Will Mt. Fuji Become A World Heritage At Last?

Osaka - Sunday, September 25, 2011




Recent hot topic in Japan that has been discussed in TV news and other programmes is the fact the Mt. Fuji and City of Kamakura are to be applied to be registered as World Heritage.



City of Kanakura, famous for the largest Buddha statue in Japan (called in Japan “Kanakura Daibutsu”) and a impressive shrine called Tsuruoka Hachimangu, used to be the capital of the Muromachi　Government (1336 – 1573), which opened the era governed by samurai; therefore, it is to be applied to be registered for its importance in Japanese history and culture.



Regarding Mt. Fuji, a symbol of Japan that everyone around the globe are familiar with, numerous attempts had been made for the World Heritage registration but in vain so the focus of the discussion in the TV programmes has been about Mt. Fuji.

1. Why previous attempts of Mt. Fuji’s registration as a World Heritage were not accepted?

There had been attempts since 2003. First in 2003 Mt. Fuji’s application was made as World Natural Heritage. However, it was not accepted mainly because of garbage issues attributing to the fact that many climbers leave behind garbage instead of taking them back. After this incident, there were some initiatives of clearing up garbage of Mr. Fuji.



Another attempt was made in 2005, when Mt. Fuji’s application was made as World Cultural Heritage. However, it was not accepted because the lower part of Mt. Fuji has already been developed to quite an extent, with motorways and national roads. Also, at first Mr. Fuji’s beautiful shape of the mountain was an appealing point but then other countries claimed that their mountain(s) are of similar beautiful shape, such as the one in Kilimanjaro.



2. What is the appealing point of Mt. Fuji in making application for World Heritage this time?



Currently their idea is “mountain of religion”. This is because in Japanese literatures from Manyoshu, one of the oldest Japanese literatures in history, to works from Edo era (1600 - 1868), Mt. Fuji is mentioned as a mountain in which people have religions faith.



3. How experts view of the possibility of Mt. Fuji to be registered to be a World Heritage?



They think currently the possibility is 50%. They feel the appealing point and reason for the registration needs to be more focused. The reason for the registration needs to be something that makes Mr. Fuji “the only one” rather that “number 1” of something, with concrete, logical explanation supported by facts.



4. What is the author’s final thoughts?



This is really about marketing; i.e. segmentation, positioning, and targeting followed by branding then creating and delivering message based on the defined USP (unique selling point).



We all now the theory and steps of effective marketing but successfully planning and implementing marketing strategy is difficult, especially when it is of something like Mt. Fuji that has possible multiple options of USP.



How would you market Mt. Fuji so that it will be registered as a World Heritage?





Resources:-

Mt. Fuji, together with Kamakura City, will be applied to be registered as a World Heritage, after multiple attempts. Mt. Fuji is a symbol of Japan but it has been difficult to identify USP making it “the only one” with reason of the registration with concrete, logical explanation supported by facts. After all, this is all about now to successfully marketing Mt. Fuji with the goal of being registered as a World Heritage.

Energy Saving Obligatory Criteria Set for New Constructions in Japan

Osaka - Monday, September 19, 2011




Nikkei, Japan’s leading newspaper specialized in business and economy reported today that Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has set up a policy of giving obligations to real estate and construction companies to meet a specified energy saving criteria set by the Japanese government for all new housings and buildings to be constructed in the future.



1. What is the overview of the policy?



The government is to set limits to energy consumption according to types of housings and buildings and to request efficiency enhancement of energy consumption such as air conditioning using heat insulators. The government aims to control and reduce Green House Gas (GHG) emission the they believe this kind of policy is effective because according to MLIT, GHG emission from constructions cover over 30% of total GHG emitted in Japan.



After 2020 construction will be not approved unless it meets the requirements set by the government. Until 2020, companies and individuals who have met requirements will be given tax incentives.



2. Isn’t there any energy saving criteria today?



Yes, there is. Such criteria for housings were set in 1999 but it is not obligatory. It costs addition 10% to construct houses meeting the criteria; therefore, only less than 40% of new houses meet the criteria.



3. How will the government proceed with setting and implementing the policy?



MLIT will set up a meeting with authorities from industries and academia in October to discuss concrete measures for obligation of meeting energy saving criteria. MLIT aims to revise the legislation regarding energy saving construction in 2013, discussing and collaborating with Ministry of Economy, Trade and Industry (METI) and Ministry of the Environment （MOE）.



To achieve such a timeline, the government is to draft new criteria by the end of the year, including limits of energy used in air conditioning and lighting depending on the types of housings and buildings. The details of the criteria will be tailored to meet local needs depending on the regions, considering regions with heavy snow in winter.



4. What is the concept of the new criteria?



New criteria will be set so that energy consumption will be 20-30% less than normal housings and buildings. To meet the criteria, heat insulators are to be used in walls and ceilings. When solar battery is implemented, energy generated by solar power will be subtracted from the energy consumption calculated.



5. When will auditing of energy saving construction be implemented?



It will be implemented in 2012. When construction companies make application in building new housings or buildings, local government will check the types of materials to be used.



When energy saving criteria is met, cost of energy saving materials used in construction will be subtracted from income to be taxed.



And for individuals, the government is to study incentives such as increase tax reduction of their housing loans.



Full implementation of the policy requires much preparation and time so the government aims to implement fully in 2020. Until then, the government would like to implement auditing systems and tax incentives to proliferate energy saving materials meeting the criteria.



6. Will obligation to meet the criteria applied to current housings and buildings?



No. This is because it is time consuming to audit all current housings and buildings, and if renovation of current housings and buildings is to be made compulsory it is quite possible that the general public will refuse.



Having said that, MLIT believes that the renovations will take place because in general market value of energy saving housings and buildings are higher.



There is also a concept of distinguishing energy saving housings and buildings from those that are not of energy saving.





Resources:-

MLIT of Japan will set up a policy of giving obligations to real estate and construction companies to meet a specified energy saving criteria set by the Japanese government for all new housing and buildings to be constructed in the future. The government is to set limits to energy consumption according to types of housings and buildings and to request efficiency enhancement of energy consumption such as air conditioning using heat insulators. The auditing system will be implemented in 2012. The policy will be fully implemented from 2020 and until then incentives will be given to companies and individuals that meet the criteria.

6 Months from the Japan Disaster – The Reality

Osaka - Sunday, September 11, 2011




It is 6 months since 3.11, the Japan Disaster of the earthquake and tsunami followed by the Fukushima Nuclear Plant Accident broke out on March 11 this year. It is also 10 year anniversary of the U.S. 9.11 WTC incident. Thus this weekend, almost all TV channels in Japan have been broadcasting special programmes about 9.11 and 3.11.



In this article, the author would like to outline the reality of the Japan disaster, focusing on the hard hit area from the tsunami.



1. What are the key numbers of the Japan disaster?



The status as of today is that over 15,000 people are dead and over 4,000 people are still missing.



The government had promised to provide temporary housing to people in need by the end of August but only 90% of the temporary housings originally planned are complete and only 83% are filled because some are built in area that is of bad access.



Removal of wreckage is 50%+ complete but this includes those of houses and building that needs to be demolished anyway. And how to dispose the wreckage is still yet to be decided.




2. How are victims without temporary housing living today?



A case of a lady living in one of the hardest hit area in Miyagi was introduced in a special programme broadcasted by NHK, a national TV company. She has a house of 3 floors (in Japan, ground floor and 2 floors in the U.K.), of which the 2 floors became flooded by the tsunami.



She first thought of start living in temporary housing but did not win the housing by lottery. Also the available temporary housings are in mountainous area, a place that are inconvenience for her who cannot drive a car; therefore, she started living in the 3rd floor of her house.



However, lifelines such as electricity and water cannot be supplied. Thus she uses battery instead of electricity, walks to the nearby city hall with a bucket to get water, and goes to a nearby hospital for toilet.



The lady has no idea when this kind of life would end.



3. How have towns been recovering that once their administration system paralyzed due to tsunami?



In another TV programme a case of a town was introduced in which 20% of the population became dead or missing from the tsunami, including the mayor and many of his staff members working in the local government. Also the local government buildings/offices were all swayed by the huge tsunami.



