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
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.
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) Promotion of the Single Content Multiple Usage strategy
The Company holds a significant number of popular brands such as Monster Hunter, Resident Evil and Street Fighter, which have been major hits in Japan as well as other markets, and is leveraging them across various sectors and products, including movies, animation, stationery, toys, and food and beverages. The Company will aggressively pursue the licensing business utilizing these intellectual properties given that it promises stable profit and, furthermore, room for growth.
(2) Initiatives by operating segment
A. Digital Contents business
While the Company holds multiple, flagship brands that have achieved worldwide status, such as Monster Hunter, Resident Evil and Street Fighter, it will further put effort into marketing activities, deepening relationships with existing customers and developing new users in line with market trends. Moreover, digital download sales have taken off in the US and Europe, and sales have also been increasing in the fast-growing Asian markets in conjunction with the development of network infrastructure. As such, the Company will aim to increase revenues by focusing on digital download sales, which carry less inventory risk and promise higher profitability than one-time physical product sales, both in Japan and overseas.
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.
(3) Initiatives in the esports business
The global esports player population has exceeded 100 million,and in Japan it is rapidly gaining popularity as evidenced by the launch of a league for professional sports teams last year and a slew of corporate sponsorships, with entrants participating across corporate and industry sector boundaries. The Company has accumulated an abundance of experience and operational knowhow on esports over the years by holding the Capcom Pro Tour through its US subsidiary. Given this, the Company will construct a business model from a medium-to long-term perspective to develop new businesses while concentrating its management resources, which started with the launch of the Capcom Street Fighter League powered by RAGE in February, and is followed by the Street Fighter League: Pro-US in the US in April.
(4) Overseas growth
Development of the overseas market will become crucial for promoting growth strategies as the domestic market matures. Japanese games, along with animation (anime) and comics (manga) are collectively referred to as "Cool Japan," and have gained popularity among young people around the world, even becoming a common global language. The Company already owns numerous tittles that are popular overseas, including Resident Evil and Street Fighter, which have been turned into Hollywood movies, and with the growing number of fans of the mega-hit title Monster Hunter: World in the promising Asian market, it intends to aggressively promote global expansion to further business opportunities.
(5) Optimization of Capcom Group management
To raise the performance level of the Group as a whole, the Company will reinforce its management functions, share information, and promote the increased efficiency of operations, while at the same time consolidating priority areas and downsizing/withdrawing from unprofitable businesses through a "scrap and build" approach based on selection and concentration of opportunities. Furthermore, the Company will reorganize its overseas subsidiaries and improve networks between companies by utilizing speedy management in line with external changes, as well as optimize the Capcom Group through more coherent business expansion with its domestic and overseas affiliates in order to enhance corporate value.
4. Our Business Environment and Issues to Address
The company expects an increasingly high-tech landscape, where high-resolution graphics and the adoption of AI (Artificial Intelligence) and VR (Virtual Reality) will enable greater realism and natural movement by characters in home video games.
As such, to generate synergy with its popular games via greater global brand awareness and value, the Company has been producing world-leading content, with brands such as Street Fighter and Resident Evil being made into Hollywood movies, now followed by Monster Hunter and Mega Man, which are also scheduled forlive-actionfilm adaptation. In recent years, as the domestic market matures, further efforts to increase sales in the larger overseas market have become essential to maintain sustained growth. The Company will, therefore, develop and sell titles that appeal to diverse customer needs, including games that are popular overseas, thereby enhancing customer satisfaction and ensuring its competitive advantage.
Moreover, in the fast growing esports business, the Company, in addition to leveraging its abundant experience and operational knowhow accumulated over the years in the US, intends to make a full scale entry into the market and gain a firm footing through the allocation of the necessary funds and human resources. Furthermore, by focusing its management resources in growth areas and priority divisions, as well as reinforcing existing divisions and downsizing and withdrawing from unprofitable divisions, the Company will rebuild its businesses in line with environmental changes It will also aim for more cohesive business development and higher management efficiency while at the same time enhancing the corporate value of the entire Group by carrying out the following business strategies and priority measures that utilize the Company’s strengths.
A. A robust development structure
The Company boasts a rich development structure that produces million-selling titles each year through creating engaging content that enhances customer satisfaction. It intends to reinforce its advantage 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, by reducing development cycles and costs through increasing staff and improving its production environment, thereby enhancing profit management.
