Odakyu Electric Railway Co., Ltd. - Diversification Begins in the 1960s
Diversification Begins in the 1960s
Until the mid-1960s, Odakyu's main strategic task was to expand its flagship line connecting the western gateway of Tokyo with Japan's most famous tourist resort, Hakone. However, since the mid-1960s the strategy of Odakyu has developed into a second phase, directed toward enhancing the quality of life of the residents along its lines. Odakyu's strategy in the second phase was, as is the case in other major private railway companies, to further promote affiliated divisions and subsidiaries through diversification, and thereby to reinforce the overall strength of the Odakyu Group. The Odakyu Group comprises many diversified divisions and subsidiaries, with Odakyu Electric Railway Company as its core. Their business activities are classified into seven fields: public transport, leisure, distribution, real estate, construction, information services, and overseas business.
In 1967, Odakyu completed the rebuilding of Shinjuku Terminal Building, and in 1975 it opened a branch line, the Tama Line, to Tama New Town for the commuters among the town's 300,000 inhabitants. In 1978, a direct route into all areas of Tokyo was opened by way of the agreement with the Underground Chiyoda Line, enabling trains of both companies to use the same track, dramatically enhancing the function of Odakyu in providing urban transport networks.
However, as the population of the areas along its lines has been growing rapidly, Odakyu's transport capability is increasingly unable to cope with the growing number of passengers. During the rush hours, Odakyu runs one ten-carriage train every two minutes or so, yet the trains are filled to more than twice their capacity, so that the passengers often find it difficult even to read magazines on their journey.
With an increasing number of high-tech industries and universities either newly set up or moving out from the city center, and with population expected to increase further in the areas along the Odakyu Line, the consensus of management is that the only way to solve the problem is to build a four-track line as soon as possible. Odakyu attempted to raise finance for this project in various ways such as obtaining government grants and issuing warrant and convertible bonds as well as foreign bonds in 1978, the first such attempt made by a Japanese railroad company. Having successfully secured such financing, Odakyu began to build a four-track line in the early 1990s. In 1991, Odakyu achieved the extension of its operations to Nishi-Izu, a fashionable seaside resort particularly popular among young people, and developed its business activities into the new area.
In the leisure industry, Odakyu has always had the advantage of running a railroad between Shinjuku and Fuji-Hakone. In spite of this, Odakyu was rather late in establishing a comprehensive leisure business. However, since it started its operations in the field of international travel services as an authorized International Air Transport Association (IATA) agent in 1972, and especially since it set up Odakyu Service Co., Ltd. in 1976, it has begun to develop a complete range of travel services.
In the early stages of its entry into hotel-related business, Odakyu ran mainly resort hotels. However, since it opened the Hotel Century Hyatt, in conjunction with Hyatt International of the United States in 1980, it has been progressing into the urban hotel business and has built chain hotels in many local cities. It also runs approximately 220 restaurants and coffee shops in these hotels and around the Odakyu line. Moreover, it has recently entered the field of sport and leisure facilities and the health industry. In 1979, it opened Seijo Tennis Garden, and since then it has added a great number of swimming pools, skating rinks, bowling alleys, and athletic clubs in the Tokyo and Kanagawa areas. Furthermore, it has stepped up its operations by opening Nishi-Fuji Golf Club in 1989, and Naka-Izu Club in 1990.
Odakyu's involvement in the retail business dates back to 1962, when the Odakyu Department Store was opened at the west exit of Shinjuku Station. Since the reconstruction of Odakyu Station building in 1967, it has become the jewel in the company's crown. At present, the task of the Shinjuku Odakyu Department Store is to respond to changes in the type and increasing number of customers resulting from the move of the municipal government offices into this area. It is estimated that the daytime population has increased by 25,000. Odakyu Shoji Co., Ltd, which is another significant part of the group, has moved into variety stores, supermarkets, and convenience stores. The first store was opened in Sagami-Ohno in 1963, and in the early 1990s the company had more than 38 stores. In the face of intense competition, Odakyu has achieved good results, making full use of its prime locations by stocking high-quality goods and thoroughly training employees in customer service. In 1976, the Odakyu Department Store opened a branch in Machida, Tokyo's most rapidly developing satellite town. Subsequently, it has expanded its operations in Fujisawa and has recorded steady growth in the sector.
The real estate department of a railroad company tends to focus only on the land close to its lines. In order to overcome this tendency, Odakyu Real Estate Co., Ltd. was established in 1964 with the aim of providing general real estate services and developing related businesses. Its operations cover the sale and leasing of land and properties as well as other intermediary services throughout the Kanto area.
The redevelopment plan for the area along the Odakyu Line is already under discussion by the interested parties, including local authorities looking ahead to the 21st century. The real test of the company's ability will be how effectively it can play its part in the long-term plan. Odakyu has concentrated its energies on renting out office buildings. Its leasing business has shown steady growth since its reorganization in 1975. It has utilized the open spaces in unused railroad land, station buildings, and hotels by letting them to tenants. In this field, Odakyu has shown remarkable growth, and its future prospects are highly promising.
Since about 1982, the phrase the "Era of New Media" has been frequently used in Japanese mass media. Cable television has become very popular and its future is promising, but it requires major investment in plant and equipment as well as in software development. Odakyu's management was initially cautious but eventually decided to enter into this business.
First, Odakyu set up a subsidiary, Odakyu Cable Vision Co., Ltd, in 1987, and then in 1988 it joined in the management of International Cable Network Co., Ltd. The viewers' chief motives for subscribing were the desire for clearer TV pictures, satellite transmission, and special local programs. Technical research is under way to establish a service network through which the customers can make payments automatically to participating shops from their own homes. In its effort to enhance its services, Odakyu Computer System Co., Ltd. and Odakyu CAP Agency Co, Ltd.—CAP stands for Communication And Promotion—were set up in 1989 and in 1990 respectively.
Approaching the 21st century, the most important project in the company's third phase was the enhancement of cooperation within the Group in its search for new business both in Japan and abroad.
Beginning in the second half of the 1980s, Odakyu saw overseas markets as fertile ground for new business opportunities. In 1989, the Odakyu Group opened its representative office in London, and it also established Odakyu Hawaii Corp. through the acquisition of Outrigger Hobron, Condominium Hotel, in Hawaii, which has 600 rooms. In 1990, the Odakyu Department Paris Office was renamed Odakyu France S.A.R.L., and Odakyu Tours U.S.A. Inc. was established to provide better services for overseas tourists.
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