DENSO Principle

Management and
Company Information

DENSO Principle for Open System August 1964

1. Establish management philosophy and corporate image
  1. (1) In the spirit of DENSO Creed, we will provide excellent quality products in large quantities and at low prices, and earn the satisfaction and trust of our customers by providing the best possible service, aiming to:
    1. 1） Provide workplaces and working conditions in which employees can work with a sense of security and aspiration,
    2. 2） Guarantee fair and reasonable dividends to shareholders,
    3. 3） Accumulate sufficient economic power to ensure the maintenance and development of the company, and
    4. 4） Contribute to the prosperity of society.
    To this end, our top management and employees, as members of the management team, are obliged to cooperate with each other and show their full potential to achieve the long-term survival and prosperity of the company.
  2. (2) DENSO will become “Global DENSO.” We will come out on top of Bosch and Lucas. That is what we are pushing toward. That is the mission of all our employees. DENSO’s idea is that it is the only way for our employees to be happy.

    We will create a process with annual goals (milestones) leading to this, and set a series of separate goals to achieve as we advance step by step.
  3. (3) Each Business Unit will identify its rivals for each product. For example, “Do not lose to NGK,” “Overtake Imasen and Mitsuba,” and “Defeat Hitachi and Mitsubishi.” In addition, each functional division outside the business units will set goals based on the characteristics of that division, and strive to consolidate its efforts. The above is to compare production scale, manpower, production efficiency, technological strength, financial strength, and other corporate details of rivals with our own, so that we can understand our rivals’ real power, thereby stimulating our competitive spirit.
2. Stabilize employees’ livelihoods and bring out their full potential
3. Actively develop new products and break away from dependence on technical cooperation
4. Expand and upgrade the business unit system and establish a new audit organization
5. Establish a strong independent sales mechanism for markets and exports
6. Strongly promote production and sales of standard products
7. Systematically realize high productivity and the principle of high wages
8. Manage human resources on a clear ability-oriented basis
9. Clarify responsibility and authority and establish responsibility and guidance structures
10. Respect time and eliminate, simplify, and speed up operations

New DENSO Principle for Open System September 1966

Japan’s economy is entering the second phase of its open-door system, including the liberalization of capital transactions, and is faced with the reality of having to be newly adaptable in all areas.

The decade up to around 1964 was the era of the so-called high-growth economy centered on a quantitative economic perspective, but since 1965, we should be moving in the direction of stable growth centered on a qualitative economic perspective. At this time, it is essential that we strongly reinforce our corporate foundations to adapt to the challenging international economy and consolidate a system that will not lose to fierce international competition. That is to say, as the advanced nations continue to work tirelessly to build advanced industrial societies on a global scale, we must reflect deeply on the backwardness and structural weaknesses of our economy, and companies must transform themselves into “companies of the world” that are internationally competitive in terms of size and structure.

Recognizing this, we have reviewed the following items of New DENSO Principle for Open System, which will be the basis of our operations, in order to renew our commitment to the company’s management.

  1. (1)Items that have already been started or completed and that do not require continued emphasis on implementation and promotion (measures expressed in specific terms)
  2. (2)Items that may require modification due to organizational issues or overly detailed expressions in relation to other matters
  3. (3)Other items that may need to be added or removed in terms of content after two years have passed since the announcement

On the other hand, the long-term policy in our 1966 Long-Term Plan existed separately from the DENSO Policy based on the Trade Liberalization of Japan, so we decided that it would be appropriate to integrate the two into a single long-term corporate policy, and began to modify the latter. After review and modification by the division directors and executive directors, the DENSO Policy based on the Capital Liberalization of Japan was compiled.

Since this DENSO Policy based on the Capital Liberalization of Japan is to be the basis for our future operations, we will fully inform all levels of the company of its purpose, incorporate its items into long-term plans for each function, and make company-wide efforts to achieve these plans and achieve the desired objectives.

