Osaka - Thursday, December 23, 2010
Countries around the globe were effected by abnormal weather this year around July, and many countries in northern hemisphere including Japan suffered from extreme heat, as explained in the previous article Abnormal Weather Worldwide – Why and Effects. It is surprising to know from recent TV programmes in Japan that the negative effect still prevails which are likely to increase. This is about Japan but the same phenomenon may well apply to other countries worldwide as well.
1. How has the weather been since September in Japan?
The temperature has been higher than previous years in general, and in December there have been days that are much warmer and days that are much colder than normally in this time of the year. The warm days are assumed to be due to the global warming and extreme heat in summer of northern hemisphere, and the cold days are due to unusually strong cold air that occasionally covers Japan this time of the year. The drastic up and down of temperature is similar to what it was in spring, and people are having difficulties to cope with the drastic temperature fluctuation.
2. What are some specific negative effects of mid-year abnormal weather at this time of the year?
1) Increase in egg price
Egg price has gone up by almost 20% in the last few months for 2 reasons. One is the fact that many chickens have been killed with break out of pandemic bird flu earlier this year (around May) in Miyazaki prefecture and recent outbreak in Tottori prefecture. The other is the mid-year extreme heat.
The extreme heat in summer was a great stress to chickens that survived the pandemic flu outbreak as well as to humans. This made them bearing fewer eggs than usual even if they did bear (e.g. chickens that usually bear 2 eggs bear only 1 this year), and the eggs they bore are all smaller than the ones they usually bear.
Thus, extreme heat led to egg shortage and increase in egg price, as much as by 20% in the last few months, negatively impacting Christmas and Japanese New Year necessity businesses as well as the overall Japanese citizens. Christmas cake manufacturers are severely hit by the egg price increase because egg is inevitable in making cakes. Companies that make and sell “dashimaki”, a Japanese food made from egg always included in “osechi”, the Japanese traditional New Year cuisine, are also severely hit.
2) Increase in red salmon price and negative effect on local employment
The price of red salmon, another inevitable ingredient for “osechi”, also increased drastically as much as by 50%. This is because due to mid-year extreme heat the average sea temperature from September to December has been 1-2℃ higher than previous years, and therefore red salmons that prefer lower sea temperature do not come to coastal shore, the usual fishing zone.
Similar phenomenon has been pointed out for many other fisheries, all attributing to global warming; however, the case of red salmon for this year is prominent. Red salmons caught this year are only 60% of previous year level even when fishermen have been working longer hours.
Decrease in yield of red salmons has not only led to increase in price but also started to negatively affect employment of local fishing cities, where their economy and employment rely on fishery.
3. The author’s final thoughts
The TV programmes reported the above 2 cases as negative effects of mid-year extreme heat but the author feels it is also the result of the long year global warming. It is just that the phenomenon is prominent this year because of the mid-year extreme heat we had this year, and that the ingredients whose price have gone up rapidly this time of the year are of cuisines essential for winter seasonal greetings in Japan. Therefore focusing on businesses of such hard-hit winter seasonal cuisines, saying that they are all due to mid-year extreme was an effective tactic for mass media because it was timely and newsworthy, being able to attract interest and attention of audience.
From everyday shopping, the author has realized that prices of other foods are also above previous year level, higher than normal inflation rate. This is mentioned occasionally, reason being abnormal weather, and some experts estimate that the total cost of foods per household in Japan would likely to go up by as much as 50% after New Year. The true negative effects of mid-year extreme heat of 2010 are yet to come, and it would directly affect lives of people in Japan and possibly worldwide.
2010年12月23日木曜日
2010年12月19日日曜日
Japanese New Graduates Struggle Finding Jobs
Osaka – Sunday, December 19, 2010
Many Japanese mass media reported around November 21 that new graduates in Japan are struggling to get a job to start their career, and since then public and private sectors and universities have taken measures supporting as many new graduates finding a job. However, whether majority of new graduates manage to find a job by the end of March 2011 upon graduation to start working on April 1 is a question.
1. What is the usual process and timeline of recruiting new graduates?
In Japan, companies would start recruiting new graduates more than one year they start working (e.g. in autumn 2010 for new graduates who are to start working from April 2012; this is because in Japan school year starts from April), and it is a rule in Japan that on October 1 every year, companies hold a ceremony to officially give offer to the new graduates who are to start working 6 months later in April.
This means that recruiting companies and supporting universities usually switch their target of new graduate recruitment/support in October. For example, they would have been supporting job hunting of students who are to graduate in March 2011 until September 2010, but from October finish supporting them and start supporting students who are to graduate in March 2012.
2. How successful is job hunting of new graduates who should be start working in April 2011?
Many new graduates are struggling to find a job. The percentage of new graduates who were successful in officially offered a job this October was the lowest in history, 57.6%, which was minus 4.9% from last year. Approximately 410,000 students who are to graduate in March 2011 are estimated to want to find a job in private sector; however, as many as 170,000 of them have not yet found a job.
With this pace, it is quite possible that the percentage of students who managed to find a job upon graduation would be lower than the current lowest history of 91.1%, recorded in 1999.
3. What countermeasures are taken so that more new graduates can find a job?
This year, private and public sectors and universities would continue supporting students with upmost efforts who are to graduates in March 2011 after September 2010 as well, with the objective of maximizing the percentage of students who have managed to find a job by the time they graduation in March 2011.
For example, one of a leading company that provides job hunting information and services started to hosted employment fairs from December that will be held until February in 7 major cities nationwide including Tokyo, Osaka and Nagoya. Small and mid-sized companies can participate in the fairs for free. It is expected that total of 380 companies and 7800 students to participate in the fairs. It is extremely exceptional that such a large employment fairs are held this time of the year. In the fair interviewing booths are to be made to help companies give the offer on the day.
Other leading companies of the same/similar industry started a new business of introducing internship opportunities to 10,000 students in October. This will be held until March 2011 and the students will be sent as interns to workplaces such as factories of small and mid-sized companies. Such business can benefit from subsidiary of Small and Medium Enterprise Agency. 7000 yen/day will be given to an intern and 3500 yen/day will be given to a company that accepts interns. Small and Medium Enterprise Agency will also collaborate with regional association/organizations of small and mid-sized companies, and plan to send total of 10,000 students, including those who have graduated but have not managed to find a job, to small and mid-sized companies from October 2010 to March 2011.
The government has allocated with urgency total of 2.5 billion yen to make as many new graduates as possible employed, and subsidiaries are to be given to each company such as the mentioned above will from this budget. In addition, the government increased the number of universities with career counselors from 250 to 500, and introduced a system in which incentives will be given to companies that have hired people who have graduated within 3 years.
4. The author’s final thoughts
The issue is not simply about the imbalance of the number of job hunters and number of jobs available in the labour market. The issue is also about mismatch of multiple factors.
Many students who graduated 1999 – 2004 (employment ice age) could not find a job and has not been able to find a full time job even after the economy recovered in 2005, and this became a critical social issue. And with the recent worldwide recession, large companies have been holding back recruiting and hiring. So to some extent it is true that the issue attributes to decrease in number of jobs available in the labour market.
However, it is a reality that quite a few small and mid-sized companies are still short of workers. Thus, eliminating mismatch by connecting small and mid-sized companies and students has started to emerge as a new business/market for recruiting related companies. The countermeasures mentioned above are a few examples of such new businesses.
Another mismatch factor is the mismatch between the type of job the job seekers expect and the skills and competencies the hiring companies expects. This applies to job seekers who are not new graduates as well. The author would like to discuss this in one of the upcoming article.
Many Japanese mass media reported around November 21 that new graduates in Japan are struggling to get a job to start their career, and since then public and private sectors and universities have taken measures supporting as many new graduates finding a job. However, whether majority of new graduates manage to find a job by the end of March 2011 upon graduation to start working on April 1 is a question.
1. What is the usual process and timeline of recruiting new graduates?
In Japan, companies would start recruiting new graduates more than one year they start working (e.g. in autumn 2010 for new graduates who are to start working from April 2012; this is because in Japan school year starts from April), and it is a rule in Japan that on October 1 every year, companies hold a ceremony to officially give offer to the new graduates who are to start working 6 months later in April.
This means that recruiting companies and supporting universities usually switch their target of new graduate recruitment/support in October. For example, they would have been supporting job hunting of students who are to graduate in March 2011 until September 2010, but from October finish supporting them and start supporting students who are to graduate in March 2012.
2. How successful is job hunting of new graduates who should be start working in April 2011?
Many new graduates are struggling to find a job. The percentage of new graduates who were successful in officially offered a job this October was the lowest in history, 57.6%, which was minus 4.9% from last year. Approximately 410,000 students who are to graduate in March 2011 are estimated to want to find a job in private sector; however, as many as 170,000 of them have not yet found a job.
With this pace, it is quite possible that the percentage of students who managed to find a job upon graduation would be lower than the current lowest history of 91.1%, recorded in 1999.
3. What countermeasures are taken so that more new graduates can find a job?
This year, private and public sectors and universities would continue supporting students with upmost efforts who are to graduates in March 2011 after September 2010 as well, with the objective of maximizing the percentage of students who have managed to find a job by the time they graduation in March 2011.
For example, one of a leading company that provides job hunting information and services started to hosted employment fairs from December that will be held until February in 7 major cities nationwide including Tokyo, Osaka and Nagoya. Small and mid-sized companies can participate in the fairs for free. It is expected that total of 380 companies and 7800 students to participate in the fairs. It is extremely exceptional that such a large employment fairs are held this time of the year. In the fair interviewing booths are to be made to help companies give the offer on the day.
Other leading companies of the same/similar industry started a new business of introducing internship opportunities to 10,000 students in October. This will be held until March 2011 and the students will be sent as interns to workplaces such as factories of small and mid-sized companies. Such business can benefit from subsidiary of Small and Medium Enterprise Agency. 7000 yen/day will be given to an intern and 3500 yen/day will be given to a company that accepts interns. Small and Medium Enterprise Agency will also collaborate with regional association/organizations of small and mid-sized companies, and plan to send total of 10,000 students, including those who have graduated but have not managed to find a job, to small and mid-sized companies from October 2010 to March 2011.
The government has allocated with urgency total of 2.5 billion yen to make as many new graduates as possible employed, and subsidiaries are to be given to each company such as the mentioned above will from this budget. In addition, the government increased the number of universities with career counselors from 250 to 500, and introduced a system in which incentives will be given to companies that have hired people who have graduated within 3 years.
4. The author’s final thoughts
The issue is not simply about the imbalance of the number of job hunters and number of jobs available in the labour market. The issue is also about mismatch of multiple factors.
Many students who graduated 1999 – 2004 (employment ice age) could not find a job and has not been able to find a full time job even after the economy recovered in 2005, and this became a critical social issue. And with the recent worldwide recession, large companies have been holding back recruiting and hiring. So to some extent it is true that the issue attributes to decrease in number of jobs available in the labour market.
However, it is a reality that quite a few small and mid-sized companies are still short of workers. Thus, eliminating mismatch by connecting small and mid-sized companies and students has started to emerge as a new business/market for recruiting related companies. The countermeasures mentioned above are a few examples of such new businesses.
Another mismatch factor is the mismatch between the type of job the job seekers expect and the skills and competencies the hiring companies expects. This applies to job seekers who are not new graduates as well. The author would like to discuss this in one of the upcoming article.
2010年12月12日日曜日
Japanese Companies Leverage China/Asia Capital for Survival
Osaka – Sunday, December 12, 2010
A recent article by Nikkei, Japanese newspaper specialized in business and economy, introduced an interesting way in which some Japanese companies leverage China and Asia capital to survive in the turbulent global economy.
The author feels that this can be a clue to many other Japanese companies in creating their own strategy to survive in the today’s global economy, although there is a risk of outflow of technologies. It is because this is an option of out-of-the-box thinking that is not chosen by many major Japanese companies yet this can be an extremely effective one, leveraging the strength of Japan.
1. What is the recent phenomenon in which Japanese companies leverage Asian capital? Why such phenomenon started to emerge?
1) Phenomenon
It is, so to speak, “Made in Chapan (‘China’ and ‘Japan’ coined together)”, convergence of China’s capital and Japan’s technology and brand. Asia (China) capital acquires underperforming Japanese companies, hotels, consumer electronics and apparel in particular, and creates new value and business to provide to worldwide market.
