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Global Management Forum 2020

China luxury goods demand rising dramatically: Cartier CEO

Company confident that digitalization allows growth without adding physical stores

Cartier CEO Cyrille Vigneron said the retail industry is "evolving" amid the pandemic, with brick-and-mortar stores becoming "less transactional and more social, more experiential." (Photo by Rie Ishii)

TOKYO -- The COVID-19 pandemic has "tremendously" accelerated the trend of Chinese consumers shopping more domestically, says Cartier CEO Cyrille Vigneron.

Attending the Nikkei Global Management Forum on Tuesday, Vigneron said that Cartier "sell[s] more now in China this year than we were selling last year in China domestically and abroad," despite the pandemic.

Vigneron explained that China is following the same path as Japan in the 1980s. At that time, Japanese consumers shopped for luxury goods abroad, and then sales gradually moved to being much more domestic.

For many luxury brands, the pandemic has reduced business opportunities because people have less contact and many events are canceled to ensure social distancing.

Yet Vigneron is optimistic about the impact on luxury goods. "Money that doesn't [get spent] on travel comes back to some products," said Vigneron, stressing that people value personal bonding more in times of pandemic and want to express their care to people whom they care about.

Vigneron also sees the retail industry "evolving" amid the pandemic.

Brick-and-mortar stores will "become less transactional and more social, more experiential," he expects. Taking Apple stores as an example, Vigneron explained that people are going there not to buy products but to experience something, such as a learning session.

"There is definitely room for retail, especially in luxury, because some of the experience you can only get physically in one store cannot be replaced," Vigneron said.

He said Cartier has reduced its number of physical stores. In the new era of digitalization, he expects the criteria to measure growth will be changed. "In the past, growth was kind of linked to additional stores, I would say we can grow without additional stores," he said -- "that's the new thing."

Siemens CEO urges rethinking capitalism for responsible business

The head of Siemens argues that a form of "inclusive capitalism" is needed so companies around the world can pursue growth in a more sustainable way, criticizing today's large multinationals for having taken capitalism "too far," focusing solely on profit.

"Money and profitability matters because if we are profitable we are competitive; if you are competitive, you can invest and innovate," President and CEO Joe Kaeser told the forum.

Siemens President and CEO Joe Kaeser said he believes that "inclusive capitalism will be the model of the future." (Photo by Yo Inoue)

"It is important to be successful, but it needs to be in a responsible way. ... When I look back at the rest of the world and Anglo-Saxon environments, I believe we have taken capitalism too far," he said, insisting that society has become increasingly important for companies, above and along with their customers, employees and shareholders.

For example, Kaeser said that not only firing employees right after hiring, but also never letting employees go are both a "bad thing" that prevents a company from making changes that fit the development of the market.

"The right mix -- a stakeholder-oriented approach -- looks at the matters of the demands of society and thinks about environmental care, sustainability, responsibility and the way we act on the people side," said Kaeser, who believes that "inclusive capitalism will be the model of the future."

Kaeser said 300,000 out of Siemens' around 385,000 employees own shares in the company, arguing that this ownership culture helps them feel more involved in its decision-making.

Siemens is divided into three companies focusing on health care, energy and digital transformation. "All three companies lock together in a mutual ecosystem and benefit" through capital participation and joint purchases, Kaeser added.

Companies should redefine 'purpose' to thrive: KPMG Japan chairman

Japanese companies should redefine their "purpose" to become resilient and thrive in the new era, Toshiya Mori, chairman of KPMG Japan, told the forum.

Mori stressed the importance of following a broad purpose as more Japanese companies seek growth overseas and a new generation emerges in order "to clarify the meaning of their existence," adding that it "needs to be visible in their activities to be accepted by the society and community," said Mori.

KPMG Japan Chairman Toshiya Mori stressed the importance of building relationships with diverse stakeholders in the post-pandemic world. (Photo by Rie Ishii)

According to surveys conducted by KPMG before and after the coronavirus pandemic began, around 65% of CEOs and other managers in 11 countries understood the importance of having a purpose before the pandemic, with the figure rising to 80% in the second survey.

