Established in 1949, Mutsumi Industry has forged its position in R&D, design and the production of press dies and machines for production lines.
It is our view that Japan is at a critical 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?
We firmly believe that recent global developments have given rise to a unique situation where Japanese companies can actively strive to introduce their products to the international market. While you described the times as exciting, I would propose that "magical" might better encapsulate the essence of this situation. While some may assume that a weaker JPY favors Japanese exports, we recognize that our firm is also grappling with escalating raw material costs. I am of the opinion that this circumstance is transient, and although it currently generates less-than-positive price fluctuations, it won't endure in the long run.
On a different note, Japanese firms possess an extensive wealth of accumulated knowledge, technological innovation, and manufacturing capabilities. Japanese companies adhere to quality standards that surpass those of any other nation on the planet. I can elucidate three primary advantages that, in my view, Japanese suppliers enjoy within the prevailing global macroeconomic framework. Foremost is quality; especially in our realm of stamping-die manufacturing, quality stands as the de facto metric for our business. Secondly, cost is a complex issue for numerous Japanese firms. As I mentioned earlier, while it's accurate that export costs are decreasing due to the depreciated JPY, the rising costs of raw materials due to various factors create a delicate balancing act. Firms like ours must carefully navigate this terrain. Naturally, if we could establish sustainable procurement routes at affordable costs, discussions about cost competitiveness would gain more traction. Unfortunately, such circumstances remain rare at this juncture. The final pivotal advantage that I believe Japan as a nation retains lies in the national character of its people. The human aspect bestows a significant edge, as Japanese individuals dedicate their lives to their crafts. They invest their all into production, aiming to manufacture top-quality products, unwavering in their dedication to the most crucial element; customer satisfaction.
An additional emerging factor in today's business landscape is speed. Customers now demand timely product delivery, and even minor logistical challenges can result in lost business opportunities. Ultimately, irrespective of cost competitiveness and product excellence, the inability to deliver products to customers within their desired time frame holds paramount importance. Unsurprisingly, this mindset has prompted numerous Japanese firms to repatriate production to Japan, grounded in their commitment to delivering products punctually to customers.
With that being said Japan does still have problems in its manufacturing sector; high energy costs as well as several recruitment challenges, especially for specialized fields. What impact is Japan’s aging population having on your day-to-day operations, and are there any opportunities given this unique challenge Japan faces?
The prevailing socio-economic challenges within the domestic market are presenting numerous complexities, and I would assert that, for most manufacturing companies, including ourselves, these challenges outweigh the opportunities. Firstly, we need to address the issue of the shrinking market, primarily stemming from Japan's population dynamics. Additionally, we grapple with concerns such as inflation and the overall stagnation of the Japanese economy. Clearly, this amalgamation of factors paints an unfavorable picture. The natural question arising is how to navigate such circumstances. From my perspective, two solutions emerge: firstly, cultivating a conducive business environment for foreign enterprises; this could involve incentivizing foreign companies to establish their operations in Japan. The second vital solution involves tapping into human resources from outside Japan, thereby addressing the deficits we presently confront in the domestic market due to the aging population and declining birth rates.
Naturally, another avenue is to transcend the confines of the domestic market itself, effectively sidestepping Japan's existing challenges. Many Japanese companies are now exploring international markets as a means of sustained growth. As an organization, we must adopt a proactive stance, diligently seeking novel avenues to promote our products both within the country and beyond its borders.
You highlighted in your question the challenges related to recruitment, and this is indeed a concern that resonates within our company. In the current year, we have been fortunate to secure the precise number of new employees required to meet our demands. However, the future remains uncertain, and the landscape of recruitment is increasingly formidable and competitive due to Japan's shrinking population. To address this, we need to extend the working age, essentially enhancing the social support framework by elevating the quality of the work environment. This would enable individuals to remain in the workforce beyond the age of 65. Another strategy could involve attracting skilled foreign workers, potentially from China, who possess comparable specialized knowledge. Such individuals would seamlessly integrate into our firm. Essentially, we are seeking individuals with experience in similar companies outside of Japan, individuals who already possess expertise in our specific industry.