2) Background
(1) China and Asia are promising, growing markets.
(2) China in particular has abundant capital.
(3) “Made in Japan” is an excellent weapon (brand) in global business yet Japanese companies have not been able to leverage it sufficiently.
(4) Not many Japanese companies are financially capable of entering Asia/China market from scratch on their own.
2. What are concrete, successful cases of “made in Chapan”?
1) Hotel
(1) Phenomenon
Among 10 hotels/real estate etc. that needs restructuring, as many as 8 are recently acquired by China and Asia funds. Such funds calculate acquisition cost on condition that they will market go China and other Asian countries i.e. market of 1.3 billion population or more, which would be far competitive price calculated by Japanese funds that calculate their acquisition cost based on only Japan domestic market. Moreover, even if they are failing companies, they are uncut diamonds in the eyes of Chinese and other Asian funds.
(2) In the case of Chikusenso Mt. Zao Resort & Spa
Chikusenso Mt. Zao Resort & Spa, located in Zao National Park in Miyagi prefecture, that had failed due to decrease in skiers in this area in the recession, was acquired by Osbert International, based in Hong Kong. The fund invested total of more than 3 billion yen to acquire and revitalized the hotel and re-opened in April this year. The fund also made effort and succeeded to start flight (first limited time) between Hong Kong and Sendai by Hong Kong Dragon Airlines.
The main target of the luxurious resort hotel with spa is the rich people of China and other countries in Asia, whose evaluation of the Japanese culture is quite high. The concept of the hotel is “Japanese modern”, and the price is over 66,000 yen per person (twin room).
2) Consumer Electronics
(1) Phenomenon
Japanese mid-sized consumer electronics makers visit everyday a long-established consumer electronics mass merchandiser that have been in the red for years, requesting to start trading with them. This is because the long-established consumer electronics mass merchandiser has the access to the distribution channel in China.
(2) In the case of Laox Co., Ltd
Laox Co., Ltd, a long-established mass merchandiser, was acquired by a China consumer electronics mass merchandiser leader last year. This opened an access to approximately 1300 stores in China, a promising and growing market, owned by the China mass merchandiser. Since then, business partners of Laox doubled or more because the partners have requested to trade with Laox, expecting to benefit from the access to China that Laox possesses in entering the promising market of China.
For this reason, Matsuzakaya, a department store in Ginza (area in Tokyo where many department stores are located) opened a Laox franchise in their department store on November 20 this year. Matsuzakaya is said to have negotiated with other companies in opening a new franchise but chose Laox with the objectives of attracting tourists from China, in addition to competitive financial requirements presented by Laox.
3) Apparel
(1) Phenomenon
Japanese long-established apparel maker acquired by a Chinese company, and expand distribution channel in China.
(2) In the case of Renown, Inc.
Renown, Inc., a Japanese long-established apparel maker, plans to open 2000 stores in China in the next 10 years, which became feasible after being acquired by the Chinese company. The strategy of the Chinese company is to penetrate the China market with high quality product made in Japan.
For this reason, the top executive of the company says that made in Japan products are of longing of Chinese customers and therefore is determined to make all Renown products made in Japan. This is not easy because of the limited equipment/production capacities in Japan. The top executive of Renown comments that this incident is a good opportunity for them to re-acknowledge their value.
To the author, the fact that Chinese companies evaluate highly of “producing in Japan” is extremely meaningful when Japanese companies shift their production to overseas (China in particular) as mentioned in many of her previous articles including "High Yen Slashes Profitability of Japanese Companies – The Reality".
A recent article by Nikkei, Japanese newspaper specialized in business and economy, introduced an interesting way in which some Japanese companies leverage China and Asia capital to survive in the turbulent global economy.
The author feels that this can be a clue to many other Japanese companies in creating their own strategy to survive in the today’s global economy, although there is a risk of outflow of technologies. It is because this is an option of out-of-the-box thinking that is not chosen by many major Japanese companies yet this can be an extremely effective one, leveraging the strength of Japan.
