Many modern companies continue to find themselves meeting the burdensome reporting demands from various interested stakeholders. Frequent reporting of near-term numbers saddles companies with the work of unnecessary disclosures, and tasks investors with sorting through information that often does not meet their needs. By focusing on factors such as competitive advantages, long-term objectives, and capital allocation priorities, companies can build buy-in among long-term investors and give them factors that are material to their decision-making. Laying out these components in the form of a long-term roadmap paints a more complete picture of how a company will create value well into the future.
Nidec Corporation (TSE Ticker: 6594) is a Japanese manufacturer of electric motors found in commercial and manufacturing equipment. Shigenobu Nahamori founded the company in 1973 and remains Chairman, President and CEO of the organization today. With annual revenues in excess of JPY¥1.4 trillion, Nidec is the world’s market leading comprehensive motor manufacturer.
Nidec’s growth strategy is presented prominently on its website, giving high-level commentary around the company’s mid-term strategic targets, which it calls ‘Vision2020’ (for the fiscal year ended March 31, 2021). Included within this section are targets for top line sales, operating profit ratio, and return on equity, while also detailing the path to achieving these targets including outlining organic growth and M&A plans.
"The long-term orientation of Nidec’s strategy is directly related to the company’s mission statement, drafted 45 years ago,” says Masahiro Nagayasu, Nidec’s General Manager of Investor Relations. " We use a 100-year time frame for planning – 100 years is 3 to 4 generations after the fact, we plan on that horizon."
Nidec sets these objectives within the greater goal of establishing regional headquarters and management companies in China, Asia, Americas, and Europe, alongside the primary corporate headquarters in Japan.1 All of this is readily available for review and consideration for Nidec’s shareholder community.
Nidec goes on to specify sales targets by segment (in range format, billions of JPY¥) for its three divisions - Small Precision Motors, Automotive Products, and Appliance, Commercial and Industrial Products. These sales targets are accompanied by management commentary around the end-market opportunities they see driving sales growth in each division. By presenting topline targets accompanied with segment-level detail, the company clearly articulates to its investors their goals for the foreseeable future and the strategic roadmap that will get them there together.
Nidec rounds out its investor roadmap with components of its M&A strategy, outlining attractive acquisition targets and detailing characteristics of particular interest so shareholders and other stakeholders know in which direction the company is heading. In Nidec’s case, this means a preference for acquisitions that diversify business risks, bring access to new prospective technologies, or add new customer groups and/or untapped geographies.
Investors were first informed of the Vision2020 priorities in April 2015. Since then, the company has regularly reviewed progress-to-date, including updates alongside regular earnings reports; these updates always begin with an identical summary of the company’s long-term objectives. This approach continuously socializes Nidec’s organizational goals among its investor base and puts current financial results in context within the broader strategy, highlighting progress.2 Nidec also regularly revisits their core drivers of growth, offering up updated perspective on areas of opportunity and new market developments. Likewise, since acquisitions play a large role in the company’s growth strategy, management regularly reviews past M&A transactions with updates around integration progress and performance versus plan.
“Investors who buy Nidec tend to be very long-term oriented and look at their investment as a long-term commitment. Short-term volatility doesn’t bother these investors and they often use volatility as a buying opportunity,” said Nagayasu.
The company’s efforts are paying off, and the investment community is taking note. Multiple investors participating in our recent Investor Guidance Preferences Study (2018) cited Nidec as a top example of a company in their coverage universe that effectively communicates long-term plans with its shareholders, specifically naming Nidec’s approach to sharing capital allocation priorities and competitive advantages as top reasons for their positive view.
In sharing a multi-year outlook and repeatedly reporting to the investment community on progress, Nidec serves as a strong example of how companies can integrate long-term targets as a part of standard investor communications, helping remind the investment community of their ultimate focus. Building on our research on long-term corporate-investor relations, FCLTGlobal’s recently released whitepaper, Driving the Conversation: Long-term roadmaps for long-term success, explores the relationship between corporations and their shareholders, including an in-depth look at how strategic roadmaps such as Nidec’s can make this dialogue more beneficial for all. Visit our Research section to learn more.