Otsuka Kagu Ltd: Saving the Furniture Business

Founded in 1969 as a small operation, Otsuka Kagu, Ltd. became Japan’s largest furniture retailer and was listed on the Tokyo Stock Exchange in 1980. A membership program in 1993 managed to revitalize the company’s sales at a time when Japan was in a recession. Years later, after sales began to decline and the founder was convicted of insider trading in 2008, the presidency was transferred to the founder’s daughter, who applied a more customer-centric model to the business. This change infuriated the founder, who removed his daughter from the company’s leadership. After persistently poor performance, the company’s board of directors reinstated the founder’s daughter; she then launched a notorious public battle for control of the company. Despite new environment-responsive strategies, revenues continued to decline to the point of the company declaring its biggest loss by the end of 2017. In August 2018, the company reported a net loss of ¥2.3 billion, with the company’s shares trading at their lowest level ever. Facing financial distress, the company had to look both inward and outward to determine its next steps.

This case is designed for an undergraduate- or graduate-level course on strategic management, marketing management, international business, Asian business, or family business management. The case highlights the need to effectively manage intangible assets such as brand equity and corporate reputation. It also examines the challenges faced by the female president of a publicly listed family business in Japan, amid a changing society. After completion of this case, students will be able to<ul><li>determine the challenges that the daughter faced when she assumed the presidency of Otsuka Kagu;</li><li>conduct a macro-environment analysis using the PESTEL framework;</li><li>perform an analysis of the furniture industry in Japan;</li><li>assess the company’s internal strengths and weaknesses;</li><li>evaluate strategic alternatives for Otsuka Kagu;</li><li>explain the responsibilities of a publicly listed firm; and</li><li>evaluate the challenges family members face when working in a publicly listed, family business.</li></ul>

• Japan
• furniture business
• brand equity