Friday, Dec 15, 2017
Industry & Trade | Asia-Pacific | Japan

Earth Chemical

Adaptability, formula to chemicals success


1 year ago

Katsunori Kawabata, President and CEO of Earth Chemical Co., Ltd.
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Katsunori Kawabata

President & CEO of Earth Chemical Co., Ltd.

Producer of a wide range of household products and insecticides, Earth Chemical has proven to be highly market responsive throughout its history and demonstrated a keen eye on what its customers want. President and CEO Katsunori Kawabata explains the company’s modus operandi and how its customer-centric focus results in highly valued products by their users. 

Earth Chemical’s history began in 1892, and generated about 160 billion yen sales last year – that’s 54% more than in 2010! What can you attribute this impressive performance to? Can you outline a bit of background on Earth Chemical’s impressive history?

In Japan, it is said that a company lasts on average 30 years, but our company has a history of over a century. The reason for our success is that the company has constantly been adapting to the changes of its surrounding needs, which I am very proud of.

Although there have been times where the company has been confronted with difficulties, our concept has always been ”customer first”, and we strive to do our best to satisfy and meet the demands of our customers. This concept has been executed throughout all of our business sectors, which is very difficult to maintain for such a long period of time.

Our company started producing magnesium carbonate, which later developed into the insecticide sector that became our core business. Today, the insecticide sector is only one-third of the sales ratio. This shows how much we have expanded our business fields. By 2020, we may even enter a new one, but that is if there are such new needs by the customers. It is simply the question, “Are there changes in the needs of the customers?” If not, we stay as we are, but I think that is very unlikely the case.

 

Earth Chemical has gradually expanded overseas, and today it exports its products to 55 countries in the world, with bases in both Thailand and China. You have been a pioneer in that matter – indeed, your local Thai subsidiary was founded more than 35 years ago. How important are your overseas’ businesses and operations for the future of Earth Chemical’s growth?

The foreign strategy is placed as one of the top priorities in the company including our mid/long range plan. Although we started our global business from Thailand in 1980, I believe the American and European markets were candidates as well. Speaking honestly, we did not have the power to enter these markets at that time. When it comes to insecticides, our main products, major markets are in warm climate areas. That is why we started from Thailand, where there are needs for insecticides throughout the year. As for China, our presence is focused in the southern parts, such as Shanghai, and currently doing business in areas above Beijing is not considered.

In the past, we had considered doing business in developed countries, but now we target the Asean countries, since the quality of living standards have managed to catch up in recent decades. I am not saying that we will not open a business in the US or EU, but first I want to establish a bold foundation in Thailand and China. I want to raise the quality of life and make a contribution with Earth Chemical technology, which I do not mean doing it “the Japanese way”. It is our goal to adapt to the environment, adapt to the area, adapt to the changes in order to contribute and enrich the everyday life of the local customers. As for the global strategy, with the world population increasing and the Japanese decreasing, and of course, the core principle of the market commensurate with the number of population, I believe it is necessary to increase more management resources in our global operations.

 

Earth Chemical produces a wide range of household products, and is the leading producer of household insecticides (with over 50% market share). Six years ago, you have entered the household gardening field to conquer a new core business. We have read about an ongoing home-gardening boom. So, what are Earth Chemical’s next fields of specialization? What next strategic moves should we expect from Earth Chemical?

The story behind our gardening business is that along with global strategy, a new strategy for the domestic business was crucial as well. We conducted a market research in order to grasp potential demands. Within the elderly population, which is rapidly increasing in Japan, gardening was the top interest for what they wanted to do after retirement. We took into consideration things such as packaging: how to make it easier for the elderly to see the text or hold the tools. Such improvements are deeply embedded in our company policy: to diminish our customers’ discontent.

In terms of our gardening business, there were potential demands but we had to have a different approach since the target age group was higher. Therefore, we created products that are tailored to that specific age group. Of course, there was already a gardening business in Japan, but our approach expanded the market by discovering new needs of specific customer groups. This idea could be applied to any sector, but it is indeed crucial to analyze the characteristics of each market, such as age groups, gender, etc. in order to respond flexibly to their needs.

 

One of the main topics of the G7 Summit in Mie Prefecture this year focused on the importance of contributing to society. For nearly 125 years, your company has taken into account the changes in people’s lifestyles, to “deliver comfort” to everyone. How is contributing to the society at the heart of your business today? Why is it important for you?

Our company is mainly B2C, and as a company that offers everyday commodities, we prioritize creating products that can help our customers’ lives to be what we call, “today is better than yesterday, yet better tomorrow”. This is why our company was able to receive so much support for such a long period.

Of course when there are disasters like the recent Kumamoto earthquake, we donate and help those in need, just as any company does. However, that is not the major part of our contribution to the society. Our fundamental idea is to enrich the everyday life of people through our products. Therefore, our business itself can be said as a contribution to the society.

In terms of our insecticide products, we do not kill insects because they are disgusting or annoying, but because they are a threat that may carry infectious disease. It is our mission to protect lives from insect-borne diseases. We have a very important and big role in the society. That is why I believe our business itself is contributing to society.

