Business Strategy of
Urban Planning and Development Systems



                 January 18, 2005
                  Yoshito...
Contents
1. Positioning and Strategy of
   Urban Planning and Development Systems
2. Reinforcing the Elevator and Escalato...
Contents
1. Positioning and Strategy of
        Urban Planning and Development Systems

2. Reinforcing the Elevator and Es...
1. Socio-economic Structural Changes

                     The demand of society today
      Improving the ability of citi...
1. Targeted Businesses in “i.e. HITACHI Plan II”

         Convergence of technology and knowledge

   Global Products Inc...
1. Hitachi’s Contributions to Economic Growth in Japan

  Enhance urban functions and facilitate truly enriching lifestyle...
1. The Urban Service Infrastructure Provides a TQOL

 Total Quality of Life… Improving safety, comfort and convenience



...
1. Business of Urban Planning and Development Systems


       Elevator and Escalator Business

              Manufacturin...
1. Major Group Companies

 Subsidiaries
  Hitachi Building Systems Co., Ltd. Equipment sales, installation, maintenance an...
1. Key Points of Our Strategies

        Enlarge our business and enhance the profit margins
                    Goal: Sal...
1. Our Advantages

                      Elevator and Escalator Business
                       Powerful brand based on te...
1. Goals

            Fiscal 2010 sales of ¥500 billion, operating profit margin of 10%*

     Sales (billion yen)        ...
Contents
1. Positioning and Strategy of
      Urban Planning and Development Systems
2. Reinforcing the Elevator and Escal...
2-1. The Elevator and Escalator Market
                Market Forecast                             Market Share in Unit Vo...
Contents
1. Positioning and Strategy of
      Urban Planning and Development Systems
2. Reinforcing the Elevator and Escal...
2-2. Market Analysis and Business Strategies

  Market analysis
     Strong growth in China leading up to the 2008 Beijing...
Contents
1. Positioning and Strategy of
      Urban Planning and Development Systems
2. Reinforcing the Elevator and Escal...
2-3. Goal for Elevator/Escalator Business

         Fiscal 2010 aim for No.1 market share in ASIAN REGIONS

  Sales (billi...
‚b‚• Ž ”‚…‚Ž ”‚“
 1. Positioning and Strategy of
       Urban Planning and Development Systems
 2. Reinforcing the Elevato...
2-4. Key Initiatives


                       Deepen ties among development bases in the ASIAN REGIONS
  Development
     ...
2-4. Key Initiatives: Development (1)

   Deepen ties among development bases in the three ASIAN REGIONS

            Urba...
2-4. Key Initiatives: Development (2)


  Develop the global products which lead ASIAN REGIONS



      •k‚P•l   Upgrade p...
(1) Upgrade product performance and enhance functions
                                                    Hitachi developm...
(2) Enhance energy saving and space minimization
     Flexibility to adapt to building layouts, environmental sensitivity,...
(3) Improve user-friendliness

       Pursuit universal design

                                                     “Urba...
2-4. Key Initiatives: Manufacturing
                               2005
                              Expand operations in...
2-4. Key Initiatives: Manufacturing
                                  2005
                                  Expand operat...
2-4. Key Initiatives: Sales

   Use IT to raise efficiency of sales activities (already started in Japan)

      Strengthe...
2-4. Key Initiatives: Maintenance (1)

            Upgrade quality and efficiency of maintenance services

               ...
2-4. Key Initiatives: Maintenance (2)

       HERIOS : elevator remote maintenance system
       HERIOS : Hitachi Equipmen...
2-4. Key Initiatives: Maintenance (3)

                          BuildAWARSlbgN’z covering ASIAN REGIONS
                 ...
2-4. Key Initiatives: Strengthen the Maintenance Business (4)

                            BuildAWARSlbgN’z covering ASIAN...
‚b‚• Ž ”‚…‚Ž ”‚“
 1. Positioning and Strategy of
       Urban Planning and Development Systems
 2. Reinforcing the Elevato...
3-1. Outline of Solutions Business: Basic Stance

  Market pull
   Propose the future needs of Urban Development Solutions...
3-1. Outline of Solutions Business: Strategies and Key Initiatives

  Strategies

      Stimulate the Building Management ...
3-1. Outline of Solutions Business: Business Model
                  Conduct highly profitable B-to-B service business
   ...
3-1. Outline of Solutions Business: Goals

   Sales (billion yen)                                                         ...
‚b‚• Ž ”‚…‚Ž ”‚“
 1. Positioning and Strategy of
       Urban Planning and Development Systems
 2. Reinforcing the Elevato...
3-2. Building Management Solutions: Market Analysis
                 Market Forecast                                      ...
3-2. Building Management Solutions: Key Initiatives
                                                                      ...
‚b‚• Ž ”‚…‚Ž ”‚“
 1. Positioning and Strategy of
       Urban Planning and Development Systems
 2. Reinforcing the Elevato...
3-3. Urban Development Solutions: Market Analysis

                      Market Forecast                                  ...
3-3. Urban Development Solutions: Business Map

                          Business Map of Hardware and Services
          ...
3-3. Urban Development Solutions: Pioneering New Businesses

                            Market trends                    ...
3-3. Urban Development Solutions: Condominiums and Houses (1)
 Living Spaces: Hospitality spaces creating a subtle atmosph...
3-3. Urban Development Solutions: Condominiums and Houses (2)
 Living Spaces: Hospitality spaces creating a subtle atmosph...
3-3. Urban Development Solutions: Buildings and Offices (1)
Work Spaces: adjustable business spaces offering greater comfo...
3-3. Urban Development Solutions: Buildings and Offices (2)
Work Spaces: adjustable business spaces offering greater comfo...
3-3. Urban Development Solutions: Buildings and Offices (3)
Work Spaces: adjustable business spaces offering greater comfo...
3-3. Urban Development Solutions: Towns and Public Facilities (1)
  Public Spaces: Cross-field for people and communities ...
3-3. Urban Development Solutions: Towns and Public Facilities (2)
  Public Spaces: Cross-field for people and communities ...
3-3. Urban Development Solutions: Towns and Public Facilities (3)
  Public Spaces: Cross-field for people and communities ...
3-3. Urban Development Solutions: Towns and Public Facilities (4)
  Public Spaces: Cross-field for people and communities ...
‚b‚• Ž ”‚…‚Ž ”‚“
 1. Positioning and Strategy of
       Urban Planning and Development Systems
 2. Reinforcing the Elevato...
3-4. Asset Management Solutions
                    Create and promote development business value
                     thr...
3-4. Asset Management Solutions


