Citizen Watch Co., Ltd.

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Citizen Watch Co., Ltd.

Shinjuku Mitsui Building
1-1, Nishi-shinjuku 2-chome
Shinjuku-ku, Tokyo 163
Japan
(03)3342-1231
Fax: (03) 3342-1280

Public Company
Incorporated: 1930
Employees: 3,257
Sales: ¥334.41 billion (US$2.33 billion)
Stock Exchanges: Tokyo Osaka

Citizen Watch Co., Ltd., the second-largest watchmaker in Japan, and in the world, has diversified its product lines. It now manufactures and markets computer peripherals, jewelry, eyewear, industrial machine tools, and precision instruments, but making timepieces, remains its primary enterprise.

Citizen began in Tokyo in 1918 as a horological research center, the Shokosha Watch Research Laboratory. In 1924 the laboratory manufactured its first pocket watch. Six years later, the group organized itself as a corporation, Citizen Watch Company, to facilitate marketing of its products, under President Yosaburo Nakajima. The new company owed its name to Tokyo mayor Shinpei Gotoh, who named Shokosha Lab’s first timepieces Citizen watches, so that they would, in his words, be “close to the hearts of people everywhere.” In addition to watches. Citizen produced precision instruments used in their manufacture. In 1935 the company built the factory in the Tanashi area of Tokyo that remains its main production facility.

In 1936, Citizen began selling watches in Southeast Asia and the South Pacific; China also became a destination for exports. The company’s international horizons remained limited to other Asian countries until well after World War II. In fact, Citizen’s export business dried up after the outbreak of hostilities with the United States, as the Japanese economy geared itself to meet military needs. In 1941, the company began producing machine tools, a business it has retained.

After Japan’s defeat by the Allied powers in 1945, Japanese industry lay in ruins, and Citizen, along with the rest of the nation, faced the task of rebuilding. That year, Shinji Nakajima took over company leadership as president. In March 1946, less than a year later, Eiinchi Yamada assumed the post. In 1949, Citizen established a subsidiary, Citizen Trading Company, to handle domestic marketing. This move allowed the parent company to focus on manufacturing, research, and development. In 1953 Citizen entered into a joint venture with Rhythm Watch, another Japanese timepiece manufacturer, to sell the latter’s clocks.

The export market began to revive in the 1950s. In 1958, Citizen resumed exporting watches to China, and, two years later, it started selling its machine tools there. In 1960, the company entered the all-important American market by providing Bulova Watch with parts for watches to be assembled and sold in the United States. In 1962, Citizen resumed exporting watches to Southeast Asia, and, in 1965, opened a sales office in West Germany, in order to export watches to Europe.

The timepiece industry in postwar Japan was all but monopolized by four companies: K. Hattori & Company, which produced the Seiko and Pulsar brands among others; Citizen; Ricoh; and Orient. In 1965, Hattori and Citizen by themselves accounted for more than 80% of Japanese watch production. Citizen also gained prominence in Japan for several technical advancements: developing Japan’s first shock-resistant watch in 1956; marketing the nation’s first wristwatch with an alarm in 1958; and, in the late 1950s, developing the first Japanese water-resistant watch. Citizen also made a significant public relations gesture in donating 850 synchronized clocks for use in the Olympic Village at the 1964 Summer Olympics in Tokyo.

The Japanese timepiece industry hit a slump in the early 1960s, as increased competition, slack domestic demand, and rising production and personnel costs all squeezed profit margins. Ricoh and Orient gradually lost their status as watchmakers of consequence, leaving Citizen and Hattori in competition with each other. Diversification was one strategy for continued survival. In 1967, Citizen entered the gem and jewelry business, establishing a subsidiary, Citizen Jewelry, for that purpose. Citizen Jewelery later was merged into Citizen Trading Company. Citizen also placed more emphasis on developing its line of business machines.

Another logical solution to the problem of sluggish domestic demand was to expand overseas business. In the 1960s Japanese watchmakers were not the kings of the export trade that they would become 20 years later. In 1967, Switzerland—known for its high-priced luxury watches—ranked first in the world in watch production, the Soviet Union— which produced cheap, generally inferior movements for sale in developing countries—second, and Japan third. It was not until the next year that Citizen established its first overseas subsidiary, a joint venture called Citizen de Mexico, which sold and later manufactured Citizen timepieces in Mexico. This was the first time that a Japanese watchmaker founded a joint venture for making and selling watches in a foreign country. In 1970 the company set up a subsidiary in Hong Kong, Sunciti Manufacturers, to produce cases and dial plates for mechanical watches. This venture was wholly owned by Citizen and its subsidiaries. Also in that year, Citizen and Bulova formed a joint venture, Bulova-Citizen, to produce tuning-fork watches for sale in Japan. Bulova held a majority stake in the new company, making it the first foreign-owned watch manufacturer that the Japanese government had allowed to take root in its own soil.

