Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Product/Development Strategies
We will concentrate on areas of growth andcreate valuable products that will be selectedby markets worldwide.
Tsutomu Watanabe
Corporate Officers
General Division Manager, Development & Production Division

In the fiscal year ended December 31, 2023, we were embroiled in a challenging business environment in which raw materialand energy prices were soaring. Amidst these conditions, while implementing a host of measures in the areas of development,procurement, and manufacturing, we introduced a total of 19 new models (series), including the BF Series tractor and Frontier Master(FM) Series combine harvester—both in the volume zone—to the domestic and overseas markets.
In our management strategy, we have been promoting initiatives to concentrate resources on regions and products where we arestrong and on growth markets, as well as structural reforms. And, under Project Z, we will steadily put these initiatives into practicewith a sense of urgency. With regard to fundamental structural reforms, we will promote the “Optimize production” by integrating
the management of production sites, and of development by selecting and concentrating development models and reforming
development methods. This will help us to build a structure that enables us to concentrate management resources on growth markets.
As for our product strategy, we will focus on the fields of large, cutting-edge, environment, and dry fields—where significant growth isexpected—and create highly competitive, valuable products that will aid our customers in solving their problems.

Research and development system
We have built a research and development system that displays
collective power through mutual collaboration among the planning,development, production, and sales departments, and manufacture
products that meet the market needs of each country and region.
The “Product Development Strategy Committee” regularly discusses
the direction with an eye on medium-term solution of social issues
from the recent business perspective, and determines basic policies
and plans for product strategies and research and development. For
advanced technologies, a priority area, the “Advanced Technology
Strategic Committee” narrows down themes to be addressed andshares technological trends, takes a deep dive into issues, and discusses
business development that leverages the Company’s strengths.
The Iseki Basic Engineering Training Center (IETC), which is a training
facility specialized in designing technologies, dedicates itself to foster
human resources to promote frontrunner development such as
application of robotic technology and electrification. In addition, theCompany creates new value by integrating external help with theCompany’s core technologies in various forms such as joint researchand open innovations with universities and corporations.

Product Development Strategy Committee

Cooperation andation sharing
informAgriculturalPlanning■ Measures to realize fundamental structural reforms andFocus on regions, products, and growth markets, which are our strength

growth strategies● Response to large-scale farming

Overseas● Response to brand expansion● Safety and environmental responses

Common● Frontrunner development■ Structural reforms through establishment of an optimal
production system● Improve quality and earning power through selection andconcentration● Improve productivity through optimal allocation of humanresources and facilities

Fundamental structural reforms:● “Optimize production” (optimal allocation of machine types
produced and production bases, capital investment for thefuture, environmental responses, and efficiency improvement)● “Optimize development” (concentration of development
resources, and efficiency improvement through the use ofshared design)
Growth strategies:● Concentration of development capability in the priority areasof the growth markets (automation, laborsaving, and mitigationof environmental burden)● Strengthen the production system on a global basis

Research and development policy
We conduct research and development in line with the four spiritsas the engineer, upholding the mission of “contributing to society
through agricultural machinery.”

Spirits as the engineer● Market ideas● Exert all technical potential● Always being one step ahead of the competitors● Be totally dedicated to product philosophy

45

ISEKI Report 2024

needs

technology

Sales subsidiaries
Suppliers

Testing research
institutions
Universities
Corporations

Development
and production
departments┃ Joint development projects in FY2023

9 themes
1 themeResearch institutions
Universities

Project Z“Optimize development”■ Product development
JapanSales

policy trends
departments Joint research
departments
Educational systemsIETC
EmpiricalITTC
research
SpecializedDiscussion
IGTC
humanresources
MarketNew

Measures to realize fundamental structural reforms and growth strategies

Business policy

Needs of regions
and customers

The Company will concentrate resources in the growth strategies for “large, cutting-edge, environment, and dry fields” byreducing the machine types (series) and models to be developed by at least 30% through selection and concentration.
In addition, even if products have different targeted markets, technologies that support them are in common in manycases. Therefore, we will promote development optimization by reforming the develop methods that include global
design in which we apply shared design for the product body, and then design parts specifically to meet the needs ofdifferent regions. Through effective and efficient utilization of investment in research and development centered aroundthe aforementioned initiatives, we will work to improve the product margin in the in the near future with the aim of
reducing product variable expenses by at least 10%, and also strive to realize production optimization.