           Accelerate business by establishing
       the Asset Management Solutions tas...
‚b‚• Ž ”‚…‚Ž ”‚“
 1. Positioning and Strategy of
       Urban Planning and Development Systems
 2. Reinforcing the Elevato...
3-5. Key Advanced Technology: Sensor Networks (1)
Key technology for the ubiquitous information society: Sensor nodes auto...
3-5. Key Advanced Technology: Sensor Networks (2)
Key initiatives to commercialize sensor networks

                      ...
3-5. Key Advanced Technology: Sensor Networks (3)

  Home Healthcare system
  •@ 24-hour monitoring of seniors’ daily acti...
3-5. Key Advanced Technology: Sensor Networks (4)

     IP network-based building management
    Centralized management of...
3-5. Key Advanced Technology: Sensor Networks (5)

  Social infrastructure (structural) monitoring

     Wireless sensing ...
Contents
1. Positioning and Strategy of
   Urban Planning and Development Systems
2. Reinforcing the Elevator and Escalato...
4. Summary

                                                   Sales of ¥500 billion and achieve a 10%
    Goal           ...
Cautionary Statement

Certain statements found in this document may constitute "forward-looking statements" as defined in ...
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Business Strategy of Urban Planning and Development Systems

  1. 1. Business Strategy of Urban Planning and Development Systems January 18, 2005 Yoshito Tsunoda, President and Chief Executive Officer, Urban Planning and Development Systems, Hitachi, Ltd. All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  2. 2. Contents 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  3. 3. Contents 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  4. 4. 1. Socio-economic Structural Changes The demand of society today Improving the ability of cities and communities to function as the foundation for a society centered on knowledge-based industries Industrial society Knowledge-industrial society Demand Growth in scale Pursuit of quality Government/ Private company/ Entrepreneur public organization local government Investing activities Investment growth Use of asset Environment Sustain damage Sustainable society All Rights Reserved, Copyright 2005 Hitachi, Ltd. 4
  5. 5. 1. Targeted Businesses in “i.e. HITACHI Plan II” Convergence of technology and knowledge Global Products Incorporating New Era Lifeline Advanced Technology Support Solutions Urban redevelopment Urban redevelopment HDD business HDD business business business Automotive products Automotive products SAN/NAS SAN/NAS business business Storage solutions business Storage solutions business Semiconductor production Semiconductor production equipment business equipment business Biomedical business Biomedical business Battery business Battery business Strategic outsourcing Strategic outsourcing business business etc. Ç‚È etc. Urban Planning and Development Systems (established in April 2003) Our mission is reinforcing the elevator and escalator business and deploying the solutions business that support new lifelines for cities in a society centered on knowledge-industries All Rights Reserved, Copyright 2005 Hitachi, Ltd. 5
  6. 6. 1. Hitachi’s Contributions to Economic Growth in Japan Enhance urban functions and facilitate truly enriching lifestyles through the “urban service infrastructure” Urban service infrastructure Improve safety, comfort and convenience Information infrastructure a half century of experience Social Mainframe Gigabit router Storage system infrastructure a century of experience 5HP motor 50MW generator Nuclear plant Computer control Railway systems All Rights Reserved, Copyright 2005 Hitachi, Ltd. 6
  7. 7. 1. The Urban Service Infrastructure Provides a TQOL Total Quality of Life… Improving safety, comfort and convenience Safety Provide exclusive security and safety to our users with less burdensome Comfort Provide hospitality while maintaining sustainability Convenience Address a variety of needs by ubiquitous IT and our service networks All Rights Reserved, Copyright 2005 Hitachi, Ltd. 7
  8. 8. 1. Business of Urban Planning and Development Systems Elevator and Escalator Business Manufacturing of elevators and escalators Installation, maintenance and renovation Solutions Business Building management solutions Urban development solutions Asset management solutions All Rights Reserved, Copyright 2005 Hitachi, Ltd. 8
  9. 9. 1. Major Group Companies Subsidiaries Hitachi Building Systems Co., Ltd. Equipment sales, installation, maintenance and renovations; comprehensive building management Seishin Service Co., Ltd. Building maintenance Hitachi Brain Co., Ltd. Marketing Hitachi-Mito Engineering Co., Ltd. Engineering and manufacturing Guangzhou Hitachi Elevator Co., Ltd. Manufacture, sales, installation and maintenance Hitachi Elevator Engineering Co., (Hong Kong) Ltd. Sales, installation and maintenance Manufacture, sales, installation and Hitachi Elevator Engineering (Singapore) Pte. Ltd. maintenance Affiliated companies Mitsubishi Hitachi Home Elevator Corporation Manufacture, sales and installation Siam-Hitachi Elevator Co., Ltd. Manufacture, sales, installation and maintenance All Rights Reserved, Copyright 2005 Hitachi, Ltd. 9
  10. 10. 1. Key Points of Our Strategies Enlarge our business and enhance the profit margins Goal: Sales of ¥500 billion and achieve a 10% operating profit margin by fiscal 2010 * Focusing on the two businesses;elevators and escalators business and solutions business(Building management, Urban development and asset management), and securing high profitability Reinforce the elevator and escalator business by focusing on ASIAN REGIONS Aim for the No.1 market share in ASIAN REGIONS(Japan, China and Southeast Asia) by concentrating on our resources in this regions Deploy the solutions business Establish superiority through up-front investments; use this as a new operating base to generate higher earnings Enlarge business scale (Building management solutions, Urban development solutions and asset management solutions). * Including the sales and operating profit of the “property sector” of Chuo Shoji Ltd. and Hitachi Life Ltd. Therefore, the definition is different to that in the segment information of Hitachi’s consolidated accounting. All Rights Reserved, Copyright 2005 Hitachi, Ltd. 10