Citizen continued to diversify and pursue the export trade in the early 1970s. In 1972 the company entered the eyewear business as import and sales agency for Christian Dior frames. The company also entered the leisure-time business that year by converting its Yodobashi factory into a bowling alley and founding another subsidiary, Citizen Kohatsu, to run it. Citizen Kohatsu also became involved in running skating rinks and tennis facilities. In 1973, Citizen founded another foreign subsidiary, Citizen Latinamerica. The next year, Citizen established Citizen Uhrenfabrik to assemble watches in West Germany, and the year after that, Hanmi Citizen Precision Industry to manufacture watch casings in South Korea. By 1978, overseas production accounted for one-fourth of the company’s total output of watches.

Nevertheless, Citizen continued second to Hattori in the 1970s, accounting for roughly 30% of Japanese watch production in a two-company industry. The American market was the ripest plum to be picked in the export trade; Citizen could not hope to match, much less surpass, its rival as long as its presence in the United States was only indirect, limited to parts that Bulova assembled and sold under its own name. Hattori’s Seiko brand was achieving name recognition in the United States, but Citizen had none. In 1975, the company established a U.S. sales subsidiary, Citizen Watch Company of America, in Los Angeles; its headquarters moved to New York City later. Citizen sharply curtailed its parts shipments to Bulova and began selling in the United States under its own name.

American sales started out small, accounting for only 10% of Citizen’s total sales in 1977. The company made significant inroads in the U.S. midpriced market with its quartz analog and multifunction digital watches, positioning itself for a run at overtaking Hattori. Citizen’s success was a major part of the overall success of the Japanese timepiece industry; Japan became the world’s second-largest watchmaking nation by 1980, boasting a 21% share of the world market and shaving Switzerland’s lead to a mere ½%. Swiss watchmakers refused to acknowledge the growing importance of electronic technology and failed to profit from it until late in the game. Citizen seemed to be on its way to carving out a comfortable sinecure within the U.S. market.

The digital watch boom that started in the mid-1970s changed the scene in the next decade. At first, the scenario seemed propitious for Citizen and Hattori. Although American semiconductor companies were the first to develop digital watch technology, they proved less than adept at exploiting it. By 1980, one-third of all watches sold in the U.S. were digital, but Fairchild Camera & Instrument, Intel, Litronix, and Motorola had all been driven out of the watch business. Texas Instruments was reeling from marketing problems. National Semiconductor was consolidating a modest niche, and venerable Timex found itself unable to get the hang of making digitals.

New players were entering the game to take advantage of this implosion. The old guard of the Far East found itself challenged by an energetic young Japanese rival, Casio Computer, and low-cost manufacturers based in Hong Kong and South Korea. All of these companies prospered by concentrating on the low-priced end of the market, producing a stream of simple, inexpensive, digital watches. These cheaper products proved popular enough to erode Citizens’s and Hattori’s market shares.

Citizen countered by launching its own line of low-priced digitals, called Vega, but ultimately decided to concentrate on taking the midprice market away from Hattori. Leadership of Citizen passed to Rokuya Yamazaki, who became president in 1981. In the 1980s Seiko became the best-selling watch brand in the United States, with Citizen ranked number two; in fact, they ranked first and second, respectively, in the world in timepiece sales and production. Yet the threat to market share from the makers of low-priced watches still had be fended off. The Japanese electronics firm Sharp joined Casio in this business. In an effort to cope with the situation, the traditional rivals joined forces to cut manufacturing costs through economies of scale. In 1985 Citizen and Hattori Seiko—the name K. Hattori & Company had assumed in 1985—entered into an agreement to supply each other with parts. Citizen would provide Seiko with hands and special driving devices and receive, in return, quartz oscillators, button batteries, springs, and other mechanical parts.