1. General
  1. 1.1 Management philosophy and corporate goals
2. Human resources
  1. 2.1 Demonstration of full potential and human resource management
  2. 2.2 Systematic realization of high productivity and high wages
3. Technology and R&D
  1. 3.1 Independent development of new products and technologies
  2. 3.2 Thorough implementation of quality first principle
4. Production and sales
  1. 4.1 Realization of high productivity
  2. 4.2 Strong promotion of production and sales of standard products
  3. 4.3 Improvement of subcontractor structure
  4. 4.4 Establishment of strong independent sales mechanism for markets and exports
5. Finance
  1. 5.1 Increase in corporate strength
  2. 5.2 Enhanced financial capacity and lower funding costs
6. Organizational management system
  1. 6.1 Improvement of leadership and establishment of responsibility system
  2. 6.2 Expansion and upgrade of business unit system and qualitative improvement of headquarters functions

DENSO Principle for Globalization April 1971

Japan’s economy has entered the final stage of capital liberalization and is finally under a fully open-door system. This means the country has entered a new phase in which it must not only adapt to the international economy and withstand the challenges of intense global competition, but also fulfill its role as a developed country.

In preparation for this day, we established DENSO Principle for Open System in 1964 and New DENSO Principle for Open System in 1966, since when we have incorporated the contents of these policies into our plans and worked hard to build a system that can keep up with global competition.

Fortunately, we have been blessed with a favorable environment and been able to achieve some success, but this was just the strengthening of the corporate structure inside a protected greenhouse, and its true value will only be tested in the future.

We have therefore renewed our commitment to take a forward-looking approach to the new circumstances, and to become an “international company” that develops strategies from a global perspective in order to survive the global competition, adapting to the changing social environment and achieving steady growth and development in balance with quality and quantity.

Taking advantage of the liberalization of automobile capital in April, the division directors and executive directors reviewed the previous policy, examined the new circumstances and the right direction going forward, and formulated this DENSO Principle for Globalization with the consensus of the entire company. Since this policy is to be the basis for our future operations, we will fully inform all levels of the company of its purpose, embody it our various plans, and make company-wide efforts to achieve these plans and achieve the desired objectives.

In particular, we have identified ten major projects that will be steadily implemented, with the functional departments in charge taking the lead in formulating a long-term plan and creating a concrete, comprehensive program.

1. General
  1. 1.1 Management philosophy and corporate goals
  2. 1.2 Basic target values
2. Human resources
  1. 2.1 Development of human skills and demonstrating full potential
  2. 2.2 Realization of high wages and high welfare
3. Technology and R&D
  1. 3.1 Development of new products and strengthening of independent technical capabilities
  2. 3.2 Strengthening and enhancement of production technology
  3. 3.3 Implementation of DENSO Quality First
4. Production
  1. 4.1 Implementation of DENSO Safety First
  2. 4.2 Realization of high international-level productivity
  3. 4.3 Establishment of a branch plant system
  4. 4.4 Demonstration of the collective strength of group companies
5. Sales
  1. 5.1 Sales strategy and product planning from a global perspective
  2. 5.2 Securing an unbeatable position in the domestic market
  3. 5.3 Expansion of overseas business
6. Finance
  1. 6.1 Strengthening of financial structure
  2. 6.2 Enhanced financial capacity and lower funding costs
7. Organizational management system
  1. 7.1 Acceleration of decision-making and establishment of a rational management system
  2. 7.2 Qualitative improvement of the business unit system

DENSO Principle for New Management Structure October 1974

From 1956, we were strengthening our global competitiveness as a company in a long-term systematic manner in line with the Japanese economy’s direction toward internationalization. In 1971, as capital liberalization was in its final stages, we felt the need to move forward as an international company, and so we formulated DENSO Principle for Globalization as a management policy and have been working to strengthen our corporate structure.

Later, however, the domestic and international business climate changed rapidly, and we reached a point where we had to recognize and focus on a number of issues in order to respond quickly to these changes, prosper in our business, and fulfill our corporate responsibilities. This year marks the 25th anniversary of our company's founding, an appropriate occasion to launch a new concept and various plans under a new policy, and so we have reviewed our current principles and formulated a new management policy called DENSO Principle for New Management Structure.

In light of the changes in the corporate climate since 1971 and the outlook for the future, the following points were of particular importance to us, and so we prioritized them during the new policy review process.

  1. (1) Rapid rise in the international status of Japan’s economy
    (Issues of friction overseas)
  2. (2) Changes in relations with resource-rich countries
    (Era of resource and energy saving)
  3. (3) Slowing growth of Japan’s economy and the automotive industry
    (Large swings during low growth)
  4. (4) Progressive inflation
    (General cost-push environment)
  5. (5) Expanding social impact of corporate actions
    (Emphasis on corporate social responsibility)

These changes are largely related to complex international political and economic factors, and there will inevitably be more occasions for company management decisions to be made in an environment with an increasingly uncertain outlook. Accordingly, as a basic management stance for the future, we have structured the contents of our new policy based on the idea that we will work to ensure appropriate growth, while at the same time, each function within the company will strive to have the capacity and structure to respond to various unforeseen changes in the business environment.

