Corporate Profile

Company Name
SUMITOMO CORPORATION
Establishment Date
December 24, 1919 History
Representative
Kuniharu Nakamura, President and Chief Executive Officer
Paid-in Capital
219.3billion yen
Stock Listings
Tokyo, Nagoya and Fukuoka
Number of Offices
Domestic: 22
Overseas (65 countries): 108 (As of May 1, 2017)Global Network
Head Office
Harumi Island Triton Square Office Tower Y
8-11 Harumi 1-chome, Chuo-ku, Tokyo 104-8610 Japan
Map of Head Office
Phone: +81-3-5166-5000
URL:http://www.sumitomocorp.co.jp/english/
Number of Employees
5,203 (Consolidated Base: 66,532) (As of December 31, 2016)
Business Description
With its global network and based on trust from companies in various industries and from consumers, Sumitomo Corporation
engages in multifaceted business activities by making the most of its Integrated Corporate Strength. These business activities
include sales of a variety of products and services within Japan, import and export, trilateral trade, and domestic and
international business investment.
Eyeing the next 100 years, we will continue to aim for stable and continuous growth going forward with
society.
At the core of the Sumitomo Corporation Group lies Sumitomo's Business Philosophy, which has been passed down and followed
faithfully by the Sumitomo Group for more than 400 years since its founding. Sumitomo Corporation Group's Corporate Mission
Statement (Management Principles and Activity Guidelines) is based on this philosophy and represents the Group's fundamental and
ultimate value standard.
Sumitomo Corporation will celebrate its centennial in 2019. Eyeing the next 100 years, we will continue to aim for stable and
continuous growth going forward with society.

Corporate Mission Statement

Sumitomo Corporation Group's Corporate Mission Statement, consisting of the Management Principles and
Activity Guidelines, is the fundamental and ultimate value standard of the Group.

Sumitomo Corporation Group's Management Principles are a contemporary translation of Sumitomo's Business Philosophy, which
was devised 400 years ago, using simplified language and a clear structure, and rewritten from a more global perspective. The
Activity Guidelines provide guidance on how each company as well as their executives and employees should behave as they conduct
daily business activities to realize the Management Principles.

As declared in the Management Principles, our corporate mission is to support our shareholders, clients, local communities,
employees, and everyone else around the world in their endeavors to achieve economic and spiritual prosperity and realize their
dreams through our sound business activities. We also maintainthroughout our business practicesa unique management style that
respects the personality of each individual and places prime importance on integrity and sound management, which represent the
essence of Sumitomo's Business Philosophy, while cherishing a corporate culture that allows each employee to take the initiative and
demonstrate creativity that is conductive to continuous reform and innovation.

By sharing the values presented in the Management Principles and the Activity Guidelines across the Group to materialize them in
specific business activities, we aim to be a global organization that constantly stays a step ahead in dealing with change, creates new
value, and contributes broadly to society.
 Sumitomo Corporation Group's Corporate Mission Statement
Corporate Vision

We aim to be a global organization that constantly stays a step ahead in dealing with change, creates new value, and contributes
broadly to society.

Management Principles

<Corporate Mission>

To achieve prosperity and realize dreams through sound business activities

<Management Style>

To place prime importance on integrity and sound management with utmost respect for the individual

<Corporate Culture>

To foster a corporate culture full of vitality and conducive to innovation

Activity Guidelines
To act with honesty and sincerity on the basis of Sumitomo's business philosophy, and in keeping with the Management Principles
To comply with laws and regulations while maintaining the highest ethical standards
To set high value on transparency and openness
To attach great importance to protecting the global environment
To contribute to society as a good corporate citizen
To achieve teamwork and integrated corporate strength through active communication
To set clear objectives and achieve them with enthusiasm

Sumitomo's Business Philosophy

The basis of the Sumitomo Corporation Group's Management Principles and Activity Guidelines is
Sumitomo's Business Philosophy, which has been passed on through the generations for 400 years since the
founding of the Sumitomo Group.

Sumitomo's Business Philosophy has been refined through many generations based on the Founder's Precepts "Monjuin Shiigaki,"
which Masatomo Sumitomo (1585-1652), the founder of the Sumitomo family, wrote and handed on to describe how a merchant
should conduct business. The basic points of Sumitomo's Business Philosophy have been passed on in the form of the two articles of
the Business Principles.
Business Principles
Article 1.Sumitomo shall achieve strength and prosperity by placing prime importance on integrity and sound management
in the conduct of its business.
Article 2.Sumitomo shall manage its activities with foresight and flexibility in order to cope effectively with the changing
times. Under no circumstances, however, shall it pursue easy gains or act imprudently.

Article 1 emphasizes the utmost importance of integrity, while Article 2 advocates the importance of having an enterprising spirit to
generate profits quickly and faithfully while adapting to a changing society, and renovating business operations while avoiding the
pursuit of easy gains or acting carelessly.
Sumitomo's Business Philosophy, which has been passed on since the Founder's Precepts was written, still serves as the timeless
principles Sumitomo Group companies follow in their activities.
There are also several other credos that are contained in Sumitomo's Business Philosophy.

One example is: "Benefit for self and others, private and public interests are one and the same." To put it another way, Sumitomo's
business, while benefiting Sumitomo, must also benefit the nation and benefit society. This represents the corporate vision that the
Sumitomo Corporation Group as a whole must pursue at all times.
The second credo is "Grand Design." This derives from copper mine management, Sumitomo's core business in its early days, which
required long-term vision and continuous effort. This attitude of viewing business from a broad and long-term perspective and
working for the benefit of the entire nation and society based on foresight of the future has been inherited from preceding Company
operators.
The third credo is "People are our most important asset." The cultivation and development of human resources has always been our
most important concern regardless of the times.

