Case
Teaching Notes
Supplementary Resources
Abstract
Otsuka Kagu, a Japanese furniture company, experienced a succession and strategy crisis when the founder’s daughter, who became Chief Executive Officer in 2009, deviated from her father’s business model to modernize the company. A rare public spat ensued when the father tried firing her, but she was backed by the Board and non-family shareholders. Having re-taken the reigns, Kumiko Otsuka proceeded with her new strategy. However, the company’s financial results soon deteriorated instead. Was her father right after all or was it a matter of time before the company would return to growth and profitability under the new strategy? What should Kumiko do?
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Appendix 1: Company Milestones
1969 | Katsuhisa establishes Otsuka Kagu with 24 employees |
1980 | Listing on JASDAQ Securities Exchange |
1980s | Started imports to Europe and America |
1993 | Katsuhisa introduces membership system as company image is that of exclusivity and selling high-end products |
2001 | Experienced declining sales and profits |
2009 | Katsuhisa steps down Eldest daughter, Kumiko takes over as Chief Executive Officer (CEO) Makes transformations to company’s business model such as removing membership system |
2014 | Katsuhisa demotes Kumiko due to unhappiness over changes in the company and takes over as CEO again |
January 2015 | The Board reinstates Kumiko and Katsuhisa files for proxy vote for his reappointment |
March 2015 | Kumiko wins proxy vote with 61% of the votes |
July 2015 | Kumiko announces changes to business model such as an image change to suit casual shoppers and reduce exclusiveness |
2016 | Otsuka Kagu records new-low in profits of −4,567 million JPY |
Appendix 2: Ownership Structure
2014 (During feud) | 2015 (After the feud) | ||
Financial institutions | 24.54% | Financial institutions | 25.77% |
Securities companies | 1.72% | Securities companies | 2.45% |
Other companies and corporations | 15.34% | Other companies and corporations | 14.58% |
Non-Japanese investors | 11.67% | Non-Japanese investors | 4.15% |
Individuals and others | 46.74% | Individuals and others | 53.05% |
Katsuhisa Otsuka | 18.88% | Katsuhisa Otsuka | 9.61% |
Kikyo Kikaku (related to Kumiko Otsuka) | 10.21% | Kikyo Kikaku | 9.75% |
Haruo Otsuka | 2.82% | Chiyoko Otsuka | 1.91% |
Employee shareholding body | 2.98% | Haruo Otsuka | 2.62% |
Note: Kumiko Otsuka has a seat on the Board of Kikyo Kikaku.
Source: Otsuka Kagu Annual Reports 2015 and 2016.
Appendix 3: Financials
Figures in million JPY | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 |
Income statement | ||||||||
Net sales | 46,307 | 58,004 | 55,501 | 56,230 | 54,520 | 54,366 | 56,912 | 57,925 |
Gross profit | 24,720 | 30,830 | 30,598 | 31,069 | 30,848 | 30,551 | 31,064 | 30,605 |
Selling, general and administrative expenses | 29,318 | 30,392 | 31,000 | 30,266 | 29,664 | 29,401 | 31,197 | 32,057 |
Profit after taxation | (4,567) | 359 | 473 | 856 | 640 | 203 | (255) | (1490) |
Balance sheet | ||||||||
Current assets | 22,094 | 29,325 | 30,312 | 26,595 | 25,334 | 25,393 | 23,867 | 25,354 |
Noncurrent assets | 15,591 | 16,386 | 16,398 | 21,062 | 16,390 | 16,358 | 18,846 | 18,353 |
Current liabilities | 7,633 | 8,828 | 9,518 | 8,433 | 7,849 | 8,069 | 7,982 | 8,286 |
Noncurrent liabilities | 4,027 | 2,419 | 2,527 | 2,973 | 1,076 | 1,015 | 711 | 765 |
Net assets | 26,024 | 34,464 | 34,665 | 36,250 | 32,799 | 32,666 | 34,019 | 34,655 |
Per share data (in JPY) | ||||||||
Profit per share | (257.10) | 19.38 | 25.54 | 46.19 | 34.21 | 10.51 | (13.18) | |
Financial ratios | ||||||||
Return on equity (%) | (15.10) | 1.00 | 1.30 | 2.50 | 2.00 | 0.60 | (0.70) | |
Return on total assets (%) | (12.10) | 0.80 | 1.00 | 1.80 | 1.50 | 0.50 | (0.60) |
Note: Net assets include shareholders’ equity with valuation and translation adjustments.
Source: Otsuka Kagu Annual Report 2017.
Appendix 4: Family Tree
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved