In this interview for the Worldfolio, Mr. Kazuhiro Kashio, President of Casio, gives us his unique insight into the past, present and future of one of Japan’s most iconic brands.
Critics have it that Abenomics has fallen short of expectation. The monetary and fiscal policies having been implemented in an attempt to trigger economic growth, the Government must now enforce structural reforms, aimed at tackling the ageing population and decreasing workforce. How has Abenomics impacted Japan from your perspective? and most particularly your sector? Has the electronic manufacturing sector benefited from this strategy?
Seventy per cent of the revenue of Casio comes from overseas markets. The economic situation of Japan – which led to the depreciation of the yen – initially contributed to Casio’s increased revenue. However, in 2016, we saw Brexit and Donald Trump coming into office in the United States, which shifted the exchange market to the appreciation of the yen, and negatively impacted our revenue and company performance. The fluctuation in the foreign exchange market has had a significant impact on our company, and during the last financial year, we have been forced to adjust our performance to downward revision in order to strengthen the company and protect it from being impacted by any future fluctuations. We are actively working on a structural change at Casio, and I am sure that we are not the only company in Japan doing so.
While Japanese companies excel in terms of know-how and technique on their home turf, they tend not be as recognized when expanding beyond the national border. For example, not many Americans know that the iPhone’s screen is manufactured by Japan display. Other countries have leveraged better in the past decade on their country brand such as South Korean firms. What is the main competitive advantage of Japanese electronics manufacturers compared to its competitors (China, Korea)?
Japans’ forte is in creating high quality authentic products at low costs. In previous years, Japanese companies have had a high level of success in doing this. During the seventies or eighties, Casio was amongst the Japanese companies who created a new market by turning analogue products into digital products. Nevertheless, other countries such as China and Korea soon recognized the value of the new market and started producing competitive products which offered the same thing, but at a lower cost. This caused a challenge for Japan and for companies such as Casio that already made quality goods at a low cost, but not as low as what was being released by China and Korea.
Since 2013, you have systematically registered an increase in consolidated net sales, as your net income also grew. What were the reasons behind this great success?
Casio’s project with Vision 15 started in 2013 and continued through to 2016. The profit margin target was 15% in 2015, and the goal was to grow the timepiece and education business to establish a new division. As a result of the project, Casio performed well in these areas and exceeded profit projections. This balanced our overall performance, which was negatively impacted by both the foreign exchange fluctuation and other divisions of Casio that experienced structural challenges and problems. In any case, we expect to see the impact of the fluctuation and of the foreign exchange markets to continue to impact Casio, and we predict falling numbers for mid-2016. The digital camera and the camera market in 2000 as a whole saw an increasing amount of severe competition. The numbers dealt with in this market dropped by 14 to 16%, going from 400 million units to 220 million units. The drop in sales can be attributed to competition from Chinese and Korean makers, but also from the market itself that saw digital cameras being replaced by smartphones, tablets and other devices. Despite this, Casio is still establishing a good business model due to success in the timepiece and education markets, which have strengthened Casio by their stable nature. Furthermore, we have performing products that are true differentiators which only we make.
CASIO is a true international company, with around 70% of sales coming from overseas. North America accounts for some 13% of your ratio, Europe around 14.7% as Asia and the rest of the world combined represent some 40%. What markets have the greatest potential? How does your product offer differentiate itself from market to market? Over the next 5 years, what will be your international strategy?
We project that the timepiece and educational markets will continue to strengthen Casio’s business foundation, and we do not foresee any future challenges in these divisions. Other divisions of Casio, such as musical instruments, digital cameras and projectors, and system division are presenting challenges. Although we are struggling in those areas, we still offer excellent products. We believe that by transforming the market itself we can turn these divisions into profitable businesses. Historically, Casio has always been an innovative company, and we have launched and created many products generated by the new needs and cultures of the world. We have created products that never existed in the past. Casio led the industry and created new markets by being the first company to produce digital cameras, calculators and digital wrist watches, which used semiconductors; something that was introduced by our company. We are very proud of this history and we aim to continue it by making new products and establishing new businesses for the future.