“Realize automation, laborsaving, and lower environmental burden in agricultural and landscaping work”
The Company will narrow down priority areas based on growth potential, etc. of markets and concentrate management
resources in the areas where its strengths can be leveraged. We will focus on research and development particularly ontechnologies related to mitigation of environmental burden such as advanced technologies for automation, laborsaving,etc., variable fertilizing technologies, and electrification.
Reduce the numbers of models and types by
30% or more, and focus on growth strategy

The Company’s characteristics in researchand development, production● Maximized product value based on technological capabilities

and intellectual property strategies● Brand power of combine harvester “JAPAN” and ricetransplanter “Sanae”● Joint research and development in collaboration with research
institutions, universities, etc.
● Strengthened collaboration with Dream Agricultural ResearchInstitute (initiatives for smart agriculture that utilize advancedtechnologies)● Development of specialized human resources in research anddevelopment and at production sites

Select &concentrate onmodels to be
developed●●Growth rate
Market scale

More efficient development & streamlined organization
Integrate
Full-scale launch of optimization manufacturing
company management● Process integration(Matsuyama &● Greater indirect efficiencyKumamoto)Development & production
structure that creates
valuable products

Improveproduct profit
margins

Large, cutting-edge, environment, and dry fields●●Common design
Enhance efficiency

Reformdevelopment
methods

Reduce variable product costs
by 10% or more to improve
profit margins in the short-term
Short-term focused measures
Across all models● Unification of standards●●

Global design*Global design: Common design for the product base and exclusive
design for those components that differ depending on the region.

ISEKI Report 202446

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Product/Development Strategies

Production system

Procurement: Strengthening supply chain management

We have five domestic production bases (Matsuyama, Kumamoto, Niigata, Shigenobu and Minamiyoshida) and three overseas bases (Indonesiaand two venture factories in China). The high-mix, low-volume production system in Japan enables us to promptly respond to diverse needs; onthe other hand, each product is manufactured at a different production base, and it is important to realize production standardization. Therefore,
we work on various initiatives to establish an optimal production system.
We are working to reduce fixed costs by promoting external production of parts and processes previously manufactured in-house, while continuing
in-house production of core technologies that have high added value and require the transmission of skills, and accumulating know-how. We haveshifted human resources to higher value-added operations by improving the productivity and enhancing and stabilizing the quality through introductionof facilities that utilize robotic and IT technologies, while responding to labor shortage through laborsaving and ensuring the safety of workers. We
have horizontally deployed systems at other bases for which we have confirmed effectiveness of their introduction, leading to overall improvement ofproductivity. In addition, we stopped in-house development and production of dryers in December 2022 and switched to purchasing and selling.
With an eye on the further expansion of the Company’s overseas business, we are promoting strengthening of systems and production transfer
at PT ISEKI INDONESIA, our global production base. Production ofriding lawn mowers for Europe, which was previously produced
at ISEKI-Matsuyama MFG. Co., Ltd. has been transferred to PT ISEKI
INDONESIA since July 2022, realizing cost reduction. Furthermore,
we expanded PT ISEKI INDONESIA by constructing a new factorybuilding in 2023 to increase its production capacity to 22,000 units,
whereby we established a system that enables production at lower
cost. The number of units produced at PT ISEKI INDONESIA in 2023
and 2024 was temporarily decreased due to production adjustments
conducted in response to the trend in the North American market.
However, we expect that the number will increase in the future as
we further transfer production of products currently manufactured in
PT ISEKI INDONESIA with strengthened production capacity
Japan and promote growth strategies of the overseas business.
We will accelerate our establishment of an optimal production system on a global basis and improve profitability.

Measures to realize fundamental structural reforms and growth strategies

Project Z“Optimize production”
While we have been promoting the establishment of an optimal production system for domestic and overseas production sites asa priority measure to enhance profitability, we will further accelerate the effort through Project Z. In July 2024, the Company plansmanagement integration through reorganization of ISEKI-Matsuyama MFG. Co., Ltd., our mother factory which manufactures tractors
and engines, and ISEKI-Kumamoto MFG. Co., Ltd. which manufactures combine harvesters. Optimal allocation of machine types andproduction bases and capital investment for the future are included in the measures under the reform. The Company will consolidate
processes that are redundant among production bases, realize reduction of stock and fixed costs through consolidation of humanresources, investments, and systems, and strengthen a structure by optimizing production and assets. In addition, we will strengthen thesystem at PT ISEKI INDONESIA to increase production and accelerate global expansion.

