2019 Far Eastern Group Annual Strategy Meeting Chairman’s Message A New Far Eastern Era Beyond Its 70th Anniversary

Having operated for 70 years, the Far Eastern Group continues its journey to embrace a winning future. The Group can only accomplish this by planning strategies to race along the waves of dynamic trends, continue its transformation, focus on talent management, and expedite the cultivation of a new generation of Far Easterners, to build the new Far Eastern era.

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Ⅰ.The Changing Business Landscape
　　
Innovation has already become a major challenge for business operators. Companies should comply with the changing trends to engage in transformation, and the following are the six key trends:

1. Industry 4.0: The Internet of Things and Big Data are the two major technologies that drive Industry 4.0, coupled with the application of cloud computing and smart equipment to fully connect the integrated supply chain, production, and customer services, through virtual and physical integration. This is to master and analyze the end customers, drive innovation of production, services, and even business models, enabling traditional production to march toward mass customization and satisfy needs of different customer segments. For instance, each pair of shoes with different colors, each outfit with different styles, and even develop memory shoe-pads to allow different shoe sizes to enjoy comfortable experience.

2. Environmental Sustainability: With consumers’ focus on environmental issues, global brands are also more aware of eco-friendly concepts, and advocate their commitment to promoting sustainable policies. Coca Cola launched non-traditional campaigns in Belgium, stating “If You Don’t Help Us Recycle, Don’t Buy Coca Cola.” Being its supplier, Far Eastern New Century is also deemed to commit the increasing usage of recycled raw materials.

3. Transparency & Traceability: For the textile industry, more and more consumers hope to understand the impact of their purchased outfits to the environment and societies.  Therefore, the industry begins to promote transparency and traceability of its supply chains. According to the survey, 37% of 150 major fashion brands in the world have been publishing the lists of their suppliers which allow consumers to understand relevant information about the manufacturing processes. Manufacturers are responsible for the management of their supply chain, to be traceable from material to consumer in terms of product location and status, and even requesting manufacturers to protect employee benefits.

4. Protectionism: Globalization used to be the main driver of the world economy. Now, with increasing national sentiment among countries, this has resulted in the rise of protectionism. It not only affects international trade along with the emerging anti-globalization movement, but also impedes the healthy development of world economies.

5. Digital Revolution: The new technologies have pushed for digital revolution, and brought structural changes in the industry. The disruptive growth of Artificial Intelligence (AI), converged with digital technologies including Mobile, Big Data, Cloud Computing, IoT, and Blockchain has accelerated the digital transformation of the enterprise. For examples, department stores have applied AR and VR to optimize customers’ shopping experience, and the healthcare industry improves its medical accuracy via AI and Big Data.

6. Energy: To combat against climate change and exhausting resources, the world is in desperate need of more renewable, cleaner, smarter, and safer energy. However, the endeavor to develop new energy may not succeed at first. Aside from expediting on the development of new energy sources, we must strive to improve existing energy system and management through adopting innovative technologies such as AI.

Ⅱ.Winning the 2020s
1. Build Innovative Enterprises
Innovation can bring competitive advantage; however, with the evolving digitalization, it also accelerates the speed of innovation. When industrial knowledge becomes mature, imitation will follow and create a red ocean market with stiff price competition. Only with continuous innovation can a business stay at the competitive edge and remain in its leading position. In order to build capacity for continual innovation, business needs to have an innovation strategy, innovation system, and a culture for innovation.

First, one must know your own positioning in order to plan your innovation strategy for the businesses, and act upon the growth of your core market. What are the unmet customer needs? How much potential does your existing technology paradigm offer for improvement? Where can you create barriers to imitation?

In addition to creating barriers, the business should leap forward into new areas, and build up new core competences. For Far Eastern New Century, starting initially from the textile industry, with increasingly intense competition the Company leaped into the polyester fiber industry, and adopted the most advanced PTA manufacturing process, and therefore paved the foundation to be ranked among the world’s top five polyester and synthetic fiber producers. With the maturing global polyester fiber industry, Far Eastern New Century should leap to green materials, engage in recycling and bio-chemical technologies, and establish new core technology competence.

Furthermore, the perspective of traditional competition brings similar companies, industries, and products into one category (such as Coca Cola and Pepsi Cola). This will limit the possibility of innovation. If we rethink competition from a different perspective, we would have a holistic view and may find new blue ocean market. Therefore, when the Netflix CEO was asked whether to compete against Amazon, he answered: “We compete with everything you do to relax.”

2. Optimize for Both Social and Business Value
Now a company must manage total social impact, including economic, social and environmental effects. Creating a total social impact in the long run will increase total shareholder returns.

For instance, in cement industry, once considered a high energy-consuming and high pollution industry, it can manage to achieve low energy-consuming, low pollution and become more high-end and sustainable nowadays. In particular, the sustainable achievement of Asia Cement Corporation’s performance leads in the world. Asia Cement Hualien Plant was invited to share its quarry conservation efforts at the World Cement Association Conference held in Shanghai in September 2019. Members of this Association will also visit Hualien Plant in the near future to understand the efforts of Asia Cement’s commitments to environmental preservation.