In such a situation, local administration function stopped completely and recovery from the disaster did not move forward at all. A manager of the local government had an extremely tough time being a pig in the middle of the administration and the general public.



It was only recently that the manager was elected as the new mayor. He is now determined to develop a recovery plan of the village by the end of the year, but the task would be not easy and execution would be less easy.



4. The author’s final thoughts



What the author is more familiar is the Kobe earthquake that occurred in 1996. She was shocked to see the devastated town that used to be really beautiful and prosperous after a few months from the earthquake. But after about 6 months the roadmap of the recovery was made and the recovery plan was implemented with relative smoothness.



That is not the case of the 3.11 Japan Disaster. It is true that the scale of the 3.11 disaster is far greater and there are multiple factors that make the recovery extremely difficult.



However, it seems to the author that the primary reason for the slow recovery is the ambiguous distinction of the roles between the national government and local government/administration.



The national government insists democracy to say that it is the responsibility of the local government to take the initiative. And the local government claim that the national government should execute stronger leadership, especially when the local government function of the local area is stopped completely.



The author agrees more to the stance of the local government. She also believes that it is because of the “gembaryoku” (strengths of the general public) of the Japanese people/victims that minimized chaos. She strongly feels that if it had been in other country there had been turmoil.



Strong “gembaryoku” and weak management/leadership in typical Japanese companies in comparison to strong management and relatively weak “gembaryoku” in many western countries is often mentioned in management and such a trend came out in this case as well, as well as the plan the author introduced in her previous article Eco-Town Development in Sendai– Recovery from the Japan Disaster.


The author sincerely would like the new Noda administration start executing stronger leadership





Resources:-

Recovery from the Japan disaster of earthquake and tsunami after 6 months is yet still very slow. Not everyone has been able to live in temporary housing. Due to the scale and multiple factors making it complicated it is difficult to compare with recover from other disasters such as the Kobe earthquake in 1996; however, and the timing of when the victims can lead their lives as they used to before the disaster is yet known. One requirement that had been lacking for the recovery is strong leadership from the national government, when “gembaryoku”, the power of the general public is strong.

Eco-Town Development in Sendai– Recovery from the Japan Disaster

Osaka - Saturday, September 3, 2011




Nikkei, the leading Japanese newspaper specialized in economy and business, reported on September 1 that Sendai City and some 20 companies started studying to develop an eco-town in the devastated area of the Japan disaster.



This includes establishment of mega solar (huge solar generation plant), and using the power generated by the mega solar to start new businesses of hydroponic cultivation and food processing in the autumn of 2012. This will take place in the agricultural lands of the coastal area near Sendai City where it was severely hit by the tsunami.



The operating company will be established by the end of 2011. Thus, agriculture renewal and recovery from the disaster initiated by private sector is to start.



1. What is the background and positioning of the project?



On August 31 Sendai City announced the draft of the recovery plan from the Japan disaster, in which concept of creating an “eco-town (eco = ecology)” leveraging natural energy is stated. Energy shortage became a critical issue after the disaster; therefore, the project aims to develop a system that can supply minimum energy even in urgency. The new business will be a focus of the plan.



Sendai City’s Recovery Plan from the Japan Disaster (Outline of the Draft)

- Basic philosophy is “new dimensional town of disaster prevention and environment preservation”.

- Timing of the project is from 2011 to 2015.

- Anticipation of flooding from tsunami will be implemented by multiple protections of both software and hardware.

- Develop model of “eco town” implementing natural energy.

- Private sector will invest in agriculture. Production, processing and supply chain facilities will be integrated and arranged.

- Develop and attract industries related in new energy and disaster prevention.

- Adopt system of designated recovery zone to attract group relocation and land use restructuring.



2. Which companies are to join the project?



Companies that are to join the project include IBM Japan, Sharp, Kagome, Mitsui & Co., Ltd., Itochu Corporation, Tohoku Electric Power Co., Inc., Seven Eleven Japan (convenience store), York-Benimaru Co., Ltd. and local agricultural production related companies, which will be announced soon.



