The Company's major customers are in the broadcast/communication, housing/living and medical/health industries and it provides one stop services for companies including development of strategies for problem solving, promotion design, production/development and execution/operation. It has successfully achieved a position with high competitive advantage by using "comprehensive capability," "flexibility" and "detailed services."
The Company is focusing on expanding the digital domain such as online advertising and customer support using virtual reality (VR) technologies, etc. It is aiming at early achievement of "sales of 10 billion yen, an ordinary income of 1 billion yen, and a digital area composition ratio of 30%."
1-1 Corporate history
President Yuji Otsu's grandfather, Kenjiro Otsu, who was aiming to be a Japanese painter, worked at a high-class art printing company in Kobe as a designer. Later, he went to the Pacific War, and after being demobilized in April 1947, he founded an advertising company, Senden Goyo Company, which became the predecessor of the Company, in Kobe city.
In addition to general advertising business, it coordinated launching ceremonies carried out by shipbuilders due to the characteristics of Kobe city, organized events and made posters for department stores. It also expanded its customer base in the textile industry, which was the central industry of postwar economic recovery.
The Company also handled the high-class packaging for the launch of "Hong Kong shirt (short sleeve shirt)" which became a major hit product of Teijin Ltd. in the 1960s. The Company's excellent design and creative capabilities, product promotion capabilities, and convenience of one stop services including printing were highly appreciated by the costumers. The Company's characteristic of providing excellent plans and creativity through direct transactions with good industries and customers has been inherited from its founding time till now.
In 1955, Tokyo office was established with a view to expanding the businesses.
While pursuing customer development in Tokyo, it began business in 1972 with Asahi Kasei Homes, one of its current major customers. After that, it expanded the customer base to the broadcast/communication industry and medical/health industry, and sales and profits steadily grew.
In February 2017, it got listed on the Tokyo Stock Exchange JASDAQ market.

1-3 Environment surrounding NISSEN INC.
◎ Change in the advertising market
In the conventional advertising market, especially in the advertising business using the media such as television and newspaper, monopolistic and exclusive inventory of stocks was the most important factor for businesses development for the media and advertising agencies that were on the supply side.
Major advertising agencies have been gaining significant profits by capturing almost all of the limited advertisement spots of TV and newspapers and holding price leadership against the advertisers.
However, the demand for mass media advertising is on a downward trend due to the end of rapidly growing economy and the advent of online advertising, which is characterized by inexpensiveness of the cost compared to conventional media and interactivity which is its essence.
According to "Advertising Expenditure in Japan in 2017" by Dentsu Inc., as the graph below shows, the total advertising expenditure in Japan has remained almost unchanged in the past 12 years. The CAGR (compound annual growth rate) of so-called four mass media including newspapers, magazines, radio and TV decreased 2.4% while online advertising expenditure, which was 377.7 billion yen in 2005, continued to grow at the CAGR of 12%, and it reached 1 trillion yen in 2014 and was 1.5 trillion yen in 2017.

Advertising through promotional media such as newspaper inserts, free papers, and direct mails (DMs) also declined 2.0% in the past 12 years.
However, looking at the trend of promotional media advertising expenditure since 2012, while it is on a negative trend for newspaper inserts and DMs, it is steadily increasing for exhibitions, images, and outdoor advertising. POP production cost also increased about 7% compared with 2012. This indicates that as the cost-effectiveness awareness rises among the advertisers, utilization of promotional media for advertising using the characteristics of each medium for targeted marketing is advancing.

As consumers' tastes and behavior diversify, the need for marketing and promotion, which will lead to "increased sales" by advertisers, is expected to grow in the future.
* Sales and operating income are forecasts made by the Company for this term. Market capitalization is the latest end-of-quarter stock number × closing price on April 23, 2018. PER (forecast) and PBR (actual) are based on the closing price of April 23, 2018.
NISSEN realizes a high operating income margin due to insourcing of creative teams even though its sales and market capitalization scale are small.
However, both PER and PBR remain at low levels. Along with improving recognition, it will be necessary to show the investors more specific ways to expand the digital territory and paths to achieve sales of 10 billion yen.
1-4 Business contents
1. Business Segment
The business segments comprise "Advertising business" and "Others." (Report segment is Advertising business only.)

① Advertising business
The Company determines an industry to focus on and deals directly with client companies. It provides one-stop advertisement solutions from developing strategies/marketing for a challenge, promotion design, production/development and execution/operation by using its own service, own media and own contents.