Sumitomo's Business Philosophy thus stresses the need for an enterprising spirit to stay a step ahead in dealing with change, while
ascribing importance to maintaining integrity and sound management, avoiding easy gains, and working for the public interest,
without being misled by short-term immediate changes. This philosophy has continuously formed the basis of Sumitomo Corporation
Group's business for more than 400 years.
Market growth is used as a measure of a market's attractiveness. Markets experiencing high
growth are ones where the total market is expanding, meaning that its relatively easy for
businesses to grow their profits, even if their market share remains stable. While,
competition in low growth markets is often bitter, and while you might have high market
share now, it may be hard to retain that market share without aggressive discounting. This
makes low growth markets less attractive.
Understanding the Matrix:
Question Marks / Problem Child (Low Market Share / High Market Growth)
Question marks are the products that grow rapidly and as a result consume large amounts
of cash, but because they have low market shares they dont generate much cash. The
result is large net cash consumption. A question mark has the potential to gain market
share and become a star, and eventually a cash cow when the market growth slows. If it
doesnt become a market leader it will become a dog when market growth declines.
Question marks need to be examined carefully to determine if they are worth the
investment required to grow market share.
Dogs (Low Market Share / Low Market Growth)
Dogs have a low market share and a low growth rate and neither generates nor consumes a
large amount of cash. However, dogs are a cash trap because of the money is being tied up
in a business that has little potential. Such businesses are candidate for divestiture.
Stars (High Market Share / High Market Growth)
A Star is being able to generate huge sum of cash because of their strong relative market
share, but simultaneously it also consumes large amounts of cash because of their high
growth rate. So the cash being spent and brought in approximately nets out. If a star can
maintain its large market share it will become a cash cow when the market growth rate
declines.
Cash Cows (High Market Share / Low Market Growth)
As leaders in a mature market, a cash cow demonstrates a return on assets that is greater
than the market growth rate so they generate more cash than they consume. These units
should be milked extracting the profits and investing as modest as possible.
After plotting the company one among the four matrix depending on its respective market
share and growth of its market in which it is operating, determine what you will do with
each product/product line. There are typically four different strategies to apply:
Build Market Share: Make further investments (for example, to maintain Star status, or
to turn a Question Mark into a Star).
Hold: Maintain the status quo (do nothing).
Harvest: Reduce the investment (enjoy positive cash flow and maximize profits from a
Star or a Cash Cow).
Divest: For example, get rid of the Dogs, and use the capital you receive to invest in Stars
and Question Marks.
The SWOT analysis is one of the very useful tool for understanding and decision-making for
all sorts of situations in business and organizations. SWOT is an acronym for Strengths,
Weaknesses, Opportunities, and Threats. A scan of the internal and external environment is
a crucial part of the strategic planning process, which is being covered by SWOT analysis. It
is used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a
project or in a business venture. Strengths, Weaknesses are considered to be internal to the
corporation or organisation where as Opportunities, and Threats are part of the external
environment. The analysis involves identifying the purpose of the business venture or
project and recognizing the internal and external factors that are favorable and unfavorable
to achieve that goal. The method is being developed by Albert Humphrey, who led a
convention at Stanford University in the 1960s and 1970s using data from Fortune 500
companies.
1. Strengths: Uniqueness of the business or department that give it an advantage over others
in the industry.
2. Weaknesses: These are characteristics that place the firm at a disadvantage relative to its
peers.
3. Opportunities: These are the external factors that will boost the sales or profitability of the
organisation.
4. Threats: These external elements in the environment could cause trouble for the business.
The internal factors may be viewed as strengths or weaknesses depending upon their
impact on the organization's objectives. What may represent strengths with respect to one
objective may be weaknesses for another objective. Identification of SWOTs is essential
because subsequent steps in the process of planning for achievement of the selected
objective may be derived from the SWOTs. SWOT analysis is a tool for auditing an
organization and its environment. It is the first stage of planning and helps to focus on key
issues.
Jika dilihat dari perkembangan saat ini Sumitomo Group berada di posisi Star dan Cash cow pada setiap lini bisnisnya saat ini dengan cash
cows juga tidak mempengaruhi going concern perusahaan walaupun cash cow diperusahaan ini cenderung low market growth, dengan high
market share. Perusahaan ini ditunjang dengan Star sehingga perusahaan ini dapat mengambil ahli high market share dan high market
Growth.
Five Forces model is used to analyze competitive environment of the company on the market. These forces are more aggressive in the
mature and aged markets, thus decreasing the overall profitability of any company playing on such a market.

1. Competitive rivalry - the competition aggressiveness in the industry.

2. Threat of substitution - the amount of other alternative products which can be used to replace company offering.
3. Threat of new entry - the entry barriers to start the business in the industry.
4. Buyer power - how the customers are influential and organized to decrease the product prices.
5. Supplier power - how the vendors are unique and powerful to keep high prices for your input materials.

Five Forces Model atau yang lebih dikenal dengan Porter Five Forces adalah suatu metode untuk menganalisis
industri dan pengembangan strategi bisnis atau lingkungan persaingan yang dipublikasikan oleh Michael E Porter,
seorang profesor dari Harvard Business School pada tahun 1979. Menurut Five Forces Model ada lima hal yang
dapat menentukan tingkat persaingan dan daya tarik pasar dalam suatu industri. Daya tarik dalam konteks ini
mengacu pada profitabilitas industri secara keseluruhan. Hasilnya, setelah analisis dilakukan maka akan dapat di nilai
apakah industri tersebut masih menarik atau tidak menarik.

Menurut Five Forces Model, sebuah industri disebut tidak menarik bila kombinasi dari five forces menurunkan
profitabilitas secara keseluruhan. Sebuah industri disebut menarik bila kombinasinya menunjukkan profitabilitas
yang menjanjikan. Tiga dari lima Five Forces merujuk pada persaingan dari sumber eksternal. Sisanya adalah
ancaman internal.
Five Forces Model

A. Threat of New Entrants

Hambatan masuk (entry barriers) merupakan berbagai faktor yang akan menghambat pendatang baru (potential new
entrants) memasuki suatu industri di Five Forces Model. Hambatan masuk yang rendah akan mengakibatkan suatu
industri mengalami penurunan profitabilitas dengan cepat karena semakin meningkatnya persaingan di antara
perusahaan dalam satu industri. Sebaliknya dalam Five Forces Model hambatan masuk industri yang tinggi,
diasumsikan akan dapat mempertahankan daya tarik industri untuk jangka waktu yang panjang. Sebagai contoh,
identitas merek (brand identity) yang kuat seperti yang dimiliki Teh Botol Sosro dan Coca-Cola telah turut
melindungi produk-produk tersebut dari serangan pesaing baru sehingga kedua produk tersebut masih dapat
mempertahankan posisinya di pasar.
Hal-hal yang perlu dipertimbangkan dalam hal ini antara lain :
Skala Ekonomi (Economies of Scale)(apakah produk bisa dibuat dalam jumlah kecil atau harus dalam jumlah
yang besar, misal: dalam pabrik kertas, nilai efisiensi yang menguntungkan baru bisa dicapai dalam skala yang besar
sehingga sulit bagi pesaing baru jika ingin masuk dengan skala industri yang kecil).
Kurva Pembelajaran (Learning or Experience Effect). Dalam proses produksi, semakin lama akan semakin
diperoleh tingkat efisiensi yang semakin tinggi. Sehingga dengan demikian akan didapat biaya yang semakin murah
dalam memproduksi. Sehingga perlu dipertimbangkan apakah hal ini dapat dicapai dalam waktu yang cepat atau
lama karena akan mempengaruhi biaya produksi secara keseluruhan.
Cost Disadvantages Independent of Scale. Adalah keuntungan yang tidak terkait dengan skala produksi.
Misalnya: hak patent, kemudahan akses ke bahan baku, hak pengelolaan / perijinan, kemudahan dari pemerintah, dll
Diferensiasi Produk. Adalah keunikan yang dimiliki baik dalam bentuk fisik produk atau positioning produk yang
membedakannya dari produk pesaing yang berada dalam industri yang sama. Perlu dipertimbangkan pula oleh new
entrant untuk mengantisipasi loyalitas merek dari produk yang telah ada.
Kebutuhan Modal (Capital Requirement). Adalah biaya yang dibutuhkan untuk memasuki bisnis ini. Untuk
industri dengan skala yang massif (contoh: semen) maka dibutuhkan modal yang luar biasa besar.
Switching Cost. Adalah biaya yang dibutuhkan untuk melakukan perpindahan dari satu pos ke pos lain. Biaya ini
termasuk pula biaya psikologis akibat perpindahan yang terjadi. Misalnya: ketika melakukan pemindahan dari
suplier A ke suplier B.
Akses ke Jalur Distribusi (Access to Distribution Channels). Dalam industri tertentu akses ke jalur distribusi
memegang peranan yang krusial. Dalam bisnis distribusi minuman ringan menurut Five Forces Model misalnya, bagi
pemain baru akan sulit untuk meminta space lebih ke armada distribusi (pihak III) bila pemain yang sudah mapan
menggunakan distributor yang sama. Sehingga dengan demikian pengaruhnya di dalan five forces model akan sangat
besar.
Antisipasi Pertumbuhan (Anticipated Growth). Perlu diantisipasi pula dalam kerangkan five forces model ini
kemungkinan pertumbuhan industri yang dapat terjadi dengan melihat data-data pendukung yang ada. Karena, bagi
pemain yang baru memasuki bisnis tersebut dapat besar sekali pengaruhnya atau malah sangat kecil. Pengaruhnya
akan besar bisa pertumbuhan industri kecil dan pemainnya banyak sehingga kue yang sedikit akan dibagi menjadi
bagian yang lebih kecil. Semantara jika baru ada sedikit pemain dan pasarnya cukup besar maka pengaruhnya akan
kecil terhadap pendatang baru.
B. Bargaining Power of Suppliers
Dalam Five Forces Model Pemasok memiliki posisi tawar-menawar (bargaining position) yang berbeda-beda
terhadap perusahaan di dalam Five Forces Model. Kemampuan pemasok untuk menentukan syarat-syarat
perdagangan yang menguntungkan kedua belah pihak sangat dipengaruhi oleh elemen-elemen struktur industri
sebagai berikut: differentiation of inputs, switching costs of supplier and firms in the industry, presence of substitute
inputs, supplier concentration, importance of volume to supplier, cost relative to total purchases in the industry,
impact of inputs on cost or differentiation, threat of forward integration. Apabila perusahaan dapat memperoleh
pasokan bahan baku dari beberapa pemasok maka kedudukan perusahaan relatif lebih kuat dibandingkan pemasok
sehingga pemasok tidak akan memberikan ancaman berarti bagi perusahaan di Five Forces Model. Tetapi apabila
perusahaan bergantung hanya kepada satu pemasok maka kedudukan pemasok menjadi kuat dan dapat menimbulkan
ancaman bagi perusahaan.
C. Bargaining Power of Buyers/Consumers
Dalam Five Forces Model pembeli memiliki posisi penting terhadap keberlangsungan hidup perusahaan karena sales
revenue yang diperoleh perusahaan berasal dari penjualan produk perusahaan kepada buyer. Posisi tawar menawar
pembeli terhadap perusahaan yang menjual barang dan jasa ditentukan oleh dua hal utama yakni bargaining
leverage dan price sensitivity. Bargaining Leverage pembeli selanjutnya ditentukan oleh beberapa faktor sebagai
berikut: buyer concentration vs firm concentration, buyer volume, buyer integrate, substitute products.
Para pengusaha hasil bumi di daerah Lampung akan memiliki bargaining power yang rendah seandainya mereka
menjual hasil buminya seperti kopi, cengkeh, lada hitam maupun damar hanya kepada satu pembeli besar di Jakarta,
karena dengan struktur perdagangan seperti ini para pengusaha hasil bumi tidak memiliki alternatif harga jual selain
yang ditetapkan oleh pembeli besar dari Jakarta tersebut.
Faktor lain yang menjadi determinan kekuatan pembeli adalah sensitivas harga yang ditentukan oleh beberapa faktor
seperti: price/total purchases, product differences, brand identity, buyer profits & decision makers incentives.
D. Threat of Subtitute Products
Dalam Five Forces Model Persaingan terhadap produk dihasilkan perusahaan tidak hanya berasal dari perusahaan
yang memproduksi produk yang sama sehingga menimbulkan persaingan langsung(direct competition), melainkan
bisa juga berasal dari perusahaan yang memproduksi produk yang memiliki kesamaan fungsi dengan produk yang
dihasilkan perusahaan. Produk seperti itu dinamakan produk subsitusi (substitute products).