3. What are some examples of the focuses of the project?






1) Implementation of hydroponic cultivation that does not require water



Hydroponic cultivation that does not require water will be implemented leveraging know how provided by Kagome. This is to be implemented because it would require much investment to remove salt (included in the sea water) from the land that once was flooded by the tsunami and use the land again for agriculture.



The new company will establish a vegetable production factory with an area of 10 hectare (approximately twice as large as Toyo Dome, a large popular baseball stadium in Japan) and 1 hectare processing factory, to integrate and manage from vegetable production to processing.



2) Selling of the agricultural products



Approximately 2,000 tons of vegetables are to be produced then processed annually, which will be sold by retailers such as Seven Eleven and York-Benimaru Co., Ltd. Annual revenue of 2.5 billion yen is expected.



3) Enhance efficiency of electricity use generated by natural energy



Energy required to operate production and processing factories will be generated by mega solar capable of generating approximately 4,000 kW and thermal power generated by burning chaff in the boilers. System to enhance efficiency of energy use leveraging IT will be provided by IBM Japan.



4. How will Sendai City proceed?



Sendai City has set up a policy of making an application of designated recovery zone to the Japanese government because such application is required in constructing factories in the agricultural land.



Sendai City will conclude long term lease contract with agricultural land owners of the area and the revenue generated from the new business will be allocated as rent. The city is to start negotiating with agricultural land owners who is thinking of closing their business after the disaster.



5. The author’s final thoughts



So many people including the author have been advocating for months that the recovery from the Japan disaster should be taken as the opportunity of developing a new, advanced eco (ecological and economical) town resistant from natural and technological disasters.



To the author, the Nikkei’s report about the project is the long awaited first step in developing such a town.



What the author questions is the fact that the project is initiated by private sector and Sendai City, not by the Japanese government because the recovery from the disaster is a nationwide issue and therefore she feels it really should be initiated by the government. Following the election held on August 29, there was a change in the leadership; new Prime Minister and his cabinet just took off. She sincerely hopes the new Noda Administration will take stronger initiative for the recovery from the disaster and the Fukushima nuclear plant accident.





Resources:-

Sendai City and some 20 companies started studying to develop an eco-town in the devastated area of the Japan disaster. This includes establishment of mega solar (huge solar generation plant), and using the power generated by the mega solar to start new businesses of hydroponic cultivation and food processing in the autumn of 2012 in the agricultural lands of the coastal area near Sendai City where it was severely hit by the tsunami. This is a big step initiated by the private sector and Sendai City for the recovery, a nationwide issue, which is ideally to be initiated by the government.

Risk Management and BCM – Implementing Learning from the Japan Disaster

Osaka - Sunday, August 21, 2011




Nikkei, the leading Japanese newspaper specialized in economy and business, reported today that the Japanese government is to set up a back-up system in which western Japan can complement government function when a disaster should occur such as a huge earthquake that directly hits Tokyo, the capital of Japan.



This is because from the Japan disaster that occurred in March this year it became prominent that a system in which regions outside Tokyo can complement government and administrative functions in an emergency is critical for as business continuity and risk management.



1. What kind of functions are planned to be backed-up outside Tokyo for an emergency?



They are administrative including foreign diplomacy, defense, police and central government offices that are responsible for economic policies. Each function will set up complementary offices in western Japan so that the newly set-up offices will be able to replace the administrative functions should an emergency occur in Japan.



2. Where will such new complementary offices be established?



Locations of the new complementary offices will be decided based on disaster risk analysis including strength of the ground, possibility of landslides and earthquakes, and transportation convenience. Candidate prefectures include Osaka, Nagoya and Fukuoka.



3. How will new complementary offices be equipped?



New offices in western Japan will be equipped with video conference rooms and satellite phones that are less unlikely to fall into communication failure should a disaster such as earthquake occur. Data centre and IT systems will be established so that information and data necessary for each ministry to continue operating in emergencies will be stored. Also staff members required to manage the offices will be allocated.



