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IR Top Page > Management Objectives > Management Objectives

Management Objectives

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(as of July 19, 2020)

Here you can find an itemized listing of our directors' fundamental management policies, which include our basic corporate philosophy, management performance metrics, dividend policy, mid- to long-term strategies and challenges faced by management.

1. Fundamental Management Policy

We are creators of entertainment culture who aim to develop software content that excites and stimulates the senses. Management's criterion is mutual prosperity; we work to build trust and improve satisfaction with our stakeholders.

2. Key Performance Indicators

Increasing Corporate Value through Continuous Business Growth

Capcom's objective is to enhance corporate value by expanding our businesses. We measure performance from a capital efficiency perspective and strive to enhance corporate value by improving return on equity (ROE). At the same time, we focus on cash flow management and securing profits.

The basic policy on the consolidated dividend payout ratio, which is one of the key performance indicators, is to maintain a payout ratio of 30% while continuing to make stable dividend payouts.

Management Plan "Mid-Term Plan/ Growth Strategies"

3. Medium- and Long-Term Management Strategies

Establishing a corporate structure capable of securing stable profits regardless of changes in the environment is a critical challenge facing management in promoting growth. As such, we aim to improve business performance via the following measures.

(1) Initiatives by operating segment

A. Digital Contents business

a) One of the reasons for increased profits in the fiscal year under review is the expansion of digital download sales. The Company will continue to accelerate the focus from physical packaged sales to digital sales in step with advances in internet technology and the overall trend of digital transformation.

b) In addition to eliminating manufacturing costs of the disks and packaging containers, digital sales can reduce distribution cost and inventory risks, and allow for more flexible pricing by region and sales period. Moreover, they help minimize piracy and second-hand sales, while allowing for a long-term sales-life, contributing to stable profits each year.

c) Through digital marketing the Company will conduct efficient promotional activities. For instance, it will analyze and predict customer preferences with centralized management of user play data and carry out development based on meeting market needs. It will also set prices flexibly in real time through digital initiatives matched to diverse customer behavior.

d) In pursuing digital strategy, marketing to capture users is critical. Therefore, it is important to secure human resources with advanced skills and special expertise in utilizing the latest technology to carry out activities such as analysis of customer play history and behavioral prediction. For this reason, in addition to acquiring such human resources from outside the firm, the Company will work to train-up the necessary human resources through in-house training and practical education.

B. Arcade Operations business

In recent years, there has been renewed appreciation for arcades as a form of familiar entertainment that is "inexpensive, close andquick." As such, the Company is promoting store openings mainly in large commercial complexes where a certain amount of foot traffic can be expected, under the banner of "No. 1 arcade in the community." The Company will also make efforts to reach a wide range of users and secure stable revenues each year by capturing young core users through prize merchandiser games, photo sticker machines (photo booths) and medal games that offer experiences that cannot be found in home video games or on smart phones; this, in addition to capturing new users by conducting free gaming experience tours for middle-aged and elderly customers and establishing kids' corners for young children, among other activities.

C. Amusement Equipments business

Pachinko & Pachislo has been hit with a wave of structural changes, including a decrease in the player population due to the impact of changes in machine model certification and customers cutting back on spending, resulting in the market falling into a downward spiral. While this business has been struggling in recent years as a result of this, the Company intends to overcome this current impasse by rebuilding the business and putting it on a recovery track with organizational reforms, developing products better suited to user tastes, enhancing the product lineup through business alliances, as well as by revising the business mix to better respond to external changes.