The new policy was compiled after a review of the opinions of the division directors on the current policy by the executive officers in charge, followed by a series of reviews by all executive officers. Because it will form the basis for our future company-wide operations, we will ensure that its purpose is fully understood at every level of the company, and that mid-term plans, annual plans, project plans, and so on are formulated in a focused and specific manner to achieve the desired objectives.

1. General
  1. 1.1 Management philosophy
  2. 1.2 Corporate goals
  3. 1.3 Basic target values
2. Safety and quality
  1. 2.1 Creating a safe and pleasant workplace with the participation of all employees
  2. 2.2 Implementation of DENSO Quality First
3. Human resources
  1. 3.1 Human resource management for demonstrating full potential
  2. 3.2 Cultivating high-level abilities and a rich sense of humanity
  3. 3.3 Stable improvement of living infrastructure
4. Technology and R&D
  1. 4.1 Promotion of new technology development
  2. 4.2 Proactive improvement of current products and their processes
  3. 4.3 Strong promotion of new product development
5. Production
  1. 5.1 Securing an international-level production system
6. Sales
  1. 6.1 Sales activities that respect trust
  2. 6.2 Increased international market share
  3. 6.3 Focus on profitability and stabilization of production
  4. 6.4 Securing an unbeatable position in the domestic market
  5. 6.5 Expansion and enhancement of overseas business
7. Finance
  1. 7.1 Strengthening of financial structure
  2. 7.2 Strengthening of financial capacity
8. Organizational management
  1. 8.1 Establishment of systems to simplify and streamline operations
  2. 8.2 Improvement of business unit and plant systems
  3. 8.3 Demonstration of the collective strength of group companies

DENSO Principle for the 1980s September 1979

Since DENSO Principle for Open System was created in 1964, we have revised it three times while adhering to it as a long-term guideline for corporate operations.

This policy was created out of a clear sense of crisis and a strong determination to strengthen our company’s structure in response to the fierce global competition that accompanied the progress of internationalization, including trade liberalization and capital liberalization, as well as new efforts to deal with Japan’s low-growth economy in the wake of the oil crisis.

Fortunately, over the past 15 years, we have been able to continue our business development and high growth targeting the broad international market. This was due not only to the unusually rapid growth of the automobile industry, but also to our long-term efforts to strengthen our corporate structure, centered on this policy, and our ceaseless efforts to become an international company.

We have decided to create a new policy because we are now on track to reach the end of the rapidly changing 1970s with a satisfactory performance, and feel we need to clarify DENSO Philosophy and our stance for the coming decade. At the same time, this year marks the 30th anniversary of the company’s founding, which we believe is an appropriate time to launch a business plan for the next era under a new vision.

As is clear from the conclusions of the recent summit meeting of developed countries (Tokyo Declaration), the future economic environment in Japan and abroad will inevitably become more challenging as we face the difficult task of reconciling energy conservation and economic growth. This will directly impact the automotive industry in particular, so we must be prepared for significant changes.

Given this situation, it is very difficult to determine DENSO’s ideal future state and the priority measures we should take. However, based on proposals from the executive group and the division directors, assistant division directors, and section managers and after a series of discussions at meetings of the Board of Directors, the following four items were identified as the main pillars of the policy.

  1. (1) Build a 1-trillion-yen company within ten years.
  2. (2) Secure a stable management base targeting a wide range of international markets.
  3. (3) Through business growth, provide employees with job satisfaction and stability in their lives.
  4. (4) To realize the above goals, strive to improve substantive capacity in all aspects and actively engage in new measures.

These items show our determination to take proactive steps with a fresh mindset, while making stable growth our basic management stance, in order to fulfill our original corporate responsibility.

In addition, we will face increased instances in which we must make decisions on, and respond to changes in, corporate operations under uncertain circumstances, and so all functions within the company must work closely and organically together, and work expeditiously to build the capacity and structure to respond quickly and comprehensively to various unforeseen circumstances.

The principle, including the above points, should be the basis of our corporate management for the next ten years, so we will ensure that its purpose and content are thoroughly understood at all levels within the company, and that it is implemented in every plan over the long term.

