Before Abenomics was a policy, Brother Industries decided to take on the world

What would you say has been the impact of Abenomics on the manufacturing sector and indeed on Brother Industries, Ltd. specifically?

For a small company like Brother, with our relatively small business, I do not feel that we receive enormous benefit or disadvantage from any decisions made by Japanese politicians. We are not of such a scale to be affected in a large way, so I always believe that we have to rely on our own power to survive. Therefore I’m not too interested in political matters.

Just for your information, when I joined Brother, the company was far smaller than it is now. At one time, 60% of the company’s sales came from the domestic market and we did our operations through door-to-door sales. However, mass merchandise stores expanded and took the place of our door-to-door business. Since our domestic business shrank, we looked for ways to survive by expanding overseas. This is our history in the last 30 to 40 years. I went to the United States 34 years ago. There, we worked on developing the market for printers, faxes, multifunction products, and labeling systems, and were quite successful with these products in the 90s. That’s how our business grew overseas whilst our business sales in the Japanese market maintained the same level.

Having been successful in the North America market, we also became successful in the rest of the world. In a way, we went overseas because it was necessary in order for our company to survive.

Brother was founded in 1908, and 2014 was a remarkable year for Brother, with your net sales growing by over 20% to 707 billion yen. What would you attribute this impressive growth to?

Because of the Abenomics, the Japanese yen became largely weaker. Due to the currency conversion rate into Japanese yen, it looks like our business became bigger. But I am always watching our sales based on the local currency because if the yen is strong, it looks like our business is smaller but if the yen is weak, our business looks bigger. That’s a misunderstanding and I am afraid people will have difficulty to understand our company’s capability or reality because of it.

We succeeded in growing our business by many ways such as merger and acquisition and increased our net sales for five consecutive years (497 billion, 516 billion, 617 billion, 707 billion). This year we are even looking for 800 billion yen. We also expect this growth to happen every year through the combination of additional businesses, products, portfolio, and more development in emerging countries and currency all together.

Brother really has developed an extensive overseas network, which started in America and has expanded to over 40 countries around the world. Now 80% of your sales come from overseas. What is your top priority for international expansion?

First of all, there is a difference between “global” and “international”. International in my mind means just doing business in various countries as a company. Global means that more different kinds of people work together regardless of the nationality, sex, or age. My dream is that we work globally together in the Brother organization. As of today, although our business has expanded worldwide, our human resources, or network, still remain local. This could take decades or centuries, but my goal is for our company to become truly globalized, mainly in a cultural and human perspective.

We carry this small charter called “The Brother Group Global Charter” and all 35,000 employees have this. It has been translated into their own languages, 27 different languages in total. This code of practice is the most important thing, which explains trust, respect, ethics, morals and challenge spirits. By using this global charter, we try to share values, concepts, and try to act based on this charter. Still, it will take decades to become a truly global company.

What is the strategy to enter new markets and continue to grow?

Manufacturing, sales and distribution are completely different. We used to manufacture everything in Japan; mostly all the necessary key components were made in Japan. But because of the competition, we needed to reduce the cost and we shifted our production to China. China had been a major factory for us for many years. But unfortunately China also became like Japan. That’s why 10 years ago I decided to shift some of our production to Vietnam. Four years ago, we found that we needed another additional manufacturing site and decided to go to the Philippines. This is just a transition of how to make a product competitively in terms of cost and quality.

On the other hand, on the sales and marketing side, 61 years ago we started sales and distribution, and sales and marketing operations in the United States. 57 years ago we started sales and marketing activities in Manchester, UK. Therefore we have quite a long history of doing business overseas.

How are you working to become more global?

Our business started from door-to-door sales of sewing machines. We also dealt with other home appliances including electric fans because we expected they could be sold with our sewing machines. At the same time we started business overseas, selling mainly typewriters, dot-matrix printers. Subsequently, we released electronic office typewriters, label writers, faxes, multifunction products, karaoke products, and lots of different kinds of things. From the beginning of the establishment of the company, the founder always had ideas, adding more new products or expanding our business portfolio, and that’s how we grew for the first 30 to 40 years.

We next entered the business of so-called network-related products, such as printers or multifunction products, etc. We were successful in those product categories, but now those businesses are starting to be saturated because people have stopped using printers or papers. Instead they started to use more smartphones or tablets. Now, I am telling people that we need more businesses in our portfolio. We need to change the portfolio of the company in order for the company to survive.

Therefore, we relied on sewing, knitting machines-related technologies in the first era, then faxes, printers, multifunction products and those so-called office products in the second era. Office products occupy 2/3 of our business but unfortunately their growth rate is starting to slow down, meaning we will need a new business portfolio for further growth. I am looking for more opportunity, including even mergers and acquisitions.

What are the new products?

Currently we are relying on printing or faxing business more than 60%. We are also doing businesses such as Karaoke, home sewing machines, more towards consumer-related products. We have reasonably good businesses in the fields of industrial sewing machines, machine tools, and industrial parts. Those industry-related areas started to grow because of the increase use of smartphones, and our machine tools are very good at making their aluminum cases with a fine finished surface.

The reason why I decided to acquire Domino in the UK with a lot of money is we wanted to make the industrial area our second major product category, after the printing business. Currently the industrial business is small but we acquired Domino. Now, we can offer printing technologies on cans, labels, fabrics and also industrial parts like gears, motors, sewing machines, and machine tools, all those so called B2B. We would like to allocate resources to them in order to grow further more. If not, even though it is successful now, our offices may not be here further.

Another example is using paper magazines, bookstores, etc. They will become digitalized so it will mean less printing. Therefore while we would love to stay No.1 in the printing market, we also need to grow further, and in order to do that we need a different portfolio that gives us another springboard for the future growth.

I have been looking for new business opportunities to acquire companies. We have added lots of new product categories through acquisitions of web conference systems, gears and motors, music content companies, and Domino. We constantly seek the opportunity of different business acquisitions and try to make each component of our portfolio as strong as possible and aim to make it the No.1 or No. 2 in its market place, whilst on top of that seeking a new portfolio.

What would you say differentiates your products from other major printing companies? What is your brand signal to existing in potential customers?

So far our brand has been pretty strong in small office, home office customers because Brother came up with multifunctional printers that were suitable for small and home office customers back in 1995. We were the first to make a compact-sized multifunctional printer in the world and our share is pretty high in North America and Western Europe. Our share of those small compact-sized multifunction printers is as high as 30-40% mainly because we have provided the products that the customers like. We were successful by bringing new products one after another into the market. When I went to the United States, a competitor had around 85-95% share of laser printer products, but after that we gradually caught up with them in the market and now we account for 30 to 40%. We are fighting with each other all the time.

One of Brother’s most important competitive advantages is your corporate culture, which is quite Japanese and you have an almost obsessive focus on the customers. Can you outline how this permeates on a day-to-day basis to your business and why it is so important in the success of Brother Industries?

We need to provide products exceeding customers’ expectations. Therefore, in a sense, we need to know what the customer is not happy about with our products and we need to develop and share new products concepts, strive to be ahead of the competitors. We try to find out some unique features the customers are looking for. We have a very short developing time for the very quickly changing market in the short term, and that is one of the strengths we have.

Brother is trendsetter in CSR and environmentally friendly products with your Brother Earth. Can you outline some of these positive for us why it is important to your growth?

I wish we could have a much bigger fund with which we could improve our brand image, corporate identity or many other things. But unfortunately our fund size for the corporate image is limited. We discussed internally what we could do with these limited funds. And then we chose to make Brother a more environmentally friendly company and a better CSR company. We decided to spend the limited money mainly to support local communities or protect natural resources or recycle of consumables. We want global customers to see us as an environmentally friendly company focusing on the protection of the world.

So how are you communicated on your environmentally friendly policies to these customers?

We communicate through the Brother worldwide headquarters websites. We have a special website for the Brother Earth “www.brotherearth.com”. It explains a lot of activities conducted by Brother, such as tree planting, environmental protection, or cleanup.

As you grow internationally, how much of your time do you spend educating the potential clients about the value of your products? Do you use your Japanese roots as a brand itself to excel excellence high quality?

