Japanese Headlines: Toshiba TEC’s Ambitious Plans for Sustained Growth

The company explains its fiscal year 2023 mid-term management plan and management policy.

Above: President Nishikori of Toshiba TEC

Toshiba TEC held its 2023 Management Policy Briefing on May 26, where the company’s President Hironobu Nishikori explained the mid-term management plan (2023–2025). Under this plan, the company’s overall basic strategy aims to execute business transformation and corporate reform to contribute to solving social issues and strive to become a global top solution partner.

Toshiba TEC plans to achieve a slight increase in sales from ¥510.8 billion in the fiscal year 2022 to ¥520 billion in the fiscal year 2025 through business transformation and corporate reform. Furthermore, the company aims to significantly increase operating profit from ¥16.1 billion to ¥39 billion, targeting an operating profit margin (ROS) of 7.5% and a return on invested capital (ROIC) of 17.5% in the fiscal year 2025. As part of the business transformation, the establishment of a joint venture with Ricoh for the development and manufacturing of multifunction printers, previously announced, is also included.

In this column, we will provide a more detailed report on the more impactful aspect of the two major elements of Toshiba TEC’s business transformation and corporate reform, focusing on the business transformation that has a greater influence on customers and related companies.

According to Nishikori, Toshiba TEC aims to become a global top solution partner by creating new value through thorough customer orientation and its touchpoints/partner co-creation.

In terms of segment-specific targets, the planned operating profit/operating profit margin for the Retail Solutions segment will double, with ¥11 billion/+3.6% in fiscal year 2023, ¥17 billion/+5.4% in fiscal year 2024, and ¥25 billion/+7.7% in fiscal year 2025. The company will expand new businesses based on ELERA (the company’s retail commerce platform) and improve profitability through expanding recurring businesses.

For the Workplace Solutions segment, the planned operating profit/operating profit margin will also double, with ¥7 billion/+3.2% in fiscal year 2023, ¥10 billion/+4.9% in fiscal year 2024, and ¥14 billion/+6.9% in fiscal year 2025. The company aims to improve profitability through the expansion of document solutions.

To achieve business growth, Toshiba TEC will increase investments in growth areas while maintaining a stable financial structure. Over the three-year cumulative period from fiscal year 2020 to fiscal year 2022, investments and loans amounted to ¥8.1 billion. This amount will increase 2.9 times, reaching ¥23.5 billion over the three-year cumulative period from fiscal year 2023 to fiscal year 2025. Capital investments will increase from ¥47.2 billion to ¥59 billion (1.25 times).

Research and development expenses will increase from ¥68.3 billion to ¥78 billion (1.14 times). Return on invested capital (ROIC) will increase from 8.2% in fiscal year 2022 to 17.5% in fiscal year 2025. In terms of shareholder returns, the company aims for a consolidated dividend payout ratio of approximately 30% and aims for continuous growth. The acquisition of treasury stock will also be appropriately implemented.

Key Measures for the Toshiba Tec 2023 Mid-Term Plan

Under business transformation, Toshiba TEC will focus on accelerating the expansion of new businesses unique to TEC and strengthen the profitability of its Workplace Solutions business. Under corporate reform, the company will focus on strengthening human resources and sustainable management.

Under the initiative of accelerating the expansion of new businesses unique to the company, Toshiba TEC will actively invest in retail innovation. To support the acceleration of new business expansion, the company will focus on four initiatives:

1. Strengthening digital talent. The company aims to increase the number of digital talent from 1,300 globally in fiscal year 2022 to 1,800 in fiscal year 2025 and accelerate the global expansion of ELERA. In November 2023, the company plans to establish an innovation and incubation hub in Dallas, Texas, as a cloud service development base and increase talent by 74%. Additionally, the company plans to increase personnel in Japan by 23%, in Europe by 15%, and in Asia by 3%.
2. Evolve ELERA, the company’s retail commerce platform. The evolution of ELERA aims to expand the system provision, which has mainly targeted the retail industry for sales management, stimulating customer visits, and stimulating purchasing, to a platform that can manage information throughout distribution, including payment providers, advertising, manufacturers/wholesalers, and logistics.
3. Enhance co-creation spaces. Toshiba reports that the number of visitors to TEC 01 SIGHT (a lab and showroom) opened in Tokyo in October 2020 has exceeded 5,700 attendees from approximately 1,600 companies. The company also has a demonstration experimental store for next-generation smart stores, utilizing the experiences and data obtained there to improve business agility.
4. Strengthen partner collaboration. Through collaboration with Digital Garage Group, which specializes in cybersecurity, Toshiba TEC aims to streamline store operations by consolidating delivery, mobile orders, and in-store orders.

Strengthening the Profitability of the Workplace Solutions Business

Toshiba TEC will establish a joint venture with Ricoh for the development and manufacturing of multifunction printers, which was announced on May 19, 2023, and is scheduled to be established between April and June 2024. Nishikori stated that the development and manufacturing of multifunction printers is mostly conducted by Japanese manufacturers. This joint venture will conduct development and manufacturing, while sales will remain the same, contributing to the business growth of both Ricoh and Toshiba TEC and energizing Japanese manufacturing.

While continuing to supply Toshiba TEC’s multifunction printers under the Toshiba brand, the intent is to realize strong manufacturing through development and production integration and expand the product lineup. Toshiba TEC also has barcode printers and aims to provide solutions that connect work sites and offices by combining them with multifunction printers with the goal of developing differentiated Toshiba brand user interfaces, solutions, and services.

The company plans to concentrate on and accelerate cost efficiency by focusing on growth areas that utilize new products resulting from the collaboration between the two companies’ technologies, including:

• Expansion of digital transformation (DX)-oriented workflow/data management solutions
• Expansion of Toshiba TEC’s unique solutions that integrate barcode printers, RFID, and multifunction printers
• Expansion of quick and detailed customization response utilizing global sales networks and development bases

Toshiba Tec Strengthening Human Resources

Toshiba TEC will actively invest in people and promote the development and active participation of diverse talents. Additionally, the company will carry out cultural reforms to create an environment where employees can work energetically.

Toshiba Tec and Sustainable Management

Toshiba TEC will set KPIs (key performance indicators) based on the important issues extracted from the Toshiba TEC Group’s philosophy and work toward achieving the goals, contributing to the resolution of social issues.