Is Japan a Developing Country of Sports? (Part 2)
Osaka – Sunday, March 7, 2010
In the previous article "Is Japan a Developing Country of Sports? (Part 1) possible reasons why Japan is/can be said as a developing country of sports were explained. In this article of part 2, the author would like to introduce a few examples of support and assistance from organizations to athletes recently delivered by news media, and attempt to draw a conclusion answering to the title of the article.
1. It cannot be denied that Japan is a developing country of sports.
In conclusion, it cannot e denied that Japan is a developing country of sports. The reason is that the support and assistance from the organizations to athletes to be introduced below are minority, complementing the insufficient support from the government and other public sector, and insufficient public infrastructure and systems (facilities etc.)
2. Some universities provide full support to their top class athletes to complement insufficient public support.
It is common in Japan that universities provide full support to their top class athletes. Athletes actually decided which university to go by the availability of support, including the facilities the school own, level of coach available and other “soft” support such as flexibility the school can provide to the athlete so that they can balance being a student and an athlete.
Daisuke Takahashi, bronze medalist of male figure skating of Vancouver Olympics, goes to Kansai University in Osaka, one of the few universities in Japan that own skating rink. Mao Asada, silver medalist of female figure skating of Vancouver Olympics, and Miki And, ranked 5th of female figure skating of Vancouver Olympics, go to Chukyo University in Nagoya, Aichi prefecture, another university in Japan that own skating rink. Both universities are private.
A good example of support was introduced in a recent TV programme by Chukyo University to Ms. Asada, by having staff members to keep the rink in excellent condition for her training, especially at the peak of training/practice for the Vancouver Olympics. Skating rink needs to be kept in good condition (smooth surface) by hard work of staff. Ms. Asada needed to practice intensively, starting from 6:00 in the morning (the time of her performance at the Vancouver Olympic). The staff members smoothed the skating rink surface to maintain the rink condition 6 times a day, the first maintenance before 6:00 am. Of course, similar support is provided by Kansai University, and both universities have been providing support daily to all their athletes. Such universities are minority.
3. Some companies/organizations support their top class athletes, a few providing full support, to complement insufficient public support.
A few companies and other organizations owning sports club with necessary facilities and coaches support their athletes, such as the following examples introduced in recent TV news, but they are also minority.
1) Full soft support to athlete from companies and organizations is an exception.
The hospital that Nao Kodaira works for, gives full soft support. Ms. Kodaira is a speed skater, who participated in several games in the Vancouver Olympics including team speed skating that won silver medal. She had delivered excellent result in the recent World Tournament. Recent TV news reported how she was warmly welcomed by the hospital staff members and patients when she came back from the Vancouver Olympics, and that she thanked them, showing her silver medal to patients. The news also mentioned that she will be leaving the hospital a few days later to attend the next tournament to be held abroad, and the hospital has been allowing her to focus on speed skating, not making her doing hospital work.
This kind of full support is exceptional. The reality of many athletes, even if the organization they belong to has relevant facilities, is that they work 8 hours a day and do training in the morning and after work. Some supportive organizations allow their athletes to work shorter hours and/or focus on training before tournaments.
2) Reward for exceptional result is breaking news.
Rewards from a company or an organization to their athletes for exceptional result has never been given until the recently, which turned out to be “breaking news”. TV news recently reported press conference by NIDEC SANKYO Corporation, the company Kiichiro Nagashima, silver medalist of male speed skating and Jyoji Kato, bronze medalist of male speed skating works for. In the press conference held on March 3 in which the founder and CEO of NIDEC, the parent company joined, and made announcement that Mr. Nagashima is given reward or 10 million yen and Mr. Kato 6 million yen (in addition to a few million yen reward from Japan Olympic organization), and that both of them will be promoted to positions 2 levels above their current positions as of April 1, 2010. 8 million yen, half of the total reward given to the 2 athletes, were paid from the pocket money of the CEO of NIDEC. The reward and promotion was a big surprise to the two athletes as well as the media, who reported this as breaking news immediately, and caused a big repercussion.
4. The government needs to take the lead to drive support from the public sector, making private sector to follow.
With the above exceptional examples complementing insufficient support from the private sector meaning Japan is a developing country in sports, the government need to take initiative to improve support from the public sector. This would make burden of individual athletes smaller (e.g. easier to use necessary facilities) and make private sector easier to follow to support, being able to support with less burden. Then above kind of examples could become less exceptional.
First measure is improving infrastructures and systems, especially facilities. Next measure is financial and other resource support, including minor sports especially Paralympics, which currently winners (medalists) are not rewarded at all, although this issue may depend on whether athletes are defined/positioned as professional or amateur.
Such measures would drive “soft” mental support, winning attention from the media and the general public, and as a result, making Japan a “developed country” of sports.
2010年3月7日日曜日
2010年3月6日土曜日
Is Japan a Developing Country of Sports? (Part 1)
Osaka – Saturday, March 6, 2010
The title of this article is from a statement of Hiroyasu Shimizu, the gold medalist of Nagano Olympic male 500m speed skating. Mr. Shimizu said that Japan is a developing country of sports, which was introduced in a recent article of one of the Japanese popular newspaper. This has caused a big repercussion, being mentioned in many other Japanese media. Mr. Shimizu had won silver and bronze medals in other winter Olympics but was could not participate in the Vancouver Olympics so he watched the whole Olympic Games with reporters. And on March 5 he announced in a press conference that he will finish his playing career at the end of this season.
The primary reason that Japan is/might be a “developing country” in sport is that assistance, in particular financial, is not sufficiently given to athletes, according to the newspaper article and a brief discussion among the panelists in a recent TV programme, together with some other reasons.
1. “Hard” support is not sufficient from the government and other organization compared with other developed countries.
The biggest reason is the insufficiency of “hard” support and assistance, especially financial, from the government and other public administration. Also most companies that athletes belong to are unable to sufficiently support athletes, especially in the recent severe economy, to complement it.
1) Budget allocated by the government is insufficient.
Budget allocated by the Japanese government for sports is much smaller than many other developed countries of America, Europe and Asia. According to the data introduced in the TV programme, the largest budget allocated is Germany. Japan’s budget is below one-tenth of Germany, and much less than that of Korea.
A panelist pointed out that simple comparison of the data is inappropriate because the figure for Japan is only of MEXT (Ministry of Education, Culture, Sports, Science and Technology) that is responsible for Olympics but not for Paralympics, which falls under the responsibility of MHLW (Ministry of Health, Labour and Welfare. Even such point is considered, the panelists agreed that financial assistance from the government is not sufficient and it is highly desired that budget is allocated strategically, under the concept of “selection and focus” similarly to corporate strategy.
2) Sports system is poorly-resourced and necessary facilities are insufficient.
