Strategy

Message from the President
Revision of Corporate Philosophy and New Commitment 
Olympus will celebrate the 100th anniversary of its founding in
2019, and we have redefined our corporate philosophy in lightof this momentous occasion. The philosophy maintains thedesire to contribute to society through our businesses that wehave fostered and built upon throughout our long history.
At the same time, it incorporates the new ideas and attitudes
that will be necessary in order to continue growing in this highly
volatile era. The redefinition of our corporate philosophy wasadvanced through a massive project that involved participationfrom more than 300 employees across the globe. This approach
was adopted with the aim of having employees root thephilosophy in their own actions, rather than having it be acreation of management handed down.
Olympus has much to pride itself on, including its employees,
products, and the value it provides to society in the form of early
diagnosis and minimally invasive therapy through its endoscope
operations, which are No. 1 in the world. However, a glance tothe future will reveal that we cannot become complacent.
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We cannot expect past successes to continue to be applicableas society and markets change. Rather, we must be able toescape from current norms and preconceptions to enact swift
action so that we can always address the most fundamental
aspects of customer needs if we hope to win out against global
competition. Moreover, as our organization grows rapidly on a
global scale, it will be crucial to share our values and behavior
expectations with employees around the world in order toremove the barriers dividing employees in different regions andadvance as a united One Olympus. It was this recognition thatinspired us to redefine our corporate philosophy.
It can be expected that a company with a firm set of values
and a clear sense of direction will produce better results andgrow more continuously than one that lacks these qualities. The
new corporate philosophy defines Our Purpose and Our Core
Values. These principles represent our promise to stakeholders.
I hope that all stakeholders, not just all employees, will recognize the commitment encapsulated in the corporate philosophy.

Our Purpose is “making people’s lives healthier,safer and more fulfilling.”
As we continue to exercise the spirit of our founders, we will also require an ability toswiftly change course founded on a receptiveness toward new ideas that are in tune withthe times and on a propensity toward quick decisions and actions. We aim to evolve
Olympus into a truly global company with a strong corporate constitution in order toachieve ongoing growth and development. Our new corporate philosophy will guide us
in this pursuit.

Hiroyuki Sasa
President and Representative Director

Operating Environment and Impact on Performance 
Looking at the macroeconomic environment from a mediumto-long-term perspective, we will see that there has been no
significant change from the initial outlook for megatrends put
forth at the time of the formulation of 16CSP. This holds true
for trends such as the growing presence of emerging countries, rising medical needs due to declining birth rates andaging populations, and growing pressure to limit medical costs
as well as for the impact of these operating environment trends
on our businesses. Nevertheless, we are witnessing changes
in the current operating environment. These changes can beseen in the enactment of the new European Union Medical
Devices Regulation; the increase in regulatory requirements for
medical device application and registration centered on
emerging countries; the stricter requirements for cleaning,
disinfection, and sterilization (reprocessing) being implemented
largely in the United States; and other factors pertaining toquality and regulatory assurance. These changes are accelerating at a pace that is exceeding all expectations.

Throughout fiscal 2018, we proceeded to address this tightening of quality and regulatory assurance requirements. We
instituted a massive shift of personnel to quality and regulatory
assurance divisions based on a top-down approach while
fundamentally revising the process of development activities torationalize this process. We thereby aimed to enhance ourability to respond to operating environment changes. In the
short term, these efforts restricted our ability to move ahead
with the development of new products, resulting in delays in
the launch of certain products and otherwise having a significant impact on our operations. As the necessary internal
systems have begun taking shape, we will be working to return
our businesses to the growth track going forward.

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Strategy

Message from the President

Medium-Term Management Plan
(For five years from fiscal 2017 to fiscal 2021)
Ideal Vision

Management Policies

Grow into a strong global player
in the medical field o be the greatest “Business to Specialist”
T
CompanyOne Olympus

Based on these policies, we will meet and exceed the expectations of all stakeholders through ongoing growth while acting asa good corporate citizen* to contribute to society by making people’s lives healthier, safer, and more fulfilling around the world.
* Olympus defines a good corporate citizen as a company that adheres to social norms, makes appropriate contributions to society,and fulfills other basic expectations as normal parts of everyday action

Management Goals*
After securing an appropriate level of financial soundness, we will constantly achieve ROE (capitalefficiency) of 15% through balanced improvements in profitability and business growth and double
the bottom EPS (earnings) over the next five years.
Capital Efficiency: ROE 15%