We have strengthened our initiatives for optimal procurement based on
central purchasing by integrating the Purchasing Department of Head
Office and procurement departments of manufacturing subsidiaries. While
overseas procurement including indirect purchasing is increasing every year,
exceeding 30% in FY2023, the Company promotes optimal procurementby considering returning procurement to Japan in regard to geopoliticalrisks such as conflicts, terrorism, and other problems, and preparing solutionplans for each region in regard to foreign exchange risks caused by theweaker yen.
The Company entered into a technical and business alliance agreementwith TAFE, which boasts the second largest share in India. In order tostrengthen price competitiveness of our products, the Company started touse parts produced by TAFE in our tractors, and will adopt them to othermachine types in the future.
By continuing to strengthen communication with suppliers, the Company
aims to avoid production loss and line stoppage risks, conduct stableproduction, and procure parts of good quality at fair prices.

┃ Percentage of procurement from overseas suppliers
PlanResults

(%)

34.5
33.2

29.2
27.7

31.4

28.8
28.8

26.6
25.0

2019

2020

25.8

2021

2022

2023

TOPICS
Automation

Development of industry’s first manned monitoring-based
robotic tractors for the 120HP class
While the labor shortage issue has become serious amid the decline in thenumber of farm workers, it is required to ensure food security and improve
food self-sufficiency. As one of the solutions to these issues, autonomous
agricultural machinery (robotic agricultural machinery) that contributes tosuper laborsaving of agricultural work has been attracting attention. For
large-sized fields in particular, expectations for large-sized-class unmanned
tractors have been growing, as they will lead to an increase in operational
efficiency through cooperative work, etc. In this market where future
expansion is expected, the Company commercialized 120HP robotic
tractors which are the largest class in Japan ahead of other companies.

Unmanned operations compliant with the“Guidelines to Ensure Safety”
Unmanned operations under manned monitoring are enabled by satisfying
the Level 2 set forth in the “Guidelines to Ensure Safety.”

Smooth automatic operations
Smooth automatic operations are realized by addressing the issue of false
detection of dust scattered by field crop operations.

Expansion to large-sized fields
The product can be used even in larger-sized fields due to the improved
communication function.

Reduction of environmental burden

Development of rice transplanters that utilize variablefertilizing technologies and map data
PT ISEKI INDONESIA
Tractors for overseas markets
ISEKI-Niigata MFG. Co., Ltd.
Rice transplanters

ISEKI-Kumamoto
MFG. Co., Ltd.
Combine harvesters

ISEKI Report 2024●

“Create robustly-structured manufacturing companies”●

Integrate human resources, investment & systems
to generate synergy through greater operational efficiency and cost
reductions
Enhance production efficiency
Effectively utilize human resources
Enhance asset efficiency
Reduce inventories
Reduce fixed costs

ISEKI-Matsuyama MFG. Co., Ltd.
Tractors and engines
ISEKI-Minamiyoshida
MFG. Co., Ltd.
Cabins47

Basic policy

ISEKI-Shigenobu
MFG. Co., Ltd.
Implements●Establish a structure for expanding production at PT ISEKI INDONESIA

There is a growing need for utilization of variable fertilizing technologies
that prevent excessive fertilizer application as a countermeasure against
climate change, in step with the progress in the data utilization associatedwith increased large-scale farming conducted by rice farmers. In addition
to variable fertilizer rice transplanters equipped with the Company’s
unique technologies, we launched map-data-linked variable fertilizer ricetransplanters that are compatible with “xarvio® FIELD MANAGER” which is a
farming management support system that utilizes AI and is promoted by
JA Zen-Noh. Through such means, the Company further strengthened thelineup of smart rice transplanters.

Reduction of fertilizer cost
The product restrains farmers from excessive or insufficient fertilizing bychanging the quantity of fertilizer based on data of the fertilizing maps.

Stabilization of crop quality
The product eliminates growth imbalances and reduces lodging by controllingsoil imbalances by curbing excessive fertilizing.

Easy operation
Anyone can easily operate the product because the map registration, which
was previously required, is no longer necessary to load maps from ISEKIAGRISUPPORT.

ISEKI Report 202448