4. Why the Japanese government made such a decision?



Simply put, it is a Business Continuity Management (BCM) of Japan by minimizing risk of government/administrative functions becoming paralyzed and economic activities falling into a chaos even if a disaster should strike Tokyo.



Currently the Japanese administrative organizations have no back-up organization/system(s) based on an assumption that a disaster covering a large area occurs and whole of Shutoken (Tokyo and its neighbours such as Yokohama, Chiba and Saitama) becomes paralyzed, which is almost equivalent to the country becoming paralyzed.



Complementary offices of central government offices are mostly located in Tokyo. Aligning with such a situation, over 60% of head quarters of large companies are currently located in Tokyo, and over 25% of GDP and population are concentrated in Tokyo. Thus, Japan is often said as “a country heavily concentrated in Tokyo, its capital”.



From the March 11 Japan disaster, it became clear that if a disaster should occur in Shutoken area it is quite possible that the economic activities throughout Japan will be in a chaos and the country will become paralyzed. Therefore, the Japanese government concluded that they would need to strengthen risk management by strengthening back-up organization/system of administrative functions by setting up complementary offices in western Japan.



5. Has there been any discussion of changing “Tokyo centralized country” before?



Yes, there has been such a discussion, such as relocating the Diet and administrative functions outside Tokyo. However, the discussion has cooled down because such a plan would require more than 10 trillion yen. Long lasting economic stagnation is a negative factor as well.



In comparison, establishment of back-up organization/system of government and administrative functions would require less cost, which is the reason why the Japanese government decided to study and discuss in earnest to put into action.



6. How the Japanese government is to proceed?



Ministry of Land, Infrastructure, Transport and Tourism (MLIT) that is responsible of mid- and long-term land and infrastructure planning is to request budget for the study (tens of million yen) in the upcoming 2011 budgeting revision in autumn. Committee constituting from experts from various fields will be established by the end of September, which is to create a report by the end of the fiscal year (March 2012) about the topic.



MLIT, Ministry of Finance, Ministry of Internal Affairs and Communications etc. are to set up cross-ministry meetings in 2012 to start discussing concrete issues of the topic, including review and improvement of legislation if necessary.





Resources:-

Japanese government/administrative functions have long been concentrated in Tokyo, the capital of Japan but the government decided to establish a back-up system in western Japan by setting up complementary offices of central government offices etc. This is because from the March 11 Japan disaster, it became prominent that business continuity and risk management is necessary to avoid paralysis of administrative function and economic activity chaos should a disaster covering large area occur, hitting Tokyo.

More M&A and Manufacturing Industry Restructuring in Japan?

Osaka - Sunday, August 14, 2011




Following the previous article Hitachi and Mitsubishi Heavy Industries Discuss Integration – Why and Its Meaning, the merger that provoked comment and interview by Mitsubishi Heavy Industries top management and his spokesperson as well as discussion online articles by leading Japanese business media, the author would like to explain what Nikkei, the leading Japanese newspaper specialized in economy and business, means by “Japan is facing historical turning point and restructuring of manufacturing industries is to come in the near future”.



1. How are Japanese automobile and electronics industries that have been the “engine” of Japanese economy?



Number of Japanese manufacturing companies in electronics including heavy industries and automobile are far greater than that of other countries, simply because mergers leading to industry restructuring have been extremely rare unlike other countries.



Today there are 8 automobile companies, 12 including companies specialized in trucks. Among 12 companies, there are only 2 that are truly “independent manufacturer” without investment from other company; Toyota and Honda. This is because there has been some restructuring in automobile industry in Japan. Market and business environment has been challenging nowadays and it is not surprising that investments (capital alliances) lead to M&A, similarly to recent M&A of the two Japanese leading iron and steel companies of Nippon Steel and Sumitomo Metal Industries. This would mean further restructuring of the industry.



Electronics is the industry that has been extremely slow in restructuring which is why even today the industry structure remains almost the same as that of just after World War II. There have been crisis such as economic depression attributing to high yen after Plaza Accord and the collapse of the bubble economy. However, electronics companies never thought of strategic alliances and M&A, leading to restructuring of the industry.