Contoh: Perusahaan bis yang melayani rute AKAP (Antar Kota Antar Propinsi) tidak hanya menghadapi persaingan
dari perusahaan bis lainnya, namun juga menghadapi persaingan dari moda transportasi lainnya seperti kereta api,
perusahaan penerbangan, maupun perusahaan travel. Saat ini perusahaan otobis seperti Prima Jasa, Kramat Jati, dan
sebagainya yang melayani rute Bandung-Jakarta saingannya tidak hanya maskapai penerbangan yang melayani rute
penerbangan Bandung-Jakarta,tapi jua memperoleh saingan yang sangat berat dari berbagai perusahaan travel seperti
Cipaganti, Baraya, dan lain-lain yang melayani rute yang sama.
E. Competitive Rivalry Within the Industry
Di dalam industri Five Forces Model sendiri, terjadi persaingan antara satu perusahaan dengan perusahaan lainnya.
Menurut Porter pencetus Five Forces Model, intensitas persaingan (intensity of rivalry) antar perusahaan dalam satu
industri sangat dipengaruhi oleh faktor-faktor sebagai berikut: industry growth, fixed costs/value added, intermitten
overcapacity, product differiencies, brand identity, switching costs, concentration & balance, informational
complexity, diversity of competitors, corporate stakes, dan exit barriers. Perusahaan yang melakukan inovasi dapat
menikmati profit yang besar pada saat pesaing lain belum memasuki pasar yang sama. Tetapi sebagaimana
dinyatakan oleh Hermawan Kartajaya,, persaingan saat ini sudah memasuki tahap wild. Hal ini ditandai dengan
semakin cepatnya pesaing memperoleh akses teknologi sehingga dalam waktu yang relatif singkat mereka akan dapat
menghasilkan produk yang serupa dengan produk yang dihasilkan oleh perusahaan innovator.
Pure Monopoly
Avoided Competition
 Hypercompetition
Perfect Competition

Product Sumitomo

Supplying cement globally and contributing to economic growth

in and out of Japan with our Integrated Corporate Strength

One of the leading Japanese trading companies in cement market

Cement and concrete are basic materials that are indispensable in the construction of office, residential and other types of buildings as
well as for civil and infrastructure engineering works, including bridges and roads. As one of the leading trading companies in terms
of cement sales, Sumitomo Corporation supplies these essential construction materials globally, thereby contributing to economic
development not only in Japan but in countries around the world.

Sumitomo Corporation's cement business dates back to shortly after World War II, although the business did not grow substantially
until 1963 when Sumitomo Cement (currently Sumitomo Osaka Cement) was established. That was the year before Japan first hosted
the Olympic Games and the country was in the midst of an unprecedented construction boom amid rapid post-war economic growth.
It was in this era that Sumitomo Corporation's cement business truly began to prosper. Since then, it has continued to thrive along
with the development of expressways, bridges and other forms of social infrastructure nationwide.

In 1988, Sumitomo Corporation established S.C. Cement, a wholly-owned subsidiary specializing in sales of cement and related
products, to expand the company's business in this field. Fifteen years later, the subsidiary started manufacturing ready-mixed
concrete in the Kyushu region, marking a significant milestone in the history of S.C. Cement as an arm of a Integrated trading
company, given that the company grew to cover a wide range of business processes from upstream to downstream, specifically by
adding manufacturing and supply of ready-mixed concrete to its original cement sales business. Since then S.C. Cement has expanded
its ready-mixed concrete production capacity, currently operating seven plants in Kyushu and holding the top position in the local
market in Fukuoka.

One of S.C. Cement's seven ready-mixed concrete plants in Kyushu. The plants trade under the name "Horiden"

Core supplier in the construction of international airport

Sumitomo Corporation is a dominant supplier of cement and related products in Tokyo and other large city areas, and in particular
remains the market leader in terms of sales of ready-mixed concrete in Tokyo and the surrounding urban areas. Behind this unrivaled
track record established by Sumitomo Corporation's cement business are strong ties with the company's real estate business. The
extensive supplier network developed by the real estate segment throughout the industry serves effectively to allow the company's
cement segment to capture information on new construction projects ahead of competitors. This internal cooperation has helped
position Sumitomo Corporation favorably to receive orders for a wide range of construction projects, from those involving real-estate
properties traded by the company to undertakings for diverse types of urban structures, including office buildings and expressways.

Concrete begins to harden shortly after it is mixed and, in general, site work using ready-mixed concrete must be finished within 90
minutes of production. Large scale construction works consume huge amounts of ready-mixed concrete, particularly during peak
times, and it is essential to deliver the required amounts of this "perishable product" according to each user's mix design on time. For
some mega projects, temporary plants are often built near work sites to produce ready-mixed concrete, allowing for more efficient
supply. Thanks to many years working to meet a broad spectrum of these and other demands, Sumitomo Corporation has gained the
trust of users in a wide range of business areas.