  11. 11. 1. Our Advantages Elevator and Escalator Business Powerful brand based on technology and trust 365-day/24-hour Hitachi’s Customer Center and 350 service center in Japan Solutions Business Utilization of elevator and escalator service network Development of leading edge products and systems Leading-edge core technologies for movement detection and sophisticated sensing Comprehensive support for customers’ business operation for real estate development, financing and many other categories of services Advantages of Hitachi Group All Rights Reserved, Copyright 2005 Hitachi, Ltd. 11
  12. 12. 1. Goals Fiscal 2010 sales of ¥500 billion, operating profit margin of 10%* Sales (billion yen) ‚T‚O‚O * ‚T‚O‚O ‚S‚S‚O ‚R‚U‚R * ‚U‚O ‚S‚O‚O Asset management ‚R‚P‚V * ‚R‚P‚T ‚V‚O solutions ‚Q‚V‚O ‚S‚W ‚R‚O‚O ‚P‚T ‚P‚O‚O Urban development ‚S‚V Solutions ‚T ‚V‚O ‚Q‚O‚O ‚U‚T Building management solutions ‚Q‚V‚O ‚P‚O‚O ‚Q‚R‚O ‚Q‚O‚O Elevator and escalator * Including the sales and operating profit of the “property sector” of ‚Q‚O‚O‚R ‚Q‚O‚O‚T ‚Q‚O‚P‚O (FY) Chuo Shoji Ltd. and Hitachi Life Ltd. Therefore, the definition is (plan) (goal) different that to in the segment information of Hitachi’s consolidated accounting. All Rights Reserved, Copyright 2005 Hitachi, Ltd. 12
  13. 13. Contents 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 2-1. The Elevator and Escalator Market 2-2. Market Analysis and Basic Strategies 2-3. Goal for Elevator/Escalator Business 2-4. Key Initiatives 3. Deployment of the Solutions Business 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  14. 14. 2-1. The Elevator and Escalator Market Market Forecast Market Share in Unit Volume (new equipment, Hitachi estimates) (2003, new equipment, Hitachi estimates) Demand (10,000 units) ‡@ Company A 28% ‚R‚Q•D‚O Japan ‡A Hitachi 25% ‡B Company B 17% ‚Q‚W•D‚R ‚Q‚X•D‚T PPDO ‚ ‚ • ‚ ‡@ Company C •@ 22% China VDW ‚ • ‚ WDX‚ ‚ • China ‡A Company A •@ 20% Southeast Asia/ ‡B Hitachi 13% India/ RDR ‚ • ‚ RDV ‚ • ‚ RDQ ‚ • ‚ Middle East QDW ‚ • ‚ QDW ‚ • ‚ QDW ‚ • ‚ ‡@ Company C 30% Japan Southeast Asia/ ‡A Company A 15% India/ ‡B Company D 11% Europe, Middle East North America, PSDT ‚ ‚ • ‚ PSDT ‚ ‚ • ‚ PSDT ‚ ‚ • ‚ ‡E Hitachi 4% others ‡@ Company C 20% ‚Q‚O‚O‚R ‚Q‚O‚O‚T ‚Q‚O‚P‚O ‡A Company D 16% (FY) Worldwide ‡B Company A 11% Strong growth in China leading up to the Beijing Olympics and Shanghai Expo ‡E Hitachi 7% All Rights Reserved, Copyright 2005 Hitachi, Ltd. 14
  15. 15. Contents 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 2-1. The Elevator and Escalator Market 2-2. Market Analysis and Basic Strategies 2-3. Goal for Elevator/Escalator Business 2-4. Key Initiatives 3. Deployment of the Solutions Business 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  16. 16. 2-2. Market Analysis and Business Strategies Market analysis Strong growth in China leading up to the 2008 Beijing Olympics and 2010 Shanghai Expo Steady growth in Southeast Asia, India and Middle East Flat Demand in Japan, Europe and North America Intense price competition in market for new installations and maintenance In maintenance market, fierce competition between manufacturer-affiliated firms and independent firms Business strategies Concentrate on our resources in ASIAN REGIONS Enhance business framework focused on China, the world’s largest market Upgrade profitability by product cost reduction and maintenance service efficiency All Rights Reserved, Copyright 2005 Hitachi, Ltd. 16
  17. 17. Contents 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 2-1. The Elevator and Escalator Market 2-2. Market Analysis and Basic Strategies 2-3. Goal for Elevator/Escalator Business 2-4. Key Initiatives 3. Deployment of the Solutions Business 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  18. 18. 2-3. Goal for Elevator/Escalator Business Fiscal 2010 aim for No.1 market share in ASIAN REGIONS Sales (billion yen) ‚R‚O‚O Share of new equipment ‚Q‚T•“ in ASIAN REGIONS ‚P‚R•“ ‚Q‚V‚O ‚Q‚O‚O China ‚Q‚R‚O ‚Q‚O‚O Southeast Asia ‚P‚O‚O Japan (FY) QOOR ‚ ‚ ‚ ‚ ‚Q‚O‚O‚T QOPO ‚ ‚ ‚ ‚ (plan) (goal) All Rights Reserved, Copyright 2005 Hitachi, Ltd. 18
  19. 19. ‚b‚• Ž ”‚…‚Ž ”‚“ 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 2-1. The Elevator and Escalator Market 2-2. Market Analysis and Basic Strategies 2-3. Goal for Elevator/Escalator Business 2-4. Key Initiatives 3. Deployment of the Solutions Business 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  20. 20. 2-4. Key Initiatives Deepen ties among development bases in the ASIAN REGIONS Development Develop globally competitive products Build a manufacturing network in the ASIAN REGIONS with Guangzhou, China, as the hub Manufacturing Cut manufacturing costs Strengthen sales activities through sales force automation (SFA), e-sales* and other means * estimation and specification decision Sales system using the web Expand the Chinese sales network to cover major cities Upgrade quality and efficiency of maintenance services Maintenance Build maintenance network covering ASIAN REGIONS All Rights Reserved, Copyright 2005 Hitachi, Ltd. 20
  21. 21. 2-4. Key Initiatives: Development (1) Deepen ties among development bases in the three ASIAN REGIONS Urban Development Systems, Hitachi Elevator Elevator Development Center Development Centre of ASIA (established Oct. 2004, Guangzhou) (Japan) Southeast Asia Hitachi (China), Ltd. Hitachi, Ltd. Research & Research & Development Engineering Centre (established Sep. 2004, Singapore) Development Center Group (Japan) (Beijing) Development base Current missions Future missions •E Develop advanced •E Develop advanced technology and Japan technology and products premium products •E Develop global products •E Develop products to meet •E Develop mainstream products for China Chinese needs the ASIAN REGIONS •E Develop products for •E Modify products for Southeast Asian Southeast Asia Southeast Asia markets All Rights Reserved, Copyright 2005 Hitachi, Ltd. 21