At this point in time, the Company provides services to the following 3 industries.
≪Broadcast/communication≫
The Company provides sales promotion services to acquire new subscribers and promote viewing to the nationwide CATV stations, major communication carriers, and program supply companies.
The core of the business is the planning and production of the television program listings information magazine called "Channel Guide" (monthly magazine) for the subscribers of about 100 CATV stations nationwide, and the circulation is about 1.5 million copies per month.
The CATV stations have about 130 channels including communication satellite (CS), broadcast satellite (BS), terrestrial and terrestrial BS, and the Company needs to write articles to introduce each program as well as prepare each TV guide for 100 stations monthly and make them easy to read and accurate, through editing.
To undertake this type of work, a certain investment is necessary for system construction, and accumulation of sufficient know-how is required for the operation. These are becoming high entry barriers, and currently there is only one competitor, although there were about 5 before.
There are about 300 CATV stations across Japan. About 240 of them develop TV guides, and the Company's market share is 40 percent. It is an essential existence for the CATV stations.

In addition, the Company operates the recommendation site of video distribution service operated by a major telecommunications carrier and provides various sales promotion.
≪Housing/living≫
(Housing)
For more than 40 years, the Company is involved in sales promotion of a major housing manufacturer "Asahi Kasei Homes Co., Ltd."
The Company's services include the general design of nationwide campaigns, individual advertisement promotion planning, development of catalogs, DMs, leaflets and housing exhibition tools, event planning and management, website/video production, and space design. As for catalogues and sales tools, it also handles inventory control.
In recent years, it offers the "geo-targeting" service that sends pinpoint information to the target using geographic information and attracts customers. It also offers new digital related services such as the latest interactive theater room using 360 ° video and VR.

The latest interactive theater room by Asahi Kasei Homes "HEBEL HAUS TOKYO PRIME SQUARE"
In January 2017, Asahi Kasei Homes opened the interior and facility showroom "Design Studio Tokyo" and the studio "HEBEL HAUS TOKYO PRIME SQUARE "with the interactive theater room "THE VISION HEBEL HAUS" in Tokyo Sales Headquarters (Shinjuku NS Building, 2-4-1 Nishi Shinjuku, Shinjuku-ku, Tokyo)
Overview of "THE VISION HEBEL HAUS"
With 360° expressive image on a continuous large screen installed on the walls and ceiling in 4 directions (front, right, left, top), the visitors can experience virtual housing space of about 20 cases including new HEBEL HAUS products and the latest exhibition halls. The visitors can easily experience many exhibition halls with fun without having to actually visit.
It is based on an interactive operation in which the users move the images by moving the palm toward the screen while sitting on the sofa. Unlike virtual reality videos for which the users must wear specified goggles, all visitors can share the same experiences, so the entire family can have fun together and communicate with each other.
<The Vision HEBEL HAUS>
Theater room: Approximately 60m2, Up to 10 people can experience at the same time
Video contents: Housing space virtual experiences of new products and the latest models with 360° image, movie on storage techniques

(Home improvement stores, etc.)
The Company plans and issues free information magazine "Pacoma" (monthly magazine) for visitors of home improvement stores nationwide. The circulation is about 300,000 copies.
Main sales are generated from collecting advertisements from manufacturers and selling the magazine to the companies owning home improvement stores.
In addition to offering various sales promotion tools to the companies mainly in the lifestyle industry, the Company is also offering online promotion/PR measures through the online magazine "Pacoma" by utilizing its content capacity.
≪Medical/health≫
(Pharmaceutical companies)
The Company is planning and developing disease prevention awareness programs in which doctors appear (televised on cable TV and radio nationwide) to support the activities of pharmaceutical companies' MRs (medical information staff). About 700 programs have been produced so far.
In addition, the Company is also entrusted with planning and operation of seminars sponsored by pharmaceutical companies and academic meetings.
(Drug stores)
The Company plans and issues free information magazine "KiiTa" (quarterly magazine) for visitors of drug stores. The magazine is distributed to about 10,000 stores nationwide.
Also since December 2016, it has been releasing the free information magazine "Re: KiiTa" (quarterly magazine), targeting salespeople of drug store companies.
Both magazines are official information magazines recognized by the Japan Association of Chain Drug Stores, and sales are generated from collection of advertisements from pharmaceutical companies, etc.
≪Others≫
The Company is also actively working on increasing customers in other industries.
Particularly, it is strengthening the approach to companies that have store networks, using its customer attraction capabilities and store-front promotion planning capabilities, which are the Company's strengths gained by working with the companies that operate home improvement stores and drug stores.
Most recently, for Japanese Subway that operates the sandwich restaurant chain "SUBWAY," the Company obtained an account from a major general advertising agency. It is now handling all of their marketing measures ranging from media handling, advertising work to production of storefront tools.
The Company is offering integrated services including planning, attracting customers and purchasing promotion from planning of the concept of a campaign, customer attraction using web advertising to the development of storefront tools such as flyers, posters and menus.