Computer control is vitally important to maximize efficiencies in operating ready-mixed concrete plants

Sumitomo Corporation has been the exclusive supplier of cement for a number of mega projects in Japan, including the Tokyo
Metropolitan Government Building, Harumi Triton Square and the new terminal of Tokyo (Haneda) International Airport. One of the
most recent undertakings involved Central Japan International Airport, nicknamed Centrair, built off the coast of Aichi Prefecture.
We set up a ready-mixed concrete plant near the work site jointly with other companies in order to supply the tremendous amount of
construction material demanded in the most efficient way. A member of the project team said, "The concrete used in the foundation of
the airport structures was nearly 100% supplied by Sumitomo Corporation."

Central Japan International Airport, opened in 2005. For the construction of this mega structure on an artificial island more than 70,000 of ready-mixed
concrete was used. This was supplied by Sumitomo Corporation

Global player in the cement business

Sumitomo Corporation has also been proactively expanding its cement business overseas. Japan-made cement and related products
are globally reputed for their high quality, and the company has steadily increased its exports. Our overseas customer list in this field
has extended to include countries half-way around the world, specifically countries in West Africa and South America, in addition to
Singapore, Hong Kong and other Southeast Asian countries that are geographically closer.

Recently, we have received in succession cement orders for large-scale projects, including Changi Airport 3rd runway project and
Hong Kong International Airport 3rd runway project. By leveraging our Integrated Corporate Strength, we will continue to contribute
to infrastructure development in Asia, which will continue to achieve remarkable growth.

Tanker exporting Japan-made cement and related products, which are highly reputed for their good quality

Supplier for infrastructure improvement projects that contributes to enhanced safety in society
Sumitomo Corporation's cement business is increasingly demonstrating its strength in Southeast Asia, where we hold extensive
trading rights and relationships fostered over years of trading activities in this region. Major economies in this region are moving into
a new acceleration phase, aiming to achieve the economic level of developed countries, and increasing investment in infrastructure
development. This is expected to dramatically raise demand for cement, which translates into the creation of new opportunities for us
to demonstrate our capabilities in this field. At the same time, we will also gear up expansion efforts in emerging markets in South
America and Africa, where infrastructure-related demand is strong.

Cement technology has developed at an incredible pace in recent years. Innovative methods and materials used for cement mix have
reinvented the centuries-old basic construction material into a new material with super strong properties that can support hundreds-
meter high contemporary tower structures. This enhanced strength is expected to play an increasingly important role in modern
society, whether that be in Japan or other countries, where concrete structures are spreading, in protecting the safety of people,
particularly against earthquakes, tsunami and other such disasters. Bearing the significant function expected of this infrastructure
material in mind, Sumitomo Corporation will continue its commitment to developing the cement and concrete business, always
looking to contribute to the enhanced safety of society.

Have you ever heard of "SUMITOMO" brand tires?

There are only a few products in which general consumers have direct access to, bearing "SUMITOMO" on its name. Among these
rare products, the "SUMITOMO" tire brand has gained wide recognition for its excellent quality, acquiring many loyal users.

Indeed, Sumitomo Corporation's tire business has a long history. Our business started in the 1960s when we began the export of
"SUMITOMO" tires, a brand developed specially for oversea markets by our long-standing partner Sumitomo Rubber Industries. Our
sales began first to the U.S. and Saudi Arabia then, gradually expanded to include Australia, Middle East, and Asian markets as well.

Sumitomo Corporation exports "SUMITOMO" brand tires produced by Sumitomo Rubber Industries and other brand tires to around 20 countries around the
world.

Shifting from trade to retail

In the 2000s, we became involved in the distribution of tires in local markets as part of our new business strategy. We started a
wholesaling business in the United Arab Emirates (UAE), a market in which we had been conducting trading business for over many
years, and we have been meticulously pursuing sales of "SUMITOMO"-brand tires. We are also participating in wholesale
businesses in Thailand, Russia and Australia in cooperation with Sumitomo Rubber Industries.

In the meantime, in the U.S., we had established a company called Treadways in 1985 to conduct wholesale business of the
"SUMITOMO" brand and other private label tires. In 2005, in order to further enforce our business base, we acquired TBC
Corporation, the largest independent tire retail chain in the U.S. to make inroads into the retail sector. As a retailer and wholesaler of
replacement tires, TBC currently operates 56 warehouses and about 1,200 retail stores throughout the U.S., boasting an overwhelming
share of 10% in the world's largest tire market. Our acquisition of this company caused great astonishment in the U.S.
High-quality "Made in Japan" tires are particularly appreciated in the Middle East, where large desert areas exist and road surface temperatures tend to be
very high. This photograph shows our distributor in Dubai, UAE.

Forming the largest network for tire sales and repair/maintenance service in the U.S.

TBC's chain stores not only sell tires but also offer auto repair and maintenance services. While the tire market in the U.S. slowed
down due to the financial crisis following the "Lehman Shock" in 2008, the tendency for car holders to use their cars for longer
rather than to purchase a new carincreased, leading to the rise of the average "vehicle age". With this expanded the demand for
repair and maintenance services of passenger cars, resulting in an increase of sales in this area for TBC as well.

Considering the potential for growth of this auto-aftermarket business, in April 2012, we decided to acquire Midas, the largest auto
repair and maintenance service provider in the U.S.. Midas is a widely known company in the U.S. Its slogan, "Trust the Midas
touch," deriving from the Greek myth about King Midas, who turned everything he touched into gold, is familiar among most. Midas
possesses 1,500 stores in North America, bringing the total number of stores in combination with those of TBC to 2,700, making it
the largest network in the industry. In addition, because TBC's stores were concentrated in the southeastern and western parts of the
U.S., while Midas stores were located mainly in the northeastern parts of the U.S. and Canada, it made it possible for them to
complement with each other rather than to compete. By making the most out of TBC's knowhow on tire sales, and maximizing
synergy between the two companies for example, through joint purchases of supplies and parts, we continue to pursue further
expansion of our revenue base.

Midas holds strong brand awareness particularly in the U.S., with a consumer recognition rate exceeding 90%.

Extending successful models across the world

Sumitomo Corporation is thus working hard to adapt itself to the rapidly changing environment, seeking business opportunities in
various regions of the world. We work to further strengthen the integrated business model of retail and repair/maintenance services in
the U.S,, and apply them to other parts of the world. Emerging markets where the car population is increasing dramatically, such as
China and South America are amongst the attractive markets we are eyeing. By fully taking advantage of our resources as an
integrated trading company, such as our expansive human network and knowledge, we will continue to promote business in various
locations in a flexible manner to meet local business practices and needs, which vary widely among countries and regions.

Promoting an integrated tire business of sales, repair, and maintenance across the globe.

Introducing our businesses in Environment


Visiting Koshikishima, which has embarked on the Islands of the Future project

Earth and Soil-Friendly Organic Sugar

Supporting Electronic Device Manufacturing Industry: High Value Added EMS Business

Storing up as a business: striving to commercialize reusing EV batteries as energy storage on a remote island off Kyushu

Bird Friendly Coffee

 Unalterable beliefs in changing times
Renewable energy: Contributing to society by becoming a new business trailblazer

Taking on endless challenges

Geothermal Power generation: Building a new electric power infrastructure to contribute to a nation's development

Taking on endless challenges

Solar Wind Power: Using connecting skills to create new value

Taking on endless challenges

Agricultural Chemicals: The significance of bringing Japanese crop protection products to the rest of the world

The positive effects of the first large scale wind farm in rural South Africa

Working around the world to close the loop in the water cycle and enable the efficient use of precious water resources

Building at its BestSumitomo Corporation's Environment-Friendly Building Business

Aiming to initiate second-life business for Electric car batteries

Establishing municipal recycling systems for beverage containers

Aiming for Full-scale Introduction and Use of Photovoltaic Power Generation


Realizing a Low-Carbon Society through Biomass Power Generation
Power generation business in Japan by Summit Energy Corp.