2. Why electronics industry restructuring has bee extremely slow in Japan?



It is because the electronics companies benefited from abundant domestic demand supported by businesses of electricity and telecommunications companies. Equipment investment of electricity companies (Tokyo Electric Power Co., Inc = TEPCO etc.) was as much as 4.9 trillion yen at the peak in 1993, and of Nippon Telegraph and Telephone Corporate (NTT), the leader of telecommunications that used to dominate in Japan, was as much as 3 trillion yen at the peak in 1996.



Heavy industries and consumer electronics that rely on businesses of electricity companies and NTT could assure sufficient profit generated from the 8 trillion yen market. This is why Japanese electronics companies could survive without drastic industry restructuring even if they lost the semiconductor competition with South Korea counterparts and suffered from depressions attributing to high yen, the bubble economy collapse and so forth.



3. Can Japanese electronics companies expect to continue benefiting from domestic electricity and telecommunications businesses?



No, they cannot. Equipment investment of electricity companies (TEPCO etc.) has plunged to as low as 2.12 trillion yen in 2010, and of NTT as low as 1.87 in 2010. This means the total equipment investment has become half from that of 1990s. In such a situation, electricity companies and NTT cannot possibly look after/support their “family” of electronics companies.



Liberalization of electricity companies has been slow but it is prominent that abundant investment from TEPCO cannot be expected when TEPCO is responsible for liability obligation of the Fukushima Daiichi nuclear plant accident. Abundant investment from other electricity companies cannot be expected either in the current ambiguous business environment.



Telecommunications companies have been “thrown out in the sea of competition” with liberalization, which is why NTT group was privatized and split in latter 1990s. NTT now handles all mobile terminals including those of the U.S. and South Korea manufacturers to compete and win over competitors such as SoftBank. This has much meaning because it was NTT, not NEC nor Fujitsu that was the “engine” of Japan’s IT industry growth. This is because even NEC and Fujitsu, the leading Japanese　IT companies, have been subcontractors of NTT.



4. How can Japanese electronics companies survive in the future?



It is to convert “the current historical crisis since World War II” to “opportunity to change the old industry structure that has remained the same since World War II”. This is to get out of over-competition in the domestic market to compete in the global market.



Japanese consumer electronics and IT related companies would need to get out from a business environment in which NTT decides various standards and make investments because that would refrain them from generating creativity to compete with the global counterparts including Apple, Google and Sumsung. This means getting out to global market and they would need to do so now.



Japanese heavy industries would need to follow that, too. It might be a little harder for them than consumer electronics and IT related companies under the current structure in which “10 electricity companies dominate” avoiding competition; however, it is quite possible that such a industry structure is to collapses in the near future.



Japanese electronics manufacturers have technologies such as of smart grid, transportation (railway) and water supply, which were highly re-evaluated by other countries although it was barely reported because of nuclear accident news. Despite critical damages by the disaster, railways avoided fatal accidents and social infrastructure such as water and electricity supply and telecommunications recovered in such a short time.



With their world-class technologies, Japanese manufacturers can be competitive again in the global market as long as they get out there. What they need is change in mindset, courage and action.



This may well mean strategic alliance or M&A, leading to restructuring of the industry. The recent news of Panasonic acquisition of Sanyo, Panasonic selling of a part of Sanyo business to Haier, and merger of Hitachi and Mitsubishi Heavy Industries is quite possible to trigger such an industry restructuring.



Although this would mean more global competition, this would also be good for the world because countries, developed and developing, would be able to benefit from the world-class technologies the Japanese companies have.





Resources:-

Restructuring of the Japanese automobile and electronics industries (consumer and heavy industries), has been insufficient since World War II, although companies of such industries have been the “engine” of Japanese economy. This is primarily because they have been benefiting from abundant domestic demand/market supported by electricity and telecommunications businesses. However, such domestic market has become half from 1990s and they are facing historical crisis. They do have world-class technology especially in social infrastructure segment so one possible way for them to survive is to take this opportunity to get out to global market, from which countries could benefit from their technologies. This may well mean more M&A among manufacturers leading to industry restructuring in Japan.