Be it nationally or abroad, your company directly competes with industrial giants, such as SONY or Panasonic, but also against local companies. If we also take watch-manufacturers into account, competition is clearly tough. What are the competitive advantages of CASIO?
Casio was established on the belief that we can “make something from nothing.” This is our concept, and we have gone forwards with our creativity based on this belief. By using digital technology, we have created new brands and businesses. We first produced the digital calculator and then moved into digital watches. The business then expanded into digital musical instruments. From a manufacturing perspective, we did not diversify our product portfolio per say. We just naturally evolved as our creativity allowed it. I have been the President of Casio for the last one and a half years. I have made it my responsibility to revisit the challenging business divisions and the issues of today’s computer world. We need to question if our manufacturing methods are valid in today’s marketplace. We must take into account the changes in the digital camera market and its decline, and we have to look at what the challenges and problems are in our own company while also looking at future products possibilities. If the forte of Japanese companies is in making high quality products, their weakness is in launching their products into the market. Casio is a pioneer in the digital camera market, but since these are being replaced by other devices, we need to think of alternative measures for the future. If you look at the timepiece business, we have created a unique brand, the G-Shock. There is no other brand comparable to G-Shock, and it is a true differentiator in the timepiece market. Going forward as a company, we have to continue this unique positioning strategy in order to survive and thrive. Part of our concept is to make products together with fans of the company, just like Sony’s Walkman or Apple’s products. This collaboration with our customer base creates a true brand-fidelity. Casio’s fans helps us designing the new G-Shock models, and we aim at continuing doing so. Our cooperation allows creativity. Going forward, we need to focus on a market-oriented approach, and not so much on a product-based approach. This will allow us to keep on creating products that will contribute to society.
CASIO was founded in 1946 during the post -war era, as a symbol of a new Japan that was looking forward to lead the world in terms of technology. From the World's first desktop electronic calculator in the 60’s to the emblematic G-Shock in the 80s passing by the 2000s fast burst and hybrid digital cameras, CASIO has always commercialized new products. Historically speaking, which have been your best-selling products? Which have been your best-selling products in recent years?
Our actions are based on corporate creed “creativity and contribution.” However, in recent years, we have seen a weakening of our concept actions. We have been following product-oriented projects and product manufacturing, but this is something which is becoming increasingly harder to do. Historically speaking, the market orientated approach is not something that Casio is experienced at, but we aim to strengthen this aspect as a company. As the representative, I would like to review this structural challenge that is within Casio. Casio has been making zero into one, manufacturing products based on a manufacturer-oriented approach for a number of years. It is the same with big corporations all around the world, but going forward, we aim to incorporate the voices of the market in manufacturing. In order to achieve this, I plan to transform our organization. With regards to the innovation of Casio: as we are approaching the 60th anniversary, we are seeing the average age of staff going up. In the past, we had a younger staff base and the company’s environment was more active and vibrant as a result. The lights were on 24/7 in the R&D center, but it is not so much like that today. So, in order to invigorate product manufacturing and creation, I would like to put in place the appropriate environment to activate such production activities.
Over the years, CASIO has truly diversified its product portfolio. From watches to calculators, to smartphone, printers, musical instruments and more, your company operates in several of sub-sectors. Looking at the future, which products will you be developing? In five year’s time, which will be the “must-have” CASIO products? Challenge when expanding in new product portfolio?
Casio manufactures over one hundred million items on an annual basis. We already offer a certain value in these divisions and we have a very strong brand, G-Shock, within the timepiece division. The education market, or student market as it is also known, is a stable market which has a new wave of customers to sell to every year. Six hundred thousand electronic dictionaries and twenty-five million functional calculators are purchased by new high school students every year, so they are purchasing these items as educational tools to prepare for exams, hence, creating an extensive customer-base. Casio holds a very good position in this market and we are aiming to extend it overseas. For example, students already use functional calculators in classes in Nordic countries, but it is not as widespread as in Japan.
