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?
| 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 |
| 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.
| 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.