Profitability: Operating Margin 15%

Business Growth: EBITDA Double-digit growth

Financial Soundness: Equity Ratio 50%* Announced on March 30, 2016

Generate Management Resources
Balance-Oriented Management Emphasizing ROE
Priority Strategies of 16CSP
1. Take action to grow businesses
2. Acquire necessary management resources in atimely manner and fully leverage these resources

EBITDA

3. Advance forward-looking preparation to realize
continued growth
4. Pursue further business efficiency improvements

Growth investments (R&D, M&A, etc.)
Internal reserve enhancement

ROE

5. Enhance management on a global andGroupwide basis
6. Strengthen Quality / Regulatory assurancefunctions and internal control, promotestrict compliance

Effectively Utilize Capital and Funds

BUSINESSGROWTHAppropriate shareholder returns

CAPITALEFFICIENCY

OperatingMarginEquity Ratio
FINANCIALSOUNDNESSPROFITABILITY

Optimally Allocate Management Resources

Progress on Management Goals
FY2017(JGAAP)(IFRS)FY2018(IFRS)

ROE

19%

11%

14%

Operating Margin

10.2%

9.6%

10.3%

–16%
(¥129.8 billion)—(¥125.5 billion)+7%(¥133.9 billion)

43%

41%

45%

EBITDA
Equity Ratio

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One Olympus Report 2018

Review of 16CSP 
Performance has not quite gone as anticipated over the past
two years. Nevertheless, the Medical Business posted an
80% increase in revenue in comparison with six years ago.
This business has continued to grow steadily while driving
Companywide performance, even posting record-breaking
revenue despite its mainstay gastrointestinal endoscopes
being in the latter half of their product cycle. The strong
growth of the Medical Business has helped us achieve aroughly 30% increase in consolidated revenue, despite thecontraction of the Imaging Business.
The 16CSP may have gotten off to a slow start, but thisdoes not change the basic strategies we need to implement.
However, I regret having to state that, given the current operating environment, we currently need to prioritize addressing themore stringent quality and regulatory assurance requirements,
improving our reprocessing systems, and creating thefoundations for rationalizing the process of development activities. We therefore would like another two to three years toreach the targets set forth in 16CSP.
Revenue*
Medical Business(¥ Billion)

OthersAfter establishment of current management team

900

600

300

492.3
349.2

0

(FY)

2012

558.3

608.9

616.3

570.4

349.7

2013

2014
JGAAP

2015

2016

2017

2018
IFRS

* After exclusion of impact of transference of Information & Communication Business

Medical Business Progress and Future Policies
The Medical Business continues to function as Olympus’
growth driver. In this business, we have proceeded to implement the up-front investments required for future growth whilemoving forward with initiatives based on the priority measuresof 16CSP. We have made particular progress in the surgicaldevice field, which we recognize as being core to the growthof the Medical Business. The 4K surgical endoscopy system,
which is positioned as a strategic product, has helped us convert customers using competitors’ products to our products. In
addition, through coordination with Image Stream Medical, Inc.
(ISM), which we acquired in June 2017, we have had successin new business negotiations with several major integrated
delivery networks in North America, the largest market for the
Medical Business. Also in North America, we have been developing a system that integrates marketing, development, andmanufacturing with the aim of boosting production and improving efficiency of the continuously growing THUNDERBEAT
energy device. Looking to other regions, performance has
been exceptionally favorable in Asia and Oceania, which has
demonstrated consistent, double-digit growth driven bystrong performance in the gastrointestinal endoscope field,
the surgical device field, and the endotherapy device field.
That being said, there are still issues needing to be addressed, and we recognize that a top priority going forward
will be ensuring that new mainstay products can be launchedin all fields without further delays. I am convinced that thecourse set in our strategies for the Medical Business is not
mistaken. We will therefore be continuing this course as we
strategically allocate resources to the surgical device field to
make up for delays.

Scientific Solutions Business Progress and Future Policies
In the Scientific Solutions Business, we will advance global
structural reforms to boost efficiency and profitability.
In the life science field, we are revising our strategies basedon current conditions. The execution of government researchbudgets in developed countries is proving sluggish in this field.
Against this backdrop, we will selectively concentrate resource
allocation, changing our focus to boosting profitability rather
than pursuing the expansion of sales. In regard to our
biological microscopes, which have large market shares,
we will supply cutting-edge solutions aimed at the cancer,
neuroscience, and stem cell research markets, among others.
At the same time, we will look to cater to new needs arisingfrom the increase in digital pathological examinations stimulated by the advancement of preventive medicine and theacceleration of regenerative medicine and drug discovery
research through private-public partnerships. It is likely that

biological microscope operations will only experience limited
growth during the period of 16CSP. We will therefore be seeking to generate profits through business structure reforms.
The industrial field, meanwhile, is enjoying strong performance in all regions. However, growth fell below targets in thisfield during the first year of 16CSP as a result of poor market
conditions. Looking ahead, we will pursue profitable growth in
the industrial field by accelerating the expansion of portfolios
targeting customer segments that are anticipated to drive
growth. Specifically, we will forge ahead with the customer
segment-oriented strategies described in 16CSP amid thefavorable conditions being seen in the global market as we
pursue growth in existing businesses while simultaneously
bolstering product portfolios. We will also address new needs
in fields where we anticipate future growth, such as smart
factories, automotive inspection, and infrastructure monitoring.