  22. 22. 2-4. Key Initiatives: Development (2) Develop the global products which lead ASIAN REGIONS •k‚P•l Upgrade product performance and enhance functions •k‚Q•l Enhance energy saving and space minimization •k‚R•l Improve user-friendliness All Rights Reserved, Copyright 2005 Hitachi, Ltd. 22
  23. 23. (1) Upgrade product performance and enhance functions Hitachi development target Hitachi selling Elevator with the world’s largest capacity Hitachi secured Other company secured Hitachi developed Other company developed Prioritize needs in high-demand zone (high speed and large capacity) Faster Focus on developing elevator with the world’s largest capacity Higher speed Substantial demand ed •@ spe d •@ Hig h an ity ac e c ap larg High capacity Slower Smaller Larger All Rights Reserved, Copyright 2005 Hitachi, Ltd. 23
  24. 24. (2) Enhance energy saving and space minimization Flexibility to adapt to building layouts, environmental sensitivity, cost savings ‚P‚X W‚O ‚P‚X O ‚Q‚O‚O‚O ‚Q‚O‚P‚O Less energy Less space Relay Microcomputer Permanent Helical gear magnet motor High efficient drive type controlled inverter system Elevators gearless Traction elevator with machine room Machine roomless Shaft space saving Hydraulic elevator with machine room elevator Less energy Worm gear Helical gear High efficient drive Handrail of system traction drive Handrail of liner drive system Escalators Power system converter Less space Slim type of balustrade Slim type drive The limit system of slim type Helical gear/handrail of liner drive system and thin Thin type drive type Truss frame system All Rights Reserved, Copyright 2005 Hitachi, Ltd. 24
  25. 25. (3) Improve user-friendliness Pursuit universal design “Urban Ace” elevator received universal design prize of Good Design Special Award in fiscal 2002 Extend the Recognized for outstanding ease use of of operation and clean, sincere universal design High-contrast, raised buttons designs From elevator to the entire spatial movement domain •@ First universal design prize •@ in the elevator industry Feedback from a panel of typical users * “Urban Ace” is the trademarks of Hitachi, Ltd. in Japan. All Rights Reserved, Copyright 2005 Hitachi, Ltd. 25
  26. 26. 2-4. Key Initiatives: Manufacturing 2005 Expand operations in the rapidly growing Chinese market Japan Open new factory in Tianjin for northern, •@ eastern and northeastern China Tianjin Expand operations in Southeast Asia Enhance production capacity Guangzhou Guangzhou Bangkok Singapore • @ • @ Existing factories (January 2005) •@ New factory (October 2005) All Rights Reserved, Copyright 2005 Hitachi, Ltd. 26
  27. 27. 2-4. Key Initiatives: Manufacturing 2005 Expand operations in the rapidly growing Chinese market Japan Open new factory in Tianjin for northern, •@ eastern and northeastern China Tianjin Expand operations in Southeast Asia Western China Enhance production capacity Eastern China Guangzhou Guangzhou 2008 Build a a more efficient and lower cost Bangkok manufacturing network in the ASIAN REGIONS with Guangzhou, China, as the hub Product cost reduction Singapore • @ • @ Existing factories (January 2005) •@ New factory (October 2005) (Details are undecided) •@ New factories (2005 through 2008) All Rights Reserved, Copyright 2005 Hitachi, Ltd. 27
  28. 28. 2-4. Key Initiatives: Sales Use IT to raise efficiency of sales activities (already started in Japan) Strengthen sales activities through sales force automation (SFA) Apply SFA: Hitachi sales force since 2000 Sales agents since 2005 Use e-sales system to enhance the approach to our customers (since 2004) Expand sales network to cover major Chinese cities Increase number of sales base (branch offices, sales companies, and sales agents) by 40% (2003 through 2005) Expanding sales network to cover local cities All Rights Reserved, Copyright 2005 Hitachi, Ltd. 28
  29. 29. 2-4. Key Initiatives: Maintenance (1) Upgrade quality and efficiency of maintenance services Improve service quality through use of remote maintenance technology (HERIOS) Upgrade service efficiency through development and use of advanced maintenance tools Customize maintenance menu to meet customer demands - Utilization of the maintenance plans improve the transparency of maintenance service - Become a more trusted partner for customers Enhance the customers service - Visit customers more often to respond effectively to our customers' needs * HERIOS is the trademarks of Hitachi Building Systems Co., Ltd. in Japan. All Rights Reserved, Copyright 2005 Hitachi, Ltd. 29
  30. 30. 2-4. Key Initiatives: Maintenance (2) HERIOS : elevator remote maintenance system HERIOS : Hitachi Equipment Remote and Intelligent Observation System 365-day/24-hour remote monitoring provide the Security & Safety •E•E•E1994 Developed and introduced the industry’s first system of this type •E•E•E1999 Received Ishikawa Award from Union of Japanese Scientists and Engineers Reduce break downs with preventing maintenance Future evolution of remote Minimize maintenance time by remote automatic maintenance diagnostic system technology Quick recovery by remote diagnostic and analysis * HERIOS is the trademarks of Hitachi Building Systems Co., Ltd. in Japan. All Rights Reserved, Copyright 2005 Hitachi, Ltd. 30
  31. 31. 2-4. Key Initiatives: Maintenance (3) BuildAWARSlbgN’z covering ASIAN REGIONS ƒ maintenance network ƒ ƒ ‚ ‘Û•É‹ ƒ ƒ ƒ ƒ[• •Ì‚ 2005 Offer high quality, efficiency maintenance services in China and Southeast Asia Reinforce the maintenance business in China E Expand the maintenance service order •@ E Build a maintenance service network •@ Reinforce the maintenance business in Southeast Asia • @ • E ptimizing the maintenance menu for each region O All Rights Reserved, Copyright 2005 Hitachi, Ltd. 31
