What Differ entiates Us? production to sales, R&D, and service, as a corporate group offering a brand recognized by customers worldwide for their unique value and reliability. In other words, precisely because our share of the global automobile market is 1%, our strategy must be to create, develop and present a distinctive brand value to the world.  To date, FHI’s product strategy has been to refine the distinctive aspects of its core technology portfolio. However, we are aware that this strategy alone will be insufficient to capture the full spirit of the increasingly diverse and sophisticated values and desires of our customers. While remaining committed to improvements in technology and quality, we know we must also work to achieve progressively higher goals in all aspects of our business opera- tions, or we will be unable to provide the value that customers want. The underlying philosophy of FDR-1 is the creation of a consistent brand image from Japan to the world stage. As deflationary trends unfold internationally, there are signs that manufacturers are overly concerned with near-term develop- ments and lack a precise understanding of what customers are really thinking. For example, in the United States, the market is influenced more by sales incentives and other conditions than by the attractiveness of the products themselves. At the same time, consumers still have a deep-seated desire for the “real thing” regardless of the price, so we see a bipolarization of the market— one group of consumers is willing to pay for top quality while the Since taking office as President of FHI, I always reflect about how to best position the Subaru brand. My principal concern is clearly defining the international course of development for FHI, which accounts for 1% of the world automobile market, as realignments in the automobile industry accelerate around the world. Under FDR-1, we set the goal of becoming “a global player with a premium brand.” With this as our medium- to long-term vision, we decided to establish a strong position in our core automobile business through all phases of our operations, from Operating income declined mainly because of our proactive investments in development programs aimed at positioning the Company as “a global player with a premium brand.” Accordingly, we are convinced FHI overall is proceeding on track toward its objectives under FDR-1. Initiatives to consolidate our corporate positioning during fiscal 2003 included promotion of manage- ment system reforms, measures to enhance staff motivation and awareness, and activities to strengthen manufacturing, sales, and service capabilities in our automobile business as well as withdrawal from the bus and rail car manufacturing business. Moreover, the long-awaited introduction of our new Legacy models in May 2003 added momentum to our transformation, showing we are moving toward our goals at full speed. In fiscal 2004, as FHI celebrates the 50th anniversary of its establishment, we will clearly demonstrate the direction we are heading under FDR-1 both in Japan and overseas. Premium Value Unique to Subaru Establishing a Global Presence as a Japanese Brand Annual Report 2003 3 Fiscal 2003, ended March 31, 2003, was the first year of our Fuji Dynamic Revolution-1  (FDR-1) medium-term business plan, which runs through fiscal 2007. In fiscal 2003, Fuji Heavy Industries Ltd.’s consolidated net sales ro se to ¥1,372.3 billion, a moderate increase of 0.7% from the previous fiscal year making it the second straight year that sales have stood at the highest levels in FHI’s history Even as operating income decreased 23.7% compared with the previous fiscal year, to ¥67.5 billion, the ratio of operating income to net sales was 4.9%, exceeding our target of 4.5% for the first year of FDR-1. Net income posted a gain of 10.6% from the previous fiscal year, rising to ¥33.4 billion. 