Strengthening Group Management and Accelerating Globalization

Building a Strong Group Management Foundation

In May 2017, Obayashi Corporation made a tender offer on the shares of its consolidated subsidiary, Obayashi Road Corporation, and acquired all of the shares, making it a wholly owned subsidiary.

As a member of the Obayashi Group, Obayashi Road Corporation had been working for many years to enhance collaboration by sharing technology and human resources with the Group and collaborating on transactions involving exterior construction and civil engineering works. The wider business environment influencing the Group was predicted to remain strong over the short term owing to the construction of facilities connected with the Olympics, large-scale redevelopment of the Greater Tokyo Area, and maintenance and renewal of infrastructure for the purpose of building national resilience. Long term, however, the construction market was not expected to expand further due to Japan’s shrinking population. This outlook was particularly pertinent to the road construction industry, as while private sector capital investment was gradually increasing, public investment was on the decline. Also of concern was the uncertain future of trends in raw material prices, as well as the shortage of engineers and skilled workers becoming normalized. To increase the profitability of each Group company, the Group needed to take urgent steps to further enhance group management, improve productivity and competitive strength by embracing technologies such as IoT and AI, and secure specialized personnel with advanced technical skills.

Under these circumstances, the Group determined that a full take-over of Obayashi Road Corporation would make it easier than ever before to share expertise and promote technical development. It would also enable the Group to improve productivity, increase competitive strength by consolidating marketing information, and allocate personnel and financial management resources more effectively—all of which would ultimately lead to further strengthening the Group’s management foundation.

In February 2017, prior to becoming a wholly owned subsidiary, Obayashi Road Corporation had been subjected to an on-site investigation by the Japan Fair Trade Commission in connection with price-fixing of asphalt mixtures used to lay down pavement, which violated the Antimonopoly Act. The subsidiary received a Cease and Desist Order and Surcharge Payment Order in July 2019. The matter was taken very seriously by Obayashi, which implemented recurrence prevention measures as soon as possible. As for the Group as a whole, it had to quickly rebuild trust by putting in place rigorous compliance measures in accordance with the existing Antimonopoly Act Compliance Program, including training and interviews with attorney advisors and a walk-through audit of the pricing process for asphalt mixtures.

Enhancing Group Management and Strengthening Marketing

Obayashi Corporation reorganized its Corporate Management Planning Department into the Corporate Strategy Division in January 2019 as a way of further promoting and strengthening the management of the Group. The reorganization was brought about from a need to further develop initiatives toward achieving its Vision for the Future through the comprehensive and strategic management of not only Obayashi Corporation as a sole entity, but the group companies as well. The Group also required a division that would serve as a compass for managing the Group to promote ESG management, which would enable improved corporate performance, as well as ensure the Group’s survival and growth. Four departments were established under the Corporate Strategy Division: the Corporate Planning Department, the Corporate Business Administration Department, the ESG & SDGs Department, and the Corporate Business Innovation & Management Foundation Department. In April 2020, the company revised the Japanese name of the Corporate Strategy Division to promote groupwide management with a global mindset. It also simplified the Japanese names of the subordinate Corporate Planning Department and Corporate Business Administration Department. It should also be noted that following the transfer of responsibility of its CSR promotion policy to the ESG & SDGs Department in January 2019, the company renamed the former CSR Department as the Corporate Communications Department. It also transferred control of operations related to the environmental to the former Safety Planning Department, renaming the department the Safety & Environment Planning Department.

In April 2019, the company set to reorganizing itself into a strategic unit that could take on projects outside the scope of its building construction and civil engineering businesses. The Marketing Planning Department was newly established under the Building Construction Division to develop marketing strategies aimed at private sector client groups in collaboration with the company’s branches. The department also coordinates with and supports both the Building Construction and Civil Engineering Construction Divisions, as well as the marketing departments of each branch, and promotes initiatives that will help optimize operations across the board. The Medical Solutions Department, which was the marketing support department in charge of functions related to medical consultation, was transferred from the Technology Division to the Building Construction Division. The company also newly created the Procurement Management Department with the main objective of strengthening procurement capabilities and increasing productivity. Moreover, it also reorganized the PD Center into the iPD Center, which was done to establish a system for providing Building/Construction Information Modeling (BIM/CIM) as an operating platform in all projects.