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Strategy

Message from the President

Future Policies for the Imaging Business and Position as a Companywide Technology Driver
The Imaging Business, which has represented a major issue
for management, is steadily moving toward a state in which it
can continue generating operating profit as we advance themeasures of 16CSP. In fact, we were able to achieve our longheld goal of turning a profit in this business in fiscal 2017, thefirst year of 16CSP. To further entrench profitability into thisbusiness, we decided to cease operations at the Olympus
factory in Shenzhen, China, in May 2018. Overseas production
for the Imaging Business will be consolidated into the Vietnam
factory going forward, and we will also concentrate investments on this factory in order to develop production
technologies and cost control technologies along with a production system that boasts higher quality and competitiveness.
Moreover, as we explained to stakeholders in the past, theImaging Business boasts incredibly sophisticated imaging technologies as well as advanced digital and network technologies
that are a step ahead of the technologies of the Medical Business and the Scientific Solutions Business. In this business,
we have succeeded in the development of cutting-edge, highperformance image stabilization technologies and high-speed
imaging technologies that have yet to be incorporated into
endoscopes and microscopes and that eclipse those of ourcompetitors. The Imaging Business thus functions as a driver ofCompanywide technologies
by enabling us to apply thetechnologies it develops to
the Medical Business andthe Scientific Solutions Business. Currently, we havedivided our camera develop5-axis image stabilization function built into
ment staff into two teams.
body of Olympus OM-D E-M1 Mark II
One team is responsible forthe development of sophisticated camera technologies. The
other team is tasked with working together with development
teams from the Medical Business and the Scientific Solutions
Business to reduce costs. Moving forward, we will commence
full-fledged, low-cost mass production in the Medical Businessto expand our single-use device operations. The camera mass
production technologies of the Imaging Business will have an
important role to play in this undertaking.
Future initiatives in the Imaging Business will include improving
production capabilities and efficiency through the smooth transfer
of production to the Vietnam factory and boosting competitiveness through the creation of products that are appealing to
specialists. The Imaging Business will continue to contribute as a
Companywide technology driver as we advance these initiatives.

Evolution into a Truly Global Company for the Next 100 Years 
Under 16CSP, we will solidify our foundations for achieving
ongoing growth to prepare us to become a world leader in the
Medical Business and to evolve into a truly global company
going forward. Reforms to the awareness of employees will be
crucial to this evolution. Currently, around 80% of Olympus’
sales come from overseas, indicating the global nature of its

businesses. At the same time, we understand that there is asignificant disparity between the Company and what has become standard for the global market. Reforming awarenesswill require time, but we are committed to evolving into a truly
global company by entrenching this awareness and recognition and realizing improvements based thereon.

Innovation Initiatives
In October 2017, we established the Technology Innovation
Office. This move was taken based on the acknowledgmentthat investments in innovation for constantly generating newvalue for society will be absolutely essential to the continuity ofour business and to the improvement of our corporate value.
One particular focus of this office will be the acceleration of open
innovation through the development of systems for collaboratingwith external entities. Within this office, we have assembled
engineers from throughout Olympus who specialize in advanced
technologies that are competitive. This includes the inventor
who was awarded the Medal with Purple Ribbon as part of the
Cabinet Office’s Biannual Conferment of Decorations in spring2017 for the development of an endoscopy system that utilizes
the Company’s narrow band imaging (NBI) technologies. This
team will aspire to create the innovation necessary for the futureof Olympus. For example, Olympus has taken its first step
toward the provision of solutions that contribute to better surgery quality by expanding the range of information surgeons
can acquire through visual means in the operating room.
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One Olympus Report 2018

Furthermore, Image Stream Medical, Inc. (ISM), which was
acquired in June 2017, possesses technologies that instantly
integrate various images and data from operating rooms to be
deployed both inside and outside of these facilities. These
technologies can be used to create solutions that contribute tobetter surgery quality and are also innovations that Olympus
would not have been able to develop by itself, even after yearsof effort. As we advance into the future, our goal will always be
to align ourselves with the needs of the times. With this inmind, we will accelerate the evolution of our technologies,
incorporating outside technologies when appropriate, in the
pursuit of ongoing growth.
The ability to make decisive investment decisions, or to
strike when the iron is hot, so to say, will be crucial to winningout against the competition. For this reason, we plan tostrengthen our ability to generate cash flow while efficiently
allocating management resources so that we can implement
the initiatives necessary for accomplishing our objectives.
For details, please refer to “R&D Activities” on page 48.

