“We’re looking to establish ourselves in the interior-design world through our wire ropes,” says president Akihito Baba.
It is our view that Japan is at a very exciting time for manufacturing. On one hand, we have had major supply chain disruptions in the last three years, caused by the COVID-19 pandemic as well as tension from the China-US decoupling situation. As a result, we are seeing many multinational groups try to diversify their supply chains with a focus on reliability. This is where Japan can enter; a country known for decades of high reliability, trustworthiness, and short lead times when it comes to production. Now, with a depreciated JPY, it is our view that there’s never been a more opportune moment for Japanese manufacturers to meet the pressing needs of this macroeconomic environment. Do you agree with this premise, and why or why not? What do you think are the advantages of Japanese firms in this current economic environment?
We actually don’t conduct any overseas exports, and in fact, 100% of our business is conducted domestically. This means that this depreciation of the JPY is affecting our business negatively since imports are more expensive. 30 years ago it was true that made-in-Japan wire ropes had the opportunity to expand overseas, however, now seeing the current situation and also the quality of made-in-Japan, the feeling is that we do not actually have an advantage when exporting overseas. In terms of quality, European companies, especially those in Germany are considered to be number one, Made-in-Japan is considered very high-quality as well but pricewise it is not comparable to Korean or Chinese-made products. With its limited manufacturing capabilities and geographical location as an island nation, Japan does not have an advantage on a wider, more global scale for the wire rope industry.
However, with all this being said it does not mean that made-in-Japan products have been replaced in the domestic market by cheaper Chinese or Korean products. That is because Japanese people and companies do not trust Chinese or Korean products easily. Basically, their products do not tend to meet high Japanese standards, and often overseas companies do not consider some of the aspects of these standards to be important or necessary, however, Japanese companies do and it is why they often put much more trust in made-in-Japan products.
Major Japanese companies in particular are immutable and do not want to make changes. For example, our products assure a high level of safety, and no issue has happened in the past. Companies in this sense do not want to replace our products with an alternative simply because of cost reasons.
Now looking away from the past to recent years, the quality of Korean products in particular has escalated, for example, a Japanese company called Construction and Crane recently adopted the usage of Korean wire ropes, which in our view is actually changing the sort of landscape of the arena somewhat. In the past Korean manufacturers have approached a sales company like ours to become an agent in Japan, however, a company like ours has strong relationships with domestic manufacturers, so it is hard in our view to start selling foreign products. Those Korean manufacturers decided to then go direct to end users, thus successfully convincing companies like Construction and Crane to convert to using Korean wire ropes. Recently we have seen other elevator companies and construction machinery companies also switching over to Korean products.
One of the more pertinent challenges that Japan is facing right now as a whole is, of course, the demographic shift. Japan is known as the world’s oldest society with a shrinking population due to low birth rates. In fact, experts believe that the population will dip under 100 million by 2050, with over 30% of people over the age of 65. This creates a labor crisis and a shrinking domestic market. What are some of the challenges you have seen as a result of this demographic shift and how is your firm reacting to the demographic changes in Japan?
This population decline you’ve described has been a great issue for us, and to make matters worse the wire rope industry isn’t allowed to hire foreign workers through the government policy. The hiring of foreign workers to mitigate the labor crisis is not an option for us at the moment.
This shortage of manpower is affecting the wire rope industry greatly. There are sort of two different divisions within the industry; manufacturing and sales. In terms of manufacturing, the manpower available is dwindling the production capabilities within Japan. In addition, companies like ours are seeing effects in the processing and sales sector where this shortage has lessened our capabilities. In fact, we are now seeing a widespread problem within the industry where there isn’t anyone to succeed in these small family businesses, so many firms are now folding. My concern is that in the future there might not be a Japanese industry to support the supply of wire ropes.
What we are seeing among the younger generation is a lack of interest in manufacturing careers. They see these kinds of jobs as dirty and dangerous, so with the wealth of options they now have due to the labor crisis, many are now choosing white-collar jobs. With that in mind, it is important for us to create a comfortable working environment for our workers so we can continue to attract a younger generation to come and work with us.
In fact, we have established a website, a YouTube channel, and various social media channels to attract young people to our company, with the hopes that they will find the work we do here to be cool. We hope that they understand that we are supporting society behind the scenes, and in turn, we want to treasure those who have a passion for wire rope processing.