(2) Strengthening the eSports business

a) Going forward, esports are expected to attract more attention due to various activities that should energize the market. In addition to the first esports tournament in the history of the National Sports Festival being held at the Ibaraki National Sports Festival in 2019, esports are being considered for inclusion as a medal event at the Asian Games in Hangzhou, China in 2022.

b) Esports are also attracting attention as a form of entertainment that can take advantage of 5G, and are rapidly growing even in Japan, which had lagged other regions of the world up to now. For instance, leagues featuring professional sports teams are being launched and major companies are crossing industry boundaries to enter the market by sponsoring esporting events in Japan.

c) The Company is investing management resources for development of this new business because it has accumulated a wealth of esports experience and operational know-how by holding the Capcom Pro Tour through its U.S. subsidiary for many years.

d) Nonetheless, the domestic market is still in an early phase of seed-sowing. Several issues to be addressed remain, including regulatory obstacles, training of professional players and building out the environment. Therefore, in order to monetize this business, it is necessary to build a model with a medium- to long-term perspective, with the understanding that it will take some time before the fruits of any investment can be reaped.

(3) Expansion of global operations

a) To pursue growth strategies while the domestic market matures, it is indispensable to cultivate overseas markets.

b) The Company is a world-leader in content and holds multiple, internationally popular brands having continuously produced hit titles in the U.S. and Europe, including in the Street Fighter and Resident Evil series, both of which have been adapted into Hollywood films.

c) In recent years, the company's presence overseas has been steadily rising due to the huge success of Monster Hunter: World. In addition to the U.S. and Europe, the Company plans to aggressively expand business opportunities in other regions by further promoting the Capcom brand. As the Asian market is expected to grow in the future, the Company will restructure local subsidiaries and focus on expanding sales in the region. It will also develop new markets such as South America.

4. Our Business Environment and Issues to Address

In this industry, it is expected that entertainment choices for customers will undergo diversification; for example, high-definition, cloud-based simultaneous multiplayer games for smartphones should be made possible by the high-speed, large-capacity, low-latency communications accompanying the rollout of commercial 5G services this year in markets including Japan. Further, the possibility of a full-scale market entry by external players has brought a seismic shift in the landscape and a wave of new business opportunities.

Situated in an industry that undergoes rapid environmental change, the Company is focusing on securing stable revenue annually while building a competitive advantage via a strong management system and pursing a high-margin, digital-forward strategy focused on expanding digital download sales. At the same time, the Company has been bolstering developer personnel through securing and training excellent human resources in order to build out its core business of home video game software development. With a maturing market, declining birthrate and aging population in Japan, overseas business expansion is indispensable to the Company's future growth plans. For this reason, in addition to Europe and the United States—its primary competitive markets—the Company aims to build an advantage in rapidly growing Asia through delighting customers there with releases of world-renowned IP while increasing its share of sales in the region.

Further, the Company sees esports as an integral part of its future growth strategy and is working to consolidate its position in this expanding market with upfront capital allocation and investments in human resources; it plans to found the Esports Academy (tentative name) for training professional players as well as to establish regional teams and leagues for female players.

In addition to implementing organizational reforms in response to changes in the environment, the Company is focused on improving corporate value while aiming to optimize its business portfolio. This is achieved through efficiently allocating management resources via a method of selection and concentration, investing in growth areas and reviewing its position in unprofitable businesses.

To this end, the Company will strive to achieve sustainable growth by utilizing both its strengths and the priority measures outlined below.

(1) Strengths

A. A robust development structure

The Company boasts a robust development structure that produces million-selling titles each year through creating engaging content that delights customers. It intends to further enhance its competitiveness by concentrating management resources in the development of home video games based on its medium-term development map, while at the same time developing a breadth of content tailored to the needs of the market through greater in-house production. To this end, the Company is improving its core competence, i.e. its development structure, through reducing both costs and the span of each development cycle with increased staff and an improved production environment, thereby improving profit management.

B. Leveraging IP through Single Content Multiple Usage strategy

The Company holds a wealth of content assets from having produced numerous million-selling titles. Its licensing business provides diversified revenue sources, which work to secure stable profits each year, by utilizing well-known game characters across various media, such as in movies, animation, toys, food and beverages, leveraging the synergy created by popular titles. A Hollywood movie based on the company's Monster Hunter series is scheduled to be released worldwide. The Company will continue to enhance its brand value going forward with a media mix including movies, TV, etc., and so continue to build its value chain.