That’s another interesting story. When I started studying printers in the United States, almost 80-90% of the Americans didn’t know that Brother was a Japanese company because Brother was more like a common name amongst American companies. A good thing about the States is that the customers do not care so much about brand names or they are not so exclusive to the brand itself. That is why we were given the opportunity to sell fax products or printer products although nobody knew about us as a printer and fax manufacturer. On the other hand, if we truly can demonstrate our differentiated or unique features that customers like, they purchase our products. That’s how we did in the American market. In a sense we are not necessary advertising that we are a Japanese company or that our products are designed by Japanese people. But in areas like Russia or the Middle East, where people like products made in Japan, we advertise that we are a Japanese company. Our marketing strategies vary in each region.

Your international expansion started in America – how would you grade the United States’ importance of continue growth? Is it still a high priority marker for you?
Yes. I was responsible for American markets including Latin America from 2000 to 2005. For our business, the American market is always leading Brother’s organization in terms of new products and concepts and big businesses. If today you look at our portfolio breakdown by region, out of our $7 billion business, 1/3 is coming from America, including Latin America.

You personally spearheaded this whole push into America in 1981? Why America? Why did a 26 year old decide to go to America?

I had not had many opportunities until then. I didn’t care about America or sewing machines or printers or anything. I just thought two years after joining the company that the system of Japanese companies was more like a seniority ranking and it took a certain number of years to become a senior manager or a position like that. I didn’t want to do that but I wanted to have many challenging opportunities while I was young – and all of a sudden two and half years after I joined the company my boss gave me a chance to distribute printer products in the United States. Of course, we already had some subsidiaries in the United State but they only sold typewriters, sewing machines and knitting machines. They knew nothing about printer products at all. They had small interest in selling printers. But on the other hand Japan wanted to sell a lot of printer products in the US because computers became so popular in the market and there was a big demand for those products too.

Fortunately, after six months of marketing activity, we had many customers who wanted to buy our products. It happened all of a sudden; we were receiving purchase orders and demands towards our printing factory to produce more and quicker... In the meantime I was busy establishing Brother branding and printer distribution as well. For the first five years after I landed in Los Angeles in 1981, I was selling Brother-made computer printers to foreign customers and also selling Brother-branded products to different customers.

Brother is an embodiment of the case of a successful global company that always responds to the market, and went international before most Japanese companies. What advice would you give to other Japanese CEOs who are interested in following your footsteps in creating global companies?

200% of Japanese top people know that the Japanese market will be shrinking and the Japanese generation will be aging more and is going to be decreasing significantly. Therefore, now you see a lot of acquisitions of insurance companies, beverage companies, even FTE acquisition. That to me seems to be a right thing in terms of strategy and thinking about the company’s future. One question I have on that activity is: how are they going to take care of the company that they’ve acquired? Our company itself only has a handful of people who can take care of a company like Domino in language, culture. I think a lot of fundamental effort is necessary. We are having meetings at least twice a month or two nights in a row over dinner talking with Domino’s CEO to communicate and think about the strategy together.

What would you say to the international community who is still hesitant about investing in Japan? Why should they come and invest and partner with company like Brother?

Japan is aging and its population is decreasing gradually. We are having fewer people who have the ambitions to go abroad and succeed. These are the basic trends in the Japanese society now. In terms of economic concepts such as inflation, or whatnot, I am not such an expert as to really know very much about that. But I personally believe that Abenomics or growth strategies, those are nice words and slogans but I have to question whether the Japanese people are really willing to be united towards the unified visions. I believe the fact that this hasn’t really taken root, and this hasn’t been promoted as well as it should, is the reason why we may see some difficulties.

I believe that it is important to think about what kind of business is suited to Japan and to be more open to forming partnerships and relationships with other overseas partners. Being an island nation, Japan definitely has great strengths such as the kind and generous spirit of the Japanese people. I believe that the spirit of the Japanese people is one of the strongest in the world, but as for looking outward and being an open country in terms of mind, regulations and policies, I believe that we are far behind. At the moment, a lot of Japanese people are very excited about the fact that there are many foreign tourists now coming to Japan shopping and spending a lot of money here, but that is kind of a temporary event. If you look in the long-term that is not enough and we need to open up the country not only for tourists but also for visitors who would like to do business with us. And in order to make that happen, I believe it is necessary to set up an environment where it will be easier for people to come to Japan to do business.