Many sports need facilities and equipments such as skating rink, swimming pool and athletic stadium, but they are insufficient, or rather, simply unavailable for some sports. The most prominent is unavailability of skating rink. This was emphasized by Shizuka Arakawa, the female figure skating gold medalist for Torino Olympics, after winning the gold medal, mentioning how the existing rinks had/has been closed, and was mentioned in many media.
3) Few companies/organizations are capable of supporting athletes, especially in the current business environment.
Only a few companies/organizations can support athletes, and less and less can continue to support. Most Japanese athletes benefit from support from schools and/or facilities of the public when they are student, and after graduating, they manage to continue being athletes with support from the company/organization they belong to. However, companies/organizations that are capable to support are extremely limited from availability of resources. What is more, with the recent downturn in economy, many of them has been closing the sports club they had been owning and managing to support athletes, including those with tradition, high performance/reputation and top-class athletes.
As a result, many athletes in Japan have difficulty in making a living and continuing to play sports as athletes meaning obtaining resources (e.g. financial for training and taking part in tournaments). They usually manage by part time jobs.
2.“Soft” support is also insufficient compared to other developed countries.
“Soft”, mental support is also insufficient compared to other developed countries.
1) General public pay attention to sports only during Olympics and other international tournaments.
The whole country pays attention to sports only when Olympic Games, World Cup and other international tournaments are held. This is mentioned by Mr. Shimizu and other top-class athletes, which may attribute to how the media deliver information to the general public, including the timing and coverage to some extent.
In addition, some sports do not at all win attention of the mass media and general public. A good example mentioned by the panelists is sports of Paralympics, which is quite true; there is almost no media coverage on Paralympics and the general public is not really aware of it. The author feels that there are many other minor sports in Japan whose situation and reason are quite similar that deserve attention.
2) Sport is not recognized as a highly “cultural activity”.
When people in Japan are asked which of the two, enjoying arts/paintings and playing golf, is more “cultural”, many people would say the former is. This is mentioned in the discussion of the TV programme, although definition of culture is rather ambiguous and diverse. Whether Japanese people in general value highly of enjoying arts/paintings or not is a question to the author, especially comparing with people from other countries with rich traditional culture in this field, but she fully understands what the panelists meant. This kind of recognition also might be one reason for the fact that general public pay attention only during Olympics and other international tournaments.
In the next article, a few examples of support and assistance from organizations to athletes recently delivered by news media will be introduced.
The title of this article is from a statement of Hiroyasu Shimizu, the gold medalist of Nagano Olympic male 500m speed skating. Mr. Shimizu said that Japan is a developing country of sports, which was introduced in a recent article of one of the Japanese popular newspaper. This has caused a big repercussion, being mentioned in many other Japanese media. Mr. Shimizu had won silver and bronze medals in other winter Olympics but was could not participate in the Vancouver Olympics so he watched the whole Olympic Games with reporters. And on March 5 he announced in a press conference that he will finish his playing career at the end of this season.
The primary reason that Japan is/might be a “developing country” in sport is that assistance, in particular financial, is not sufficiently given to athletes, according to the newspaper article and a brief discussion among the panelists in a recent TV programme, together with some other reasons.
1. “Hard” support is not sufficient from the government and other organization compared with other developed countries.
The biggest reason is the insufficiency of “hard” support and assistance, especially financial, from the government and other public administration. Also most companies that athletes belong to are unable to sufficiently support athletes, especially in the recent severe economy, to complement it.
1) Budget allocated by the government is insufficient.
Budget allocated by the Japanese government for sports is much smaller than many other developed countries of America, Europe and Asia. According to the data introduced in the TV programme, the largest budget allocated is Germany. Japan’s budget is below one-tenth of Germany, and much less than that of Korea.
A panelist pointed out that simple comparison of the data is inappropriate because the figure for Japan is only of MEXT (Ministry of Education, Culture, Sports, Science and Technology) that is responsible for Olympics but not for Paralympics, which falls under the responsibility of MHLW (Ministry of Health, Labour and Welfare. Even such point is considered, the panelists agreed that financial assistance from the government is not sufficient and it is highly desired that budget is allocated strategically, under the concept of “selection and focus” similarly to corporate strategy.
2) Sports system is poorly-resourced and necessary facilities are insufficient.
Many sports need facilities and equipments such as skating rink, swimming pool and athletic stadium, but they are insufficient, or rather, simply unavailable for some sports. The most prominent is unavailability of skating rink. This was emphasized by Shizuka Arakawa, the female figure skating gold medalist for Torino Olympics, after winning the gold medal, mentioning how the existing rinks had/has been closed, and was mentioned in many media.
3) Few companies/organizations are capable of supporting athletes, especially in the current business environment.
Only a few companies/organizations can support athletes, and less and less can continue to support. Most Japanese athletes benefit from support from schools and/or facilities of the public when they are student, and after graduating, they manage to continue being athletes with support from the company/organization they belong to. However, companies/organizations that are capable to support are extremely limited from availability of resources. What is more, with the recent downturn in economy, many of them has been closing the sports club they had been owning and managing to support athletes, including those with tradition, high performance/reputation and top-class athletes.
As a result, many athletes in Japan have difficulty in making a living and continuing to play sports as athletes meaning obtaining resources (e.g. financial for training and taking part in tournaments). They usually manage by part time jobs.
2.“Soft” support is also insufficient compared to other developed countries.
“Soft”, mental support is also insufficient compared to other developed countries.
1) General public pay attention to sports only during Olympics and other international tournaments.
The whole country pays attention to sports only when Olympic Games, World Cup and other international tournaments are held. This is mentioned by Mr. Shimizu and other top-class athletes, which may attribute to how the media deliver information to the general public, including the timing and coverage to some extent.
In addition, some sports do not at all win attention of the mass media and general public. A good example mentioned by the panelists is sports of Paralympics, which is quite true; there is almost no media coverage on Paralympics and the general public is not really aware of it. The author feels that there are many other minor sports in Japan whose situation and reason are quite similar that deserve attention.
2) Sport is not recognized as a highly “cultural activity”.
When people in Japan are asked which of the two, enjoying arts/paintings and playing golf, is more “cultural”, many people would say the former is. This is mentioned in the discussion of the TV programme, although definition of culture is rather ambiguous and diverse. Whether Japanese people in general value highly of enjoying arts/paintings or not is a question to the author, especially comparing with people from other countries with rich traditional culture in this field, but she fully understands what the panelists meant. This kind of recognition also might be one reason for the fact that general public pay attention only during Olympics and other international tournaments.
In the next article, a few examples of support and assistance from organizations to athletes recently delivered by news media will be introduced.
2010年3月1日月曜日
Will Doll’s Festival Celebration Be Passed On?
Osaka – Monday, March １, 2010
In Japan, families with girls celebrate March 3rd is a day to wish for their growth and happiness. Families with girls display a set of hina dolls at home and make offerings of white sake and hina-arare, (rice crackers). It is believed hina dolls protect girls from bad luck.