Sumitomo Corporation Conducts Geothermal Power Business from the Long-Term Perspective

Introducing thermal power generators capable of reducing CO2 emissions in Egypt

Introducing our businesses in Food Products

Earth and Soil-Friendly Organic Sugar

Integrated Corporate Strength to Support Agriculture in Western Australia


Supplying Safe, Secure and Delicious FoodYongenton Silky Pork to Japanese Consumers

Bird Friendly Coffee

Vietnam, the field where Sumitomo Corporation exerts its Integrated Corporate Strength

People are the bridge that links the future

Vol. 4: Retail Business

People are the bridge that links the future

Vol. 1 Food and Agricultural Business Edition

 Unalterable beliefs in changing times
Food Business: Venture investment for secure supply of essentials for human life

High-quality Bananas are maintained through "Cold Chain System"

Visit to Chiba Kyodo Silo and Chiba Flour Milling, Two Companies that Satisfy Food Demands in the Tokyo Metropolitan Area
Sistem Pengendalian
Simons (1995) mengklasifikasikan sistem pengendalian manajemen untuk implementasi strategi menjadi
empat diantaranya (1) interactive control sistem adalah pengendalian manajemen yang berfokus pada ketidakpastian
stratejik dengan menganalisis peluang dan tantangan, (2) diagnostic control sistem adalah pengendalian manajemen
yang menjamin pencapaian sasaran/kinerja, (3) boundary control sistems yaitu pengendalian yang fokus untuk
mengidentifikasi tindakan dan kesalahan yang harus dihindari, dan (4) beliefs control sistem yaitu pengendalian yang
berorientasi mencari core values organisasi.

Menurut Jaworski (1988), sistem pengendalian manajemen dibagi menjadi dua yaitu (1) pendekatan formal
yaitu mekanisme pengendalian yang tertulis dan diciptakan manajemen untuk mempengaruhi karyawan agar
berperilaku mendukung tujuan organisasi. Pengendalian output merupakan jenis pengendalian formal; (2)
pendekatan informal merupakan pengendalian berbasis proses atau perilaku. Pengendalian input merupakan
pengendalian informal. Anthony dan Govindarajan (1998: 6) melihat sistem pengendalian manajemen merupakan
struktur dan proses dimana manajer mempengaruhi anggota organisasi yang lain untuk mengimplementasikan
strategi. Proses pengendalian manajemen meliputi tahapan penentuan perencanaan stratejik, program dan
penganggaran.

Fisher (1998: 53) menambahkan bahwa pengendalian manajemen meliputi: (1) pengendalian operasional yang
baku (standard operating procedure) yang imanifestasikan dalam bentuk struktur organisasi, budaya organisasi, atau
kebijakan-kebijakan organisasi misalnya sistem akuntansi manajemen; (2) pengendalian sibernetik yang meliputi
sistem penganggaran dan kompensasi insentif.

Konsep Sistem Pengendalian

Ada beberapa konsep mengenai sistem pengendalian yang dikembangkan beberapa akademisi seperti Robert
 N. Anthony, Vijay Govindarajan, Joseph A. Maciariello, Calvin J. Kirby, Robert Simons, dan Kenneth A. Merchant.
Penulisan karya akhir ini menggunakan konsep Sistem Pengendalian yang dikembangkan oleh Merchant dan
Simons.

1. Sistem Pengendalian Manajemen Merchant

Kerangka Sistem Pengendalian Manajemen lain dikembangkan berdasarkan pendekatan perilaku. Ouchi
mengembangkan kerangka mekanisme pengendalian dikembangkan oleh Merchant melalui pengendalian objek
(object control).

2. Sistem Pengendalian Simons

Simons mengembangkan kerangka Sistem Pengendalian dengan menekankan suatu sistem yang formal, sistem
informasi yang dapat memelihara atau mengubah pola kegiatan, yang tidak hanya berorientasi kepada pencapaian
sasaran namun juga inovasi. Kerangka tersebut disebut dengan Levers of Control (Simons, 1995).

Simon (2000) menjelaskan bahwa terdapat empat sistem kontrol Levers of Control (LOC) yaitu
belief system, boundary system, diagnostic
style="mso-spacerun: yes;"> control system, dan interactive control system yang bekerja sama untuk manfaat perusahaan.

a) Belief System
Belief system merupakan sistem formal yang digunakan oleh manajer untuk mendefinisikan,
mengkomunikasikan nilai-nilai inti perusahaan dalam rangka untuk menginspirasi dan memotivasi karyawan
untuk mencari, mengeksplorasi, membuat, serta mengeluarkan upaya dalam tindakan yang tepat (Simon,
1994). Belief system menjelaskan tentang nilai-nilai inti organisasi, definisi organisasi, tujuan dan arah organisasi
(Simon, 1995, 34). Hal tersebut berupa visi dan misi organisasi (Simon,
1995). Dalam Simon (1994) contoh dari belief system yaitu: Pernyataan tentang Visi organisasi, Pernyataan
tentang Misi organisasi, Pernyataan tentang Tujuan organisasi

b) Boundary System
Boundary system merupakan sistem formal yang digunakan oleh top manajer untuk mengkomunikasikan
batasan dan aturan organisasi untuk dihormati (Simon, 1994). Boundary system memberitahukan karyawan apa
yang mereka tidak dapat lakukan (Simons, 2000). Tujuannya adalah
untuk memungkinkan karyawan memiliki kebebasan untuk berinovasi, menggali, menciptakan, dan
mencapai standar tertentu. Salah satu contoh dari boundary systems dalam (Simon, 1994) yaitu
merupakan sistem yang berisi tentang aturan, batasan, dan larangan dalam : Kode etik organisasi, Sistem
perencanaan strategis, Sistem penganggaran

c) Diagnostic Control System

Dalam Simon (1994) diagnostic control system merupakan sistem umpan balik formal yang digunakan
untuk memantau manfaat organisasi serta mengkoreksi kesalahan apakah sesuai dengan standar kinerja
organisasi. Tujuan dari diagnostic control system adalah memotivasi karyawan untuk
melakukan, menyelaraskan perilaku karyawan dengan tujuan organisasi, dan untuk menyediakan
mekanisme pemantauan, selain itu dengan dengan adanya diagnostic control system, karyawan
memiliki kebebasan dalam berinovasi, membuat serta mencapai target tertentu dalam sebuah
 organisasi (Widener, 2007). Dalam Simon (1994) contoh dari diagnostic control system yaitu :
Rencana laba dan penganggaran, Sistem tujuan organisasi, Sistem pemantauan kegiatan, Sistem pemantauan
pendapatan

d) Interactive Control System

Interactive control system merupakan sistem pengendalian dimana manajer secara teratur dan
aktif melibatkan diri ke dalam pengambilan keputusan dan aktifitas karyawan (Simon, 1994).
Interactive control system merupakan proses komunikasi dua arah yaitu antara manajer dengan karyawan
bawahan pada berbagai tingkat organisasi (Abernethy & Lillis, 1995; Spekl, 2001). Dalam Simon (1994) manajer
dapat menggunakan interactive control system dari : System mengenai agenda penting organisasi dan
mendiskusikannya dengan bawahan, Fokusnya perhatian rutin manajemen di
seluruh operasi organisasi, Partisipasi dalam diskusi yang berhadapan langsung dengan bawahan, Melakukan
debat secara berkelanjutan mengenai data, asumsi dan tindakan perencanaan.
6 Sumitomo Corporation Annual Report 201

CORPORATE MISSION STATEMENT

Corporate Vision

We aim to be a global organization that constantly stays a step ahead in dealing with change,
creates new value, and contributes broadly to society.