Reinforcement of Frameworks to Target Higher Levels
An important measure in reinforcing our frameworks for sharing
values and strategies on a global basis was the transition to amatrix-style operational structure conducted in April 2015. Three
years have passed since this transition, during which we haveseen the steady entrenchment of the mind-set of the matrix styleof business operation. In addition, we have been making progressin the cross-business application of superior initiatives, successful undertakings, and other best practices, and the steadychanges occurring during this period have become palpable.
In April 2017, we instituted a new executive management team.
With choosing members for this new team, we took steps to reinforce our global management system by appointing non-Japanese
senior managers from subsidiaries in Europe and the Americas asexecutive officers. This decision was based on our realizationthat we could not compete with only Japanese people in global
positions. This ability to overcome language barriers and HR-related obstacles to actively appoint global talent to global positions
will be important and of significant meaning to Olympus as it seeks
to compete with overseas rivals as a global company. Olympus
currently employs 36,000 individuals, over 60% of whom workoverseas. Non-Japanese individuals have also been appointed tohead our compliance and legal affairs functions. In the future, wewill examine the possibility of introducing global human resource
systems that allow for talented, non-Japanese individuals to be
assigned to important positions as part of our efforts to develop abusiness base that will enable us to compete on the global stage.
Becoming a truly global company will require that we target ahigher stage as we strengthen our various systems. Therefore,
accomplishing this objective will entail reworking organizational
structures and chains of command and reporting to better
match the matrix style of business operation. In addition, we
will need to furnish a global and Groupwide management
framework that will allow for more rapid decision-making andstrategy execution coupled with more effective control of risks
pertaining to management. With the strengthening of global
and Groupwide corporate governance underpinning these
efforts, we will also seek to effectively assess and control risks
that threaten to impede the strategies of 16CSP. We will needto sufficiently examine those risks that could have a particularly
large impact on the accomplishment of our targets. However,
if we overexert ourselves in controlling smaller risks, Olympus
could lose momentum, which in turn would impact its strategies. This framework therefore incorporates general principles
on the extent to which specific risks should be controlled.
Turning now to the Medical Business, the pillar supporting our
growth, it is not enough that we only address current regulations.
Instead, we will need to strengthen our compliance systems inthis business with an eye to the regulations that could be enacted 10 years from now. We have been enhancing compliancedivisions across the globe, starting in the United States and then
expanding these efforts to other regions, and making our regulations and standards more rigorous as part of this undertaking.
Meanwhile, the Medical Affairs Office has been established topromote the acquisition and verification of medical evidence,
while the Government Affairs Office, which was formed in January 2018, is responsible for coordination with government
agencies. Nevertheless, given the central position of the Medical
Business at Olympus, we recognize that there is a need to further bolster our compliance systems and to enhance quality andregulatory assurance systems on a global basis. It will therefore
be crucial for us to view all aspects of this business, including
human resource systems, financial strategies, and compliancesystems, through the lens of global standards as we determine
the changes that need to be made. Olympus is poised to evolve
into a truly global company, and we need to seize this opportunity in order to live up to the expectations of our stakeholders.

Pursuit of Higher Corporate Value
We expect that the operating environment will undergo various
changes as we move forward. It will therefore be all the more
important for us to share and entrench Our Core Values, which
define the values we share throughout our global operations,among everyone at the Olympus Group. When every employee at
Olympus fully understands the corporate value and raison d’être of
the Company, reflecting this understanding in their work and intheir actions, we will be able to contribute to society with operational excellence and unparalleled products and services. These
contributions will in turn lead to a higher reputation and increased
performance for Olympus. Employee motivation will likely rise together with our reputation and performance, inspiring employees
to practice even higher degrees of operational excellence, which
will drive subsequent improvements in corporate value. This process will thus result in the “Spiraling Up” concept, and this is aconcept that we are passionate about creating and sustaining.
Always mindful of Our Core Values, everyone at Olympus isunited in their commitment to achieve Our Purpose: “making
people’s lives healthier, safer and more fulfilling.”
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