MESSAGE FROM THE CEO & COO
The Benesse Group’s operating environment continued to experience fundamental
changes during fiscal 2002, ended March 31, 2003.
The most significant change was the reforms of Japan’s educational system, launched
in April 2002. Viewed from an historical perspective, these reforms represent a major mile-
stone in the evolution of the education system in Japan.
The reforms introduced a two-day weekend and led to the adoption of a new curricu-
lum giving students more free time by reducing textbook content by around 30%. How-
ever, the reforms also raised concerns among parents about whether public education is
becoming too relaxed by excessively reducing demands on students. This is the climate
that characterizes the private education market, where providers of educational resources
and services are responding to diversifying needs with an array of new products. Cram
schools offering personalized education, practical science activities and field trips have
appeared on the scene. Other cram schools combine classroom instruction with e-learning.
However, all this comes against the backdrop of a falling birthrate, weak consumer spend-
ing and intensified competition in the private education market in Japan. In public educa-
tion, there are plans on the table for different types of schools, such as those combining
junior and senior high schools, and so-called super-science schools. A two semester-
year is also already being introduced. With different regions and indi-
vidual schools exploring new approaches to education, and
extensive reforms underway, we believe a new era is just around
the corner in the Japanese education market.
It is now over three years since the April 2000 introduction
of the Long-term Care Insurance System. This has helped
to stimulate and expand the nursing care market. Grow-
ing awareness of this system is increasing demand
for nursing care services, and private-sector
service providers are responding proactively.
As Japanese society ages and the market for
nursing care services expands, more private
firms will enter the market.
The language-services market, particularly over-
seas, is experiencing a temporary slowdown in the
wake of the 9/11 terrorist attacks in the U.S. and
the war in Iraq. We are, however, confident that this
is a potential growth area in view of the underlying
long-term trend toward more globalized, borderless
economies. Demand, particularly for English lan-
guage education, continues to be strong in
Japan. We expect sustained growth in demand
for all types of language services, including
further expansion in the corporate sector.
Left: Right:
Soichiro Fukutake Masayoshi ‘Mike’ Morimoto
Chairman and CEO President and COO
REVIEW OF FISCAL 2002
In fiscal 2002, consolidated net sales declined 3.4% to ¥258,289 million. Sales were lower in
the Education Group as enrollment declined in mainstay Shinkenzemi home study correspon-
dence courses. Sales also declined in the Language Company due to the sale of a translation
service business at Berlitz International, Inc., a consolidated subsidiary. On a more positive
note, the Senior Company continued to steadily increase sales on the strength of an expand-
ing nursing care home network. Meanwhile, the circulation of magazines published by the
Women & Family Company (W&F Company) were favorable, and newly launched titles quickly
won popularity.
Operating income fell 33.6% to ¥16,317 million, affected by lower sales in the Education
Group and the impact of a high level of investments in the W&F Company. Net income
rose ¥6,646 million from the previous fiscal year to ¥6,973 million. This rise was mainly
because profit was undermined last year by a ¥13,195 million impairment loss on good-
will at Berlitz, and a ¥3,150 million extraordinary gain on exemption from future pension
obligation of the governmental program.
In April 2002, we extensively renewed the course materials for our Shinkenzemi home
study correspondence courses. Unlike previous course materials, which were designed
primarily to supplement public education, the new materials focus on building the student’s
fundamental academic abilities and on the essential elements of each subject. In April
2003, to further leverage our new course materials, we introduced improved versions of our
Junior High School and Senior High School Courses to more closely match the academic
ability of individual students. Our efforts go well beyond the renewal of our existing
products, extending to the development of new products and services in promising growth
areas. This includes Preschool Courses, designed for babies and their parents and English
language study materials for toddlers. These new products and services are being well
received and are recording favorable sales growth.
Although our educational services face a very difficult operating environment, we are
confident that mainstay Shinkenzemi products will find a new level of strength, once the
quality of the new course materials is communicated to the market. In addition, the con-
tinuing introduction of new products and services in response to changing market needs,
and the ability to offer more than just basic correspondence course products, will support
us in restoring business performance and propel us firmly onto a growth track.
MANAGEMENT RESTRUCTURING
We are fundamentally restructuring our management framework at a time when our operat-
ing environment is also experiencing dramatic changes. This restructuring is so far-reach-
ing that we are positioning fiscal 2003 as the year of our third founding. This follows a
second founding in 1995, the year we changed the company name from Fukutake Pub-
lishing Co., Ltd. to Benesse Corporation.
Management restructuring is centered on the introduction of a Corporate Executive
Officer System. By transferring more authority to in-house companies and divisions, this
is promoting rapid and appropriate decision-making, while at the same time enhancing
ANNUAL REPORT 2003 09
transparency and confidence in our decision-making process.
In addition, we have appointed two independent directors to the Board to strengthen
its supervisory functions. We have also appointed Group Executive Officers to strengthen
governance throughout the Group. This new structure separates supervisory and executive
management roles. With the Board and the Corporate Executive Officers fulfilling their
respective roles and responsibilities, we expect to raise the quality of management of the
whole company.
On the occasion of Benesse’s third founding, Masayoshi Morimoto was appointed as
the company’s new President, the first change to this post in 17 years. The main motivation
for selecting Mr. Morimoto, an external appointment, was to make an entirely clean break
with our past as we seek to implement bold and extensive reforms. The Annual General
Shareholders Meeting held on June 25, 2003 approved this appointment and that of
Soichiro Fukutake as Chairman and CEO. Mr. Morimoto was also appointed to the con-
current position of COO. Until now, overall managerial authority has been held entirely
by Mr. Fukutake, but in order to clearly separate supervisory and executive management
roles, senior management responsibilities have been divided and clearly defined. The
CEO now supervises management from the standpoint of shareholder interests, while
the COO, having received operating authority from the CEO, is responsible for corporate
business performance.
The new Corporate Executive Officer System builds on the in-house company system
we have already introduced. We see this new system as being as important to the smooth
functioning of the company as an operating system is to a computer. Only after putting
the Corporate Executive Officer System in place can we embark on our path of ongoing
restructuring. We will now concentrate on making the new management system function
smoothly, while developing new initiatives to assure medium- to long-term growth.
In total, the new initiatives we have talked about represent a new and exciting era for
your company. We very much hope that you will continue to support us as we open this
new chapter in the corporate history of Benesse.
July 2003
Soichiro Fukutake Masayoshi ‘Mike’ Morimoto
Chairman and CEO President and COO
BRIEF PERSONAL HISTORY OF MASAYOSHI MORIMOTO
1962: Joined Sony Corporation
Subsequently worked as President, Sony Manufacturing Company of America; President, Sony Comercio e Industria
Ltda.; and Corporate Senior Executive Vice President, Sony Corporation.
2001: Appointed Representative Director and President, Aiwa Co., Ltd.
December 2002: Appointed advisor to Benesse Corporation
April 2003: Appointed Chief Executive Vice President
10 ANNUAL REPORT 2003