Management Principles

[Corporate Mission]
To achieve prosperity and realize dreams through sound business activities
[Management Style]
To place prime importance on integrity and sound management with utmost respect for
the individual
[Corporate Culture]
To foster a corporate culture full of vitality and conducive to innovation

Activity Guidelines

To act with honesty and sincerity on the basis of Sumitomos business philosophy and in
keeping with the Management Principles
To comply with laws and regulations while maintaining the highest ethical
standards
To set high value on transparency and openness
To attach great importance to protecting the global environment To
contribute to society as a good corporate citizen
To achieve teamwork and integrated corporate strength through active
communication
To set clear objectives and achieve them with enthusiasm
8 Sumitomo Corporation Annual Report 2016
OUR HISTORY
Supported by Sumitomos business philosophy,
the Sumitomo Corporation Group has continued to grow
while tackling various operating environment changes.
1919
Foundation
Sumitomo Corporation was originally founded as
the Osaka North Harbour Company Limited in
December 1919. The company engaged in real
estate management, conducting land rec- lamation
in the Hokko
(North Port of Osaka) and
the development of the
surrounding areas, along
with other activities.
Sumitomos Business
Philosophy
Honoring the principles of integrity and
sound management, we pursue sincere and
sound business activities, acting with an
enterprising spirit to contribute to soci- ety.
Forming the base for Sumitomo
Corporations activities, this sentiment is
encapsulated in Sumitomos business
philosophy, which has been passed down for
more than 400 years since the incep- tion of
Sumitomo in the 17th century.
Monjuin Shiigaki, the origin of Sumitomos
business philosophy (Source: Sumitomo
Historical Archives)
Saihei Hirose, Sumitomos first
Director-General (Source: Sumitomo
Historical Archives)
1945
Advance into trading business
In 1945, the company was renamed Nippon
Engineering Co., Ltd., and advanced into the
trading business, handling products from
Japans major manufacturers as well as
products manufactured by its own group
companies. From then on, the company
focused on trading, aiming to expand both the
range of products it traded and the industrial
segments in which the company operated.
1950s 1960s
1950
Expansion of its presence abroad
The company began steadily expanding its
presence overseas, posting an employee to
Bombay (now Mumbai), India, for the first time
in 1950, and subsequently establishing a U.S.
subsidiary in New York in 1952.
1952
Name changed to Sumitomo
Shoji Kaisha, Ltd.
The General Headquarters of the Allied Powers
in Japan issued an order calling for the
dissolution of zaibatsu financial conglom- erates
in 1945. As a result, the usage restriction of the
Sumitomo trade name and trademark were
abolished in 1952 in conjunc- tion with the
signing of the Treaty of San Francisco.
Accordingly, the companys name was changed
to Sumitomo Shoji Kaisha, Ltd., at this time.
1945
End of World War II
General Headquarters of the Allied Powers
in Japan issues an order calling for the
dissolution of zaibatsu 1971
1950
Special demand for supplying the United
States in the wake of the Korean War
Japanese economy makes strides toward
recovery
1955
Japanese post-war economic miracle
Exports stimulated and trade deregulated
1962
Adoption of the product
division structure
In conjunction with the expansion of its busi- ness
area and transaction volumes, for enabling all of the
Companys business to be advanced through
unified policies, the product division structure was
adopted in 1962. This move involved consolidating
the Osaka and Tokyo sales offices and creating nine
product divi- sions: Iron & Steel, Nonferrous
Metals, Electric, Machinery, Agriculture & Fishery,
Chemicals, Textiles, General Products & Fuel, and
Real Estate. These product divisions were assigned
the responsibility for transactions and profitabil- ity
as well as the human resources-related authority for
their respective business.
1970s
1977
Big Three & The Best
In 1977, the Company launched its slogan of
Big Three & The Best, and passionately
pursued the goal which signified it as being one
of the top three companies in terms of total
trading transactions and the overall best
company in the industry from an all-encom-
passing standpoint by improving profitability
and efficiency.
1979
Introduction of
sales division system
In 1979, a sales division system was intro-
duced in connection with the expansion of the
Companys business scope. By promot- ing
empowerment to the four newly established
sales divisionsIron & Steel; Machinery &
Electric; Nonferrous Metals, Chemical & Fuel;
and Consumer Products flexibility in sales
division was greatly improved.
1964 1979
Summer Olympics in Tokyo Second oil crisis
1970 1980
Expo 70 in Osaka IranIraq War
1985
Nixon Shock Plaza Accord
1973 Rapid yen appreciation Monetary
First oil crisis easing policies instituted by the
Transition to floating Bank of Japan
exchange rate system
 1988
Vision of Integrated
Business Enterprise
In 1988, the Company set out its vision of
becoming an Integrated Business Enterprise
and promoted (1) acceleration of business
activities, (2) expansion into downstream fields,
and (3) reinforcement of Integrated Corporate
Strength, based on existing trad- ing activities.
Through these promotions, the Company aimed
to form two major revenue sources: trading
activities and business activities.
1980s 1990s
1996
The copper incident
In 1996, it came to light that the general man-
ager of a sales department was conducting
unlawful copper trading unbeknownst to the
Company. This incident led to the recording of
losses to the extent of 285.0 billion, and
roughly a decade was required to resolve
the issue. Learning from this experience, the
Company implemented a strict internal
control system to prevent the recurrence of
similar acts.
1998
Establishment of the Corporate
Mission Statement and introduction of
the Risk-adjusted Return Ratio
In 1998, the Sumitomo Corporation
Management Charter was revised, and the new
Corporate Mission Statement was formed. The
Risk-adjusted Return Ratio was introduced as a
new management indicator to serve as a
common benchmark for judging the profitability
of projects based on the amount of returns
generated compared with inherent risks.
1986 1991
Sharp rise in stock and real estate prices Collapse of asset price bubble in Japan,
lead to creation of Japanese asset price start of recession
bubble 1996
1989 Launch of large-scale financial system
Consumption tax introduced in Japan reform (Japanese Big Bang)
Nikkei 225 reaches record high of 1997
38,915.87 in December Asian financial crisis
End of Cold War and collapse of the 1999
Berlin Wall Creation of Economic and Monetary
Union
Dot-com bubble
2000
Implementation of medium-term
management plans
Under the Reform Package, a medium-term
management plan was adopted in 1999, and the
Company pushed forward with reforms aimed at
achieving (1) profit growth by expan- sion of
core businesses, (2) strengthening the corporate
constitution through risk asset man- agement, (3)
realization of effective, efficient management,
and (4) reinforcement of cost competitiveness.
After the conclusion of this plan, the Company
worked to strengthen its earnings base by
formulating and implement- ing a series of two-
year medium-term management plans, including
Step Up Plan, AA Plan, AG Plan, and GG Plan.
2000s
2001
Consolidated Head Office in
Tokyo
In 2001, the names of the Osaka Head Office
and Tokyo Head Office were abol- ished, and
the Head Office functions were consolidated
within a new location at Harumi Triton Square, in
Chuo-ku, Tokyo. At the same time, the Company
introduced the business unit system, giving rise
to the Kansai Regional Business Unit, Chubu
Regional Business Unit, and Kyushu Okinawa
Regional Business Unit. Harumi Triton Square
was created through a development project that
was spearheaded by the Company. With a scale
of 300.0 billion, this project garnered a con-
siderable amount of attention as the largest
commercial facility
development project in
Japan at that time.
2001
Birth of Japans big three
megabanks
September 11 attacks
2003
Start of Iraq War
Severe acute respiratory syndrome
(SARS) outbreak, mad cow disease
pandemic in the United States
2008
Lehman Brothers bankruptcy
2015
Overall loss recorded due to
substantial impairment losses
The Company has continued to strengthen its
earnings base since the financial crisis that
followed the bankruptcy of Lehman Brothers in
2008. However, in fiscal 2014 the Company
recognized substantial impairment losses on
several large-scale projects, forcing it to record an
overall loss for the first time in 16 years.
2010s
2015
New medium-term management plan: Be
the Best, Be the One 2017
In 2015, we launched our new medium-term
management planBe the Best, Be the One
2017. To make Groupwide efforts in over-
coming issues and to outline a path toward the
realization of What We Aim to Be is theme for
the management plan.
OUR HISTORY
2010
Greek government debt crisis
Chinas GDP becomes No. 2 in the world
2011
Great East Japan Earthquake
2013
Abenomics economic reforms
Tokyo chosen to host 2020 Summer Olympics
 For the years ended March 31

Financial Highlights We have prepared consolidated financial statements in accordance with U.S. GAAP for 2010 or
earlier and International Financial Reporting Standards (IFRSs) for 2011 or later.