1. What is the recent phenomenon in which Japanese companies leverage Asian capital? Why such phenomenon started to emerge?
1) Phenomenon
It is, so to speak, “Made in Chapan (‘China’ and ‘Japan’ coined together)”, convergence of China’s capital and Japan’s technology and brand. Asia (China) capital acquires underperforming Japanese companies, hotels, consumer electronics and apparel in particular, and creates new value and business to provide to worldwide market.
2) Background
(1) China and Asia are promising, growing markets.
(2) China in particular has abundant capital.
(3) “Made in Japan” is an excellent weapon (brand) in global business yet Japanese companies have not been able to leverage it sufficiently.
(4) Not many Japanese companies are financially capable of entering Asia/China market from scratch on their own.
2. What are concrete, successful cases of “made in Chapan”?
1) Hotel
(1) Phenomenon
Among 10 hotels/real estate etc. that needs restructuring, as many as 8 are recently acquired by China and Asia funds. Such funds calculate acquisition cost on condition that they will market go China and other Asian countries i.e. market of 1.3 billion population or more, which would be far competitive price calculated by Japanese funds that calculate their acquisition cost based on only Japan domestic market. Moreover, even if they are failing companies, they are uncut diamonds in the eyes of Chinese and other Asian funds.
(2) In the case of Chikusenso Mt. Zao Resort & Spa
Chikusenso Mt. Zao Resort & Spa, located in Zao National Park in Miyagi prefecture, that had failed due to decrease in skiers in this area in the recession, was acquired by Osbert International, based in Hong Kong. The fund invested total of more than 3 billion yen to acquire and revitalized the hotel and re-opened in April this year. The fund also made effort and succeeded to start flight (first limited time) between Hong Kong and Sendai by Hong Kong Dragon Airlines.
The main target of the luxurious resort hotel with spa is the rich people of China and other countries in Asia, whose evaluation of the Japanese culture is quite high. The concept of the hotel is “Japanese modern”, and the price is over 66,000 yen per person (twin room).
2) Consumer Electronics
(1) Phenomenon
Japanese mid-sized consumer electronics makers visit everyday a long-established consumer electronics mass merchandiser that have been in the red for years, requesting to start trading with them. This is because the long-established consumer electronics mass merchandiser has the access to the distribution channel in China.
(2) In the case of Laox Co., Ltd
Laox Co., Ltd, a long-established mass merchandiser, was acquired by a China consumer electronics mass merchandiser leader last year. This opened an access to approximately 1300 stores in China, a promising and growing market, owned by the China mass merchandiser. Since then, business partners of Laox doubled or more because the partners have requested to trade with Laox, expecting to benefit from the access to China that Laox possesses in entering the promising market of China.
For this reason, Matsuzakaya, a department store in Ginza (area in Tokyo where many department stores are located) opened a Laox franchise in their department store on November 20 this year. Matsuzakaya is said to have negotiated with other companies in opening a new franchise but chose Laox with the objectives of attracting tourists from China, in addition to competitive financial requirements presented by Laox.
3) Apparel
(1) Phenomenon
Japanese long-established apparel maker acquired by a Chinese company, and expand distribution channel in China.
(2) In the case of Renown, Inc.
Renown, Inc., a Japanese long-established apparel maker, plans to open 2000 stores in China in the next 10 years, which became feasible after being acquired by the Chinese company. The strategy of the Chinese company is to penetrate the China market with high quality product made in Japan.
For this reason, the top executive of the company says that made in Japan products are of longing of Chinese customers and therefore is determined to make all Renown products made in Japan. This is not easy because of the limited equipment/production capacities in Japan. The top executive of Renown comments that this incident is a good opportunity for them to re-acknowledge their value.
To the author, the fact that Chinese companies evaluate highly of “producing in Japan” is extremely meaningful when Japanese companies shift their production to overseas (China in particular) as mentioned in many of her previous articles including "High Yen Slashes Profitability of Japanese Companies – The Reality".
2010年12月5日日曜日
Profitability Recovery of Japanese Companies Under High Yen
Osaka – Sunday, December 5, 2010
In the previous article "High Yen Slashes Profitability of Japanese Companies – The Reality" the author introduced some cases of how Japanese companies including those that are usually regarded as globally competitive have been suffering from the recent high yen.