1. What is the Doll’s Festival and how is it celebrated?
In Japan, families with girls celebrate March 3rd is a day to wish for their growth and happiness. Families with girls display a set of hina dolls at home and make offerings of white sake and hina-arare, (rice crackers). It is believed hina dolls protect girls from bad luck.
1. What is the Doll’s Festival and how is it celebrated?
This family event originally began in the Edo era and is referred to as the Doll's Festival because families of girls display a set of dolls representing the emperor, empress, their servants, miniature furniture, and so forth, on a five or seven-tiered stand, like the one shown in the photograph. Cerebration also accompanies the Doll’s Festival foods including vinegared rice with thin strips of egg, pieces of raw fish, vegetables and crab meat arranged on top and diamond-shaped coloured rice cake (as in the photo) in addition to white sake and hina-arare. There is also the Doll’s Festival song as well.
2. What are the related events and lores?
It is often said that ancient people transferred their sins onto the dolls and threw them in rivers. This event is called Nagashi-bina, in which dolls are floated down rivers to wash away bad luck. In Katsuura City, Chiba Prefecture, more than 10 thousand dolls are displayed during the festival. A hina parade featuring children dressed like hina dolls is also staged.
In addition, it is often said that the set of dolls need to be put away immediately after March 3rd otherwise the girl will not be able get married. There does not seem to be a logical relationship between the timing of putting away the dolls and whether the girls get married or stay single (or timing of getting married). What they try to imply is that in traditional ancient Japan, girls brought up in a family with sloppy lifestyle (e.g. lazy to put away seasonal things such as the Hina dolls in a timely manner) will not easily welcomed as a bride.
3. What is the reality today?
Similarly to other traditional ceremonies, less family is celebrating the Doll’s Festival as it used to be. This might be because people simply cannot afford to buy set of dolls and/or have no space to display in their house. Or people simply do not find importance of celebrating such a tradition.
Also, Japanese females now have much wider range of options to choose from (thus some are stuck to choose the best choice for them) and they are mostly free from stereotyped marriage and housewife. This is good; however, it is possible that this is one reason for low birthrate, along with weak economy and tough labour market leading to anxiety in economic independence of individuals, economic burden of raising children and poor social infrastructure for working mothers.
Sublime concept “wish for growth and happiness or girls” of the Doll’s Festival and the belief that “hina dolls protect girls from bad luck” remain the same regardless of the era but the definition of happiness and luck seem to be going through change society in which we live in and values of people changes. Similarly to keeping to and succeeding philosophy of the company to next generation but transforming/evolving the organization, strategy and methodology of realizing philosophy, the author feel that essence off the tradition of the ceremony is to be maintained and passed down to our posterities.
2. What are the related events and lores?
It is often said that ancient people transferred their sins onto the dolls and threw them in rivers. This event is called Nagashi-bina, in which dolls are floated down rivers to wash away bad luck. In Katsuura City, Chiba Prefecture, more than 10 thousand dolls are displayed during the festival. A hina parade featuring children dressed like hina dolls is also staged.
In addition, it is often said that the set of dolls need to be put away immediately after March 3rd otherwise the girl will not be able get married. There does not seem to be a logical relationship between the timing of putting away the dolls and whether the girls get married or stay single (or timing of getting married). What they try to imply is that in traditional ancient Japan, girls brought up in a family with sloppy lifestyle (e.g. lazy to put away seasonal things such as the Hina dolls in a timely manner) will not easily welcomed as a bride.
3. What is the reality today?
Similarly to other traditional ceremonies, less family is celebrating the Doll’s Festival as it used to be. This might be because people simply cannot afford to buy set of dolls and/or have no space to display in their house. Or people simply do not find importance of celebrating such a tradition.
Also, Japanese females now have much wider range of options to choose from (thus some are stuck to choose the best choice for them) and they are mostly free from stereotyped marriage and housewife. This is good; however, it is possible that this is one reason for low birthrate, along with weak economy and tough labour market leading to anxiety in economic independence of individuals, economic burden of raising children and poor social infrastructure for working mothers.
Sublime concept “wish for growth and happiness or girls” of the Doll’s Festival and the belief that “hina dolls protect girls from bad luck” remain the same regardless of the era but the definition of happiness and luck seem to be going through change society in which we live in and values of people changes. Similarly to keeping to and succeeding philosophy of the company to next generation but transforming/evolving the organization, strategy and methodology of realizing philosophy, the author feel that essence off the tradition of the ceremony is to be maintained and passed down to our posterities.
2010年2月14日日曜日
How Japan Can Cope With Decreasing Labour Force?
Osaka – Sunday, February 14, 2010
Nikkei, specialized in economy/business and politics, reported on February 12 that lavour force* for 2009 was less than 60% of the total population over 15 years old for the first time after Word War II. This trend is prominent compared with other countries worldwide, and could well become a negative factor for economic growth.
1. What is the trend of Japan’s labour force, compared with other countries?
Japan’s labour force trend is quite different from those of other countries.
1) Japan’s Labour force has been on the decline in the aging society.
Japan’s labour force has once increased during high economic growth then started to decrease. The arrival of the aging society has been recognized for quite a long time and the effect has been prominent in the last 5-10 years, especially in the last few years. Labour force declined for 2 consecutive years to become 59.9% in 2009, the lowest since 1953, when statistics are available for comparison.
2) Only Japan’s labour force has been on the decline.
According to comparison with statistics of ILO (International Labour Organization), labour force of major countries for 2009 varies from country to country and some are less than that of Japan, but Japan is the only country that has been on the decline. Labour force of Western Europe such as France and Germany was 59.1%, 65.0% for the U.S. and 73.7% for China.
Although Western Europe was below Japan, none of these countries worldwide has been on the decline like Japan. For 2009, the U.S. is expected to increase by 0.4%, China to increase by 1.0% and Western Europe by 0.1%. However, according to MIC (Ministry of Internal Affairs and Communications), Japan’s labour force for 2009 was 66.17 million, which is decrease by 0.5% from 2008, and that it has decreased 2 consecutive years.
2. What is the outlook of Japan’s labour force?
The outlook of Japan’s labour force differs between ILO and the Japanese government. The Japanese government estimates that number of workers increase attributing to their employment policies and therefore the labour force remains at 59%. However, ILO estimates that it will decrease to 56.3% by 2020.
3. What is the reason for consecutive decrease in Japan’s labour force?
There are several reasons for Japan's consecutive decrease in its labour force.
1) Baby boomer generation has been retiring.
The fact that baby boomers has been reaching the age of retirement (60 years old) in the aging society is the biggest factor for decrease in labour force.
2) Less young people manage to get a job.
In the recent tough job market, less young people are successful in getting their job. According to recent reports, many people to graduate in March 2010 are still struggling with job hunting, when in time of stronger economy and job market many of them are usually offered a job by autumn, about 6 months before their graduation. Nikkei also points out that with such a tough job market, more young people give up even starting their job hunting. Nikkei and other news media also reported recently that some young people started to seek job outside Japan, such as in the U.S. and Asia.