  32. 32. 2-4. Key Initiatives: Strengthen the Maintenance Business (4) BuildAWARSlbgN’z covering ASIAN REGIONS ƒ maintenance network ƒ ƒ ‚ ‘Û•É‹ ƒ ƒ ƒ ƒ[• •Ì‚ 2005 Offer high quality, efficiency maintenance services in China and Southeast Asia Reinforce the maintenance business in China E Expand the maintenance service order •@ E Build a maintenance service network •@ Reinforce the maintenance business in Southeast Asia • @ • E ptimizing the maintenance menu for each region O 2008 Build a maintenance network in Asia •EStandardized service level throughout Asia •EStrengthen support collaboration in ASIAN REGIONS All Rights Reserved, Copyright 2005 Hitachi, Ltd. 32
  33. 33. ‚b‚• Ž ”‚…‚Ž ”‚“ 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 3-1. Outline of Solutions Business 3-2. Building Management Solutions 3-3. Urban Development Solutions 3-4. Asset Management Solutions 3-5. Key Advanced Technology to Support Solution Business: Sensor Networks 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  34. 34. 3-1. Outline of Solutions Business: Basic Stance Market pull Propose the future needs of Urban Development Solutions Market, ahead of the trend Technology push Apply the advanced technologies in IT, energy facility and security fields to enhance safety, comfort and convenience “Collaborative Value Creation” Create and promote new business value by collaboration with business partners All Rights Reserved, Copyright 2005 Hitachi, Ltd. 34
  35. 35. 3-1. Outline of Solutions Business: Strategies and Key Initiatives Strategies Stimulate the Building Management Solutions market Establish superior position ahead of competitors in the Urban Development Solutions market, where rapid growth is foreseen Enhance Solutions menu by using Hitachi Group’s advanced technologies and asset Conduct highly profitable B-to-B service businesses Key initiatives Building Management Solutions: enhance one-stop service menu and quantify the service value Urban Development Solutions: take-off ahead of competitors with advanced Technologies Asset Management Solutions: accelerate business by establishing the asset Management Solutions task force All Rights Reserved, Copyright 2005 Hitachi, Ltd. 35
  36. 36. 3-1. Outline of Solutions Business: Business Model Conduct highly profitable B-to-B service business Real estate owners/Developers/Construction contractors/Government and public organizations/Universities, etc. Value-added Services/Solutions Service fees services Living Spaces Work Spaces Public Spaces Condominiums, houses Buildings, offices Towns, public facilities Urban Services Infrastructure •ƒ Hardware •„ •ƒ Services •„ Advanced technology/Specific technology Highly effective network Sensor networks, micro-grid energy management, Hitachi’s Customer Centers/Service center total security management, etc. established in elevator/escalator business Hitachi Group IT Power and Industrial Financial services Services Systems All Rights Reserved, Copyright 2005 Hitachi, Ltd. 36
  37. 37. 3-1. Outline of Solutions Business: Goals Sales (billion yen) •k‚Q‚R‚O•l* ‚P‚V‚O ‚Q‚O‚O ‚U‚O •k‚P‚R‚R•l * •k‚P‚P‚V•l * ‚W‚T Asset Management ‚V‚O Solutions ‚V‚O ‚P‚O‚O ‚S‚W ‚S‚V Urban Development ‚P‚T Solutions ‚T ‚P‚O‚O Building ‚U‚T ‚V‚O Management Solutions QOOR ‚ ‚ ‚ ‚ QOOT ‚ ‚ ‚ ‚ QOPO ‚ ‚ ‚ ‚ (FY) (plan) (goal) * Including the sales of the “property sector” of Chuo Shoji Ltd. and Hitachi Life Ltd.Therefore, the definition is different to that in the segment information of Hitachi’s Consolidated accounting. All Rights Reserved, Copyright 2005 Hitachi, Ltd. 37
  38. 38. ‚b‚• Ž ”‚…‚Ž ”‚“ 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 3-1. Outline of Solutions Business 3-2. Building Management Solutions 3-3. Urban Development Solutions 3-4. Asset Management Solutions 3-5. Key Advanced Technology to Support Solution Business: Sensor Networks 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  39. 39. 3-2. Building Management Solutions: Market Analysis Market Forecast s“’¥ Ž Ì‚ê• Á Market Analysis (Hitachi estimates) Overall market Sales (billion yen) (billion yen) ‚T,‚O‚O‚O Falling prices are reducing the market market size scale of conventional building S,‚USO ‚ ‚ ‚ maintenance services, such as S,‚OOO ‚ ‚ ‚ S,‚QOO ‚ ‚ ‚ ‚S,‚O‚O‚O management equipment and cleaning Hitachi Annual growth of about 2% in total market due to inclusion of peripheral ‚R,‚O‚O‚O sales goal ‚P‚Q‚O activities, such as security services POO ‚ ‚ ‚ ‚P‚O‚O Top 50 companies have only about 30% ‚Q,‚O‚O‚O VO ‚ ‚ ‚W‚O market share; the market is currently UT ‚ ‚ divided by a large number of small and ‚U‚O medium-size service providers ‚P,‚O‚O‚O ‚S‚O ‚Q‚O ‚O ‚O QOOR ‚ ‚ ‚ ‚ QOOT ‚ ‚ ‚ ‚ QOPFY•j ‚ ‚ ‚ •i O ‚ All Rights Reserved, Copyright 2005 Hitachi, Ltd. 39
  40. 40. 3-2. Building Management Solutions: Key Initiatives Strengthen one-stop Buildings/Offices Consulting based on Hitachi comprehensive service capability engineering skills Building Provide safe and secure Systems environments •EMachinery security system Co., Ltd. •ERemote monitoring control (Energy saving system, etc proposals, etc.) Building equipment Maintain high-level reliability (elevators,escalators 365-day/24-hour /HVAC) remote monitoring Hitachi’s Consulting to improve the Customer Centers Security value of customer asset Daily maintenance Directive Cleaning/Hygiene to visit site management Quantification of Report on problems Building and equipment service value maintenance 350 nationwide Ensure transparency of Others 365-day/24-hour service centers services emergency response Improve service quality HVAC: heating, ventilation, and air-conditioning All Rights Reserved, Copyright 2005 Hitachi, Ltd. 40
