From innovative pumps to smart saws, President Eiichi Kohara discusses Koshin's international growth and customer-focused strategies.
Japanese manufacturing is at an exciting time. Over the past three years, significant disruptions in the supply chain have occurred due to COVID-19 and the US-China decoupling situation. As a result, corporate groups are seeking to diversify their suppliers to ensure reliability. Consequently, Japanese firms, renowned for their advanced technology and reliability, find themselves in an interesting position. Observers argue that the weakened Japanese yen presents a unique opportunity. Do you agree with this sentiment? What advantages do Japanese companies possess in the current macroeconomic environment?
I agree with this sentiment, although I cannot ignore the fact that Japanese manufacturing companies have traditionally relied on Chinese with an inexpensive manufacturing cost. Unfortunately, our quality, monozukuri and unique technologies have adhered to the Chinese market. Nonetheless, most Japanese SMEs enjoy the advantage of possessing distinctive processing technologies and know-how. With the recent depreciation of the Japanese yen, it is high time for us to enhance the appeal of our products in the overseas market. While I anticipate potential demand in overseas markets moving forward, the challenge for Japanese companies lies in our limited marketing skills to effectively promote the competitive advantages of our products to international clients.
Since Japan holds the distinction of being the oldest society with a rapidly shrinking population, the transmission of unique know-how, technologies and the monozukuri philosophy accumulated over many years faces a significant threat. As the pool of graduates available for companies to hire and succeed their older workers diminishes, the transfer of knowledge, unique know-how and technology becomes more challenging. Additionally, the domestic market is also shrinking. Considering these circumstances, what challenges does this demographic shift pose to Koshin, and how have you been adapting to them?
Japan's declining population is undeniably a pressing issue that has resulted in a labor shortage. The Japanese people, not easily perceiving a sense of crisis or urgency, have left companies suddenly grappling with labor shortages, leading to confusion. However, our company takes a different approach. We have established our monozukuri principles based on automation and mechanization, where we made significant investments to reduce our reliance on manpower in monozukuri. Furthermore, we have pursued innovation in our monozukuri practices. From the outset, our company's philosophy centered around utilizing less manpower. When we started our business, we had nothing at all, and we embraced the mindset of minimizing dependence on manpower. We focus on small parts of our processing technologies, enabling us to prioritize automation and manpower savings as integral elements of our DNA. This approach has not only improved our quality but also enhanced production efficiency.
Japan’s domestic market is shrinking, particularly within the agriculture industry. Limited by age, aging farmers face challenges in utilizing heavy machinery; even starting the engine of such equipment becomes a formidable task. More female farmers are entering the agricultural field in response to the declining number of male farmers. To address this disadvantageous situation, our philosophy revolves around the development of agricultural machines, such as mowers, that are light, compact and user-friendly. Our primary focus is on creating products that cater to the needs of aging individuals and even female users.
The transition from gasoline to fuel cells or battery to EVs in the automotive sector is also occurring in the realm of agricultural machines. Conventional engines, known for their noise and heat, are gradually becoming obsolete. The emergence of electric-powered agricultural machines brings forth a new era, facilitating mobile communication and incorporating sensors that enable autonomous driving. Electric vehicles offer farmers a lightweight, quieter and user-friendly alternative. The utilization of batteries in agricultural machines transforms the market, creating a new landscape.
Your products can be divided into five main categories: agriculture & garden, construction & civil engineering, industrial application, marine & fishery and household appliances. Apart from the agriculture sector, is Koshin exploring other areas of focus? In which other fields are you planning to introduce your products?
Pumps have consistently remained the focal point of our business and they have always been our mainstay business and the primary source of our profits since our establishment. This success has allowed us to make investments in venturing into new challenges, automating processes and improving productivity while striving to reduce costs. Apart from pumps, we are also exploring equipment that utilizes batteries or electricity.
Like other companies, we have not extensively considered alternative pump functions. Operating tasks with pumps is very simple; thus far, we have not encountered any significant problems or accidents. However, it is now the right time for us to delve deeper into enhancing the functionality of our pumps. Additionally, we need to explore the possibilities of incorporating batteries into our pump systems.
Batteries have also been increasingly used in the gardening sector in recent years. To acquire expertise in the field of electricity, we have sought the guidance of external advisers, including retired professionals and mid-career hires with experience in power companies. They have provided valuable insights for the development of our new products. Currently, we are in the process of accumulating internal knowledge and technology to generate innovative ideas for our pumps.
When people think of pumps, they often associate them with tasks such as water extraction and concerns about potential accidents like liquid leakage. However, it is important to note that there have been no reports of lethal accidents thus far. On the other hand, battery-operated mowers and weed cutters equipped with rotating blades possess inherent risks that can potentially harm users or lead to fires and explosions. While research and development are crucial, we must also consider the flip side, which is safety. We are actively learning about safety measures specifically for mowers and weed cutters. Regardless of how advanced our technology may be, without prioritizing safety, accidents could jeopardize the financial stability of our company and even lead to bankruptcy.