4. What are possible ways to overcome negative impact of decrease in labour force on the Japanese economy?
In short, it is making diverse people entering job market, in addition to economic growth meaning activating job market. Possible solutions are as below.
1) Promote retired people to continue working.
Official retirement age is 60 in many companies, and government has started to request companies to re-hire employees reaching retirement age. This would contribute to leveraging their full-fledge expertise and know-how.
2) Promote women to work after marriage and have children.
Japan is behind other developed countries in this Diversity & Inclusion issue although they have started to initiate. They can further learn best practices from other countries and implement measures meeting situation, manners and customs etc. of Japan while changing the total system and infrastructure of the society. Some topics include day-care centre, child-care leave system, and work sharing to name a few. Of course, change in everyone’s mindset is vital.
3) Obtain help of talents/workforce from abroad.
Obtaining manpower from abroad is another solution. Being an island country with history of 200 years national isolation, contrary to countries such the U.S. that are rather open and proactive in accepting talents/workers from abroad, Japan has been behind in this field. Japan how has started to have talents/workers from Asia (e.g. Indonesia, China) to make up for shortage in workers of healthcare (caregiver) and agriculture (farmers) that are extremely critical. But these measure as rather “reactive” measures.
The author feels that Japan would need to take more “proactive” measure to attract talents/workforce with long-term strategy, with learning from other countries, including smaller countries such as Singapore, Finland and Columbia that successfully took corporate strategy approach. They positioned themselves carefully to develop vision and strategy and successfully implemented, such as to become country strong in medical, welfare, IT, environment etc. and focused on investing and attracting talents/workforce/capital from around the globe in that particular industry, while improving systems and infrastructures of total society aligning with the total strategy.
After all, this issue is all about how to make Japan an attractive place to invest and do business in, and making it competitive in the global economy.
* Labour Force (from Nikkei, edited and translated by the author)
Labour force is sum of employed (employees in companies/organizations and as business owners) and unemployed (people who are hunting for a job). This is one of the metrics showing economic poser of a country. People who have retired, given up job hunting, full-time housewife and students not include in the job market are excluded in labour force.
Nikkei, specialized in economy/business and politics, reported on February 12 that lavour force* for 2009 was less than 60% of the total population over 15 years old for the first time after Word War II. This trend is prominent compared with other countries worldwide, and could well become a negative factor for economic growth.
1. What is the trend of Japan’s labour force, compared with other countries?
Japan’s labour force trend is quite different from those of other countries.
1) Japan’s Labour force has been on the decline in the aging society.
Japan’s labour force has once increased during high economic growth then started to decrease. The arrival of the aging society has been recognized for quite a long time and the effect has been prominent in the last 5-10 years, especially in the last few years. Labour force declined for 2 consecutive years to become 59.9% in 2009, the lowest since 1953, when statistics are available for comparison.
2) Only Japan’s labour force has been on the decline.
According to comparison with statistics of ILO (International Labour Organization), labour force of major countries for 2009 varies from country to country and some are less than that of Japan, but Japan is the only country that has been on the decline. Labour force of Western Europe such as France and Germany was 59.1%, 65.0% for the U.S. and 73.7% for China.
Although Western Europe was below Japan, none of these countries worldwide has been on the decline like Japan. For 2009, the U.S. is expected to increase by 0.4%, China to increase by 1.0% and Western Europe by 0.1%. However, according to MIC (Ministry of Internal Affairs and Communications), Japan’s labour force for 2009 was 66.17 million, which is decrease by 0.5% from 2008, and that it has decreased 2 consecutive years.
2. What is the outlook of Japan’s labour force?
The outlook of Japan’s labour force differs between ILO and the Japanese government. The Japanese government estimates that number of workers increase attributing to their employment policies and therefore the labour force remains at 59%. However, ILO estimates that it will decrease to 56.3% by 2020.
3. What is the reason for consecutive decrease in Japan’s labour force?
There are several reasons for Japan's consecutive decrease in its labour force.
1) Baby boomer generation has been retiring.
The fact that baby boomers has been reaching the age of retirement (60 years old) in the aging society is the biggest factor for decrease in labour force.
2) Less young people manage to get a job.
In the recent tough job market, less young people are successful in getting their job. According to recent reports, many people to graduate in March 2010 are still struggling with job hunting, when in time of stronger economy and job market many of them are usually offered a job by autumn, about 6 months before their graduation. Nikkei also points out that with such a tough job market, more young people give up even starting their job hunting. Nikkei and other news media also reported recently that some young people started to seek job outside Japan, such as in the U.S. and Asia.
4. What are possible ways to overcome negative impact of decrease in labour force on the Japanese economy?
In short, it is making diverse people entering job market, in addition to economic growth meaning activating job market. Possible solutions are as below.
1) Promote retired people to continue working.
Official retirement age is 60 in many companies, and government has started to request companies to re-hire employees reaching retirement age. This would contribute to leveraging their full-fledge expertise and know-how.
2) Promote women to work after marriage and have children.
Japan is behind other developed countries in this Diversity & Inclusion issue although they have started to initiate. They can further learn best practices from other countries and implement measures meeting situation, manners and customs etc. of Japan while changing the total system and infrastructure of the society. Some topics include day-care centre, child-care leave system, and work sharing to name a few. Of course, change in everyone’s mindset is vital.
3) Obtain help of talents/workforce from abroad.
Obtaining manpower from abroad is another solution. Being an island country with history of 200 years national isolation, contrary to countries such the U.S. that are rather open and proactive in accepting talents/workers from abroad, Japan has been behind in this field. Japan how has started to have talents/workers from Asia (e.g. Indonesia, China) to make up for shortage in workers of healthcare (caregiver) and agriculture (farmers) that are extremely critical. But these measure as rather “reactive” measures.
The author feels that Japan would need to take more “proactive” measure to attract talents/workforce with long-term strategy, with learning from other countries, including smaller countries such as Singapore, Finland and Columbia that successfully took corporate strategy approach. They positioned themselves carefully to develop vision and strategy and successfully implemented, such as to become country strong in medical, welfare, IT, environment etc. and focused on investing and attracting talents/workforce/capital from around the globe in that particular industry, while improving systems and infrastructures of total society aligning with the total strategy.
After all, this issue is all about how to make Japan an attractive place to invest and do business in, and making it competitive in the global economy.
* Labour Force (from Nikkei, edited and translated by the author)
Labour force is sum of employed (employees in companies/organizations and as business owners) and unemployed (people who are hunting for a job). This is one of the metrics showing economic poser of a country. People who have retired, given up job hunting, full-time housewife and students not include in the job market are excluded in labour force.
