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Nishinihon Shoko continues to provide niche market solutions

Interview - October 30, 2023

For over 60 years, Nishinihon Shoko has continued to refine a perfect blend of quality, innovation, and reliability for manufacturing success.

KOZO OKAMOTO, PRESIDENT OF NISHINIHON SHOKO CO., LTD.
KOZO OKAMOTO | PRESIDENT OF NISHINIHON SHOKO CO., LTD.

What is your take on the so-called rise and fall of Japan’s manufacturing industry? What do you believe to be the core strengths and competencies of your Japanese clients that set them apart and allow them to be competitive on an international stage? 

We started as a trading firm and now we’ve developed manufacturing capabilities, so we have a very unique skill set as a company not only in the domestic market but also overseas. We are taking advantage of the experiences and know-how that we have accumulated and that really speaks to the notable characteristics of this company.

There are 70,403 companies in the world that have been in business for more than 100 years, of which 37,085 are Japanese companies. Of these 37,085 companies, 25.9% are in the manufacturing industry, which is the top industry sector. There are also 1,388 Japanese companies that have been in business for over 200 years, 41.5% of which are in the manufacturing industry.

Some Western countries have been claiming that Japan has lost almost 30 years now because of the so-called “Lost Decades.” While from the perspective of some large markets, there is some truth that the Japanese industry has declined to some extent, I think that some Japanese companies have maintained a powerful presence in niche markets, especially B2B manufacturing. I actually believe that the history of the Japanese industry as a whole is very similar to the history of my company; Nishinihon Shoko. As I mentioned, we started off as a trader selling machines and tools and our main customers were automotive makers. Over time we developed our manufacturing capabilities supplying tools for glass makers that were producing glass for automobiles. We supplied connectors such as electric terminals or wire harnesses.

That market was quite niche and we worked together with glassmakers to get the requirements from those makers. We’ve accumulated the technology required to attach glass to the connectors.

 

When we talk about the transformation of Japan’s industry there are two opposing theories that we often hear. One suggests that Japan’s move out of mass markets into more niche fields is a natural evolution and makes perfect sense given the population decline and the island mentality of Japanese people. The other point of view suggests that it’s out of necessity and it was the only way that Japanese firms could survive in international markets. Which view do you feel is more accurate?

I’m not sure exactly what other companies feel about this sentiment, but I wouldn’t mind answering this question from my standpoint as the second-generation president of Nishinihon Shoko. When this company was founded by my father we catered to domestic clients and we sold machines and tools to domestic customers. Once we acquired our manufacturing capabilities for terminals and harnesses we were still catering to the domestic clients. Looking at my father’s business I realized that Japan’s population was declining and I felt that it was inevitable that the automotive market was going to shrink.

I wanted this company to succeed but I also wanted to expand Nishinihon Shoko’s business further. My answer was to turn my eyes to the overseas market. Honda was a good example of a Japanese automotive firm that found success in the US, and that move came about because they felt a sense of crisis in the Japanese market while also wanting to expand their business in a larger market.

This thinking is why we decided to go to the Chinese market where we had a lot of prospects for growth. We also established a joint venture together with an American competitor in Hong Kong. Our company was responsible for sales activities in Southeast Asia while our American counterpart was responsible for manufacturing and accounting. Three years after the establishment of this joint venture the partnership was dissolved and we went into the Chinese market alone.

Initially, we sold manufactured products to Japanese makers which were present in China, but then we also started doing trading activities as well which was our main competency. Taking advantage of the know-how we accumulated in Japan enabled us to sell more machines and tools there. We gradually expanded the business with our manufacturing capabilities combined with our trading capabilities.



You mentioned this joint venture you had lasting three years, and there has been some hesitation on behalf of some Japanese companies when they go overseas to collaborate with foreign makers. As a company that didn’t have that hesitation, what was your experience like and what role do you think these kinds of collaboration will play in your continued expansion?  