C. Multi-platform releases

The Company's proprietary game engines (integrated development environment), such as the RE ENGINE and MT Framework, allow the sharing of development tools across different platforms, such as PlayStation 4, Xbox One, Nintendo Switch and PCs. By utilizing these proprietary game engines, the Company is capable of releasing the same software across multiple platforms, which has contributed to increasing sales and improving profitability.

(2) Reinforcement of information security

Measures against various cyber risks both in Japan and overseas, including the prevention of information leaks and compliance with the E.U.'s General Data Protection Regulation (GDPR), have become crucial in light of the importance of personal information management systems in recent years. As a part of these measures, the Company is reinforcing its information security system through the hiring of expert personnel, human resources development, thorough in-house training and regular checks, to prevent cyberattacks, including computer viruses and unauthorized access that would debilitate information systems and cause turmoil.

(3) Business continuity planning

In recent years, various regions around Japan have been ravaged by typhoons, earthquakes and other large-scale, unforeseen natural disasters. In response to these events, the Company will reinforce its crisis management system so that, in the event of an emergency, damages, losses and the impact on important businesses will be kept to a minimum through quick and appropriate responses, and that business activities will be able to continue through early recovery.

Further, accompanying the state of emergency that was declared in Japan due to the novel coronavirus, COVID-19, there are some concerns regarding the impact on the Arcade Operations and Amusement Equipments businesses, as well as on content production through work-from-home. Among these, in addition to anticipating a decrease in revenue due to temporary closures of stores in the Arcade Operations business, it will be necessary to closely monitor any decline in demand in the Amusement Equipments business as well following voluntary suspension of operations on the part of the hall operators. Meanwhile, the Company will revise its development process for content production, concentrating its ingenuity and knowhow to minimize any adverse impact.

Nonetheless, the core Digital Contents business can be expected to continue to contribute results even in a situation where retail stores around the world have temporarily suspended operations because the Company has successfully advanced digital sales.

The company is committed to building a solid business foundation while remaining cognizant of any changes in the business environment brought by COVID-19.

(4) HR strategy

A. For a game software company like Capcom, employees are indeed human capital, and are recognized as important resources for the business. In order to pursue sustainable growth, it is essential to secure and train competent human resources. As such, the Company is enhancing its rank-based training programs, such as the general manager training program, the manager candidate training program and the new employee training program, while also striving to boost morale and encourage discovery of capabilities by adopting personnel systems that address changes in the environment and place the right person in the right position.

B. The Company endeavors to seek out progressive and creative human resources and promotes diversity while carrying out hiring and evaluations without regard for gender, nationality or age in order to engage its diverse human resources.

(5) Basic capital policies

A. Dividend policy

The basic policy on the consolidated dividend payout ratio, which is one of the key performance indicators, is to maintain a payout ratio of 30% while continuing to make stable dividend payouts.

B. Acquisition of treasury stocks

Giving due consideration to the changes in the business environment and the Company's financial condition, the Company will acquire treasury stock swiftly and flexibly when it is determined that it will contribute to increasing shareholder value.

C. Total payout ratio

The Company is also mindful of the total payout ratio [(dividend paid + treasury stock acquired) ÷ net income], which shows the level of return to shareholders, and we strive to achieve market confidence based on well-balanced capital strategy.

(6) Basic policy for strategic holdings of publicly listed shares

A. In order to strengthen and tighten relationships with those companies with which there are ongoing business dealings, while eliminating habitual cross-holding and personal favoritism, the Company comprehensively takes into consideration the relevant advantages and disadvantages from medium- to long-term perspectives, including whether the shares contribute to future business relationships and sustainable enhancement of corporate value. As a result, the Company limits its holdings to a minimum and, as of the end of the current fiscal year, only three securities were held.

B. The Company considers the details of the business relationship, the amounts, the benefits and the stock price fluctuation risks on the continuous holding of such shares. As a result, if it is determined that little economic rationality remains in holding such shares, such as in cases where the carrying amount has fallen 50% or more, the Company takes into account factors including the economic situation and, upon consulting with the issuer, reduces or disposes of such shares at the appropriate time.