2010年2月7日日曜日
Toyota’s Additional Recall of Prius
Osaka – Sunday, February 7, 2010
Nikkei, specialized in economy/business and politics, reported on February 5 that Toyota decided to perform recall its hybrid vehicle of Prius in the U.S. and Japan totaling 270,000 cars due to brake problem. Toyota will soon officially report to MLIT (Ministry of Land, Infrastructure, Transport and Tourism) of Japan and Department of Transportation of the U.S., and to officially announce recall in Japan in a few days. Nikkei also reported on February 7 that Toyota decided to recall Prius sold to approximately 60 other countries and regions totaling 30,000 cars. The new Prius has been launched aggressively in emerging countries and therefore the number of countries and regions is that the new Prius are sold is 1-1/2 times that of the older Prius.
There had been over 70 claims from Japanese customers that under certain situation brakes of Prius does not function as expected, and Toyota is to revise control software, the root cause. Toyota is now investigating whether similar problem in other hybrid vehicles or not. In addition, Toyota also had started recall of other models such as Corolla in the U.S. due to accelerator pedal problem, which resulted in recall of 4,450,000 million worldwide.
1. How and why Toyota finally decided to perform recall of Prius?
Mr. Akio Toyota, Toyota’s president discussed over phone on February with Mr. Lahoud, Secretary of Transportation of the U.S., in which he clarified that Toyota will put safety measures as its first priority. Toyota’s stance had been that brake problem is not of the structural defect; however, it finally decided to perform recall from comprehensive judgment of impact on many factors including financial performance and brand.
The Prius that is to be recalled was launched in May 2009. Improvements have already made for those produced from January 2010 thus 170,000 cars marketed in Japan and 100,000 cars marketed to the U.S. will be recalled. Toyota also is thinking of starting to recall and/or voluntary recall in other countries and regions.
2. What is the problem and how recall is to be performed?
It is that brake does not function as expected under certain circumstances attributing to trouble in control software of ABS (Anti-block Brake System) that is designed to minimize skidding when road is slippery after rain etc. The software will be revised at Toyota’s dealers.
Other hybrid vehicles such as SAI and Lexus HS250h launched after the new Prius also adopts the same brake system. Toyota may well decide to recall the control software for these models, too.
3. How the brake problem came into light?
Toyota had some claim from a few customers in the autumn of 2009, and started to investigate in earnest then the claim soared in the end of the year. At the press conference held on February 4, Toyota emphasized that the reason for realizing and coming up with countermeasures took time is “sufficient time was required to investigate root cause, and they did not mean to hide claims they had from customers”.
4. What is the possible negative effect of the additional recall?
With additional recall of total of 4,450,000 cars worldwide attributing to accelerator pedal problem, following are a just a few possible negative effects on Toyota.
1) Deterioration in Toyota brand and its reputation
Toyota’s reputation and brand as “role model of high quality product manufacturer with extreme high productivity” is likely to go down. Toyota’s continuous improvement for LEAN production of high quality products had been studied and implemented as role model in other companies of various industries such as Panasonic (for V-shaped recovery) and production division of a pharmaceutical giant to name a few. With recent worldwide recall due to quality problem, its reputation and brand that have been built over so many years would have get negatively effected, which Tobak recently discussed this in his blog article “Can Toyota Avoid Brand Disaster?” (2010), and many readers left comments.
2) Negative effect on EV car sales
Prius is mostly sold in Japan as the image leader model that drives its environment /EV car strategy. Prius recall is surely to have negative effect on sales.
3) Further be behind in financial performance recovery
With negative effect of Prius recall, Toyota’s bottom line may remain in red, and with negative effect to its sales, its may further delay in recovery compared to its competitors.
Toyota is already behind recovering its financial performance, as mentioned in the previous article Japanese Manufactures Drastically Recovering with External Demand, and the additional Prius recall may well make Toyota further delay in recovering its financial performance. According to Nikkei’s article on February 5, Toyota announced on February 4 that its consolidated bottom line (GAAP) for fiscal year ending March 2010 is expected to be 80 billion yen (vs. -436.9 billion yen for previous year), even though it was originally expected to be -200 billion yen, attributing to automobile sales recovery and cost reduction. However, this estimation does not include negative effect of Prius recall.
Sales is expected to be 18.5 trillion yen which is -10% from previous year but is +500 billion yean from original estimation. Consolidated sales unit have been increased by 150,000 units from the original plan to 7.18 million units.
Toyota is to declare 170 – 180 billion yen for worldwide recall cost attributing to accelerating pedal problem, which is the reason that operating profit is expected to be -20 billion yen although it is to improve by 330 billion yen from the original plan. It is by reduction in corporate tax and earnings from dividend that Toyota expects to return to black for the bottom line.
5. What is the biggest challenge for Toyota?
Toyota, that has become the largest automobile maker in the world by drastic globalization, faces challenge of combining globalization and quality assurance. The following are the risks that Toyota has in performing recalls, all of which are about this challenge.
1) Recall system has not been established in all countries and regions.
Although most of the accelerating pedal and brake problem recalls are to be done in western countries, recalls are also to be done in the Middle East and Latin Americas as well. In some cases in these countries, recall system has not been established in such countries, and therefore Toyota needs to be flexible in performing smooth recalls.
2) Relationship with Toyota and software learning level are not uniform worldwide.
For both recalls software will be revised at Toyota’s dealers, which means relationship with Toyota and of software learning level of local dealer staff are key, but both varies from country/region to country/region. Therefore, Toyota needs to investigate method of software distribution and announcement to customers meeting local situation and needs, and compose manuals accordingly. With globalization, much countermeasures and procedures are required to fulfill smooth recall.
3) Risk also lies in component procurement.
With worldwide sales doubling in 10 years at 2007 (at the peak) to 8.43 million units, Toyota’s business partners of suppliers also diversified, meaning higher risk in high quality components to assure high quality. In fact, some experts point out that one of the root cause of problem since last autumn lies in difficulty in quality control under such situation.
6. What Toyota has already done as countermeasure?
Toyota already established a global quality committee led by President Toyota, being fully aware of the difficulty of embedding DNA of “quality first” mindset and culture in all parts of such a large global organization. Toyota is to challenge combining globalization and high quality, the requirement to be competitive in globalizing business environment, and recover its brand, reputation and financial performance. President Toyota clarified his stance of continuing with its global strategy of “local production with high local content”.
References:-
Tobak, Steve (2009) Can Toyota Avoid Brand Disaster?
http://blogs.bnet.com/ceo/?p=3745
Nikkei, specialized in economy/business and politics, reported on February 5 that Toyota decided to perform recall its hybrid vehicle of Prius in the U.S. and Japan totaling 270,000 cars due to brake problem. Toyota will soon officially report to MLIT (Ministry of Land, Infrastructure, Transport and Tourism) of Japan and Department of Transportation of the U.S., and to officially announce recall in Japan in a few days. Nikkei also reported on February 7 that Toyota decided to recall Prius sold to approximately 60 other countries and regions totaling 30,000 cars. The new Prius has been launched aggressively in emerging countries and therefore the number of countries and regions is that the new Prius are sold is 1-1/2 times that of the older Prius.