Over the past 50 years, Far Eastern Group has been committed to CSR efforts. This year, the celebration of the Group’s 70th anniversary will also focus to philanthropic activities, which gesture is very well received by all.

Ⅲ.The New FE Era
Far Eastern Group has already been operating for seven decades. The next 70 years will be a new era facing new challenges. We hope that all Far Eastern employees may work together to jointly create the New FE.

1. Create the New FE Brand Image
What is brand image? Amazon CEO Jeff Bezos said: “Your brand is what other people say about you when you’re not in the room.” U. S. President Donald Trump once said: “If your business is not a brand, it is a commodity.” Former Starbucks CEO Howard Schultz expressed: “If people believe they share values with a company, they will stay loyal to the brand.” Therefore, branding is the soul of a company representing the company, its DNA and commitment to the customer. In the competitive global market, branding promotes recognition, and heightens one’s company awareness. Customers tend to engage with familiar brands and consumers tend to make purchase from familiar brands. When purchasing a product or service, customers also take into consideration the value delivered by the brand. On the other hand, good branding strategy also provides motivation and direction for the staff, and encourages staff to support with action.

Thus, businesses must consider if your target customers recognize your brand. Is your brand unique or different? Does your brand deliver a good value for the price? Do customers perceive your brand to be convenient? Do customers perceive your brand to be easily accessible? Does your brand connect with people on an emotional level? There are a lot of strong brands in the world, you immediately recognize them. Far Eastern Group spans across ten industries from food, clothing, residence, transportation, and many other areas. How many FE brands do you recognize?

Among the FE brands, logos of Far Eastern New Century, Far Eastern Department Stores, and Far EasTone Telecommunications have been changed several times, demonstrating that we can progress with time. The Group is celebrating its 70th anniversary in 2019, and we designed the 70th anniversary logo and slogan “Together for a Promising Future.” We also designed new logos for AGP Polytech USA Holdings, Inc. and other companies, to open a brand-new page. We can learn from Apple about branding, enabling every stakeholder to understand and value the brand’s vision and relevance, and willing to pay a premium for it. That is the key to success.

2. Make FEG Remarkable
In 2019, Far Eastern Group registered record high revenues and profits. Compared with world enterprises, Far Eastern Group makes the Global 500 Fortune list with commendable performance. However, we should not feel complacent about this. Looking forward, the followings are the directions that still require our joint efforts:

a. FE Digitalization: First, we should expedite FE digitalization. We should strengthen our data analytics to make accurate predictions as a reference for policy making. Second, we must break down silos to connect systems and technologies, allowing applications of new technologies throughout company divisions. In the meantime, we should review operating models and supply chains, embrace new ecosystems, and enhance collaborative partnerships with outside partners, in particular to have more in-depth and closer cooperation between group affiliates and our education institutions. Furthermore, the human resource department should also expedite to cultivate cross-function, bicultural digital talent to embrace an agile management culture.

b. FE Plus: Far Eastern needs to have continuous growth and expansion. With current business scope spanning ten major industries, the Group companies must maintain their leading positions and remain leaders in their respective industries. Furthermore, we should strategize to extend into new business scopes, such as technology-related industries, and seek new future development opportunities.

c. FE Worldwide: In recent years, our production sites span across three continents, extending into U. S. and Africa. Far Eastern Group has operating sites in Japan, U. S., and Ethiopia. Our products sell in over 140 countries. In the future, we shall expedite our global deployment, and therefore it is more important to elevate foreign language capability of our staff to be truly global.

I would urge every enterprise of Far Eastern to become a great company to fit into the following 8 major requirements:

(1) Good Products / Services
(2) A Fantastic Management Team
(3) Best in Your Class (Service and Technology)
(4) Large Market with Paying Customers
(5) Sustainable Business Model, Strong in Execution, Processes & Financial Discipline
(6) Being Agile and Adaptable
(7) Understand Big Data, AI/Analytics, Clouds, IoT, and Security
(8) Being Environmentally Friendly in addition to the natural environment that also includes society, media, and policies.

The general public admires that our Group business scope spans so many industries and we are able to disperse risk. However, “talent” is our most valuable asset. Far Eastern Group is very fortunate to have so many talented colleagues embedded with strong Far Eastern spirit. I would like to thank you all. It is your efforts and dedication that has brought us here today. We may not be able to control the outside environment. Going forward in the next seventy years, we must remain calm, strive to be strong, and focus on talent cultivation. Our educational institutions such as Yuan Ze University and Oriental Institute of Technology serve as the Group’s think tank. Lecturers and professors should go outside of the campus to connect with the trend and work along with enterprises. Staff of each company should enhance their language ability, to expedite the fostering of new-generation talents. The year of 2020 is a key milestone for the Group that I would urge everyone to exhibit on the Far Eastern spirit, work diligently to achieve a remarkable FE. #