Now that you’ve been conducting exporting activities to more than 17 countries we know that you often participate in cultural exchange programs and trade shows. Looking forward, given the current macroeconomic climate we’ve discussed, what would you say is the focus of your international development strategy? Are there any particular regions you are focusing on or a particular type of product that you are really trying to push for the international market?
We are decidedly inclined towards countries that have already established themselves as economically advanced, primarily European countries, and similarly, countries like the US. These nations possess the financial capacity to procure our products. This consideration underscores our pursuit of international competitiveness, given the presence of numerous companies worldwide engaged in the production of stamping-die, much like ourselves. However, we are not venturing beyond our capacities to delve into Southeast Asian markets. Currently, such an expansion lacks business rationale. We have already established a presence with active sales operations in that region, making it challenging to project any further forays into this particular market. Our focus has been deliberately directed towards the prime locations – the US and Europe. These countries hold a profound appreciation for Japanese quality and are willing to invest accordingly.
Conversely, promoting products is an intricate endeavor. My extensive experience in this field allows me to speak with authority on this matter. A trend I've observed with Japanese technologies is that while we excel in conceiving exceptional products and services, we often face difficulties in articulating these offerings. A significant number of Japanese individuals do not possess fluent English language skills, making it challenging to precisely define the attributes of a product or service. Presently, certain Western companies are interested in procuring Japanese products but require Japanese sales representatives who possess strong English proficiency. With this in mind, we have initiated English learning programs within our company. Furthermore, we have facilitated staff training at Berlitz, an established language school in Japan. This strategic move empowers our employees to adeptly promote and sell our products in English to foreign markets. Expanding our reach to a wider global audience has assumed paramount importance.
Regarding your inquiry about the nature of our products, we don't confine ourselves to specific items. Instead, we are more accurately characterized as a proposal-oriented company. Our prominence lies in supplying stamping-die and specialized machines dedicated to all production processes in any industry, along with comprehensive support spanning prototyping, development, design, and manufacturing. By effectively promoting this comprehensive package and identifying customers who value such offerings, we can forge connections and chart a pathway to international markets.
It seems to be less of an innovation problem in Japan and more of a communication problem. I also feel that there has been a big change in Japan’s manufacturing business culture. Before the understanding was that if you make a good product it will sell, but now even in niche B2B fields the times have changed to the point where promotion and marketing are required. Could you tell us in more detail about the efforts you’re making to promote yourselves as an SME and B2B business?
We are pursuing various avenues to approach this challenge. One involves leveraging distribution channels, while another entails contract-based arrangements. At the same time, we are actively exploring possibilities like technology transfer and partnerships. When we confront reality, it becomes evident that many Japanese manufacturing firms have yielded their opportunities to European counterparts to make inroads into foreign markets. Specifically focusing on the manufacturing sector, Germany stands as a central hub for such companies, and its pervasive influence extends globally. Overcoming the extensive groundwork already laid by German enterprises is indeed a formidable task. We internally refer to this German dominance as the "First Wave." The "Second Wave" corresponds to the emergence of Japanese manufacturing firms, and this entry has left minimal room for further expansion.
Given the nature of our industry, our stamping-die manufacturing must be seamlessly complemented by top-tier engineering capabilities. In essence, there is an inherent requirement for exceptionally skilled engineers to facilitate the manufacturing process of such equipment. Our full embrace of this strategy necessitates maintaining a profoundly close rapport with our partner companies.
Mutsumi Industry actively engages in marketing efforts during both domestic and international exhibitions. These trade shows serve as invaluable hubs of industry information, enabling us to discern prevailing trends and anticipate the industry's trajectory. This strategic information collection, analysis, and future planning have assumed paramount importance for our company. We intend to expand our presence in such events moving forward. Moreover, by the year 2024, we have set our sights on establishing a sales office in the US by the end of the year.
Have you picked a city yet?