We also have good performing timepieces that are purchased by users all over the world, and we are increasing our product range by looking into a new genre of watches, one of them being the smart watch. I believe we can offer new value for watches, and not just in the timepiece market, but also in the different products and business divisions that we are creating. Casio ships out one hundred million items every year, already producing very strong products and aiming to strengthen even more. One of the strengths that Casio has is within wearable devices, namely wearable watches, portable cameras, electronic dictionaries and functional calculators. Our future objective is to make new products, while also enhancing the user value, usability and usefulness of existing devices. Today, the bestselling smart watches are made by Apple. However, our focus is not on making the bestselling smart watch, but instead on making something that will offer value and usefulness for the users. We released the first model of our smart watch “”Smart Outdoor Watch WSD-F10” in March 2016, and a new model, the “PRO TREK Smart WSD-F20”. I understand about ten million units of apple watches were shipped out and sold last year alone, but I am not sure if everyone wears the smart watch on a daily basis. The values that are offered by this watch are duplicated by those offered by smart phones, so the watch doesn't really have a unique functionality. Is it worth charging your smart watch every day if your phone already has all applications?
CASIO’s corporate creed: “creativity and contribution,” and the ability to create 1 from 0 are oaths to innovation and creation, it depicts a commitment to creating original and useful products. From a managerial point of view, how do you maintain this culture of innovation?
I grew a love for the United States when I lived in New Jersey from 2005 to 2007, and I have a wish for our brand to perform even better and to be more connected in the country I have grown to love. The second model of our smart watch is due to be the most exciting product that will be launched in the US. There are certainly challenges in competing in the US, in terms of price and competition from brands which are already established in the smart watch market. Apple, Michael Kors and other players are already competing for lower prices, and the major players who I consider to be Apple and Fitbit, have already been establishing unique genres of smart watches. However, Casio already has a good position in the timepiece market with the G-Shock, which has performed well in the US. In fact, the boom of the G-Shock started in the US. We produced an iconic TV commercial about an ice hockey field where the watch was used instead of the pic. A TV program decided to validate if this claim was actually true or not, and when they replicated the situation, they found that it was true. The G-Shock was sturdy enough to withstand that kind of shock. So, that was the very beginning of the G-Shock boom and it spread out to the US army and military troops, and kind of imported back to the Japanese market by itself. We already have this strong recognition in the US. We used the US as a cultural hub to transmit our brand to other markets, and we aim to do the same with the smart watch. We have created our smart watch by focusing on outdoor use, moments where it is impossible to reach for your phone in your backpack. This is the true value that our smart watch bring to the user. It has various apps available for mountaineering, cycling, running and fishing. The current power life is of two days, which is still quite a short amount of time but perfect for the outdoor purpose for which it is intended. The smart watch has been created using excellent waterproof and water resistant technologies developed in the G-Shock brand. Furthermore, comfort has also been considered. Our new watch combines the unique technology used in our timepieces with the smart phone digital technology. We offer a truly unique and valuable range of competitive smart watches which we only Casio can make.
One of the beautiful things about Casio is that it is a family business. You are the fourth generation at the head of Casio and whilst this is a beautiful thing one side I am sure it gives you a tremendous amount of pressure on the other. As the president of Casio what would you like your precedency to be remembered as in the future? What developments or resources do you want to be remembered for?
As you rightly pointed out, I am the fourth President of Casio. Casio Computer was established in 1957 by the four Casio brothers. The first president was my grandfather, the second was the older brother of the first president, and the third-generation president was my father, who was the third brother. The second president served for 26 years and the third served for around 27 years, so I am actually the second generation. Times are changing, and as the president of the company, I think I have to change the management approach from top-down to bottom-up. I believe that this is my mission and responsibility. I aim at creating a new Casio, built on collaboration with the younger staff who will be leading the company into the future. At the same time, I want to preserve the philosophy of the company. Our corporate creed of creativity and contribution: “0→1 zero to one” or “make something from nothing,” while never giving up is something that must be preserved. I want to hand over this philosophy to the next generations. Over the last fifty-nine years, we have built this spirit together with the founders. Now that we are approaching the sixtieth anniversary of Casio Computers, we would like to compile the quotes and memorable words of the founders in order to hand them over to the next generations.
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