Citizen also responded to the threat by further diversification. The company decided that non-timepiece products should eventually account for half of total sales, compared to 32% in 1985. Citizen expanded its information-equipment group, the descendant of its office-machine business; in 1984, it began exporting its printers and disc drives to the United States. In 1986—the year that Citizen supassed Seiko in volume to become the world’s largest watchmaker—the company introduced a new color liquid-crystal-display television that would spearhead its increased involvement in consumer electronics. The company also strengthened its machine tool and precision instrument businesses. In 1986, it joined with the American manufacturer Perkin-Elmer to form Perkin-Elmer Citizen, a venture to produce and assemble analyzers and semiconductor processing devices in Japan. In 1987, Citizen established Citizen Systems, a research facility for developing new information equipment technology, in Los Angeles, and Citizen Manufacturing (UK) to manufacture printers in Great Britain. That same year, Michio Nakajima succeeded to the presidency.

Nakajima recognized that growth in the mature timepiece market was limited, and immediately began to pursue diversification, especially in the fast-growing computer and computer-component markets, Citizen quickly became a respected supplier of laptop-computer components and disc drives. “Citizen executives now strongly feel that... diversification is the only way for survival,” wrote a correspondent for The Japan Economic Journal, July 5, 1986. At the same time, the new products on which Citizen has pinned its hopes depend heavily on their reception in overseas markets, particularly the American market. The strength that the yen acquired relative to the U.S. dollar and other currencies in the mid-1980s has made Japanese goods more expensive to buy in the United States, threatening their market shares. It would appear that Citizen’s long-term viability has become dependent on exchange-rate fluctuations and the vagaries of international trade, an area in which politicians, rather than market forces, are operating. Making watches brought Citizen success in its first 60 years. Diversification may be the key to success in its future years.

Principal Subsidiaries

Citizen Iwate Co., Ltd.; Kawaguchiko Seimitsu Co., Ltd.; Citizen Precision Machine Co., Ltd.; Citizen Mechatronics Co., Ltd.; Sayama Precision Industries Co., Ltd.; Tama Seimitsu Co., Ltd.; Ageo Seimitsu Mfg. Co., Ltd.; Japan CBM Corporation; Tokorozawa Seimitsu Co., Ltd.; Citizen Yoshimi Co., Ltd.; Citizen Otec Co., Ltd.; Citizen Kohatsu Co., Ltd.; Premier Precision Ltd. (Hong Kong); Astar Precision Co., Ltd. (Hong Kong); Goodrington Co., Ltd. (Hong Kong); Walop Ltd. (Hong Kong); Miyota Precision Co., Ltd.; Citizen Electronics Co., Ltd.; Fuji Keiki Co., Ltd.; Cimeo Precision Co., Ltd.; Hokkaido Citizen Corporation; Tohoku Citizen Corporation; Chubu Citizen Corporation; Chugoku Citizen Corporation; Sunciti Manufacturers Ltd. (Hong Kong); Citizen Watches (H.K.) Ltd. (Hong Kong); Citizen of Korea Co., Ltd.; Citizen Latinamerica Corporation (Panama); Citizen Watch Company of America, Inc. (U.S.A.); Citizen Watch Europe G.m.b.H. (Germany); Citizen Uhrenfabrik G.m.b.H. (Germany); Citizen America Corporation (U.S.A.); Citizen Europe Ltd. (U.K.); Farbest Industries Ltd. (Hong Kong); Crown Young Industries Ltd. (Hong Kong); Wah Kong Precision (Jiangmen) Ltd. (China); Taiwan Star Precision Ltd.; Shih Chun Precision Co., Ltd. (Taiwan); Shiang Pao Precision Co., Ltd. (Taiwan); Fuji Star Co., Ltd. (Taiwan); Citizen Precision of Korea Co., Ltd.; Citizen de Mexico, S.A. de C.V.; Plasticos Citizen S.A. (Mexico); Citizen Manufactring (U.K.) Ltd.; Royal Time Citi Co., Ltd. (Thailand); Citizen Machinery Europe G.m.b.H. (Germany); Citizen Computer Peripherals G.m.b.H. (Germany); Citizen Systems Inc. (U.S.A.); CBM America Corp. (U.S.A.); Tokyo Citizen Corp.; Kansai Citizen Corp.; Citizen Watch (U.K.) Ltd.; Citizen Watches Australia Pty Ltd.; Citizen Watches New Zealand Ltd.; Citizen Watch Switzerland AG.