Message from the President Mar.2007

a monthly magazine for our employee Mar.2007

An Organic Growth Strategy

Currently around 6,000 engineers work for Meitec, with growth coming mainly from new graduate hires. In fiscal year ended March 31, 2006, we hired 282 new graduates (who joined the firm on April 1, 2006), and 61 mid-career engineers (who joined between April 1, 2005 and March 31, 2006). As the hiring patterns from this year demonstrate, Meitec’s growth has been due mainly to new graduate hiring, which accounts for four to five times that of mid-career recruitment.

The market for new hires, however, is shrinking rapidly, and is changing in structure. Simply stated, the absolute number of new graduates in science and technology is poised for long-term decline. The number of science graduates has risen each year for about the last 10 years, but as the effects of the declining birthrate become apparent, along with fewer young people eager to study the sciences, within five years this number is expected to fall to below 90,000. This means that the heating up of the new tech graduate market over the last few years is not a temporary issue, and must be addressed as a structural problem. To Meitec specifically, this means that we must create a new recruitment model that will allow for sustainable growth without relying on new graduates. We have incorporated two strategies to achieve this into our Global Vision 21 business strategy.

1.Group growth strategy: The entire Meitec Group will maintain several personnel placement brands (currently the five brands of Meitec, MEITEC FIELDERS, Meitec Cast, Meitec Global Solutions, and MEITEC EXPERTS) to promote the growth of the entire group through “broadbandization of the staff placement business, and creation of a group-wide recruitment model.”

2.Mid-career recruitment enhancement strategy: Meitec will maintain mid-career recruitment capabilities at its 36 engineering centers (ECs) nationwide to strengthen recruitment in collaboration with front-line employees.

With the cooperation of Meitec, the Meitec Group, and the employees on the front line, we have begun to gradually see some positive results from these strategies. In terms of Group growth strategies, we have continued to increase personnel throughout the Group. Meitec alone has remained more or less steady for the last three years with approximately 6,000 engineers, but the staff placement business for the entire Group (the five brands plus Meitec CAE) has grown to 8,276 staff members (as of the end of September 2006), an increase of around 600 engineers. The number of Chinese engineers hired by Meitec Global Solutions has already exceeded 100, and is expected to reach 115 by the end of March 2007. We are also making steady progress with the intra-group career rotation scheme, with the number of engineers rotated from Meitec Fielders to Meitec set to soon surpass 100 staff members.

In terms of strategies to strengthen mid-career recruitment, during the current fiscal year we expect to hire more than 150 engineers, an increase of more than 100 from the previous fiscal year. At the same time, however, we anticipate that the number of new graduates joining the firm from April 2007 will decline by 60 from a year earlier. Nevertheless, with the combination of the measures from the two strategies I’ve mentioned, we expect to start the fiscal year beginning from April 2007 with a year-on-year increase in the number of engineers at both Meitec and throughout the Meitec Group.

For any company, sustainable growth is the first priority for achieving “mutual growth and prosperity” with its employees. The two growth strategies currently pursued by the Meitec Group are strategies for sustainable growth that can be achieved through organic growth. Growth realized by using the strength of capital to incorporate external business resources through M&A and other means is called “external growth,” while internal growth based on a company’s inherent strengths is “organic growth.” A company needs both types of strategy to achieve long-term, sustainable growth. To establish an organic growth model, however, I believe that first of all it’s necessary to address structural changes in the market or business environment. Just as a tree withstands fierce blizzards to gradually add growth rings and become strong, so I’d like the Meitec Group to use its strengths to build its own growth rings, and become a corporate group with strong and sturdy branches.

March, 2007