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Fri 17 Nov 2006 08:00 PM

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Big Brother is watching

The printing vendor’s Gulf operation is receiving a lot of attention from its parent company thanks to its strong growth. IT Weekly talked with Seiichi Hirata to see what it is looking for.

Set up almost 100 years ago in 1908, Japanese firm Brother Industries is now celebrating the ten year anniversary of its operations in the region through its subsidiary Brother Gulf.

With weak performance in its domestic market, the company, which manufactures office equipment, including printers and fax machines — as well as sewing machines — is focusing on growing its business in other markets, including in the Middle East.

Currently in the second phase of its ten-year Global Vision company strategy programme, which centres on driving growth, Brother is particularly focusing on the small office and home office (SoHo) market.

During his first visit to Dubai, Brother Industries representative director and president Seiichi Hirata told IT Weekly more about his plans.

Why have you come to the Middle East?
Brother International celebrates the tenth anniversary of its establishment so I came to say thanks to our staff for the success of the past ten years. Also, as this is my first visit to Dubai, it is a good opportunity to meet our staff in Dubai, to say hello and also to ask them to sell more.

Brother has had a lot of success in the region with good sales results in 2005. Do you expect this to continue and how much do you expect the market to grow by?
Oh yes, that should continue and also I believe the market around here has much more potential to grow in our business segment. The market [in the region] should grow two or three times over the coming three to five years. That will be possible. I should explain though that our current turnover in this area is less than 1% of the total Brother group turnover.

At the same time our market in the United States and also Europe will also grow, therefore I expect the absolute value [of the market in this area] will increase but the percentage will remain the same.

Do you have a target for an increase in the percentage of the total turnover that comes from this region?
At the moment I don’t ask [the staff at regional subsidiary Brother Gulf] to show any exact percentage among our group turnover but generally American markets or European markets are mature and we cannot expect such rapid growth for these markets, but here around the Arab area we have a good opportunity to grow more compared with these mature markets.

How do you plan to achieve this growth?
We must introduce new products. That is our responsibility as the manufacturers and at the same time these people here [at the regional subsidiary] will devote themselves to developing our channels and also to penetrating the Brother brand name among industries.

As a producer, we [at Brother Industries] will make a real effort to develop new machines, especially for the small office and home (SoHo) market, which we are specialised in. The Brother people here will devote themselves to cultivating customers and to creating a good channel to contribute to these customers.

How much have you invested in the region so far and are there any plans to change your investment?
So far, we have established a very small sales company and we don’t have any manufacturing plant here, therefore our investment to this region is still not so significant.

I don’t think [this is going to change] because if the economic situation changes drastically then that will change that. So far, we don’t have any plan to establish [actively] here. We have expanded our sales organisation so rapidly that we will keep things as they are, but capable human resources are important and there will be investment in human resources and the infrastructure of the group.

Can you tell me about the Global Vision programme?
We set up our Global Vision 21 in 2002 and that is our dream for the coming ten years. The ten years are divided into three stages. The first phase was our mid-range plan, CSB 2005, which we have now finished.

The main objectives of CSB 2005 were to establish a sound financial situation among the Brother group. To be frank, the Brother group’s financial situation was not so good when we established [phase one] therefore in our first stage we aimed to come up with a sound financial situation among the group and we succeeded.

Now we are entering the second phase, CSB 2008. The second stage is driving Brother’s growth. That is the reason why I’m asking these people to grow [their revenue] more in this region as well and pushing them to grow. I don’t deny that [Brother Gulf] did a very good job over the past ten years, but at the same time, now that the group as a whole is aiming for growth, as a part of that group Brother Gulf should accelerate its growth.

What is your growth target for the Brother group?
We are aiming [to reach] 600 billion yen [US$5.1 billion] in turnover in 2008. That is a numerical target but at the same time, we must arrange a good infrastructure within the group. Human resources and technical basis, these are the important factors for our future growth.

On a global basis, which are Brother’s weak markets?
I’m sorry to say the Japanese market. The reason is in Japan we are very famous as a sewing machine manufacturer and people don’t think Brother is producing good printers, faxes, etc.

China is another weak market for us. China is a very important growing market and therefore for the last two years, we put our resources into the Chinese market and established a 100%-owned sales company in Shanghai. We have four factories in China but from a market point of view, we established there two years ago.

Is brand recognition a problem in the Middle East?
[The team at Brother Gulf] are trying very hard but still we need Brother to be recognised as a sophisticated IT manufacturers. Our team here is going to put resources in the coming three years into brand building.

How do you intend to compete against your rivals?
Our major competitors have a full range of products, but we are going to specialise on the SoHo market. The SoHo market is now growing globally, therefore our customer base is growing and we are going to propose our products to SoHo people. In the past, we have focused on the SoHo market so we know the SoHo people and we know their requirements, therefore [if] we concentrate on the SoHo market then we have a chance to compete with the opposition.

[Soho people] work at home and run very small businesses by themselves. That means [they require] smaller, more compact and [single unit] machines, a multi-function printer, for example. A multi-function centre, for example, is a very suitable machine for these people, with a fax, printer and scanner all in one machine, it is space saving and very efficient.

For multi-function machines, our market share is over 30% globally. Also we are developing colour ink multi-function machines. Our market share [in this segment] is still low but the market is moving to colour ink multi-function machines so we have a good opportunity for this market as well. That is our important product right now for the next three years.

Are there any new markets globally you plan to enter?
We have already entered nearly all the markets in the world but the BRIC countries — Brazil, Russia, India, China — are very important markets for us for the future. We have already set up our own sales company [in these countries] except in India, which is coming soon. But these four big developing countries are very important markets for us for future.

Brother has been established a very long time. How do you plan to adapt in order to continue the success you have enjoyed so far?
A good question. Our company was established almost 100 years ago and in 2008, we will celebrate the 100th anniversary of Brother. The company started producing sewing machines and then by using sewing machine technologies we started to produce typewriters.

Then stationery companies requested us to produce dot matrix machines, colour printers, fax machines. Based on this, we changed our company structure from being a sewing machine manufacturer to IT manufacturer or IT services provider so the motivation of changing the company is simply reflecting the change of the market by using potential Brother technologies.

If the market requires [it] and we have such technologies and sales channels, we can change and we will follow that market.

Seiichi Hirata, representative director and president, Brother Industries

Seiichi Hirata has been the representative director and president of Brother Industries since 2003. Based in Brother’s headquarters in Nagoya, Japan, Hirata oversees the global operations of the company and plays a pivotal role in setting the company’s vision and direction. Hirata joined Brother in 1970 and has risen gradually through the management ranks. In 1994, he was made general manager, special projects for the managing director of finance. Then the following year, he was promoted to managing director of Brother International Europe and spent the next five years on the continent, a move which he said has given him deep insight into operations in Europe.

Hirata has a BA in Economics from Nagoya University in Japan.

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