Since their establishment in 1968, OSK has been dedicated to the export of scientific instruments and educational tools.
Over the past 20 to 30 years, Japanese firms have faced very stiff price competition from regional neighbors located in countries with a lower cost of production. Nevertheless, when we look at certain niche B2B fields, specifically in the scientific sector, you find companies like GEO that are leaders in electron microscopes. I'd like to ask, how do you explain that Japanese firms have been able to remain competitive despite this tough price competition from Asian countries?
I believe the core strength of Japanese competitiveness and why Japan remains competitive is due to its social structure. While major companies dominate, there is also a significant presence of small and medium-sized enterprises (SMEs) that support the industry. This intricate business ecosystem, along with the craftsmanship and engineering spirit exhibited by these companies, has contributed to Japan's competitive edge. Acquiring such craftsmanship takes time and cannot be achieved overnight, which is why Japan continues to thrive.
In the scientific equipment industry, in which our company operates, the focus is not on mass production but rather on the meticulous manufacturing of individual units. Each unit receives careful attention to detail, following a high mix, low volume production model.
This approach demands extensive knowledge and a rich history of expertise in producing high-quality products. However, an ongoing challenge lies in passing down this knowledge of craftsmanship to the next generation.
You mentioned that passing down knowledge to the next generation is a challenge, which becomes even more interesting when considering Japan's unique demographic situation. Japan is recognized as the oldest country in the world, and it also faces a declining population. As a result, companies are confronted with various challenges. Firstly, the shrinking domestic market means there are fewer consumers. Secondly, there is a significant human resources and labor challenge. It becomes increasingly difficult for companies, particularly in finding skilled engineers and hiring new workers. I would like to know how your company is addressing Japan's demographic challenge and what opportunities and challenges it presents for you.
This population issue with the aging population and declining birth rate is a significant social challenge that no single company, including ours, can tackle alone. As a company, we are directly experiencing the impact of these demographic changes. Currently, Japan is facing a shrinkage in the domestic market.
As to how our company will respond to this challenge, we believe it is essential to expand the market by exporting to compensate for the shrinking domestic market due to the declining birthrate. Specifically, in cooperation with the SMEs Promotion Association, we have created an English-language catalog that introduces the products of Japan's excellent SMEs, and we are distributing this catalog to embassies and other organizations in various countries with the aim of developing new markets.
In addition, as the number of skilled craftsmen decreases due to aging, it is difficult to pass on knowledge and skills to the next generation, and an increasing number of manufacturers are being forced to discontinue or close their businesses due to lack of successors. As a result, schools and research institutes are unable to find the equipment they need in Japan. So we strive to help them by importing the equipment they need.
You mentioned that at first your role was exporting Japanese products and now it's changing to also importing foreign ones. So traders, or shoshas, are quite unique to Japan. Not many other countries actually have a very developed trading business market in the beginning. If you look 20-30 years ago, traders were mainly in charge of finding products and financing these products. Today, however, that role is changing. We're seeing the appearance of more specialized companies that add added value services either from the manufacturing standpoint or from a training slash education standpoint. You just talked about your own evolution, how you went from exporting to also importing. How do you see your role evolve within the next five to 10 years? What new responsibilities or new values do you think trading houses such as yours will have to comply with?
Briefly explaining our transition, we were established in 1968 and for the first 20 years, our main focus was supplementing the lack of human resources and funding for SMEs to enter new foreign markets. We also worked to overcome language barriers that hindered Japanese companies from exporting.
As a trading firm, we acted on behalf of these SMEs. From the 1980s to the 1990s and continuing to the present day, our main business has been the ODA business. We collaborate with the Japanese government's development assistance programs in various developing nations.
This partnership is an important aspect of Japan's overseas contributions, and as a company, we recognize its significance and share the responsibility to contribute to the overall development of these countries.
In the upcoming 10 years, we will continue serving as a supplier for ODA projects. Simultaneously, we will act as an importer to fill the gap in equipment that is currently lacking in Japan due to product discontinuation. Our focus lies in three major areas: education, medical, and agriculture. Three pillars form the basis of our vision for sustainable operations.
While the need for language support in international business has decreased over time, there are still companies that require assistance with overseas sales due to limited human resources and funding. We actively search for and connect with these companies, which possess unique technology but struggle to engage in overseas sales. Although it may not be a large market, it remains a clientele base that we currently focus on.
You brought up an interesting point about your work in Official Development Aid (ODA). In developing countries, especially in regions like East Africa, the challenge lies not only in infrastructure but also in the availability of a skilled workforce. While new medical or scientific equipment can be provided, the lack of operators who know how to utilize these machines becomes an issue. Thus, training and education are crucial in ensuring the effective use of the equipment. Can you tell us about how your company not only supplies the equipment, but engages in the training of local staff?
As part of our ODA projects, we not only supply the equipment but also organize training schemes. We collaborate with local engineers or manufacturers, and if necessary, we bring in equipment and specialists from neighboring regions, if needed, to provide training.
One significant challenge related to ODA projects is the requirement for consumables. Both medical and scientific equipment rely on consumables, and initially, a few years' worth of consumables are provided to the laboratories.
However, once these consumables are used up, it becomes the responsibility of the local institutions to purchase them. In many cases, these institutions struggle due to financial constraints, and our company also faces limitations in budgetary capabilities to cover all the necessary consumables; how to achieve the stable supply of consumables remains an ongoing issue.
I'd like to delve a little deeper into ODA, which is, of course, one part of your export business. Another aspect, as you mentioned, is assisting Japanese SMEs in exporting their products overseas. Could you provide further details about this segment of your business? Are there any specific countries or regions that are particularly significant for this segment?
In our ODA export business, Southeast Asian and African countries are our main customer base. However, we do not have a single dominant product that drives our sales. Our focus is not on a single product that drives our sales, but on meeting the specific and various requirements of our customers.
The equipment we offer varies greatly depending on factors such as whether our client is a university laboratory or a specific department, the research topic, and the intended purpose of use. To cater to these diverse requirements, we provide a wide range of products in our portfolio.
I'd like to talk a bit about your import business, which I find quite interesting as it represents a significant change. We noticed that you work with a diverse range of partners, including large companies in the US, as well as an Israeli company specializing in civil engineering testing. It's truly a unique aspect of your business. Considering the future, do you have any plans to seek additional foreign partners to bring into Japan, and if so, which specific products or sectors you are most interested in exploring and expanding into?
Our strategy for importing to Japan revolves around identifying two key factors. Firstly, we respond by addressing gaps or shortages in the Japanese market where certain equipment is lacking. Secondly, we target sectors where the price of equipment in Japan is relatively high, making it more cost-effective to import equipment from overseas.
I have a fun and challenging question for you. Imagine that I am a company located in Southeast Asia, and I am interested in purchasing a specific type of instrument for my R&D lab. I have found a Japanese company that manufactures the instrument I need. In this scenario, what advantages would there be for me to go through your trading company instead of directly contacting the manufacturer?
For example, in educational and research and development facilities, there is often a need for multiple types of instruments. Instead of reaching out to each supplier individually, it is much more convenient for these facilities to place their orders through us. We have a wide range of equipment available, making it easier for them to find everything they need in one place.
Additionally, if maintenance or after-sales service is required, it can also be cumbersome for them to contact each supplier separately. By working with us, they only need to communicate with Ogawa Seiki for overall support.
You mentioned previously that looking at the future, you will focus on three particular fields, namely education, medical and agriculture. Why did you choose these three particular fields as your focal points of interest? What is the potential that you see there?
The basic starting point of our company was as an education provider. Over the years, we have expanded our presence to more than 20 countries worldwide. During my visits to these countries, I witnessed first-hand the challenges people face, such as food shortages, which emphasizes the importance of agriculture. Additionally, there are poor health situations that require improved medical services.
It's important to acknowledge that war and conflict are issues that are beyond our control to tackle directly, so considering our business operations, we focus on three key areas of agriculture, medical services, and education, which all play a vital role in improving the daily lives of people and are the core elements we aim to support through our work.
Let's imagine we meet again exactly five years from now for another interview. What dreams and goals would you like to see the company achieve by then? What accomplishments would make you feel proud and eager to share with us in that future interview?
In five years, I will be 82 years old, so it's unlikely that I will be here. What's truly important is to pass down the passion and spirit of Ogawa Seiki to the next generation who will be at the forefront of operating the company.
My focus, as well as that of the successors of Ogawa Seiki, is on preserving the legacy that has been handed down through generations. While I do have a vision for the company in the next five to ten years, it is not something that I should actively discuss or promote.
Instead, I want the company to be highly flexible and capable of responding rapidly to the changing demands of society. To achieve this, it is crucial to build a solid foundation and foster a mindset that embraces change. This is where our focus lies.