There had been over 70 claims from Japanese customers that under certain situation brakes of Prius does not function as expected, and Toyota is to revise control software, the root cause. Toyota is now investigating whether similar problem in other hybrid vehicles or not. In addition, Toyota also had started recall of other models such as Corolla in the U.S. due to accelerator pedal problem, which resulted in recall of 4,450,000 million worldwide.
1. How and why Toyota finally decided to perform recall of Prius?
Mr. Akio Toyota, Toyota’s president discussed over phone on February with Mr. Lahoud, Secretary of Transportation of the U.S., in which he clarified that Toyota will put safety measures as its first priority. Toyota’s stance had been that brake problem is not of the structural defect; however, it finally decided to perform recall from comprehensive judgment of impact on many factors including financial performance and brand.
The Prius that is to be recalled was launched in May 2009. Improvements have already made for those produced from January 2010 thus 170,000 cars marketed in Japan and 100,000 cars marketed to the U.S. will be recalled. Toyota also is thinking of starting to recall and/or voluntary recall in other countries and regions.
2. What is the problem and how recall is to be performed?
It is that brake does not function as expected under certain circumstances attributing to trouble in control software of ABS (Anti-block Brake System) that is designed to minimize skidding when road is slippery after rain etc. The software will be revised at Toyota’s dealers.
Other hybrid vehicles such as SAI and Lexus HS250h launched after the new Prius also adopts the same brake system. Toyota may well decide to recall the control software for these models, too.
3. How the brake problem came into light?
Toyota had some claim from a few customers in the autumn of 2009, and started to investigate in earnest then the claim soared in the end of the year. At the press conference held on February 4, Toyota emphasized that the reason for realizing and coming up with countermeasures took time is “sufficient time was required to investigate root cause, and they did not mean to hide claims they had from customers”.
4. What is the possible negative effect of the additional recall?
With additional recall of total of 4,450,000 cars worldwide attributing to accelerator pedal problem, following are a just a few possible negative effects on Toyota.
1) Deterioration in Toyota brand and its reputation
Toyota’s reputation and brand as “role model of high quality product manufacturer with extreme high productivity” is likely to go down. Toyota’s continuous improvement for LEAN production of high quality products had been studied and implemented as role model in other companies of various industries such as Panasonic (for V-shaped recovery) and production division of a pharmaceutical giant to name a few. With recent worldwide recall due to quality problem, its reputation and brand that have been built over so many years would have get negatively effected, which Tobak recently discussed this in his blog article “Can Toyota Avoid Brand Disaster?” (2010), and many readers left comments.
2) Negative effect on EV car sales
Prius is mostly sold in Japan as the image leader model that drives its environment /EV car strategy. Prius recall is surely to have negative effect on sales.
3) Further be behind in financial performance recovery
With negative effect of Prius recall, Toyota’s bottom line may remain in red, and with negative effect to its sales, its may further delay in recovery compared to its competitors.
Toyota is already behind recovering its financial performance, as mentioned in the previous article Japanese Manufactures Drastically Recovering with External Demand, and the additional Prius recall may well make Toyota further delay in recovering its financial performance. According to Nikkei’s article on February 5, Toyota announced on February 4 that its consolidated bottom line (GAAP) for fiscal year ending March 2010 is expected to be 80 billion yen (vs. -436.9 billion yen for previous year), even though it was originally expected to be -200 billion yen, attributing to automobile sales recovery and cost reduction. However, this estimation does not include negative effect of Prius recall.
Sales is expected to be 18.5 trillion yen which is -10% from previous year but is +500 billion yean from original estimation. Consolidated sales unit have been increased by 150,000 units from the original plan to 7.18 million units.
Toyota is to declare 170 – 180 billion yen for worldwide recall cost attributing to accelerating pedal problem, which is the reason that operating profit is expected to be -20 billion yen although it is to improve by 330 billion yen from the original plan. It is by reduction in corporate tax and earnings from dividend that Toyota expects to return to black for the bottom line.
5. What is the biggest challenge for Toyota?
Toyota, that has become the largest automobile maker in the world by drastic globalization, faces challenge of combining globalization and quality assurance. The following are the risks that Toyota has in performing recalls, all of which are about this challenge.
1) Recall system has not been established in all countries and regions.
Although most of the accelerating pedal and brake problem recalls are to be done in western countries, recalls are also to be done in the Middle East and Latin Americas as well. In some cases in these countries, recall system has not been established in such countries, and therefore Toyota needs to be flexible in performing smooth recalls.
2) Relationship with Toyota and software learning level are not uniform worldwide.
For both recalls software will be revised at Toyota’s dealers, which means relationship with Toyota and of software learning level of local dealer staff are key, but both varies from country/region to country/region. Therefore, Toyota needs to investigate method of software distribution and announcement to customers meeting local situation and needs, and compose manuals accordingly. With globalization, much countermeasures and procedures are required to fulfill smooth recall.
3) Risk also lies in component procurement.
With worldwide sales doubling in 10 years at 2007 (at the peak) to 8.43 million units, Toyota’s business partners of suppliers also diversified, meaning higher risk in high quality components to assure high quality. In fact, some experts point out that one of the root cause of problem since last autumn lies in difficulty in quality control under such situation.
6. What Toyota has already done as countermeasure?
Toyota already established a global quality committee led by President Toyota, being fully aware of the difficulty of embedding DNA of “quality first” mindset and culture in all parts of such a large global organization. Toyota is to challenge combining globalization and high quality, the requirement to be competitive in globalizing business environment, and recover its brand, reputation and financial performance. President Toyota clarified his stance of continuing with its global strategy of “local production with high local content”.
References:-
Tobak, Steve (2009) Can Toyota Avoid Brand Disaster?
http://blogs.bnet.com/ceo/?p=3745
2010年1月30日土曜日
Japanese Manufactures Drastically Recovering with External Demand
Osaka – Saturday, January 30, 2010
Nikkei, specialized in economy/business and politics, reported on January 28 that financial performance of many major Japanese manufacturers have started to recover drastically driven by external demand. It seems that Sony’s consolidated operational profit has gone back to black by 1000 billion yen after 5 quarters for October – December 2009. Honda also seems to double its consolidated operating profit for the same period from the previous quarter of July – September 2009. Ongoing revenue improvement attributes to changing to profit structure more optimized for generating profit by fixed cost reduction and productivity efficiency improvement, plus increase in external demand with worldwide economy recovery.
Better Profit Generation with Cost Reduction
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Revenue (billion yen) / Operating Revenue for Previous Year (billion yen) / Factors
Sony / Approx. 100 / -17.9 / Cost reduction. TV and game business recovering
Honda / 120 - 170 / 102.4 / Strong fuel efficient car business in India and Thailand. Japan business getting stronger as well.
