Management Strategy

Management Strategy▶IT Strategy“Offensive” and “Defensive” DX
Creation of Digital Strategy Committeeof the Department Store and Parco, using the latest digitaltechnologies. We will find and develop new content, which
the Department Store did not provide until now. By doing
so, the Group will provide new customer value (customerexperience) and diversify revenue streams to build the basis
for “regrowth” in 2024 and beyond.

While striving to achieve “full recovery through earlyrevenue recovery” by fiscal 2023, which is the final yearof the Groupʼs current Medium-term Business Plan, wewill create a Digital Strategy Committee that creates anenvironment for and promotes “offensive digital” field
across the Group looking at “regrowth” in fiscal 2024 andbeyond to accelerate “offensive DX.”
In its activities, we will implement the following threemeasures including redefining value to be provided inour commercial model, finding and developing content,
and promoting advanced use of customer data to further
promote the DX strategies of the Department Store andParco in the Group.

(2) Provision of customer experience across the Group
using the Lifetime Service HUB
The Group integrated customer database Lifetime Service
HUB (LTS-HUB) is intended to manage and use all customer
data of each company in the Group. Parco, following theDepartment Store, finished importing its data into the HUB.
Going forward, we will provide the Groupʼs united buying
experiences and services to customers in the areas wherethe Department Store and Parco are located next to eachother, including Shinsaibashi and Nagoya. We will provide
high quality customer experiences that cater to individual
customers to achieve full recovery through early revenue
recovery.

(1) Development of the “next generation DXbusiness model”
We will develop the next generation business model,
which keeps a distance from the previous business models
Conceptual diagram of Lifetime Service HUB

Department Store
Customer data

Data mart for
Department Store(Customer profile)

Data mart for
Parco

Data mart for……………

Data mart for……………

Data mart for……………

Sales results………

Analysis

Data lake

3 Analysis function

Estimate customer preferences and values
and estimate the products, services andway of selling that meet them

1 Accumulation function

Perpetuate and retain
data of each company………

Analysis of each customer (AI) Compilation

………
………

Chat / infrastructure

4 Hub function………

(3) Strengthening of organization functions
to promote DX
The DX promotion departments of the Department Storeand others lack human resources who can plan, carry out,
and operate DX and it is urgent to strengthen the systems.
Therefore, we will strongly work on individual DX themes
by strengthening the systems actively using external humanresources through an alliance with external partners and othermeasures.
We need to develop the capabilities of individual employees
in order that the Group will work as one to promote DX in thefuture. To this end, we will introduce a development programand carry it out in all companies to improve the skills andknowledge on DX of all employees of the Group. We will define
the type of desirable DX talent and launch initiatives to have allemployees and DX specialized talents acquire necessary skills.

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The Group integrated customer DB
2 Integration function

Integrate customer data acquired by eachcompany in the Group through its
business with “actual persons” as a key

CleansingIssue of integrated ID Name-based
aggregation

Increasing information security risk due to increasingly
complex and sophisticated cyber attacks is a severe threat
in conducting business activities. Therefore, we formulated
the Groupʼs common Security Policy in July 2018 andcontinuously take security measures using the policy asguidelines at each company in the Group to minimize
such risk. In addition, in April 2020, we formulated the IT
Governance Policy and Rules as guidelines for controllinga series of activities from formulating IT strategies toimplementing them.
With regard to visualizing and improving the status ofsecurity measures, we interviewed each company using achecklist and assessed vulnerability to confirm the safetyof their websites that had a high risk of data breaches
and their systems that hold personal information, andmade improvements to promptly ensure the safety of
the websites and systems where problems were found.
In addition to continuing these efforts, we will also takemeasures to strengthen security, including investigating
the robustness of servers, strengthening monitoring, andreviewing internal rules for more appropriate information
management.