1. General
  1. 1.1 Management philosophy
  2. 1.2 Corporate goals
  3. 1.3 Basic target values
2. Human resources
  1. 2.1 Stable improvement of living infrastructure
  2. 2.2 Organization and human resources demonstrating full potential
  3. 2.3 Training of DENSO people for the global era
3. Technology
  1. 3.1 Strengthening of technical development capabilities
  2. 3.2 Creation of world-class products
  3. 3.3 Strengthening and enhancement of cost reduction technologies
4. Quality
  1. 4.1 Improvement of product reliability
  2. 4.2 Implementation of DENSO Quality First
5. Production
  1. 5.1 Realization of DENSO Safety First and creation of a pleasant workplace
  2. 5.2 Creation of a production system that leads in international standards
6. Sales
  1. 6.1 Sales activities utilizing our collective strength
  2. 6.2 Securing an unbeatable position in the domestic market
  3. 6.3 Expansion and enhancement of exports and overseas business
  4. 6.4 Stabilization of production
7. Finance
  1. 7.1 Comprehensive management of funds
  2. 7.2 Strengthening and enhancement of profitability management system
8. Business operations
  1. 8.1 Strengthening of business structure
  2. 8.2 Improvement of product group and plant systems
  3. 8.3 Demonstration of the total strength of group companies

DENSO Principle for the 1990s November 1986

Since 1964, DENSO has established a policy for each operational milestone, using it as a long-term management guideline to navigate a difficult business environment.

Looking back on our progress to date, while we have been supported by the strong growth of the automobile industry, our successes have largely been the result of our tireless efforts to strengthen our corporate structure based on the policies we have set out from time to time. DENSO Principle for the 1980s was a statement of our resolve to weather that increasingly difficult decade, with the basic goal of creating a trillion yen company that would be strong in both quality and quantity. However, despite the low-growth business environment, we were able to achieve our goals three years ahead of schedule, supported by strong overseas sales of car air-conditioning systems, electronics-related products, and other products that were the pillars of our business.

Nevertheless, the business climate has changed considerably, and we cannot hope to make another leap forward by following our existing course. The sudden and significant exchange rate fluctuations triggered by G5 discussions are taking a heavy toll on the Japanese economy and the export industries that have supported it. While no one can predict where this will lead, it is difficult to imagine a return to the state of affairs of even just one year ago.

We decided to prepare this new policy because we believe that in the face of such changes, further growth beyond one trillion yen will only be possible with new policies and measures. We must respond to change with new ideas, and we must tackle the expansion of scale with appropriate structures. If we consider that the major trends in the 21st century will emanate from the current situation, our corporate management needs to make a major change in direction now in order to keep up with these trends.

With this basic understanding, we have fully incorporated the content of recent company-wide TQC activities, reviewed mainly by executive directors and division directors, into this policy, which has been compiled as a management policy for action over the next ten years, with an eye toward the 21st century. The central idea running through the policy is “to develop strategic management on a global scale as a company specializing in automobile products, thereby realizing a Global DENSO.” Specifically, we aim to realize the world’s best products and establish an unshakable position as a world-class company as we develop our business activities on a global scale. At the same time, we hope to make a significant contribution to the development of the Toyota Group by pioneering the frontiers of emerging technologies and new product fields.

This principle was compiled based on proposals from the executive directors and the division directors, assistant division directors, and section managers and after a series of discussions by the executive group and executive committee meetings, and its core policies can be summarized into the following four items.

  1. (1) To achieve consolidated net sales of two trillion yen within ten years by operating as a truly global company conducting business worldwide.
  2. (2) To create a conglomerate that continuously expands and develops its business even in peripheral fields, while keeping the automotive sector as its main business base.
  3. (3) To establish a strong management foundation for the Group as a whole by cultivating affiliates with distinctive characteristics in specialized fields and sharing a broad range of business.
  4. (4) To build a groundbreaking management system centered on information network development as a means of realizing the above.

This principle deliberately follows the traditional format and is organized by function, because we have determined this to be the most appropriate way for all divisions to mobilize the company’s collective strength as they consider the role they should play from their respective standpoints to achieve the goals of each function.

We are determined to secure our position as a truly global company by advancing into new worlds and new fields, and all the above basic policies are indispensable to achieving this. As is clear from the implementation of the current DENSO Principle for the 1980s, however, a number of issues remain to be addressed, including technical development in peripheral fields and strengthening of the group company structure by function. It goes with reiterating that even an excellent management strategy is meaningless unless it is actually put into action. There are many precedents, in both the East and the West, demonstrating that “a somewhat good strategy executed perfectly” can bring out much more of an organization’s potential than “a great strategy executed imperfectly.”