Toshiba / Approx. 10 / -158.8 / Improvement in fixed cost and recovery in semiconductor business.
Canon* / 92.1 / 35.8 / Recovering in worldwide camera sales. Expense compressed.
Fuji Film Holdings / Approx. 5 / 1.2 / Improvement in LCD film and business machine business.
TDK / More than 11 / -5.1 / Strong hard disk related business.
Murata Manufacturing Company / Approx. 11 / -3 / Demand increase in electronic components for PC etc.
Note: For October – December 2009. Canon’s data is of announcement, others is of Nikkei estimation.
Sony drastically improved its game and LCD TV business that were in a slump. PS (Play Station) 3 that had reduced manufacturing cost made a big hit with positive effect of price reduction in the U.S. which contributed to returning to black after 4 quarters. LCD TV sales are now strong in the U.S., Japan and China. Job cuts and site integration contributed to improving operating profit and loss to zero level. However, operating profit improvement that had once been estimated to be 20 billion yen for fiscal year ending March 2010 is expected to be limited. This is because there are anxieties such as restructuring expense to accumulate toward the end of March 2010, and uncertainties/risks such as high yen.
Honda is improving its financial performance driven by growth in the emerging market. Fuel efficient small and medium size car business has become strong in Asia such as India and Thailand, and cost reduction measures such as enhancing local content contributed to positive effect. As a result, Honda’s consolidated operating profit for October – December 2009 seems to have doubled from July – September 2009 to 120 – 170 billion yen.
Honda produced approximately 890,000 cars worldwide October – December 2009, which is increase by 80,000 from July – September. Honda’s bicycle business is also strong in emerging market in particular. Operating profit is estimated to reach 190 billion yen for fiscal year ending March 2010, but it is possible that it reaches more than 300 billion yen.
Companies such as Hitachi is benefiting from worldwide automobile sales recovery, which is decreasing its operating loss of automotive equipment business. Hitachi’s flat panel TV business is also improving. As a result, Hitachi’s consolidated operating profit seems to recover reaching 100 billion yen, which is much more than the original plan of 20 billion yen.
Although there are anxieties and uncertainties such as high yen and domestic economy plunging again, it is expected that revenue of major manufacturers continues to improve driven by external demand. Canon announced its financial performance for fiscal year ending December 2009 on January 27, 2010, in which it estimated that consolidated operating profit for fiscal year ending December 2010 is to reach 330 billion yen, which is +52% from previous year. This is due to continuation of strong sales of single-lens reflex camera, which is of high profitability, especially in China.
It is a pity that Toyota is not one of the manufacturers that is drastically recovering its financial performance, with recent recalls.
Nikkei, specialized in economy/business and politics, reported on January 28 that financial performance of many major Japanese manufacturers have started to recover drastically driven by external demand. It seems that Sony’s consolidated operational profit has gone back to black by 1000 billion yen after 5 quarters for October – December 2009. Honda also seems to double its consolidated operating profit for the same period from the previous quarter of July – September 2009. Ongoing revenue improvement attributes to changing to profit structure more optimized for generating profit by fixed cost reduction and productivity efficiency improvement, plus increase in external demand with worldwide economy recovery.
Better Profit Generation with Cost Reduction
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Revenue (billion yen) / Operating Revenue for Previous Year (billion yen) / Factors
Sony / Approx. 100 / -17.9 / Cost reduction. TV and game business recovering
Honda / 120 - 170 / 102.4 / Strong fuel efficient car business in India and Thailand. Japan business getting stronger as well.
Toshiba / Approx. 10 / -158.8 / Improvement in fixed cost and recovery in semiconductor business.
Canon* / 92.1 / 35.8 / Recovering in worldwide camera sales. Expense compressed.
Fuji Film Holdings / Approx. 5 / 1.2 / Improvement in LCD film and business machine business.
TDK / More than 11 / -5.1 / Strong hard disk related business.
Murata Manufacturing Company / Approx. 11 / -3 / Demand increase in electronic components for PC etc.
Note: For October – December 2009. Canon’s data is of announcement, others is of Nikkei estimation.
Sony drastically improved its game and LCD TV business that were in a slump. PS (Play Station) 3 that had reduced manufacturing cost made a big hit with positive effect of price reduction in the U.S. which contributed to returning to black after 4 quarters. LCD TV sales are now strong in the U.S., Japan and China. Job cuts and site integration contributed to improving operating profit and loss to zero level. However, operating profit improvement that had once been estimated to be 20 billion yen for fiscal year ending March 2010 is expected to be limited. This is because there are anxieties such as restructuring expense to accumulate toward the end of March 2010, and uncertainties/risks such as high yen.
Honda is improving its financial performance driven by growth in the emerging market. Fuel efficient small and medium size car business has become strong in Asia such as India and Thailand, and cost reduction measures such as enhancing local content contributed to positive effect. As a result, Honda’s consolidated operating profit for October – December 2009 seems to have doubled from July – September 2009 to 120 – 170 billion yen.
Honda produced approximately 890,000 cars worldwide October – December 2009, which is increase by 80,000 from July – September. Honda’s bicycle business is also strong in emerging market in particular. Operating profit is estimated to reach 190 billion yen for fiscal year ending March 2010, but it is possible that it reaches more than 300 billion yen.
Companies such as Hitachi is benefiting from worldwide automobile sales recovery, which is decreasing its operating loss of automotive equipment business. Hitachi’s flat panel TV business is also improving. As a result, Hitachi’s consolidated operating profit seems to recover reaching 100 billion yen, which is much more than the original plan of 20 billion yen.
Although there are anxieties and uncertainties such as high yen and domestic economy plunging again, it is expected that revenue of major manufacturers continues to improve driven by external demand. Canon announced its financial performance for fiscal year ending December 2009 on January 27, 2010, in which it estimated that consolidated operating profit for fiscal year ending December 2010 is to reach 330 billion yen, which is +52% from previous year. This is due to continuation of strong sales of single-lens reflex camera, which is of high profitability, especially in China.
It is a pity that Toyota is not one of the manufacturers that is drastically recovering its financial performance, with recent recalls.
2010年1月24日日曜日
China Business Drives Financial Recovery of Japanese Companies
Sunday, January 24, 2010 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on January 23 that according to the outlook of financial performance for fiscal year ending March 2010, China business is to be the driver for many automobile and machinery manufacturing companies. For Nissan and Komatsu, 40%-50% of consolidated operating profit is estimated to be generated from China business and profit by region for China is to be greater than those of developed countries. This shows that Chinese economy is driving recovery of company financial performance when demand of Japan, the U.S. and Europe continues to plunge. Having said that, some experts say that Chinese economy seems to be overheated and competition is getting more and more severe. China is a promising marketing but there are challenges/issues such as risk management and thorough cost reduction.