However, only half of Japanese CEOs surveyed recognized the importance of defining a purpose. "Companies should contribute to realizing a sustainable society. That is the role of a corporation," Mori stressed.

It is said that out of 60,000 global companies with a history of over 100 years, 25,000 are in Japan.

"Japanese companies emphasize harmony and are good at improvement," Mori said, "but they are not good at discarding the past or disrupting what we have today," with old companies tending to cling to past success.

Mori also said "diversity" has become another keyword for many business leaders amid the pandemic. "Not only profit but also relationships with diverse stakeholders should be valued," he said.

Cars could cost only 20% of today's prices: Nidec CEO Nagamori

One of Japan's most outspoken CEOs, Shigenobu Nagamori of motor manufacturer Nidec, believes cars could eventually cost barely 20% of today's prices due to disruptions caused by the spread of electric vehicles and the expansion of supply networks.

His remarks at the forum come at a time when major Japanese automakers' traditional close relationships with their keiretsu suppliers could potentially come to hinder them from adopting advanced technologies.

Nidec Chairman and CEO Shigenobu Nagamori said close relationships with keiretsu suppliers could potentially hinder Japan's auto industry from adopting advanced technologies. (Photo by Rie Ishii)

Although Nagamori acknowledged that the EV market is growing slower than expected, he reiterated that it will soon trigger a dramatic price competition in the auto industry.

"The prices of cars have increased, while home appliances and other goods have experienced a series of price declines," Nagamori said, calling electric vehicles a big innovation. "The price competition will soon happen as new players such as Tesla and others come into the market."

When asked how much prices would decrease from around 2 million yen ($19,000) today, Nagamori answered, "If we assume EVs will account for over half of the auto industry after 2030, prices would be one-fifth."

"In China, cars are selling at around 450,000 yen," Nagomori argued, referring to the value-priced EV model launched recently by SAIC-GM-Wuling Automobile, a joint venture among SAIC Motor, General Motors and Liuzhou Wuling Motors.

Affordable cars are also being launched in Europe, Nagamori said, describing these cars as "free from preconceived notions of the past." Lowering car prices could, he added, be critical to delivering vehicles to consumers in developing countries.

As the world's largest motor manufacturer, Nidec seeks to supply high-quality, low-cost electric car parts to various Japanese automakers. "We want the Japanese car industry to win the world. Sometimes success in the past could impede [new challenges," Nagamori said.

Nagamori also talked about another challenge Japanese companies face: a shortage of talent. He insisted Japanese university education needs changes, as the young generation today lacks a global, business-oriented mindset.

H.I.S. chief Sawada envisions space tours for $300,000

The COVID-19 pandemic has opened up opportunities for the Japanese travel agency H.I.S. to expand its scope, CEO Hideo Sawada told the forum earlier on Tuesday.

"You could think of a crisis as a chance," said Sawada, whose company was hit hard by the global outbreak as international travel ground to a halt. The company asked its employees to come up with ideas for new businesses and picked about 10, including soba restaurants.

H.I.S. CEO Hideo Sawada, right, and fashion designer Junko Koshino discussed opportunities opened by the coronavirus pandemic. (Photos by Rie Ishii)

Sawada said the world is entering a new era and the company should "do more and more new things." Digital initiatives by H.I.S. include virtual tours, in which local guides tell remote tourists about travel destinations. In the long term, Sawada also eyes space travel.

Sawada is looking to enable consumers to travel to a space hotel for about 30 million yen ($285,000). He said he wants to ask Elon Mask, founder of Tesla and SpaceX, for space travelers to stay in an orbiting H.I.S. hotel before visiting the moon or Mars.

Fashion designer Junko Koshino, speaking in the same session, also said the pandemic could be an opportunity. "Japan is in an era of isolation," she said. "It could be a good idea to learn more about Japan ... before traveling overseas, especially for young people."

Daiichi Sankyo CEO Manabe pledges to prepare for future pandemics

Sunao Manabe, CEO of Japanese pharmaceutical company Daiichi Sankyo, vowed earlier Tuesday to address global challenges in COVID-19 vaccine development and distribution, which is expected to be an essential factor in resuming normal activities.

