Strong and agile SMEs have formed the backbone of the Japanese industry for decades. Leveraging on their capacity for innovation and adaption, they now aim to strengthen their presence overseas and bring their high-quality products and specialized services to a new group of customers.
Japan’s Chuken Kigyos are the strong, agile and technology adept SME that form the backbone of Japanese industry. They are sometimes referred to as the ‘hidden champions’, as their products often go unnoticed by the end consumer.
However their specialized technology is essential for larger firms – including the household names we associate with Japan, from Toyota and Nissan to Panasonic and Sony – to make their final end-user products. In fact around 80 percent of Japanese corporations depend on these SMEs that work in niche markets and have developed unique capabilities in innovation.
And like these bigger firms, Chuken Kigyos adhere to the strict principles of Monozukuri, the Japanese philosophy of craftsmanship and attention to detail that defines the superior, unmatchable quality of the ‘Made in Japan’ brand.
“We believe that the concept of Monozukuri first and foremost lies in the skills, the commitment and the character of the Japanese people,” says Mitsuaki Higashio, President of Higashio Mech, a proud member of the Chuken Kigyos for seven decades.
“By essence, the Japanese are very dedicated to their work and have a high level of commitment. What makes the Japanese production special is precisely that commitment.”
Another competitive edge of Japanese SMEs is their incredible ability to adapt to change, be it technological or market-oriented, which is particularly important in the era of globalization and the emergence of fourth industrial revolution technologies. Japan’s shrinking domestic market has forced the nation’s SMEs to expand their operations overseas in recent years, both by following bigger Japanese companies to new markets and by finding new customers in those markets.
Adaption and innovation have been key to the success, as well as the future strategy, of Higashio Mech, which makes a series of pipe fittings divided into six subdivisions: galvanized steel pipe fitting, lining steel pipe fitting, copper pipe mechanical fitting for refrigerant, stainless steel pipe mechanical fitting, aluminum pipe mechanical fitting and plastic pipe mechanical fitting. “I have pride that our company is such a very seldom fitting manufacturer in the world that has so wide range of product lines.” says company chairman and CEO, Mr. Mitsuaki Higashio.
“We have been manufacturing fittings for 69 years. Until 1996, our company’s volume of sales grew significantly but the Hanshin Awaji Great Earthquake in 1995 was a major turning point. I have decided to develop the plastic mechanical fitting, a completely new concept for us, instead of the traditional cast iron fitting. Thanks to our continuous innovation, we managed to survive and grow. Our R&D department was key in maintaining our presence and success on the market; between 40 and 50 patents have been filed worldwide.”
Having accumulated extensive know-how in the manufacture – most of machines in automatic assemble lines are self-designed – and application of malleable cast iron and plastic fittings, Higashio Mech now aims to bring more of its unique and high-quality products, which can be found such places as homes, apartments, hospitals, schools and office buildings, to a growing international customer base.
Promising to provide high-performing fittings with the concept of “no leakage, no pullout and no special tools required”, the company is focusing its efforts in expanding in the U.S., Europe and South East Asia – where it aims to raise awareness of its products such as ‘MECHFit’, the only push-fitting without tools that is more reliable than traditional push-fittings for multilayer and PEX pipes, and ‘O’zzone Boy’ which is for refrigerant and has the top market share.
“Our volume of sales is still little on the global market but we are working hard to increase our presence overseas. Europe is a very conservative market so it takes time for them to adopt new products even if we come with a better technological solution. We have to educate the market and push our products because we believe in them,” explains Mr. Higashio.
“We need to find partners to better penetrate worldwide markets. We already have good and reliable partners at each region in Europe, Middle East, South East Asia, Australia and U.S.. We are currently discussing a global partnership with a certain top manufacturing company to introduce new joint developing products internationally. The market is changing and we try to adapt in the best possible way.”
Morita Iron Works
Speaking with the president of Morita Iron Works Co., Ltd., a century-old company with 180 employees based in Saitama, Mr. Masaaki Morita gives his take on the important, yet hidden, role that these specialized SMEs have played in building Japan’s global success and reputation.
“The SMEs are the reason why Japanese manufacturing has shined on the world stage. They have become the backbone of the Japanese economy in all sectors,” he says.
“We all know the names of the big companies in Japan and of course, they are still attractive around the whole world. But the reason why they are successful lies in the support of these SMEs that are experts in their fields.
“The specificity of the Chuken Kigyos lies in the specialization of their activity. They only work with one specific product or service and their expertise is unique. Chuken Kigyos’ importance cannot be underestimated and some of them are listed in the first section of Tokyo Stock Exchange.”
Mr. Morita’s company specializes in the manufacture of valves for the water treatment industry, and has played a huge role in the development and growth of Japan’s water supply over the last 100 years. As such, Morita Iron Works has formed part of the backbone of society itself, more so than industry.
Morita Iron Works was a pioneer in the manufacturing of valves in Japan in 1917, at a time when all equipment for water treatment was being imported from the U.S. and Europe. And today, the company remains a leading supplier of high-functional shut-off valves, flow-control valves, and check valves, based on the technology and know-how it has cultivated for over a century.
But like Higashio Mech, moving forward the company is both leveraging on its innate spirit of innovation and focusing on overseas expansion (particularly in fast-growing South-East Asia) in a bid to address the challenges of a changing market and ensure its survival for the next 100 years.
“We have to stick with making valves which are our core business products and what our company is recognized for. But we are now standing at a crossroad because we have to maintain our tradition while putting extra effort in innovation. We need to transfer the technology that we accumulated throughout the years into making even better products,” explains Mr. Morita.
“Our number one priority is to maintain the work and tradition achieved throughout a century of existence. We also want to keep creating good and efficient valves and ultimately become the only valves manufacturing company in Japan because we believe that our dedication is unique on the market.”
Many of the long-established Chuken Kigyos specialist manufacturers have stemmed from the same trading roots. Like Morita Iron Works, Miyawaki Inc. began as a trader and distributor in 1933, until its founder spotted a niche for manufacturing the products that it was supplying to its customers – in this case, steam traps.
After researching and developing its own new-and-improved steam traps, the company experienced significant growth in the industrial boom years following World War II. And by the 1970s, Miyawaki’s series of energy efficient TB steam traps had become extremely popular with customers, at a time when conservation had become particularly important as a result of the global oil crisis of 1973-74.
Today, