Japanese firms’ eyes set on global markets

Globalization would not seem to be a problem for Japanese companies which for decades have been major, and in some cases, dominant players in world market sectors such as for automobiles and consumer electronics. However, a slew of new economic and business realities are proving that for Japanese companies to avoid being left behind in globalization’s new wave, they need to dramatically boost overseas revenues to offset falling demand at home.  

With demographers forecasting the Japanese population to decrease by more than 20% by 2050, fewer people means less consumption, as well as lower tax revenues. Also surprising to many familiar with the Japanese traits of company loyalty and esprit de corps, the country has among the most anemic work productivity rates of the world’s most developed economies, while at the same time, foreign manufacturers are making major inroads into luring Japanese consumers.

But many Japanese executives have seen the writing on the wall and are now transforming their management practices to better meet these challenges in order to make their companies truly global. One of Japan’s most widely-known and respected firms around the world is Toshiba Mitsubishi-Electric Industrial Systems Corporation (TMEIC), whose President and CEO Kiyotaka Machida says he is well aware of the steps that Japanese companies must take.

“I think it’s difficult to imagine that the manufacturing sector will augment its production capacity in Japan while the population is basically expected to decrease in the future. Many executives are already making decisions from a ‘global consolidated management’ standpoint with the emphasis placed on investments and mergers and acquisitions overseas,” he explains.

In one example of forward thinking regarding foreign markets, TMEIC became the global leader in market share of PV inverters used in solar power systems by increasing its production lines from two to 18.

Executives at another Japanese giant, Asahi Holdings, came up with a dual-track business model, one aimed at the domestic market and the other targeting overseas expansion, according to President and CEO Mitsuharu Terayama. The company’s already extensive mining and metal refining operations will take a further step toward globalization through a new model of processing various materials to delivering the final product direct to the consumer. “This will mean the whole chain is involved – which no other refining companies are doing – in expanding our operations, so that Asahi becomes the world’s top refining company,” says Mr. Terayama.

Diversifying business lines along with acquisitions are another way to international expansion, a method which has worked for several Japanese companies such as the manufacturer AGC Asahi Glass. “Back in the 1950s and 1960s, we went into India and Southeast Asia for the glass and commodity chemical businesses,” recalls President and CEO Takuya Shimamura. “And one of the turning points for our globalization strategy was the later acquisition of a Belgian company called Glaverbel, the resources of which we leveraged to expand our network.”

Today, with the pace of mergers and takeovers quickening among many Western companies leading to more and more world-straddling behemoths, several Japanese executives see survival through the country’s small and medium-sized operations cooperating more closely on a global scale.

“It’s important for Japanese companies to clarify their true strengths and work with one another,” argues Teruhisa Ueda, the President and CEO of Shimadzu Corporation, a manufacturer of precision analytical instruments. Providing more detail on how this scheme might work, Masaki Hojo, the President and CEO of material handling group Daifuku, outlines how difficult it is for small and medium-sized companies to engage globally.

“Despite these firms being very small, they still have the technology and techniques which are worth promoting internationally,” he says. “We should encourage technical tie ups or partnerships for smaller companies with larger companies.”

Helping out in just that area in fact is the Japan External Trade Organization (JETRO), a government-related organization that works to promote Japanese trade and investment. “As a whole, Japanese SMEs do not have much experience operating abroad,” says JETRO Chairman & CEO, Hiroyuki Ishige. “So we organize business missions to offer opportunities for these SMEs to do presentations in front of foreign corporations, to communicate their strengths, and to help them find partners.”