Rehabilitating Daiei - A Japanese Retailer in Trouble
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ICMR HOME | Case Studies Collection
Case Details:
Case Code : BSTR161
Case Length : 15 Pages
Period : 1996 - 2005
Organization : Daiei Inc.
Pub Date : 2005
Teaching Note :Not Available
Countries : Japan
Industry : Retailing
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Heading For Rehabilitation Contd...
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In this context, IRCJ expected the Marubeni-led consortium to be the most
suitable, to promote its basic objectives as Marubeni had been the
second-largest shareholder in Maruetsu Inc., a food supermarket chain in the
Daiei group. As per IRCJ's revival plan, the consortium was also given one-third
of the voting-rights shares of Daiei, out of which Advantage Partners had a 23.4
percent stake and Marubeni's stake was 10.9 percent. Another one-third of the
voting rights were left for the ordinary shareholders in Daiei.
Marubeni's draft rehabilitation plan for Daiei included an investment of 60
billion yen; with 43.4 billion yen worth of shares to be bought by Advantage
Partners and another 18.6 billion yen of shares to be bought by Marubeni.
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Further, IRCJ and Marubeni planned to appoint a new president from outside the
company and also other new executives for the rehabilitation work. Marubeni
wanted to make the most of Daiei's existing workforce and their retailing
expertise to turn the company around. Though IRCJ
and Marubeni were optimistic that their revival plan would work,
industry experts did not share their optimism.
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Yuuki
Sakurai, an analyst at Fukoku Mutual Life Insurance in Tokyo, said,
"Marubeni will probably want to focus on Daiei's food operations, but
food is not an area where you can easily raise prices. Marubeni is
looking for a way to differentiate from other trading companies. I'm
just worried that this may not be the best way."9
Background Note
On April 10, 1957, Isao Nakauchi started a discount drugstore in Osaka, Japan. Nakauchi
was a Japanese soldier who had survived heavy fire while serving in the
Philippines during World War II. |
The first store was highly successful and this prompted Nakauchi to open more such stores in the Osaka area. Nakauchi later named the retail chain
'Daiei'. The company's motto was to provide "good products, cheaper and cheaper."By the late 1960s, Daiei had established itself as a leader in the retailing industry in Japan. It stayed focused on its philosophy of
"for the customers"offering them products at low prices.
In 1964, Daiei expanded its operations in Tokyo and opened its first suburban
store near Osaka in 1968. The company gradually expanded into other parts of
Japan by acquiring established companies and starting new stores...
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