After I graduated from university I studied in the United States so I didn’t feel that I needed to hesitate when collaborating with an American company. We collaborated with that American company for three years as I mentioned, however, after three years I felt there was a gap between our business mindsets. That is why we ultimately chose to establish our own company in China. They wanted to stick with the Made-In-The-USA branding, but we wanted to brand things more Made-In-China. That became a key difference between our companies’ thinking. Now it has been around 15 years since we established ourselves alone in China, and I truly believe that my aim at that time was not wrong.

Later on, we established another company in the US and we also started manufacturing in Mexico to cater to a larger market. Now we are serving customers in North, Middle, and South America from this base. Moving forward we are now focusing on manufacturing in that market, but we would also like to add some element of trading capabilities there so that we can expand our business even further. At the same time, however, we need to enhance the technologies we possess as a maker and we have to showcase our unique skill set. Now we have Mr. Yamada here who has extensive experience as a technical advisor, and the aim is to continue to make these kinds of hires; people who have technological backgrounds in other companies who have the skills to enhance our technology here at Nishinihon Shoko.

 

What is the current focus of your R&D efforts?

Our motivation mostly comes from the needs of the customers and the market as a whole. If we don’t catch those requests or needs we are not able to develop something purely through internal discussion. We are a small company so we don’t have a large-scale research center, so there is an emphasis on listening carefully to the customers and grasping the needs of the market firmly. Communication with the customers gives us ideas for new developments and by meeting those requests we have been able to develop new technology and products.

Looking at the needs of different markets, as you can imagine, the needs coming from China are slightly different from those coming from Japan or the US. It is very difficult to provide the same product or technology to all the different markets, even domestically. Within Japan, we have different clients, and of course, those clients have different needs. By providing core specifications to everybody we can then add something else that is based on the customer’s request or preference. In order to achieve this variance, the experience and know-how that we’ve accumulated are very key.

Speaking of recent developments, we are trying to be more eco-friendly in our manufacturing processes. Lead-free is something that we are trying to achieve in our materials as well as our soldering processes. By upgrading these processes we believe that we can not only cut costs but also enhance our quality too.

 

One place where the environment is a particular focus is Europe, and they are known for being very strict with regulations. At the beginning of the interview, you mentioned how Europe was an important area of focus for your international development strategy. Can you speak more generally about your international development plans, and specifically about your goals for the European market?  

Regarding the strategy going forward, we would like to continue to make use of the know-how that we’ve accumulated in Japan. When we entered the Chinese market 15 years ago the market was quite global with companies from the United States and Europe all across the market. In that environment, we learned and experienced a lot, with the requirements of different countries being of particular interest to us.

European countries are some of the most advanced in the world in terms of their automotive sectors, which we believe is fertile ground for expanded growth. Another aspect I would like to address however is the increasing labor shortage in Japan. By offering automation solutions for equipment and factory processes we can gain new customers. We offer the automation of soldering processes, in particular for components relating to automotive glass. Customers appreciate these technologies and we believe this appreciation will continue to grow as labor shortages pop up around the globe. We are actively promoting these technologies to our clients who are looking for labor-saving solutions. To expedite this expansion in Europe we have already purchased land in Poland. Unfortunately, however, with the Russian-Ukrainian conflict.

Our ultimate goal is to enter the European market, but now I would like to talk a little about Indonesia. We have a 100% subsidiary in Indonesia which is responsible for distribution. Going forward I see Indonesia taking the number 2 position in terms of global sales within Southeast Asian and Asian countries. We have a plan in place to start manufacturing in Indonesia before the end of 2023.

 

Imagine that we come back in 5 years and have this interview all over again. What goals or dreams would you like to have achieved by the time we come back for that new interview?

First of all, I would like to resume our project to enter the European market and the other key goal is expanding our business in the Americas. We would like to continue to take advantage of our key main competencies; manufacturing and trading, in both Europe and the Americas.

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