1. How Chinese economy has been?
Chinese economy has been revitalized with positive effect of the economy stimulation measures implemented by the Chinese government (approximately 53 trillion yen) in November 2008. Chinese economy has recovered to 2 digit growth for October – December 2009 and its presence has been enhancing in the world economy.
2. How have Japanese companies been benefiting from revitalized Chinese economy?
China has become the largest automobile market (unit base) in the world last year, and Japanese automobile companies also have been increasing their sales, in particular Nissan. Nissan was quicker than other Japanese companies in strengthening product lines of small cars and developing sales/distribution network, leading to approximately 750,000 unit sales (almost +40% from previous year) for 2009. Operating profit from China business is expected to reach 50-60 billion yen, which is almost half the consolidated operating profit. Nissan estimates to enjoy consolidated operating profit of 120 billion yen when Toyota is estimated to remain in red. Nissan is quicker in recovering its financial achievement by generating profit in growing marketing of China.
Component manufacturers are also benefitting from demand growth in China. NSK’s business in the developed countries remains in low level and is expected to generate 60% - 70% of its consolidated operating profit from China business.
Chinese Business Outlook of Japanese Automobile and Machinery Manufacturers
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Profit: % of China Business / Consolidated Operating Profit (billion yen) / Vs. Previous Year / Trend of Chinese Business
Nissan / Almost 50% / 120 / Returning to black / Quick in establishing sales distribution network, leading to sales growth of almost 40% for 2009
Honda / +40% / 155 / +13% / Strong sales of Accord in cities on the coast
Komatsu / About 40% / 72 / -53% / Strong hydraulic shovel business, growth by 30%, overwhelming Japan business
Furukawa Electric / +25% / 10 / +3% / With strong infrastructure investment, high voltage cable in full production in China and increase in business growth
NSK / 60% / - 70% / 8 / -64% / Bearing business grows targeting automobile and industry machinery companies, when business in Japan, the U.S. and Europe continues to plunge
Regarding machinery manufacturers, sales of China for Komatsu and Hitachi Construction Machinery are approximately 20% of worldwide business, which is greater than Caterpillar. Reducing cost by manufacturing locally, Komatsu’s operating profit from Chinese business is almost 40% of worldwide business, and Komatsu is quicker than Caterpillar in recovering its financial performance.
More companies in other industries are benefitting from growing Chinese market. For example, Toto’s business of luxurious toilets (using luxurious materials etc.) is strong in China. Their China business is expected to be in black when Japan and other business are expected to remain in red. Operating profit from China business is to reach approximately 30%, the biggest worldwide.
3. What are the anxieties and risks of Chinese economy and business?
Chinese economy seems to be overheated, according to some experts. It is prominent that increase in export of steel material to Chinese market is contributing to consolidated financial performance for iron and steel giants. However, many of the executives in this industry are cautious, commenting that “if credit squeeze measure at to be taken (to prevent overheating), the current strong steel material market trend in China may well change”.
Honda is enjoying strong sales of Accord in China but profit of joint venture business in China is to remain the same with previous year. It is because price erosion is extreme in China, when each company strengthens production and sales organization. As proportion of Chinese business increase, necessity of risk management for business fluctuation and increase in competition in this market increases.
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on January 23 that according to the outlook of financial performance for fiscal year ending March 2010, China business is to be the driver for many automobile and machinery manufacturing companies. For Nissan and Komatsu, 40%-50% of consolidated operating profit is estimated to be generated from China business and profit by region for China is to be greater than those of developed countries. This shows that Chinese economy is driving recovery of company financial performance when demand of Japan, the U.S. and Europe continues to plunge. Having said that, some experts say that Chinese economy seems to be overheated and competition is getting more and more severe. China is a promising marketing but there are challenges/issues such as risk management and thorough cost reduction.
1. How Chinese economy has been?
Chinese economy has been revitalized with positive effect of the economy stimulation measures implemented by the Chinese government (approximately 53 trillion yen) in November 2008. Chinese economy has recovered to 2 digit growth for October – December 2009 and its presence has been enhancing in the world economy.
2. How have Japanese companies been benefiting from revitalized Chinese economy?
China has become the largest automobile market (unit base) in the world last year, and Japanese automobile companies also have been increasing their sales, in particular Nissan. Nissan was quicker than other Japanese companies in strengthening product lines of small cars and developing sales/distribution network, leading to approximately 750,000 unit sales (almost +40% from previous year) for 2009. Operating profit from China business is expected to reach 50-60 billion yen, which is almost half the consolidated operating profit. Nissan estimates to enjoy consolidated operating profit of 120 billion yen when Toyota is estimated to remain in red. Nissan is quicker in recovering its financial achievement by generating profit in growing marketing of China.
Component manufacturers are also benefitting from demand growth in China. NSK’s business in the developed countries remains in low level and is expected to generate 60% - 70% of its consolidated operating profit from China business.
Chinese Business Outlook of Japanese Automobile and Machinery Manufacturers
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Profit: % of China Business / Consolidated Operating Profit (billion yen) / Vs. Previous Year / Trend of Chinese Business
Nissan / Almost 50% / 120 / Returning to black / Quick in establishing sales distribution network, leading to sales growth of almost 40% for 2009
Honda / +40% / 155 / +13% / Strong sales of Accord in cities on the coast
Komatsu / About 40% / 72 / -53% / Strong hydraulic shovel business, growth by 30%, overwhelming Japan business
Furukawa Electric / +25% / 10 / +3% / With strong infrastructure investment, high voltage cable in full production in China and increase in business growth
NSK / 60% / - 70% / 8 / -64% / Bearing business grows targeting automobile and industry machinery companies, when business in Japan, the U.S. and Europe continues to plunge
Regarding machinery manufacturers, sales of China for Komatsu and Hitachi Construction Machinery are approximately 20% of worldwide business, which is greater than Caterpillar. Reducing cost by manufacturing locally, Komatsu’s operating profit from Chinese business is almost 40% of worldwide business, and Komatsu is quicker than Caterpillar in recovering its financial performance.
More companies in other industries are benefitting from growing Chinese market. For example, Toto’s business of luxurious toilets (using luxurious materials etc.) is strong in China. Their China business is expected to be in black when Japan and other business are expected to remain in red. Operating profit from China business is to reach approximately 30%, the biggest worldwide.
3. What are the anxieties and risks of Chinese economy and business?
Chinese economy seems to be overheated, according to some experts. It is prominent that increase in export of steel material to Chinese market is contributing to consolidated financial performance for iron and steel giants. However, many of the executives in this industry are cautious, commenting that “if credit squeeze measure at to be taken (to prevent overheating), the current strong steel material market trend in China may well change”.
Honda is enjoying strong sales of Accord in China but profit of joint venture business in China is to remain the same with previous year. It is because price erosion is extreme in China, when each company strengthens production and sales organization. As proportion of Chinese business increase, necessity of risk management for business fluctuation and increase in competition in this market increases.
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