Furthermore, for Japan Pizza Hut which operates the pizza shop chain "Pizza Hut," in order to expand the fans of Pizza Hut and increase the awareness of the movie "Spiderman" by taking advantage of the fun aspect and the fan base of the movie content, the Company undertook the overall designing of the campaign that included "dissemination of self-shooting images with Spiderman via social networking services, making use of augmented reality (AR)," "production of pizza box," and "operation of events for the fans," etc. and executed the plan.

② Others
NISSEN Printing Co., Ltd., the Company's subsidiary, receives orders for various types of commercial printing. It also receives orders and manufactures catalogs, pamphlets, leaflets, direct mails, posters, etc.
In addition, NISSEN Printing owns a unique machine to print and stick images on fans. They are called "Eco paper fans," for which it owns the manufacturing patent. It receives orders from various industries across the country as their "sales promotion tools" and manufactures them.
1-5 Characteristics and strengths
◎ To determine good industries to target, build a unique service model, and expand its scale
As mentioned in the history above, the Company has been developing by targeting growing and excellent industries of the era as major customers. For example, it worked with the textile industry in the 1960s, the housing industry in the 1970s, and, broadcast/communication and medical/health industries thereafter. The needs and challenges for advertising and SP are different for each industry.
The Company can provide highly unique one-stop solutions combining various approaches for attracting customers and expanding sales by grasping unique issues and needs of each industry. The Company calls it the "unique service model."
The Company is expanding the size by repeating the cycle of accumulating know-how in providing services, increasing the profitability by promoting insourcing of making core products, expanding the volume and creating profits, and
defining a new target industry and entering there.
◎ Internal system that supports the unique service model
The internal system that supports the "unique service model," which is the Company's unique characteristic, is also a major feature.
Because the Company does not involve agents with customers and all businesses are handled directly with the customers, it can directly identify issues of the industries and companies to which the customers belong.
For the identified issues, the in-house specialized teams consisting of creative directors, planners, copywriters, web designers, and video directors create optimal solutions.
In the past, the Company was mainly outsourcing. However, based on the policy of President Otsu, who is aiming at strengthening competitiveness, the Company began to develop in-house creative teams about 10 years ago. Currently it has about 30 staff who gained extensive experiences at major advertising agencies, etc.
The Company is accumulating know-how by internalizing production of the core parts for creating the optimal solution, while, for the other parts, it builds and utilizes close and strong relationships with excellent external partner companies (website production, SP production, paper, printing, logistics, etc.). It provides one-stop optimal solutions for customers.
◎ It has achieved a position with high competitive advantage in the advertisement/SP industry based on the "comprehensive capability."
Although there are various players in the advertising industry depending on the scale and specialty fields, the Company has succeeded in achieving a position with high competitive advantage through its unique "comprehensive capability."
As mentioned in the market environment section, major advertising agencies, which follow the business model with an oligopolistic control of advertisement spaces, are beginning to focus on online advertising, as the negative growth of mass media such as TV and newspapers continues. However, to maintain their corporate size, they need to efficiently earn income using the mass media. Even if there are needs of POP and SP among the customers, the major advertising agencies need to outsource the work in these fields where flexibility is required. This makes it difficult for them to gain sufficient customer satisfaction.
Meanwhile, advertising agencies specializing in the Internet have grown significantly with the expansion of online advertising and many of them have gotten listed, but they do not have analog solutions for "sales floors" such as POP and SP. They are less likely to choose internalization of producing solutions from their corporate culture.
Under these circumstances, the Company's comprehensive capability to offer a wide range of one stop solutions from planning, production to execution of advertisement/SP, including analog and digital, is extremely attractive to the customers.
The Company recognizes that being in a position to offer solutions based on "comprehensive capability," "flexibility" and "detailed service" is their strong competitive advantage in a field where it is difficult for both major advertising agencies and Internet specialized advertising agencies to provide adequate services, and it will continue to strengthen this position.