Hitachi and Mitsubishi Heavy Industries Discuss Integration – Why and Its Meaning

Osaka - Sunday, August 7, 2011




Following the announcement made by Panasonic on July 28 of selling their refrigerator and washing machine business originally of Sanyo to Haier explained in the previous article Increasing Chinese Companies Acquiring Japanese Companies – How and Why?, Nikkei, Japan’s leading newspaper specialized in business and economy, reported on August 5 that Hitachi and Mitsubishi Heavy Industries are to start discussing integration of their main businesses including social infrastructure, with a possibility of future merger (management integration) of the two companies.



Taking this opportunity, Nikkei also made a special article insisting that Japan is facing a historical turning point in its core industries. This is because the recent M&A related announcements are the signs that restructuring in manufacturing industries, the “engine” of the Japanese economy.



1. Why the two companies decided to start discussing integration of their social infrastructure business?



It is because although the two companies are leading companies in this business domain in Japan, it is extremely difficult for them to compete and survive in the global market. The two companies do have world-class R&D capability but to compete in the global market they need to further become competitive in total power.



They realized this because recently they have been losing business negotiations for order intakes and their western counterparts winning. This attributes primarily to the fact that they were slower than their western counterparts to start developing business in future growth markets, in emerging countries in particular in earnest.



Such examples include the business negotiation for order intake of coal-fired thermal power station of Malaysia in March this year, the largest one in South East Asia, in which Mitsubishi lost and Alstom won (Hitachi also was involved in this at the beginning). In September of 2010, Hitachi lost and group of Canadian companies including Bombardier won the business negotiation of order intake of monorail construction of Sao Paulo, Brazil.



2. What is the positioning of the two companies in the global market?



This is summarized below (Source: Nikkei, translated by the author).



Company / No. of Employees (kilo) / Sales (trillion yen) / Net Profit (billon yen)

GE / 280 / 11.8658 / 916.4

Siemens / 400 / 8.5880 / 463.3

Hitachi / 360 / 9.3158 / 238.8

Mitsubishi Heavy Industries / 2.9037 / 30.1

* GE: for fiscal year ending December 2010, Siemens: for fiscal year ending September 2010, Hitachi and Mitsubishi: for fiscal year ending March 2011. 1 USD = 79 yen, 1 Euro = 113 yen



For gas turbine sector, #1 is GE with market share of 44%. #2 is Siemens with market share of 28%. #3 is Mitsubishi but with market share of only 8%.



And for railway sector, total market share of the big 3 companies (Bompardier of Canada, Alstom of France, Siemens of Germany) reach over 50%, with solid manufacturing and maintenance sites worldwide, when it is only just less than 5% for Hitachi.



3. Which market(s) do the two companies regard as the promising, future growth market(s)?



It is the worldwide infrastructure market, such as power generation. According to Organization for Economic Co-operation and Development (OECD), worldwide amount of power to be generated will be more than 3 trillion kW/h in 2035, which is increase by 80% from 2008. Investment in power generation infrastructure is expected to reach as much as 130 trillion yen between 2010 and 2035, of which 1/4 (approximately 32 trillion yen) is expected to be in China.



4. In which sector(s) the two companies could generate synergy if they are integrated?



One possible sector that the two companies generate synergy by leveraging their strengths is “Smart City” business. This is a city in which energy is efficiently used leveraging IT, of utilizing natural energy such as wind and solar.



This is because Hitachi is engaged in both social infrastructure and IT system, and Mitsubishi has world class technology in renewable energy such as wind and geothermal power.





In the next article, the author would like to introduce what Nikkei means when they say “historical turning point in industries in Japan”.





Resources:-

Hitachi and Mitsubishi Heavy Industries started discussing integration of their main businesses including social infrastructure, with a possibility of future merger (management integration) of the two companies. This is because although they are the two leaders in Japan with world class technology in R&D, they are not competitive enough to survive and compete in the global market. With integration, they aim to generate synergy in promising market expected to grow in the future such as power generation, leveraging their strengths. Their discussion, together with recent M&A related announcements, means that Japan is facing a historical turning point in its core industries.