Please refer to the Financial Section

Profit (Loss) for the Year Attributable to Owners of the Parent and Basic Profit starting on page 77 for more details.
Billions of Yen
300.0
250.7 251.5 245.0
238.9 243.0
232.5
215.1 220.5 216.5 223.1
211.0 202.9
197.1 200.2
200.0 184.0
155.2 151.4

100.0
74.5
46.5
0.0

100.0 73.2
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Profit (loss) for the year attributable to owners of the parent Basic profit

Total Assets and ROA

Trillions of Yen %
10.0 4.0
3.5 9.0
8.4 8.7
7.6 7.8 7.8
7.5 7.0 7.1 7.2 7.2 3.0
2.7
3.0 3.1
2.8 2.9 2.8
5.0 2.0
2.2

2.5 0.9 1.0

0.0 0.0
0.8

2.5 1.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Total assets (left scale) ROA (right scale)

Equity Attributable to Owners of the Parent and ROE

Trillions of Yen %
3.2 32.0

2.4 2.5
2.4 2.3 24.0
2.1

15.2 16.1 1.7

15.1 1.6 1.6 16.0
1.6
1.5 1.5 15.4
1.4 10.0
12.9 12.4
0.8 10.6 8.0

3.2
0.0 0.0

3.0
0.8 8.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Equity attributable to owners of the parent (left scale) ROE (right scale)
Interest-Bearing Liabilities (net) and DER (net)
Trillion of Yen Times
4.0 4.0
3.5
3.2 3.2
3.1 3.1
2.9 2.9 3.0
3.0 2.8 2.8 2.8

2.4 2.0
2.0 2.2
2.0
1.8 1.9
1.6
1.4 1.4 1.0
1.0 1.3
1.2

0.0 0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Interest-bearing liabilities (net) (left scale) Debt-equity ratio (net) (right scale)

Non-Financial Highlights For the years ended March 31

Number and Ratio of Women in Managerial Roles

Promoting the active involvement of female
People %

OUR BUSINESS HIGHLIGHT

employees in business is one of the impor- tant
150 4.5
management strategies of the Sumitomo
3.87
Corporation Group. We aim to increase the ratio
107 of women in managerial roles to between 6% and
2.88 7% by the year ending March 31, 2021.
100 3.0

2.16 78
For details about personnel management
1.75 59
initiatives, please see page 64.
50 1.37 1.5
49
39

0 0.0
2012 2013 2014 2015 2016
Number of women in managerial roles (left scale) Ratio of women in managerial roles (right scale)

Number of Directors
The Sumitomo Corporation Group appoints
People
outside directors with various viewpoints to
20
reflect the opinions of shareholders and other
stakeholders appropriately in meetings of the
Board of Directors. Further, after the general
13 meeting of shareholders convened in June 2016
12 12 12 12
3 there were 14 directors, comprising 10 internal
2 2
10 directors and four outside directors.

For details about governance initiatives,

10 10 10 please see page 56.

0
2012 2013 2014 2015 2016
Number of internal directors Number of outside directors
Promote Growth Strategies
Another major objective of BBBO2017 is to
promote growth strategies. How was progress with
regard to the policy of encourage and step up cross-
organizational collaboration?

Tabuchi
A Companywide growth strategy set forth in BBBO2017 is to encour- age
an even-greater degree of cross-organizational collaboration in industries
where we expect strong growth over the medium-to-long term. Through
such collaboration, we will advance initiatives that leverage our integrated
corporate strength to create new value in automobile-related businesses,
IoT businesses, retail businesses in Asia, energy-related businesses, food
and agriculture-related busi- ness, and other fields.
In retail businesses in Asia, for example, Group companies
P.T. Oto Multiartha and P.T. Summit Oto Financejointly referred to as the
OTO Groupare developing an automotive financing business in
Indonesia, which has cultivated a massive customer base of 1.7 million
users. Seeking to take advantage of this customer base in retail finance fields
outside of automobiles, we commenced investment in commer- cial bank PT.
Bank Tabungan Pensiunan Nasional Tbk (BTPN) in February 2015. By fully
leveraging the customer bases and business networks of both the OTO
Group and BTPN, we aim to cater to the robust con-
sumption demand from Indonesias growing middle class by developing
finance businesses targeting various retail sectors. At the same time, we will
promote collaboration between these companies and other Group companies
to advance multifaceted business ventures that include such areas as
logistics. Looking at the whole Company from the viewpoint of industries
and functions, we will step up cross- organizational collaboration between
highly compatible businesses
to bolster earnings capacity.

What progress has been made in the effort to improve

policies for upstream mineral resources and energy
businesses, in which large impairment losses were
recognized in both fiscal 2014 and fiscal 2015?

Takahata
We have been focusing on starting up projects with recent invest- ments,
such as the Nickel Project in Madagascar, for which financial completion
was achieved in September 2015 (see page 23 for details). We also pushed
forward with ongoing cost reduction measures in existing projects. At the
same, we are aspiring to create a business portfolio that features not only
dispersed risks but also resilience to market downturns. To this end, we
formulated management policies for our portfolio of upstream mineral
resources projects that include standards for the ratio of unfinished projects
to total projects and the maximum risk exposure to be allowed per project.
In addition, we established the Project Management Department for Mining
& E&P
as a dedicated organization tasked with enhancing our mark
 Total Management System atau disingkat dengan TQM adalah suatu sistem manajemen kualitas yang berfokus pada Pelanggan (Customer focused)
dengan melibatkan semua level karyawan dalam melakukan peningkatan atau perbaikan yang berkesinambungan (secara terus-menerus). Total Quality
Management atau TQM menggunakan strategi, data dan komunikasi yang efektif untuk meng-integrasikan kedisplinan kualitas ke dalam budaya dan
kegiatan-kegiatan perusahaan. Singkatnya, Total Quality Management (TQM) adalah pendekatan manajemen untuk mencapai keberhasilan jangka panjang
melalui Kepuasan Pelanggan (Customer Satisfaction).

Dalam TQM (Total Quality Management), semua anggota organisasi atau karyawan perusahaan harus berpartisipasi aktif dalam melakukan peningkatan
proses, produk, layanan serta budaya dimana mereka bekerja sehingga menghasilkan kualitas terbaik dalam Produk dan Layanan yang pada akhirnya dapat
mencapai tujuan kepuasan pelanggan.

8 Elemen Pokok TQM

Terdapat 8 Elemen Pokok dalam Sistem Manajemen TQM (Total Quality Management). Kedelapan elemen pokok tersebut diantaranya adalah:

1. Fokus pada Pelanggan (Customer Focussed)

Pelanggan merupakan pihak yang menentukan apakah kualitas produk maupun jasa yang dihasilkan perusahaan tersebut memenuhi kebutuhan atau
tingkatan kualitas yang diinginkannya. Apapun yang dilakukan oleh sebuah organisasi/perusahaan seperti pelatihan karyawan, perbaikan proses,
penggunaan mesin canggih ataupun adopsi teknologi terbaru yang pada akhirnya Pelangganlah yang menentukan apakah upaya-upaya yang dilakukan
tersebut bermanfaat atau tidak.