In implementing this new policy, we expect all members to develop a specific action plan wherever possible, based on their reflections on their implementation of the old policy, and to vigorously pursue each task in a spirit of perseverance in the face of challenges.

1. General
  1. 1.1 Management philosophy
  2. 1.2 Basic policy
  3. 1.3 Basic targets
2. Sales
  1. 2.1 Achieving the world No. 1 market share by manufacturing world No. 1 products
  2. 2.2 Strategic development of overseas business
  3. 2.3 Development and sales of direct-delivery products in anticipation of market needs
  4. 2.4 Securing a strong position in commercial markets
  5. 2.5 Active expansion of peripheral businesses
3. Technology
  1. 3.1 Creation of world-class products
  2. 3.2 Strengthening of new product development capabilities
  3. 3.3 Strengthening of basic research
4. Quality
  1. 4.1 Quality assurance based on technical advancement
  2. 4.2 Establishment of Group quality assurance system
5. Production
  1. 5.1 Creation of a production system one step ahead of competitors
  2. 5.2 Strategic production activities
  3. 5.3 Reinforcement of division of labor with Group companies
6. Human resources
  1. 6.1 Organization and human resources that enhance vitality
  2. 6.2 Securing and developing human resources that can promptly meet needs
  3. 6.3 Creating a workplace that respects humanity
7. Finance
  1. 7.1 International financial structure
  2. 7.2 Strengthening of our financial base
  3. 7.3 Establishment of a financial information system
  4. 7.4 Enhancement of our profitability management system
8. Business operations
  1. 8.1 Strengthening of our management system
  2. 8.2 Establishment of a strategic decentralized management system
  3. 8-3. Improvement of collective group strength

DENSO Principle for Structural Change Response January 1994

1. General
  1. 1.1 Basic policy
    1. (1) Securing business growth essential to sustain operations
    2. (2) Strengthening of product competitiveness
    3. (3) Creation of a global business structure that can withstand a strong yen
    4. (4) Transformation to a leaner business structure to survive tough times
  2. 1.2 Basic targets
    1. (1) Securing business growth essential to sustain operations
    2. (2) Strengthening of product competitiveness
    3. (3) Creation of a global business structure that can withstand a strong yen
    4. (4) Transformation to a leaner business structure to survive tough times
  3. 1.3 Operational structure
2. Priority measures
  1. 2.1 Securing business growth essential to sustain operations
    1. (1) Direction of transformation
    2. (2) Company-wide activities
    3. (3) Activities by function
  2. 2.2 Strengthening of product competitiveness
    1. (1) Direction of transformation
    2. (2) Company-wide activities
    3. (3) Activities by function
  3. 2.3 Creation of a global business structure that can withstand a strong yen
    1. (1) Direction of transformation
    2. (2) Company-wide activities
    3. (3) Activities by function
  4. 2.4 Transformation to a leaner business structure to survive tough times
    1. (1) Direction of transformation
    2. (2) Company-wide activities
    3. (3) Activities by function

Commentary in DENSO JIHO

Since 1964, DENSO has established a five- to ten-year policy for each operational milestone, using it as a long-term guideline for our corporate management. Under DENSO Principle for the 1990s, we have been working to become a truly global company that operates worldwide. Due to the sluggish economy and the sharp appreciation of the yen, however, we too are facing unprecedented difficulties, coming in far short of our targets. Moreover, this environmental change is not a one-off event, but a structural one for Japan’s economy as a whole, and the same old ways of thinking and doing things will not get us through this difficult period. In order to leap boldly into the 21st century, we need to review our existing corporate structure from all angles and achieve a transformation into a stronger corporate structure.

DENSO Principle for Structural Change Response were created to indicate the directions we should take in the future, and were limited to the three years up to 1996 so that transformation could be implemented in a short period of time. The basic idea is to ensure favorable business growth and strengthen international product competitiveness by “transforming products,” and to create a lean, global corporate structure that can respond promptly to changes in the business climate, such as yen appreciation, by “transforming the company.”

To make DENSO a stronger, better company, we need all of you to fully understand the contents of the new principle, and then to mobilize your wisdom, strength, and courage to make a full-fledged commitment to transformation.

Our transformation starts with each and every one of you initiating immediate action based on new ways of thinking that go beyond conventional frameworks. Let’s all scrum together and push valiantly toward the try line.

(From DENSO JIHO, Issue 408, January 1997)

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