While we haven't finalized a location yet, we are considering areas around the Great Lakes, such as Ohio, Detroit, or Chicago. In August 2023, myself and another salesperson are scheduled to attend a significant exhibition in the US to assess the current landscape. The prospect is indeed thrilling, yet simultaneously presents a formidable challenge.
You just mentioned areas that historically have had an automotive manufacturing presence such as Michigan or Ohio. In the past automotive has been your core market; selling stamping-die to automotive component makers. These types of parts aren’t affected by the change to EVs, but the overall trend in the industry is moving very quickly toward hybrid or EVs. What impact, if any, is this once-in-a-century transformational shift having on your manufacturing activities?
The impact of change is certainly reverberating throughout our company, manifesting in the evolving product preferences of our customers. Just as you pointed out, the automotive sector is currently undergoing a transformation of unprecedented magnitude due to the transition to EVs. The advent of electrification is ushering in a host of new products within automobiles. Consequently, this dynamic demands novel solutions from the perspective of stamping-die manufacturing. The current landscape is marked by a multitude of transformative events, with our company experiencing their collective effects. I often draw parallels between contemporary cars and home appliances, as they essentially transform into mobile computers.
Just on your point, we know that there is a material change occurring with the switch to EVs. Ferrous-based metals are being discarded in favor of lighter-weight ones such as aluminum, magnesium, titanium, and even plastic resins like CFRP. In terms of your business have you had to adapt your equipment to cater to these new material demands?
Indeed, we are diligently monitoring the industry trends, and you are absolutely correct that there's a pronounced demand for material shifts. You mentioned CFRP or carbon-fiber-reinforced polymers, a material that we started engaging with a couple of years ago. We ventured into promoting innovative manufacturing methods for CFRP, targeting its application in aerospace parts. We preemptively recognized these emerging industry trends and concentrated our efforts on experimenting with this material. Naturally, the introduction of new materials obliges our company to proactively adapt and explore fresh avenues, thereby intensifying our research and development initiatives, all driven by our unwavering commitment to delivering enhanced solutions for our customers.
In your opinion, what role will Japan play in the EV ecosystem in the future? Do you feel there is still a place for Japan in the future of the automotive industry?
At this juncture, I find it challenging to provide a definitive response to this question. Electric vehicles (EVs) have yet to attain their ultimate form, and a considerable degree of uncertainty shrouds their future trajectory. Substantial discussions revolve around key aspects like charging infrastructure and the source of energy. Notably, there is a growing inclination towards hydrogen as an alternative to batteries, underscoring the multifaceted landscape currently unfolding within the industry. The lack of a conclusive solution engenders diverse possibilities for the path ahead. Regardless of the eventual outcome, I firmly hold the belief that Japanese suppliers will retain a significant role to play. This is particularly evident when we consider the precision imperative in manufacturing processes, a critical requirement for battery production.
As you prepare to pass the company on to your daughter what would you like your lasting legacy to be? What achievements are you most proud of and what advice would you give your daughter as she prepares to take the reins of Mutsumi Industry?
During my youthful and energetic years, I invested my utmost dedication to realize the goal of establishing this company. The entirety of what we witness today stands as a testament to that dream and the relentless pursuit of its fulfillment. The trajectory beyond this point rests upon the shoulders of the subsequent generation, with my daughter poised to steer the company's course for many years to come.
In terms of guidance for my daughter, my aspiration is for her to further amplify our presence in North America and Europe. I envision the company crafting a distinct reputation in these regions, positioning itself as the preferred choice for manufacturing firms seeking innovative solutions. Notably, a spectrum of emerging technologies including AI, digital twins, and robotics hold the potential to revolutionize the manufacturing landscape. I strongly advocate for the company's thorough exploration of these technologies, followed by their seamless integration into our operational framework. This commitment will propel our products to the vanguard of the industry, enhancing their competitive edge in global markets.
Lastly, I implore my daughter to perpetuate the core value we place on our employees. Despite our modest size, I hold the aspiration that our staff will radiate a sense of pride when affiliating themselves with Mutsumi Industry.