Elimination of security risk

Realization and promotion of new work styles● Removal of unpatched systems and measures to monitor and apply patches● Enhancement of the security levels of the IT organizationand employees of each company● Early detection of and measures against cyber attacks● Removal of Win 7 PCs and expansion of use of new PCs
and establishment of rules● Creation of systems and IT environment tailored toPromotion of use of cloud computing

Dissemination of IT governance and improvement of IT literacy● Promotion of shift to common cloud platform● Strengthening and expansion of the functions ofcommon cloud platform● Promotion of IT-BCP measures● Measures to deter shadow IT and internal fraud● Dissemination of IT governance, improvement of
its accuracy, and expansion of its field● Introduction of IT governance management tool

new work styles

Life stage management

Common base to acquire and use unfixeddata such as conversation information andcommunication information“Offensive”DX of operating companies
Daimaru Matsuzakaya Department Stores redefined thecompany it aims to be as a “ʻmedia commerceʼ company
that promotes sustainability and communicates content
both online and offline” in the Medium-term Business Plan.
Based on this policy, we will start to expand the businessthat uses the internet to overcome the time and placeconstraints. Specifically, we will launch a beauty (cosmetics)
OMO shopping business, create an art-focused website(digital gallery) that attracts customers, and rebuild food
EC. In addition, we will open and operate D2C malls.
Parco will promote the four pillars of its DX strategy with“foundation building centered on two core businesses
including the SC Business and the Developer Business +content business” as the basic policy of the Medium-termhome. In anticipation of telework continuing due to thedeclaration of the state of emergency and the priority
preventative measures, we will take measures such as
making our operation systems cloud-based, building theGroupʼs common integrated base for authorization, andintroducing EDR* to enable more flexible work styles.
Thereby we will achieve the same security level both insideand outside the company and employees will be able towork safely and securely anywhere.
*EDR stands for Endpoint Detection and Response

Strengthening and improvement of“defensive IT”

Customer data………

“Defensive”DX

Distribution

ParcoSales results

Business Plan. Specifically, we will increase the number of
our ID customers and centralize customer IDs (integrationof Parcoʼs online store membersʼ IDs), and actively promotecustomer exchange in entire Parco and the Group to createsynergy. Going forward, we will also build multi EC (Parcoʼsonline store and tenantsʼ EC sites) platform and create
the appeal of real digital Parco using xR technology forfurther digital shift.

In order to strengthen the security management
system, we established CSIRT* in the Company andjoined the Nippon CSIRT Association in July 2019. TheCompany works with people responsible for information
security management of the Group companies to develop
manuals in preparation for incidents while continuously
providing incident response training. By doing so, we go
on strengthening the security management system of theentire Group.
Employee education is an important element to ensure
information security. We started to provide e-learningbased education and targeted attack email training for all
employees in fiscal 2018 and continue activities to raise
the level of information security of employees througheducation and training.

In terms of operation systems, we plan to rebuild the coresystems aiming for data-driven management. We will start
to alter our course to data-based management. To begin
with, we started to build the Group common accounting
system (system renewal, etc.) in March 2021. This systembuilding is intended to “centralize financial information,”“standardize and streamline operations” and “strengthen
financial functions using digital technologies” with theaim of supporting decision-making in future-oriented
management and financial management and realizing
operation reform in finance and accounting departments.
The Group common accounting system will beintroduced to Daimaru Matsuzakaya Department Storesin fiscal 2024, and then, expanded into all companies in
the Group. After introducing the system, we will predict
and analyze using various financial and non-financial data
to realize sophisticated and prompt decision-making. We
will also rebuild other core systems to standardize andstreamline operations at the Group level.
In addition, in order to build a base that supports
the implementation of DX, the standardization of cloudenvironment, the introduction of security guidelines
and the development of rules for security check (systemvulnerability assessment) before introducing systems werecompleted. In fiscal 2021, we will continue to promote theshift to a cloud environment that enables us to digitalize
and realize our business strategies promptly and flexibly.
We have already built the Groupʼs cloud foundation thathas data connection function and job execution andmonitoring function and all systems that will be introducedin the future will be cloud based. By doing so, we will
promote the shift to cloud in terms of both hardware andsoftware. We will actively use cloud to build infrastructure
in a short time and quickly start to provide services andenter markets.
Overview of the Group common accounting system
Analysis /BI

Performance management

Accounting system
Consolidated settlement

Fund management

The Group integrated
accounting database

Document management(Electronic books maintenance)

Purchase/cost

Interface*CSIRT stands for Computer Security Incident Response Team.

In terms of infrastructure, we introduced cloud-enabled
computers and improved a communication environment
promptly to enable back-office staff to work fromDepartment StoreParcoThe Group companies

Information system

Information system

Information system

The Group common base (authorization, workflow, integrated master management)

Integrated Report 202147