Furthermore, in April 2020, the company set up the new Marketing Division, which would serve as a centralized marketing unit for all company branches and enhance company-wide marketing systems related to the domestic construction business. The division works to improve both customer satisfaction and the quality and quantity of marketing information by participating in all aspects of the marketing process—from information gathering at the upstream marketing stage to marketing activities for individual projects—and establish and implement efficient marketing strategies that take advantage of company-wide information and resources. A further goal is to strengthen the Obayashi Group’s overall marketing capabilities through collaborative efforts with group companies, as well as by working alongside related divisions in Japan and abroad to target global customers. The company established the Marketing Planning Department, Client Relations Department, Project Promotion Department, and Medical Solutions Department under the Marketing Division, with operations of the Marketing Planning Department and Medical Solutions Department transferred over from the Building Construction Division. At the same time, a Kanto Branch was newly set up with the goal of increasing the company’s market share in the Greater Tokyo Area.

The company additionally established the new Mechanical & Electrical Building Service & Renovation Business Planning Office as part of the Building Construction Division, aiming to strengthen cost competitiveness, construction and quality management, and technical development in the areas of facility construction and renovation works, both of which have been growing in importance in recent years. Under the office, the company created two departments, namely the Mechanical & Electrical Building Service & Renovation Business Department and the Mechanical & Electrical Technology Administration Department.

The engineering department, organized under the Technology Division, had been providing assistance with marketing and construction concerning engineering-related facilities projects to the company’s branches. The department aimed to increase the number of construction contracts by actively gathering marketing information under its own initiative and providing technical proposals to customers. Looking to further expand the engineering business, the company reinforced the project promotion system by newly establishing Business Development Departments 1 and 2 under the Engineering Division in April 2017. These departments sought to improve competitiveness and profitability by promoting marketing in new, as well as existing sectors (production facilities, environmental facilities, information-related facilities, etc.), and strengthening the integrated system for promoting related operations (planning, design, procurement, construction, and similar operations). In April 2019, the company reorganized the Engineering Division as an independent unit from the Technology Division. In doing so, the company aimed to strengthen the engineering business, enabling it to create new added value by executing M&As and alliances in a flexible manner and solve the problems faced by customers and society in sectors including next-generation medical care and the environment.

Enhancement of Research and Development Functions

The Technology Division also underwent organizational reforms, with the main objective being to enhance the research and development of technologies that support the businesses of the Obayashi Group.

The company reorganized the Technology Research Institute’s Technology Solutions Department as a unit under the direct control of the Technology Division in April 2019, transforming it into a one-stop department for exchanging technology with clients and other parties, providing technical support to business departments, and any other matters related to technology. The company also established the new Obayashi Future Laboratory, which plays a central role in accelerating projects related to the creation of the future, such as space exploration and the mobility revolution. The lab also searches for kernels of ideas that can be nurtured into next-generation technologies.

As part of the organizational reforms that took place in April 2020, the company newly set up the Technology Strategy Planning Office under the Technology Division, and under the office, the Technology Strategy Planning Department and Intellectual Property Management Department. The existing Research & Development Management Department also became a subordinate unit under the office. These reforms were carried out as a way of providing a system that would comprehensively implement various strategies, including the formulation of individual technology development policies, in addition to the drafting, promoting, and managing of intellectual property strategies, and selecting topics for R&D and management thereof. Meanwhile, the Nuclear Facilities Division was made independent from the Technology Division with the hopes of strengthening its function as a specialized unit dedicated to technologies related to nuclear facilities. Having a specialized unit will facilitate the company in winning contracts for construction work involving nuclear technology, which is expected to be in strong demand.

