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".