  41. 41. ‚b‚• Ž ”‚…‚Ž ”‚“ 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 3-1. Outline of Solutions Business 3-2. Building Management Solutions 3-3. Urban Development Solutions 3-4. Asset Management Solutions 3-5. Key Advanced Technology to Support Solution Business: Sensor Networks 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  42. 42. 3-3. Urban Development Solutions: Market Analysis Market Forecast Market Analysis (Hitachi estimates) Overall market Sales (billion yen) (billion yen) 700 VOO ‚ ‚ ‚ A market where rapid growth is expected. Full-scale expansion has 600 started due to entry of companies from many fields (electric machinery, 500 Hitachi SUO ‚ ‚ ‚ sales electronics, security, etc.) goal 400 80 More than 60% is dominated by VO ‚ ‚ services segment market size 300 ROO ‚ ‚ ‚ 60 Alliances spanning industries are being formed because no single 200 40 company can cover all needs PT ‚ ‚ 100 20 ‚T 0 0 QOOR ‚ ‚ ‚ ‚ QOOT ‚ ‚ ‚ ‚ QOPO•i FY•j ‚ ‚ ‚ ‚ All Rights Reserved, Copyright 2005 Hitachi, Ltd. 42
  43. 43. 3-3. Urban Development Solutions: Business Map Business Map of Hardware and Services Ubiquitous Energy/ Security IT Environment Video on demand Home energy Living Spaces Home security (VOD) @• management Condominiums, houses Home healthcare Room access Building information ESCO *1 Work Spaces Buildings, offices Control System integration BEMS *2 Digital Media ESCO Town security Communication Micro-grid Public Spaces Interpretation service Energy Networks Towns, public facilities Private finance initiative (PFI) *1 ESCO : Energy Service Company *2 BEMS : Building and Energy Management Service All Rights Reserved, Copyright 2005 Hitachi, Ltd. 43
  44. 44. 3-3. Urban Development Solutions: Pioneering New Businesses Market trends Key initiatives Living Security service demand is growing Establish superiority by pioneering Spaces ahead of others the IT condominium markets Condominiums, Rapid growth is expected in home Expand the services menu Houses healthcare, VOD, etc. from 2005 Enhance one-stop service capability Work Keep the balance between energy extending from equipment supply Spaces saving and comfort to maintenance management services Buildings, More sophisticated security system Enhance service quality and efficiency, Offices with reduced burden of operations utilizing Hitachi’s customer centers Improve convenience through “intelligent functions” at commercial Launch new services such as town facilities, railway stations, hospitals security services ahead of others Public and other facilities Establish superiority in regional Spaces Optimal energy control for districts energy systems using Hitachi’s Towns, control technology and facilities Public facilities Concentrate on PFI for government Full-scale launch of PFI projects by offices and schools national and local governments All Rights Reserved, Copyright 2005 Hitachi, Ltd. 44
  45. 45. 3-3. Urban Development Solutions: Condominiums and Houses (1) Living Spaces: Hospitality spaces creating a subtle atmosphere of peace IT condominium system Home security system Home video on demand service Home health care service Community information service All Rights Reserved, Copyright 2005 Hitachi, Ltd. 45
  46. 46. 3-3. Urban Development Solutions: Condominiums and Houses (2) Living Spaces: Hospitality spaces creating a subtle atmosphere of peace IT condominium system Providing security, comfort and convenience in common areas, living areas and when away from home •ETriple security: main entrance, elevators, home door •ERemote lock system using cell phone Mobile •EVisual confirmation of visitors when away from home solutions •Ee-mail notification using cell phone when family member returns or when an emergency occurs Main entrance/Intercom Cell phone Elevators Data center Door/Intercom Internet Control Contact PC Home server, Emergency center center response Condominium controller Security team Home appliance call out Hitachi service network, Hitachi’s Customer Condominium Partner security company Centers All Rights Reserved, Copyright 2005 Hitachi, Ltd. 46
  47. 47. 3-3. Urban Development Solutions: Buildings and Offices (1) Work Spaces: adjustable business spaces offering greater comfort and flexibility Building management services Physical/cyber security management system “Unconscious security” management system Intelligent elevator system Office communication support system Optimized control system for HVAC and lighting Emergency response system All Rights Reserved, Copyright 2005 Hitachi, Ltd. 47
  48. 48. 3-3. Urban Development Solutions: Buildings and Offices (2) Work Spaces: adjustable business spaces offering greater comfort and flexibility Building management services Optimal integrated management for HVAC, lighting and security in many buildings •œ Building energy saving service •EEasy attainment of energy saving targets without sacrificing comfort of building occupants •EMaximize operating efficiency of HVAC equipment both centralized heat sources and package-type units Use of energy consumption Area-specific HVAC forecast upon an energy BEMS BEMS adjustments to match saving plan personal preferences Turn off HVAC for Optimal PAC* operation unseated office room to raise efficiency Use of centralized heat Hitachi’s Optimal output control source to achieve based on changes in overall optimization Customer Centers ventilation needs * PAC : Packaged air conditioners All Rights Reserved, Copyright 2005 Hitachi, Ltd. 48
  49. 49. 3-3. Urban Development Solutions: Buildings and Offices (3) Work Spaces: adjustable business spaces offering greater comfort and flexibility Physical/cyber security systems Offers security and convenience to match specific client needs through the integration of biological verification, smartcards and internet technology •œ Building management system using smartcards •EA single smartcard unifies building entry/exit management and data security management •EPC log-in management linked to building entry/exit records •EReplicate personal desktop environment on shared company PCs ‚c‚a Management Common recognition method server Room entry/exit information access Recognition PC Building entry gate Entry/exit Log in for server All Rights Reserved, Copyright 2005 Hitachi, Ltd. 49