In this article, the author would like to introduce some cases of how other companies have managed to recover their revenue and profitability despite the recent high yen.
1. How much Japanese listed companies recovered their performance in Apr-Sep 2010 despite extreme high yen?
1) Overall
The increase rate of consolidated operating profit was 2.4 times that of the previous year, which was much more than the original estimation of 70% increase from the previous year. The profit level recovered to 98% of Apr-Sep 2008 (i.e. before the worldwide economic crisis), and to 80% of Apr-Sep 2007 (i.e. the peak).
2) Specific examples
(1) Ushio, Inc.
Business of Ushio, Inc., whose business supports 3D movie boom with 3D film projector for theatres, continues to be strong even in high yen situation. They could only sell 3 products 10 years ago but their business is expected to grow as much as 7500 units, with global market share of 60%.
(2) Ricoh
Ricoh’s business in Americas that had been sluggish started to recover despite the recent high yen. They had thoroughly transferred sales know-how to the U.S. companies they had acquired, and their America business is expected to become positive soon in 2011, first time after 14 quarters.
2. How did Japanese companies manage to recover profitability despite the recent high yen?
1) Cost reduction
Primary reason for the profitability recovery is extreme cost reduction measures since the worldwide recession, which is sometimes said as practically the biggest post-war restructuring. Manufacturers drastically reduced cost (personnel etc.) last year to lower break even point by 13%. This decrease percentage is the biggest in the past 25 years (i.e. statistics is available and thus can compare).
Companies have been continuing their efforts to cut costs and improve productivity. For example, the reason for increase in Hitachi’s operating profit for Apr-Sep 2010 was increase in revenue and cost reduction (50% each).
Positive effects of such of their efforts have been conspicuous; operating profit of Japanese companies in total increased by 2.8% to reach 5.6%. The increase rate is the biggest since the economic bubble collapsed. The operating profit of 5.6% is almost 5.8% or Apr-Sep 2007, which was the peak.
2) Demand growth of emerging markets
Much of their sales and business growth came from growing demand of emerging market, Asia in particular. For example, increase of revenue of Komatsu in total was 33% when it was 58% for China. Increase of revenue of Nissan in total was 28% when it was 64% for Asia.
Some others were especially successful in business of emerging markets with launching products meeting local needs. For example, Sony developed and launched low cost flat panel TVs with limited functions in India and deprived the top market share position in India of Samsung.
3) Countermeasures to the high yen
This includes production shift to overseas as mentioned in the previous article, leveraging low cost components supplied from overseas, and owning both receivables and payables in foreign currencies.
For example, Hitachi Construction Machinery Co., Ltd. increased their production in Europe to raise their overseas production rate. Kawasaki Kisen Kaisha, Ltd. started to study accepting some portion of their receivables of their newly supplied products in USD instead of in Japanese yen. NEC separated their export-oriented semiconductor business and as a result they are no longer affected by foreign exchange fluctuation against USD. Toshiba, with similar measure, had positive effect with high yen, benefiting also with production outsourcing expansion to overseas contractors.
3. What is the outlook for the latter fiscal year of 2010?
1) Overall
Anxiety psychology proliferates among Japanese companies due to continuing high yen, termination of government’s economy stimulation incentives and slow recovery of economy of developed countries; however, there are some possible solutions of overcoming such anxiety factors. One is cultivating and harvesting the “new revenue seed” that was planted and came out in the first half of 2010. Another is flexibly adapting to external and internal environmental changes to upgrade available technologies and open/create new market.
2) Specific examples
(1) Ozu Corporation
Ozu Corporation, a leading paper distributor in Japan, started new business, operating their new factory of plants. With decreasing paper demand, they aim to benefit the recent trend of “security of foods”.
(2) NHK Spring Co., Ltd.
NHK Spring Co., Ltd started production and supply of new suspension that supports magnetic head of HDD (Hard Disk Drive). They already enjoy global market share of 45% but aim to further get ahead of their competitors with next generation products whose control accuracy has more than doubled.