 

Earth Chemical develops products that are inspired by Japanese habits and culture. To name a few examples, some of your repellents use natural wasabi to keep pests away, and your bath products are inspired by hot spring spas. How is Earth Chemical helping to export Japan quality and know-how around the world?

Japan is famous for its high quality and those foreign consumers who are already aware of it use Japanese products. It is true that the notion of this Japanese brand has supported our business. Although I am the President and CEO of a company, I am a consumer as well; we all are. As a core idea, I do not want to produce a product that I do not want to use myself. Quality is important, however in terms of “Japanese quality”, I believe we need to have a clear view on the concept. There is a danger of overstatement of the concept caused by the amount of attachment towards the idea of “quality”. That is why I believe it is important to ask myself if I want to use this product, finding any inconvenience or unnecessary functions that can lower consumer satisfaction.

When speaking of a new product, the first thing a person would imagine is a product with an innovative new ingredient. However, a new product can be made by improving its label or container. I believe it is important to change our mindset on product development, and realize that a product is not just made up of the ingredients it contains, but that every factor, such as packaging, that consists in a product make a product. My aim is to develop products where all these components integrate into the perfect product.

 

What advice would you give other CEOs or other people aspiring to become a CEO as yourself at such young age?

As a CEO I get asked about the future operation of the company, about the future of Japan and also about globalization. These questions have always made me contemplate. As I mentioned before, unprecedented ideas cannot be achieved by technical thinking. One of my favorite Japanese proverbs says, “Continuity is the father of success”. Instead of setting an exorbitant goal, the accumulation of plain work may eventually lead to a great reformation.

It is also crucial to think of oneself as a consumer and question if the product is really reaching the demand of the customer, instead of products that are driven only by researchers’ perspectives. I am sure one can find many hints by asking those questions.

It is difficult to maintain this stance as the time passes, and I am doubting myself if I am doing these things, but I believe it is very important. Eventually I will age and might have difficulties reading small letters, and such changes may become new hints for product development. In the end, a deep analysis of a specific generation, gender, marital status, etc., will result in a good product.

 

It seems clear that Abenomics has had both an impact on the economy and global mindsets. What are your thoughts on this subject? What has been the impact on your sector, and Earth Chemical in particular?

In a broad meaning, Prime Minister Abe has been making many reforms, and the financial reform in particular has been very difficult for him. Due to the reform of tourism policy, which made it easier for foreign people to visit Japan, in our sector, “daily commodities”, where the Japanese quality directly shows, there has been influence seen as the terminology “explosive shopping spree”.

As the next step, it is important for the index prices to go higher since the prices of commodity goods are cheap in Japan despite their high quality. I believe raising the index prices is part of the governmental aim, however it is true that there were some miscalculations in their plan. However, when we look at the policy from a broad perspective, the reforms had a positive economic effect. In terms of exports and imports, there is a gap between the policy effect towards the Japanese economy and our sector. Japan holds many export business; therefore, the economy has had much benefit from the depreciation of the yen. For our sector, the increase of commodity prices is priority, but we will still have to see.

 

What opportunities do you see with the possible ratification of the Trans-Pacific Partnership (TPP), considering that Earth Chemical exports products on both sides of the Pacific?

I do not think the TPP will affect our company significantly. Including our insecticide products, daily commodity goods are regulated differently in each country. This, in a way, protects domestic companies and becomes a wall against foreign companies, so we should not be immediately exposed to the free competition.

I believe the TPP will have a big impact on the food industry first and foremost, and then develop to other categories. I believe our industry will be the last step of the TPP. On the other hand, we import many of our ingredients; therefore I expect there will be benefits from the TPP in that sense.

 

How would you like the leaders of the world to see Japan?

I believe Japan is a microcosm of the future world, by means of population. The Japanese market is well known for its good quality, bringing comfort to the users, but that is only a result of human nature. Everyone wants comfort, and I think that is the reason for the popularity of Japanese products. However, another side of the Japanese market is the high volume of older consumers. The global population is still growing, but I want the leaders of the other countries to realize that in the future, they may have to face the same aging problem we face in Japan and take action towards it.

I do like Japan and the Japanese people, but I am not the person who advocates that Japan is the number one country. I have traveled to a lot to other countries and I think it’s a matter of perspective. It is true that we have the Omotenashi and the Japanese susceptibility, and the subtle manners, but fundamentally, it’s putting yourself in the place of others; would you be happy to be treated this way? I feel that is the universal notion of manners, and a society where everyone lives in comfort and happiness is a shared goal. When I went to the US recently, I flew via a local airline and the plane was delayed. While we were waiting, the pilot came out of the cockpit and started making jokes to entertain people in the cabin. Would Japanese airlines do that? No, I expect them to operate by the manual. Sometimes, those manual ways can be good manners, but also it can be a barrier towards communication and relations between people. I think the will to make someone happy, like the pilot’s entertaining sprit, and acting flexibly to fulfill it, is important no matter where your business area is or which country you operate in.



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