In 2006 Daiko launched the first of its own products in the form of the Gokunan®, a super-low rebound sling that possesses high strength and great wear resistance. Applications include lifting mold and propellers, bridge construction, and much more. What was the motivation behind the development of the Gokunan®?
It is actually a long story and incorporates the tale of how we changed our business style. At first, our sole business was wholesaling, so we acted as a wholesaler for manufacturers to sell their products in bulk. However, in the 1990s the Bubble economy burst, and therefore our business was no longer operable. The founder, my uncle, decided to change his approach and sell directly to end users instead of being a wholesaler.
In 1999 we changed the company name from Daiko Trading to Daiko Corp. and we shifted our business to direct sales. At the time we changed to having direct conversations with our end users, and through these conversations, we began to understand how users were struggling with the wire ropes. We took on board these issues that people were experiencing, and together with the manufacturers we were able to develop the Gokunan® with the idea to tackle all of these issues head-on. Compared to conventional wire ropes it is only one-third the hardness. Wire ropes are essentially bundles of steel, so by making it less hard we were able to improve upon the product. Reduced repulsion force makes the weight feel lighter, which significantly reduces the physical burden, and the feedback from customers was very good.
Another product we have developed is called Kiwami, which uses a high-strength material. For example, the 50mm wire rope sling you have been using can be replaced by the Kiwami 45mm wire rope sling. It is approximately 20% lighter than conventional products and by reducing the size of the sling rope you can reduce the burden of on-site work and environmental impact.
In addition to the Kiwami and the Gokunan®, we know that you also have your Jakob Rope Systems, which has been critical for many projects such as Miyashita Park, the Tsutenkaku Tembo Paradise, and the Shiokaze Bridge. Why were your products chosen for these specific projects and what advantages do they bring to your customers?
The reason why the Jakob Rope System has been applied in many locations around Japan is because there really isn’t anything else quite like it here domestically. It is actually something that came from Europe and we became an agent of theirs to expand our business field knowing that limiting ourselves to just wire ropes would not be sustainable.
The uniqueness of the Jakob Rope System is that it has a very fashionable and designable grid that is very moldable. It can be shaped into 3D items and I think this is a big advantage.
Are you looking to find more overseas companies to partner with as you have done with Jakob Rope Systems? Are you looking to function more as an agent to introduce foreign products to the Japanese market?
Yes, and in fact this is one of the pillars of our business. Located next to the atomic bomb dome in Hiroshima, the Orizuru Tower has an observatory with a ceiling and floor made from wood. In order to prevent people from falling in the open air a wire rope net is applied. In fact, the size of the grid of the net is large so it does not obstruct the view for people and additionally, it allows a high level of airflow, making the environment comfortable. This Orizuru Tower project has become a great success which then led to the creation of the 2020 Miyashita Park project.
Another type of business that we are trying to start up is an interior design business through a partnership with TTM Rossi, an Italian company that provides interior components for high-end brands like Bulgari as well as high-end hotels. High-end stores opening up in Japan are now incorporating designs that they were using before in their home countries like Italy.
With this new business, what is your strategy to market yourself and grow this interior design business?
Right now we are still planning things out and things haven’t exactly been easy. Initially, our main products were wire ropes and rigging products, which allowed us to go directly to end users, but when we started dealing with the Jakob Rope Systems we weren’t exactly sure who to talk to. We went to a construction design company and they incorporated the Jakob Rope System into their drawings and designs. That worked out very well for us. With the interior design business, again we are faced with the challenge of finding who exactly we should talk to about expanding the business.
One way that Japanese companies are looking to mitigate the issues that come with the demographic situation is by looking overseas. Companies have started to expand themselves and open up overseas bases. Is this an area of interest for your firm?
30-40 years ago the answer was yes, we were looking to expand overseas, however, now the situation has changed and we are solely concerned with the domestic market, with a particular focus on importing products to Japan. Although the Japanese market size is shrinking, there continues to be a market, and the sustainable supply of products to these Japanese companies is still important. Denzai for example is a company that imports large machinery into Japan, and they rely on our wire ropes that we provide from overseas.
Imagine that we come back in ten years and have this interview all over again. What goals or dreams would you hope to have achieved by the time we come back for that new interview?
The founder of the company liked to say back in his day that providing wire ropes was enough for a sustainable business, but in my generation, the creation of new business pillars is a necessity for survival. I’ve constantly felt challenged to create these new business opportunities for our company, but at the same time, I do understand the need for direction and purpose. Who knows, we might even be a construction company in ten years time.
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