B. Rich library of internationally popular titles
The Company has become a world-leader in content that holds multiple, internationally popular brands by continuing to produce hit titles in the US and Europe, including for Street Fighter and Resident Evil, which have been made into Hollywood movies. Moreover, with the massive success of Monster Hunter: World, the Company's presence has been steadily rising overseas. Accordingly, in addition to the US and Europe, the Company hopes to expand business opportunities in the fast-growing Asian market as well through further penetration of the Capcom Brand.
C. Leveraging IP through Single Content Multiple Usage strategy
The Company holds a wealth of content assets from having created 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.
D. Multi-platform development
The Company's proprietary game engines (integrated development environment), such as MT Framework and RE ENGINE, 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.
E. Promotion of digital strategy
In addition to digital download sales, which can be expected to provide sustainable, higher-margin income, the Company has been making efforts to increase sales through development and promotional activities suited to market needs. This is made possible by ascertaining accurate customer information, such as their responses and attributes, through surveys and analyses of user trends using digital marketing.
(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 EU's General Data Protection Regulation (GDPR), have become indispensable 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
Various regions around Japan have been ravaged by typhoons, earthquakes and other large-scale natural disasters in recent years. In response to these disasters, 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.
(4) Promotion of workstyle reforms
Starting from April 2019, laws related to workstyle reforms will go into effect and various measures including the reduction of overtime work will become imperative. As part of measures to promote work-life balance and reduce any instances of excessive working hours, the Company has endeavored to improve and maintain employee health by encouraging employees to take paid leave and through holding Safety and Health Committee meetings every month. The Company is also working to create an environment with child-rearing support and other initiatives, including on-site childcare facilities, which will empower employees to pursue their careers actively. At the same time, it will seek to foster a corporate culture that provides job satisfaction in order to secure and leverage outstanding talent.
(5) Developing and securing human resources
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 potential abilities by adopting personnel systems that address changes in the environment and place the right person in the right position. Further, 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.
(6) 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 stock
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.
During the period under review, 2,737,100 shares were acquired through a tender offer as part of returns to shareholders.
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. During the period under review, the total payout ratio improved as a result of the above acquisitionof treasury stock.
(7) Policy on 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 issues were held.
B. As regards said holdings, the Company considers the details of the business dealings and the amounts, and verifies 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, serious scandals, and other factors pertaining to the relevant business partner.
(8) Dialogs with stakeholders
Each year the Company proactively conducts dialogues (meetings) with shareholders and institutional investors to promote better understanding of its management policies and growth strategies, while at the same time endeavoring 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 its website, in addition to disclosing the latest information on the Capcom IR Site, as well as working to respond quickly and appropriately to various requests and questions.
(9) Investor Relations (IR) and Shareholder Relations (SR)
Based on the above, the Company has been focusing on its IR and SR activities. This includes meeting with over 400 shareholders and institutional investors both from Japan and overseas 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 andto increase fans of Capcom.
During the period under review, the Company's activities were recognized by the following third-party organizations.
|Integrated Report||Selected as one of the eleven companies, nominated by four or more asset managers, as a company with an "Excellent Integrated Report" in the "Excellent Integrated Report" evaluation by Japanese equity asset management companies contracted with GPIF.|
|"21st Nikkei Annual Report Awards," Excellence Prize|
|IR Site||Nikko Investor Relations Co., Ltd., "Fiscal 2018 Listed Company Website Quality Ranking," Overall First Place|
|Daiwa Investor Relations Co., Ltd., "Internet IR Award 2018," Grand Prize|
(10) 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 IP) and corporate governance (such as through raising the ratio of outside directors 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 the regional community).
(11) Corporate governance
The Company is working to strengthen corporate governance in order to achieve sustainable growth and medium-to long-term enhancement of its corporate value. It is doing so based on its corporate philosophy, which is to be a creator of entertainment culture that stimulates your senses, that moves and excites people through entertainment in the form of games. In order to promote sound management and improve business transparency, the Company endeavors to avoid risks and prevent scandals by establishing organizational structures that allow its corporate governance to function properly. Such endeavors include the establishment of the Nomination and Remuneration Committee and the Compliance Committee as voluntary committees. Meanwhile, the Company will be flexible as it engages in aggressive business development and strives to achieve its growth strategy, which includes investing in growth areas, implementing tie-up strategies and conducting mergers and acquisitions.