What do partnerships play in your business model? Are you currently looking for any partners in overseas markets?
Moving forward, it is imperative for us to consider forging partnerships with overseas companies. However, it is crucial to acknowledge that the usage of pumps varies depending on the users and their geographical location. For instance, pumps may be employed to transport water from rivers to elevated lands, requiring different piping configurations. Our primary focus should be on identifying and addressing the specific requirements of our customers. Once we have gained a deeper understanding of the potential needs and demands in the overseas market, we can then explore suitable partnerships with international companies.
Are there any pump technologies or products you are working on that you would like to showcase to our international readers?
When it comes to the design of our pumps, there are minimal distinctions compared to many other manufacturers. However, the areas where we truly excel and showcase our differentiation are durability and performance in challenging conditions. For instance, if users need to extract water from a deep well up to 5 meters, there might not be a noticeable difference. However, when the depth reaches 7-8 meters, the disparity becomes evident.
In essence, our product's differentiating factor lies in the cumulative effect of numerous small distinctions that set us apart from our competitors. Even a slight variance in know-how or the way we process parts can make a significant impact. Our components are built to last, ensuring a longer functional lifespan compared to our competitors' products. Utilizing distinct raw materials and designs also contributes to a prolonged end-of-life phase for our products. Moreover, our products stand out due to superior surface processing, offering enhanced strength and anti-corrosion capabilities. This advantage empowers customers to utilize our products reliably whenever the need arises. They can rely on our pumps during emergencies without worrying about their functionality. It is this accumulation of incremental differences that truly sets our product apart from the competition.
The SRS-180W, a rechargeable two-way reciprocating saw, was recently introduced as part of the wider Koshin Smart Series. This innovative tool incorporates two types of blades manufactured in Japan, effectively cutting through various materials such as metal, wood, resin, tatami and even carpets. What motivated you to develop the SRS-180W, and how do you plan to promote this product further?
Saws have always been a well-known tool, and Makita is known for its expertise in manufacturing this type of equipment. Our product range includes chainsaws, mowers, weed-cutting machines and saws. Recognizing the need for a convenient solution to cut branches in high areas, we developed the concept of integrating these two functionalities into a single tool. This idea originated from our marketing activities, where we actively engage with customers at the gemba or on-site locations. By directly listening to their feedback, we sought to gain deeper insights into the market's potential needs and demands. During these interactions, we discovered a multitude of challenges faced by non-professional customers in residential areas, particularly regarding the management of large waste materials. Motivated by these findings, we endeavored to address these issues by introducing this product specifically designed to cater to such areas.
We discovered that this tool, designed for professionals, presents challenges for non-professional users. Therefore, we made an effort to replace the identified specifications based on the insights gathered from our marketing activities conducted at the gemba. Our products and other tools fall into the same category but are displayed in the gardening or non-professional section of our store, unlike other companies that showcase such products in the professional area. While professionals, with their expertise, can safely utilize this product, it is not specifically designed for them. Our focus has been on prioritizing safety functions and considering usability, especially for female customers, resulting in improvements to our product. This is the approach we aim to employ in order to appeal to and promote this product to non-professionals, who constitute our primary target audience. By actively listening to customer problems and opinions during our marketing activities, we collected various options and conceived the idea of offering different blade variations for this product.
While manufacturers of professional-use products typically emphasize specifications and high performance, our focus is different. Our product caters to soft users. Therefore, our promotional strategies revolve around identifying and delivering tailored solutions that cater to our customer's specific needs.
Moving forward, what countries or regions have you identified for further expansion, and what strategies will you employ?
We aim to increase our sales turnover in the overseas market. Although we have been mainly working in Japan, our goal is to expand our product appeal and promotion to cater to customers in different markets worldwide. Our flagship product has been the pump, particularly in the agricultural sector. With the growing trend towards battery-powered pumps and agricultural equipment, we envision significant potential for product diversification and the utilization of sensor and automated control technology. Consequently, we have made substantial investments in this area.
We have successfully sold our products in the overseas market, but we have yet to establish production capabilities there. We see great opportunities in advanced countries like North America and the European market, where we can provide value-added products not only in agriculture but also in industrial and other sectors by leveraging other facilities and developing new technologies. Currently, our production is centralized at our main base in Japan, with products manufactured in China and Thailand being distributed globally.
While we have not identified the location for our next production facility, we are considering establishing and constructing new overseas facilities in the future. These facilities will not only focus on production but also incorporate marketing functions, monozukuri and sales capabilities. Localizing ourselves close to the target market will enable us to listen to the voices of local customers and develop new products that fit the needs of the market.
Interview conducted by Karune Walker & Sasha Lauture