  50. 50. 3-3. Urban Development Solutions: Towns and Public Facilities (1) Public Spaces: Cross-field for people and communities that create pleasant and •@ •@ memorable experiences Community support services Town security services Private Finance Initiative Service support system for retail stores Service support system for hotels Area navigation services All Rights Reserved, Copyright 2005 Hitachi, Ltd. 50
  51. 51. 3-3. Urban Development Solutions: Towns and Public Facilities (2) Public Spaces: Cross-field for people and communities that create pleasant and •@ •@ memorable experiences Community support services Supports easy and convenient interaction with community people •œ TV Telephone Interpretation Service •ESupport the multi-language communication •EInterpreters appear on screen by IP telephone •EOffer low-cost services covering multiple languages Interpreter Interpreter Service spots Hitachi Interpreting Service Management Center Interpreter All Rights Reserved, Copyright 2005 Hitachi, Ltd. 51
  52. 52. 3-3. Urban Development Solutions: Towns and Public Facilities (3) Public Spaces: Cross-field for people and communities that create pleasant and •@ •@ memorable experiences Town security services A new type of town security that preserves a community’s safety and security in agreement with the surroundings •œ Low-profile Street and Security Lighting System •EBright illumination for walkways prevents crime •EBuilt-in security camera and emergency reporting device •EImages are recorded over the network Images of sites with security services Low-profile street and security lighting system All Rights Reserved, Copyright 2005 Hitachi, Ltd. 52
  53. 53. 3-3. Urban Development Solutions: Towns and Public Facilities (4) Public Spaces: Cross-field for people and communities that create pleasant and •@ •@ memorable experiences Private Finance Initiative Hitachi Group can offer best solutions for the public sector •œ Key points of Hitachi’s Private Finance Initiative Business •EAdequate equipment plans and maintenance management aiming for optimal life cycle cost •ECentralized management based on Hitachi Group-wide strengths •EThe optimal operations based on the research laboratories’ management methods Customer Institute of Basic Medical Science & Laboratory installation : Animal Resource Center, University of Tsukuba Hitachi’s proposal received high marks for energy saving, through the use of natural energy and other means, and for its reduced level of maintenance management due to a long-term support system. Business contract signed in March 2004 All Rights Reserved, Copyright 2005 Hitachi, Ltd. 53
  54. 54. ‚b‚• Ž ”‚…‚Ž ”‚“ 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 3-1. Outline of Solutions Business 3-2. Building Management Solutions 3-3. Urban Development Solutions 3-4. Asset Management Solutions 3-5. Key Advanced Technology to Support Solution Business: Sensor Networks 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  55. 55. 3-4. Asset Management Solutions Create and promote development business value through collaboration with business partners Maximizing the customer’s asset value Hitachi Group Real estate development Companies Related equipment Partners (including elevators Renovations/conversions and escalators) •¡ Chuo Shoji •¡ Hitachi Life •¡ Hitachi Plant Engineering •¡ Hitachi Architects & Engineers •¡ •¡ Hitachi Air Conditioning Systems Hitachi Industrial Equipment Systems Developers •¡ Hitachi Building Systems •¡ Hitachi Building Systems,etc. Services (cleaning and hygiene management, Equipment maintenance management Property management Construction security, food services, Contractors etc.) •E •¡ •¡ Nikkyo Create •@ •¡ Seishin Service Hitachi Security Services •¡ •¡ Chuo Shoji Hitachi Architects & Engineers •¡ •¡ Chuo Shoji Hitachi Life •E •E •¡ Hitachi Building Systems, etc. •¡ Hitachi Building Systems •¡ Hitachi Building Systems All Rights Reserved, Copyright 2005 Hitachi, Ltd. 55
  56. 56. 3-4. Asset Management Solutions Accelerate business by establishing the Asset Management Solutions task force Concentrate staff from Hitachi Group companies Aim to generate more earnings from Hitachi Group’s and customers’ asset Create and promote value through collaboration with developers Conduct highly profitable maintenance business All Rights Reserved, Copyright 2005 Hitachi, Ltd. 56
  57. 57. ‚b‚• Ž ”‚…‚Ž ”‚“ 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 3-1. Outline of Solutions Business 3-2. Building Management Solutions 3-3. Urban Development Solutions 3-4. Asset Management Solutions 3-5. Key Advanced Technology to Support Solution Business: Sensor Networks 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  58. 58. 3-5. Key Advanced Technology: Sensor Networks (1) Key technology for the ubiquitous information society: Sensor nodes automatically collect information and transmit it wirelessly to application systems Temperature/Humidity sensor Sensor node The sensor node in its case Connector for external sensors (distortion, pulse wave, switch, etc.) Infrared sensor Sensor board Acceleration sensor Communication + CPU board Light intensity sensor Power supply board 25mm Features System configuration Stationary node Application 1) Compact Relay node Gateway system 2) Wireless 3) Low power LAN Name-tag- consumption type node Sensor network 4) Location Wristband- management server monitoring type node Sensor database All Rights Reserved, Copyright 2005 Hitachi, Ltd. 58
  59. 59. 3-5. Key Advanced Technology: Sensor Networks (2) Key initiatives to commercialize sensor networks Carry out the new business launch quickly with a focus Develop new business on urban development solutions, such as IT condominiums, building internal environment control and social infrastructure monitoring Make substantial investments for the rapid launch of Prioritized investments these businesses Establish business promotion Establish Hitachi Group-wide promotion task force, combing Hitachi Group’s human resources task force All Rights Reserved, Copyright 2005 Hitachi, Ltd. 59