Manabe referred to a messenger RNA vaccine developed by the U.S. pharmaceutical company Pfizer, which possibly has a very high efficacy of 90%. It is still not certain whether coronavirus vaccines would be required once a year, like those for influenza, or more often. "And the virus mutates," he said. "We still have some challenges in R&D."

Daiichi Sankyo President and CEO Sunao Manabe vowed to address global challenges in the development and distribution of COVID-19 vaccines. (Photo by Yo Inoue)

"We have our proprietary technology," he added -- "Daiichi Sankyo is trying to address these issues as well."

He also pledged to prepare for future pandemics. "To face such future risks, using our science Daiichi Sankyo would like to contribute to the world," he said. He also listed antibiotic-resistant bacteria -- which could cause as many as 10 million deaths -- as another theme in the company's agenda.

Daiichi Sankyo is part of the project in Japan to distribute the COVID-19 vaccines developed by the U.K.-based AstraZeneca and the University of Oxford. It is also working on its own vaccine for the disease.

Daiichi Sankyo's vaccine "is also messenger RNA, but what we target is a bit different" and also has a high efficacy, Manabe explained. "Once we develop a technology like that, in addition to COVID-19 we will be able to apply it to a future pandemic."

Netflix CEO Hastings says streaming to take over broadcast

Reed Hastings, founder and co-CEO of the U.S. streaming service Netflix, told the forum that with or without pandemic lockdowns, video streaming will take over broadcast for series and films.

Netflix founder and co-CEO Reed Hastings explained that streaming has an advantage because it lets people watch anytime they want. (Photo by Rie Ishii)

"Broadcast will stay strong for sports and news, but I think series and films will mostly be moved to streaming," Hastings said. He explained that streaming has an advantage because users can watch content anytime they want.

Netflix has been one of the most notable beneficiaries of the world's coronavirus lockdowns. It expects about 34 million new members from just this year, which Hastings said is about 4 million more than in the last few years.

But the CEO said the key to growth is not just the boost from COVID-19. "Basically, people want to watch great series or films whether there is COVID or not," he said. The company has been focusing on creating original content.

"Fortunately, now all around the world, consumers can get the Netflix service. ... We really get this content-sharing around the world," he emphasized. He referred to the example of "Crash Landing on You," a South Korean drama that has become a global hit.

Hastings recently published a book, "No Rules Rules: Netflix and the Culture of Reinvention." He said, "The essence of it is, if you have the right people, you can manage through culture and through values, rather than through command."

Green push brings opportunities for carmakers: FCA chairman

John Elkann, chairman of Fiat Chrysler Automobiles, told the forum that despite uncertainties posed by the pandemic, it is a "very good moment" to be in the automobile industry.

Elkann is also chairman of the European holding company Exor, which invests in FCA and will become the largest shareholder in Stellantis, a company to be formed out of the merger of FCA with French automaker Groupe PSA announced last year.

Fiat Chrysler Automobiles Chairman John Elkann said "there are many exciting novelties" in the auto industry now, and striving for carbon neutrality "has a lot of implications ... in how we build a car." (Photo by Rie Ishii)

"If you ... want to invest in the future, [investing in the car industry] will be rewarding for every stakeholder," Elkann said. He added that cars are changing and "there are many exciting novelties around connectivity, autonomy [and] safety."

He also said that striving for carbon neutrality "has a lot of implications not only on the powertrain but also in how we build a car and what a car is made of."

On the FCA-PSA merger, Elkann said the new company will be among the largest vehicle producers in the world. "We definitely believe that the size which we [will] have is going to allow us to be competitive," he said. He explained that the merger would cut costs on investments and that there would be a run rate of 5 billion euros ($5.9 billion) of annual synergies.

As a businessman running a family business, he said that "there is no magic formula" for staying in business across the decades. He said all generations should have "the same desire to go ahead and to make sure that one wants to write a new chapter."

Read about Day2 of the forum here.

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