Bosch
Visteon

Key Customers: As the second-largest member of the Toyota Group, more than half of DENSO's
products go to Toyota Motor Corporation (TMC), which owns better than 20 percent of DENSO
stock. DENSO also supplies nearly all other major Japanese automakers as well as numerous U.S.
manufacturers, including Ford, General Motors, and Chrysler, and major European auto
manufacturers such as Volvo, BMW, and Fiat.

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 DENSO corporation strategic analysis

Table 1 - Key Dates:

1937: Newly formed Toyota Motor Corporation builds starter and coil factory in
Kariya.
1949: Nippondenso Company is formed from two existing Toyota plants.
1950: Quality control methods begin to be adopted.
1953: Nippondenso begins technical agreement with Bosch.
1957: Nippondenso refocuses on process control methods.
1959: Annual sales reach ¥10 billion.
1965: New plants open in Hiroshima and Ikeda.
1966: Nippondenso establishes offices in the U.S. and Canada.
1967: The company opens a starter and alternator factory in Anjo.
1968: Nippondenso opens auto industry's first integrated circuit research facility.
1969: The company's annual sales exceed ¥90 billion.
1971: International growth prompts the formation of overseas subsidiaries.
1979: The company's annual sales reach ¥500 billion.
1985: Nippondenso Technical Center is established in Southfield, Michigan.
1987: The company's sales pass ¥1 trillion and subsidiaries are established in
Taiwan and Thailand.
1996: The company's name is shortened to DENSO Corp., reflecting global
orientation.
2001: DENSO buys out the remaining interest in Purodenso Company

Long history!!!

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 DENSO corporation strategic analysis

II. DENSO Analysis from strategic perspective

1. DENSO Strategic Management and Strategic competitiveness -

If we read the mission statement of DENSO “Contributing to a better world by creating value
together with a vision for the future” it looks like company is aiming for growth and values for future
by contributing to world. Denso strategic leaders Torao Hayashi and Tsuneo Ishimauru led Denso to
true global company from just automotive parts supplier of Toyota. The company expended
tremendously after its birth, Denso have presence in most part of the world today, their wide
product portfolio includes electrical appliances ,automotive products, electronics , industrial robots
and automation, even comfort related products like mosquito killer, seat heater and barcode reader.
They even tried their hands in Mobile manufacture but it failed. They build their competitive
advantage by doing collaboration with different companies in every region, venture with Purolator
Products and Robert Bosch GmbH were few examples of their Joint ventures. Development of new
disruptive technologies and convert it into core competency is main characteristics of the company.
According to The Patent Board’s Automotive & Transportation Patent Scorecard™ published in The
Wall Street Journal, Denso Corporation (Kariya, Aichi, Japan) continues to lead the Automotive &
Transportation Industry. Denso has the largest number of patents issued in the industry totalling
835 for the period and maintains an Industry Impact 12% above the industry average which
improved by 14%.

Year 2008
The Patent Board Scorecard Ranks Denso Corporation as #1 Innovator in Automotive & Transportation Industry
Top 10 Innovators in Automotive & Transportation Patent Scorecard™ | Quarterly snapshot – 13 week averages

Graph 1

Patent Granted

Denso Corp
8% 4%0% 19% Honda Giken Kogyo
8%
General Motors Corp
Toyota Motor Corp
Ford Motor Co
13% Robert Bosch GmbH
17%
Delphi Corporation
Nissan Motor Co Ltd
10% Magna Intl Inc
8% 13%
Fallbrook Technologies Inc

*(Automotive & Transportation patents only for the multi-industry companies)

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 DENSO corporation strategic analysis
If we observe the above table then we can understand how much effort company is putting into
innovation to maintain its position as market leader.

2- DENSO External and Internal Environment

SWOT Analysis

Strength Weakness

 Extensive Customer Base  Lack of business alliances

 High quality products/services  Not innovative enough in emerging
 Innovative products/services technologies.
 Lucrative location  Lack of innovation in emerging hybrid
 Strong market position automobile market.
 Strong online presence
 Strong brand
 Strong supplier relationships

Threats
Opportunities

 Competition from foreign markets

 Available technological innovations
 Competitor's actions
 Expand customer base (Geographically or
 Foreign exchange rate changes affecting
through new products)
imports/exports
 Market Diversification
 Innovative products/services of
 Demand for latest technologies education.
competitors

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 DENSO corporation strategic analysis

3- DENSO Business Level strategy

DENSO is diversifying its business portfolio in many sectors to minimize the risk; they have the best
Total Quality management in industry inherited from Toyota. Denso has implemented new SAP and
CRM technologies to provide best services to its customers. By implementing the TQM and best
supply chain management practices they were able to reduce the cost of their product at
competitive level. Their unique integrated product differentiation and cost leadership strategies give
them competitive advantage over others.