  60. 60. 3-5. Key Advanced Technology: Sensor Networks (3) Home Healthcare system •@ 24-hour monitoring of seniors’ daily activities via wristband-type node •@ Allows family members to constantly confirm a senior’s health status from a distance •@ Provides daily data records to allow monitoring trends in an individual’s health Health status and emergency information Health management Health Health information Blood database Family members Home monitor pressure Hitachi’s facilities gauge Customer Centers scale Home Network TV server Cell phone Responds to Security emergencies device Service provider Wristband-type node All Rights Reserved, Copyright 2005 Hitachi, Ltd. 60
  61. 61. 3-5. Key Advanced Technology: Sensor Networks (4) IP network-based building management Centralized management of building equipment, IT devices and other items to monitor operating status Provision of diverse systems and services covering comfort, security, disaster prevention, etc. Offices/IT Environment LAN 24-hour Energy saving control Sensor network centralized (HVAC*, lighting) management Base station HVAC* Environmental monitoring (comfort, energy saving) Lighting Hitachi’s Customer Centers Temperature sensor node Name-tag-type node Security camera Internet Detection of accidents/ Security emergency notification (crime/disaster prevention) Notification Smoke sensor node Computer rack PC Crime prevention IT devices access control sensor node Buildings Sensor networks base station * HVAC: heating, ventilation, and air-conditioning All Rights Reserved, Copyright 2005 Hitachi, Ltd. 61
  62. 62. 3-5. Key Advanced Technology: Sensor Networks (5) Social infrastructure (structural) monitoring Wireless sensing using an ultra-compact, low-cost distortion sensor Regular monitoring of structures for lowering life cycle costs Sensor node Sensor network (wireless) Construction site Structural monitoring Control center (stress, warping) (deterioration, bolt loosing) All Rights Reserved, Copyright 2005 Hitachi, Ltd. 62
  63. 63. Contents 1. Positioning and Strategy of Urban Planning and Development Systems 2. Reinforcing the Elevator and Escalator Business 3. Deployment of the Solutions Business 4. Summary All Rights Reserved, Copyright 2005 Hitachi, Ltd.
  64. 64. 4. Summary Sales of ¥500 billion and achieve a 10% Goal operating profit margin by fiscal 2010 * Elevator and Escalator Business •E Aim for the No.1 market share in ASIAN REGIONS(Japan, China and Southeast Asia) by concentrating on our resources in this regions Solutions Business (Building management,Urban development and asset management) •E Establish superiority through up-front investments; use this as a new operating base to generate higher earnings •E Enlarge business scale * Including the sales and operating profit of the “property sector” of Chuo Shoji Ltd. and Hitachi Life Ltd. Therefore, the definition is different to that in the segment information of Hitachi’s consolidated accounting. All Rights Reserved, Copyright 2005 Hitachi, Ltd. 64
  65. 65. Cautionary Statement Certain statements found in this document may constitute "forward-looking statements" as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such "forward-looking statements" reflect management's current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as "anticipate," "believe," "expect," "estimate," "forecast," "intend," "plan," "project" and similar expressions which indicate future events and trends may identify "forward-looking statements." Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the "forward-looking statements" and from historical trends. Certain "forward-looking statements" are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on "forward-looking statements," as such statements speak only as of the date of this document. Factors that could cause actual results to differ materially from those projected or implied in any "forward-looking statement" and from historical trends include, but are not limited to: -rapid technological change, particularly in the Information & Telecommunication Systems segment and Electronic Devices segment; -uncertainty as to Hitachi's ability to continue to develop and market products that incorporate new technology on a timely and cost-effective basis and to achieve market acceptance for such products; -fluctuations in product demand and industry capacity, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment; -increasing commoditization of information technology products, and intensifying price competition in the market for such products; -fluctuations in rates of exchange for the yen and other currencies in which Hitachi makes significant sales or in which Hitachi's assets and liabilities are denominated, particularly between the yen and the U.S. dollar; -uncertainty as to Hitachi's ability to access, or access on favorable terms, liquidity or long-term financing; -uncertainty as to Hitachi's ability to implement measures to reduce the potential negative impact of fluctuations in product demand and/or exchange rates; -general economic conditions and the regulatory and trade environment of Hitachi's major markets, particularly, the United States, Japan and elsewhere in Asia, including, without limitation, a return to stagnation or deterioration of the Japanese economy, or direct or indirect restriction by other nations on imports; -uncertainty as to Hitachi's access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies; -uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and development of certain key products; and -uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write-down equity securities it holds. The factors listed above are not all-inclusive and are in addition to other factors contained in Hitachi's periodic filings with the U.S. Securities and Exchange Commission and in other materials published by Hitachi. All Rights Reserved, Copyright 2005 Hitachi, Ltd.

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