C. When exercising voting rights, the Company decides on whether to vote for or against each proposal pursuant to internal procedures, comprehensively taking into account the business conditions, corporate misconduct, and other factors pertaining to the relevant business partner.

(7) Dialogs with stakeholders

Each year the Company continues an active dialog with shareholders and institutional investors through meetings to promote better understanding of its management policies and growth strategies. At the same time, it endeavors to meet the expectations of all stakeholders, including shareholders, institutional investors and customers. The Company also provides information on the general meeting of shareholders and financial results by such means as the Integrated Report and the Capcom IR Website, where it also discloses updates on the latest company information, and works to respond quickly and appropriately to various requests and questions from stakeholders.

(8) Investor Relations (IR) and Shareholder Relations (SR) activities

The Company has been ahead of the curve in placing focus on IR and SR activities. This includes over 350 meetings with shareholders and institutional investors each year, as well as speaking on its management policies and financial information through top management meetings and results briefings, all in an effort to build a relationship of trust and to increase fans of Capcom. During the period under review, the Company's activities were recognized by the following third-party organizations.

Integrated Report Excellent Integrated Report
GPIF's asset managers entrusted with domestic equity investment
Excellence Prize, 22nd Nikkei Annual Report Awards
Nihon Keizai Shimbun Inc.
IR Website Grand Prize, Internet IR Award 2019
Daiwa Investor Relations Co., Ltd.
Overall Ranking: Grade AAA, Fiscal 2019 Listed Company Website Quality Ranking
Nikko Investor Relations Co., Ltd.
Overall ranking No.2, Investor Relations Site Ranking 2019
Gomez Consulting Department, Morningstar Japan K.K.

(9) ESG initiatives

ESG stands for Environmental (E), Social (S) and Corporate Governance (G). The Company, from an ESG standpoint of fulfilling its social responsibilities as a good corporate citizen, promotes business strategies that pay due consideration to the environment (such as the reduction of greenhouse gas (GHGs) emission by switching to LED lighting and the reduction of paper resources by digitizing instruction manuals), society (such as through outreach classes for children and regional revitalization efforts using the Company's game and esports businesses) and corporate governance (such as through raising the ratio of outside directors, promoting diversity in the workplace for female and non-Japanese employees and establishing the Nomination and Remuneration Committee), and strives to enhance corporate value by building trust with stakeholders (including shareholders, investors, customers, business partners, creditors, employees and regional communities).

Corporate Social Responsibility

(10) Relationship between SDGs and ESG

SDGs stand for Sustainable Development Goals and represent the sustainable development goals (17 goals) that should be achieved by the world during the 15-year period from 2016 to 2030, as set forth by the United Nations. ESG takes a forecasting approach that implements improvement measures based on the present. Compared to this, SDGs take a back-casting approach that set and implement necessary measures by calculating backwards from the future. SDGs are composed of three core elements: environmental protection, economic growth, and social inclusion, and are highly relevant to ESG while including some aspects of ESG. Instead of pursuing these activities in all areas, the company will focus on activities based on its business and situation. As part of this effort, the company has been furthering the reduction of plastic waste (by discontinuing discs and packaging) through the promotion of digital sales, providing a rewarding work environment (by establishing on-site childcare), and supporting child abuse prevention activities (through donations to relevant organizations and facilities), as well as promoting maintenance and improvement of employees' health (through promoting use of paid leave to reduce working hours).

(11) Other important matters concerning the Company

In consideration of the declaration of a state of emergency in Japan due to the spread of COVID-19 and to the subsequent requests to implement measures such as work from home policies, all of the Company's offices have been closed and a work from home policy for all employees (except for a certain number necessary for continuing operations) is in effect for approximately the duration of the state of emergency, in order to prevent spread of the infection among employees, business partners and the greater community.

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