In the previous article "High Yen Slashes Profitability of Japanese Companies – The Reality" the author introduced some cases of how Japanese companies including those that are usually regarded as globally competitive have been suffering from the recent high yen.
In this article, the author would like to introduce some cases of how other companies have managed to recover their revenue and profitability despite the recent high yen.
1. How much Japanese listed companies recovered their performance in Apr-Sep 2010 despite extreme high yen?
1) Overall
The increase rate of consolidated operating profit was 2.4 times that of the previous year, which was much more than the original estimation of 70% increase from the previous year. The profit level recovered to 98% of Apr-Sep 2008 (i.e. before the worldwide economic crisis), and to 80% of Apr-Sep 2007 (i.e. the peak).
2) Specific examples
(1) Ushio, Inc.
Business of Ushio, Inc., whose business supports 3D movie boom with 3D film projector for theatres, continues to be strong even in high yen situation. They could only sell 3 products 10 years ago but their business is expected to grow as much as 7500 units, with global market share of 60%.
(2) Ricoh
Ricoh’s business in Americas that had been sluggish started to recover despite the recent high yen. They had thoroughly transferred sales know-how to the U.S. companies they had acquired, and their America business is expected to become positive soon in 2011, first time after 14 quarters.
2. How did Japanese companies manage to recover profitability despite the recent high yen?
1) Cost reduction
Primary reason for the profitability recovery is extreme cost reduction measures since the worldwide recession, which is sometimes said as practically the biggest post-war restructuring. Manufacturers drastically reduced cost (personnel etc.) last year to lower break even point by 13%. This decrease percentage is the biggest in the past 25 years (i.e. statistics is available and thus can compare).
Companies have been continuing their efforts to cut costs and improve productivity. For example, the reason for increase in Hitachi’s operating profit for Apr-Sep 2010 was increase in revenue and cost reduction (50% each).
Positive effects of such of their efforts have been conspicuous; operating profit of Japanese companies in total increased by 2.8% to reach 5.6%. The increase rate is the biggest since the economic bubble collapsed. The operating profit of 5.6% is almost 5.8% or Apr-Sep 2007, which was the peak.
2) Demand growth of emerging markets
Much of their sales and business growth came from growing demand of emerging market, Asia in particular. For example, increase of revenue of Komatsu in total was 33% when it was 58% for China. Increase of revenue of Nissan in total was 28% when it was 64% for Asia.
Some others were especially successful in business of emerging markets with launching products meeting local needs. For example, Sony developed and launched low cost flat panel TVs with limited functions in India and deprived the top market share position in India of Samsung.
3) Countermeasures to the high yen
This includes production shift to overseas as mentioned in the previous article, leveraging low cost components supplied from overseas, and owning both receivables and payables in foreign currencies.
For example, Hitachi Construction Machinery Co., Ltd. increased their production in Europe to raise their overseas production rate. Kawasaki Kisen Kaisha, Ltd. started to study accepting some portion of their receivables of their newly supplied products in USD instead of in Japanese yen. NEC separated their export-oriented semiconductor business and as a result they are no longer affected by foreign exchange fluctuation against USD. Toshiba, with similar measure, had positive effect with high yen, benefiting also with production outsourcing expansion to overseas contractors.
3. What is the outlook for the latter fiscal year of 2010?
1) Overall
Anxiety psychology proliferates among Japanese companies due to continuing high yen, termination of government’s economy stimulation incentives and slow recovery of economy of developed countries; however, there are some possible solutions of overcoming such anxiety factors. One is cultivating and harvesting the “new revenue seed” that was planted and came out in the first half of 2010. Another is flexibly adapting to external and internal environmental changes to upgrade available technologies and open/create new market.
2) Specific examples
(1) Ozu Corporation
Ozu Corporation, a leading paper distributor in Japan, started new business, operating their new factory of plants. With decreasing paper demand, they aim to benefit the recent trend of “security of foods”.
(2) NHK Spring Co., Ltd.
NHK Spring Co., Ltd started production and supply of new suspension that supports magnetic head of HDD (Hard Disk Drive). They already enjoy global market share of 45% but aim to further get ahead of their competitors with next generation products whose control accuracy has more than doubled.
登録:
投稿 (Atom)