Measures to Increase Productivity and Digital Transformation for a New Era

In April 2019, the company reorganized the former Mechanical & Electrical Department as the Construction Robotics Division, aiming to develop environmentally friendly construction equipment that utilized technologies such as IoT and AI, introduce these at sites as early as possible, and create more earnings sources through new business models. The objective was to develop comprehensive businesses that integrated the development and marketing functions of advanced technologies, while also helping to realize innovation and expand the scope of Obayashi Group’s businesses through actively pursuing technological collaboration with other industries. First, to address the pressing challenge of establishing autonomous construction technology using robotics, the company pushed forward with the automation, labor saving, and autonomation of construction machinery such as cranes, additionally working to develop dedicated facilities that would increase efficiency in the construction of offshore wind power facilities. It also renamed the Tokyo Machinery Factory the East Japan Robotics Center, and the Osaka Machinery Factory the West Japan Robotics Center.

A year later, in April 2020, the company reorganized its ICT-related departments with the intent of spurring on the digitalization of information and its consequent implementation. The Global ICT Integration Department (whose functions were migrated over in stages before the department was completely dissolved in June) was merged with the iPD Center—formerly belonging to the Building Construction Division—to create the new Digital Integration Division.

Understanding that ICT was an important management resource, the Global ICT Integration Department (established in 2010) had been promoting the adoption of ICT in the company’s domestic and overseas business activities. However, the department was dissolved and its functions were transferred to the Digital Integration Division in June. The iPD Center is now part of the Digital Integration Division, and its role is to provide BIM models, the source of integrated management information and BIM production information, in anticipation of the rollout of digital transformation (DX) expected in the near future. With these changes, the company’s digital strategy departments came to consist of the Corporate Strategy Division, which plans and develops strategies, and the Digital Integration Division, which promotes the strategies.

Reorganization of Overseas Branches and Area Strategies

In April 2019, Obayashi Corporation closed its Overseas Business Division in Tokyo, establishing the North American Regional Headquarters as the organization responsible for strategy development and business promotion and development for the entire North America region. The headquarters was formed by merging the San Francisco office, which had been created in 1979 as a base for directly managing North American civil engineering projects, with the former North American Regional Headquarters, which had been set up in 2010 to promote each of the group companies’ businesses in North America. Meanwhile, the company established the Asia-Pacific Regional Headquarters in Singapore.

(Reference: Special Contents > Global Presence > Introduction of Overseas Offices North America)

(Reference: Special Contents > Global Presence > Introduction of Overseas Offices Asia and Other Regions)

The Overseas Business Division had previously had wide-reaching authority over operations in Asia and North America; however, transferring authority to the two regional headquarters allowed the company to provide support to overseas group companies on a closer, more direct level with the headquarters at the center. This change consequently led to quicker decision making and encouraged a form of localization that was attuned to the specific situation in each respective region. The network between branches was strengthened by the two headquarters, as they held regular meetings for group companies from each region to give business reports and liaise with one another, as well as conduct other activities. The North American and Asian-Pacific Regional Headquarters also began laying out and implementing measures for the growth of the entire regions under their respective authority, which included the group companies, while additionally assuming responsibility for profits and losses. This approach emulated the system in Japan, in which branches and their respective head offices cooperate vertically and horizontally with each other. Furthermore, in April 2020, the Architectural Design & Engineering Department was newly established at the Asia-Pacific Regional Headquarters with the aim of overseeing the design departments of overseas group companies in the Asia-Pacific region, along with promoting collaboration between these companies and with the Architectural Design & Engineering Division at the Tokyo Head Office. The department hopes to expand the design and construction businesses across the region, improve its design capabilities, and ensure quality.

(Reference: Special Contents > Global Presence)