2. Keterlibatan Karyawan secara keseluruhan (Total Employee Involvement)

Karyawan merupakan sumber daya perusahaan yang penting dalam mencapai tujuan yang direncanakannya. Oleh karena itu, keterlibatan karyawan secara
keseluruhan dapat mendukung perusahaan dalam melakukan peningkatan proses dan kualitas yang berkesinambungan yang kemudian menghasilkan produk
dan layanan yang terbaik untuk pelanggannya. Dalam pemberdayaan karyawan, diperlukan pelatihan dan peningkatan terhadap keterampilan karyawan
dalam mengerjakan tugasnya.

3. Pemusatan perhatian pada Proses (Process-centered)

Perhatian pada peningkatan proses merupakan pondasi dasar dalam sistem manajemen TQM. Proses merupakan serangkaian langkah-langkah yang dimulai
dari penerimaan INPUT dari supplier (internal maupun eksternal) dan meng-transformasi-nya menjadi OUTPUT yang akan dikirimkan ke pelanggan
(internal maupun Eksternal).

4. Sistem yang Terintegrasi (Integrated System)

Meskipun terdapat banyak keahlian dan ruang lingkup kerja dalam suatu perusahaan yang membentuk departementalisasi secara vertikal maupun
horizontal. Semuanya memerlukan suatu sistem yang terintegrasi dengan baik agar visi, misi, strategi, kebijakan, tujuan dan sasaran perusahaan dapat
dikomunikasikan dengan baik dan jelas kepada semua karyawan.

5. Pendekatan Strategi dan Sistematik (Strategy and Systematic Approach)

Salah satu bagian yang penting dalam Manajemen Kualitas adalah pendekatan Strategi dan Sistematik dalam mencapai Visi, Misi dan Tujuan Perusahaan.
Proses tersebut biasanya disebut dengan Perencanan Strategi ataupun Manajemen Strategi yang melakukan perumusan dan perencanaan strategi dalam
mengintegrasikan konsep kualitas ke dalam Strategi Perusahaan secara keseluruhan.

6. Peningkatan yang berkesinambungan (Continual Improvement)

Peningkatan yang berkesinambungan mendorong perusahaan untuk melakukan analisis dan menciptakan cara-cara yang lebih bersaing dan efektif dalam
mencapai tujuan perusahaan dan memenuhi harapan semua pihak yang berkepentingan.

7. Keputusan berdasarkan Fakta (Fact-based decision making)

Untuk mengetahui sejauh mana kinerja suatu perusahaan, diperlukan data untuk mengukurnya. TQM mewajibkan perusahaan tesebut untuk mengumpulkan
dan melakukan analisis data secara berkesinambungan agar keputusan ataupun kebijakan yang diambil benar-benar akurat dan tepat sasaran. Dengan
adanya data, kita dapat menarik kesimpulan berdasarkan kejadian ataupun hasil sebelumnya.

8. Komunikasi (Communications)
Dalam operasional sehari-hari, perusahaan pasti akan mengalami perubahan baik perubahan dalam strategi, kebijakan, jadwal maupun metode pelaksanaan.
Perubahan tersebut perlu dikomunikasikan dengan baik kepada semua karyawan yang bersangkutan. Komunikasi yang baik juga akan menimbulkan
motivasi dan semangat kerja dalam mencapai tujuan perusahaannya.

Biaya Kualitas (Biaya Mutu) atau dalam bahasa Inggris sering disebut dengan Quality Cost adalah Biaya-biaya yang timbul dalam
penanganan masalah Kualitas (Mutu), baik dalam rangka meningkatkan Kualitas maupun biaya yang timbul akibat Kualitas yang
buruk (Cost of Poor Quality). Dengan kata lain, Biaya Kualitas (Quality Cost) adalah semua biaya yang timbul dalam Manajemen
Kualitas (Quality Management).
Feigenbaum (1961) dalam bukunya yang berjudul Total Quality Control menyebutkan bahwa Biaya Kualitas terdiri dari 3 kategori
utama, yaitu Biaya Pencegahan (Preventive Cost), Biaya Penilaian (Appraisal Cost) Biaya Kegagalan (Failure Cost). Biaya
Kegagalan kemudian dibagi lagi menjadi 2 jenis yaitu Biaya Kegagalan Internal (Internal Failure Cost) dan Biaya Kegagalan
Eksternal (External Failure Cost).
Biaya Pencegahan (Preventive Cost) adalah biaya yang dikeluarkan dalam mencegah terjadi kegagalan pada proses pertamanya
seperti Biaya Pelatihan (Training Cost) dan Biaya Perencanaan Kualitas (Quality Planning). Biaya Peniliaian (Appraisal Cost) adalah
biaya yang timbul saat melakukan penyaringan atau pendeteksian kegagalan produk seperti Biaya Pengujian, Inspeksi dan Proses
Audit. Sedangkan Biaya Kegagalan adalah Biaya yang timbul akibat buruknya kualitas ataupun kegagalan produk yang tidak
memenuhi standar pelanggan (Customer). Dalam Biaya Kegagalan ini, terdapat lagi biaya kegagalan Internal yang terjadi akibat
buruknya kualitas selama proses produksi dan Biaya Kegagalan Eksternal yang terjadi akibat kegagalan produk yang telah dijual.
Untuk lebih jelas, silakan perhatikan Tabel dibawah mengenai 3 Kategori Utama Biaya Kualitas (Quality Cost) beserta contoh biaya-
biaya yang akan timbul dari Biaya Kualitas tersebut.

Pengertian Six Sigma dan Tahapan DMAIC Metodologi Six Sigma pertama kali diperkenalkan oleh Motorola pada tahun 1987 oleh seorang Engineer
yang bernama Bill Smith dan mendapat dukungan sepenuhnya oleh Bob Galvin sebagai CEO Motorola pada saat itu sebagai Strategi untuk memperbaiki
dan meningkatkan proses serta pengendalian kualitas (Proses Improvement and Quality Control) di perusahaannya. Six Sigma mulai terkenal dan menjadi
Populer di seluruh dunia setelah Jack Welch mempergunakannya sebagai Bisnis Strategi di General Electric (GE) pada tahun 1995. Secara umum, Six
Sigma adalah metodologi yang dipergunakan untuk melakukan upaya perbaikan dan peningkatan proses yang berkesinambungan atau terus menerus
(Continuous Improvement).

SIX SIGMA berasal dari kata SIX yang berarti enam (6) dan SIGMA yang merupakan satuan dari Standard Deviasi yang juga dilambangkan dengan
simbol , Six Sigma juga sering di simbolkan menjadi 6. Makin tinggi Sigma-nya, semakin baik pula kualitasnya. Dengan kata lain, semakin tinggi
Sigma-nya semakin rendah pula tingkat kecacatan atau kegagalannya. Seperti Tabel konversi Sigma dibawah ini.

Strategi yang dilakukan oleh Six Sigma adalah :

Fokus terhadap Kepuasan dan Kebutuhan Pelanggan (Customer Focused)

Menurunkan tingkat kecacatan (Reduce Defect)
Berkisar di sekitar Pusat Target (Center around Target)
Menurunkan Variasi (Reduce Variation)

Konsep dasar dari Six Sigma sebenarnya berasal dari gabungan Konsep TQM (Total Quality Management) dan Statistical Process Control (SPC) dimana
kedua konsep tersebut berasal dari pemikiran-pemikiran para pakar seperti Deming, Ishikawa, Walter Shewhart dan Crossby. Dalam perkembangannya, Six
Sigma yang mulanya adalah sebuah metric berkembang menjadi sebuah Metodologi dan saat ini sudah menjadi sebuah Sistem Manajemen.

Dalam Penerapan Six Sigma, target atas kecacatan atau kegagalan proses dikontrol dalam target 3,4 DPMO (Defects per Million Opportunities atau
Kegagalan per sejuta kesempatan) yang artinya dalam 1 Juta unit produk yang diproduksi hanya ada 3,4 unit yang cacat. Berarti perusahaan memproduksi
produk dengan tingkat kepuasan pelanggan mencapai 99,9997%.