The reason behind DENSO’S consistently capturing a greater share of the global automotive
component market? The answer lies in technologies, people, innovative problem-solving approach,
and unique approach to manufacturing.

DENSO MANUFACTURING: A FORMULA FOR SUCCESS

 Innovative manufacturing and processes at DENSO.

 Concurrent engineering
 Systemization, modularization and standardization
 Enhancing quality: advanced manufacturing equipment and skills
 Lowering costs: aiming to achieve a global minimum cost
 Reducing delivery time: initiatives begin at the design stage
 QCD: at the heart of efforts to boost global share
 The universal production system: uniform QCD performance
 The vital ingredient: investing in people

4- DENSO Merger and Acquisitions strategy

Year Major M&A by DENSO

1953 Technical cooperation with Robert Bosch GmbH
of Germany.

1991 Start of a joint venture with AT&T Co. of the

United States in regard to integrated circuit (IC)
cards.

1999 Acquisition of Rotating Machines Division of

Magneti Marelli S.p.A.

2001 Acquisition of Climate Control Equipment

Division of Magneti Marelli S.p.A

2004 Partnership with Toshiba Information Systems

(Japan) to develop software on TRON platform.

Product Diversification and developing global presence has never been problem for DENSO, most of
the Joint ventures and acquisition DENSO did is to acquire new technologies and increase its
learning.

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 DENSO corporation strategic analysis
Agreement with market leader Robert Bosch GmbH not only armed them with advanced
technologies and best processes but also opened their doors to European automotive market. Also
DENSO is working on future technologies with Toshiba and already introduced some niche products
in market developed together. Here we can observe the open innovation approach of DENSO.

5 – DENSO International Strategy

In 1953, with the technical agreement with Robert Bosch Inc. and In 1966 company’s first
establishment of overseas facilities in Chicago and Los Angeles indicates there global orientation,
DENSO aggressively invested in American, European and Asian subcontinents and they did Joint
ventures, friendly agreements to enter into new market, DENSO has presence in 32 Countries,
operating 219 subsidiaries and 140 Manufacturing companies all around the world. This kind of
market penetration and strong global presence provided them with pool of resources and
economies of scale that leads to above average return and makes them world leader.

Figure 1: DENSO world operations

6 – DENSO Corporate Governance

Figure 2: DENSO’S corporate governance system

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 DENSO corporation strategic analysis
Denso operates in global market characterized by rapid change. In this environment, enhancing the
overall competitiveness of the group is essential to raising corporate performance over the long
term. The overriding objective of the framework is to ensure sound, efficient and highly transparent
management based on the continuous disclosure of information to shareholders, investors and
other stakeholders.
In a move to enhance corporate governance, In 2004 DENSO introduced a new management system
based on a streamlined Board of Directors and a new system of non-board managing officers
.Reduced number of board directors from 32 to 13 is intended to speed up the decision making
process. The 24 non board managing officers are responsible of daily operation at their divisions,
while a number of the 13 directors will oversee the operations of each of DENSO’s business
Segments.
DENSO’s Board of Corporate Auditors consists of two standing corporate auditors and three external
Auditors. The board is responsible for monitoring the actions of the Board of Directors and auditing
the operations and financial positions of all DENSO’s domestic and overseas subsidiaries.
DENSO established a Corporate Ethics Committee in 1997. This committee is responsible for ensuring
that DENSO’s operating activities are carried out in accordance with all relevant rules and regulations
and with DENSO’s own ethical code.
DENSO established a Risk Management Committee in May 2003. This committee works to prevent
risk wherever possible, and provides risk detection, assessment and management in a timely
manner.

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 DENSO corporation strategic analysis

7 – DENSO’S future Challenges

Graph 2: DENSO Sales

Although after looking at graph shows that DENSO is consistently performed well year after year but
future is full of challenges maintaining this flow is going to be more challenging, due to emergence of
new economies like BRIC countries DENSO needs to increase their presence in these countries
specially China and Russia where DENSO presence is nowhere .
Due to fast diffusion of knowledge between all industries it is really difficult to maintain
differentiation and cost leadership strategy DENSO has to work on their innovation especially in
hybrid car domain where Denso is not doing well in comparison to its competitors.
Due to emergence of New player like Tata and Hyundai which are offering very low cost high quality
cars collaboration with them is need of time.
Future of Denso is safe if company can maintain its flexibility to adopt and innovate new
technologies continually and providing value to its customers and maintaining good and long term
relationship with them.

Thanks for giving your valuable

time!!!

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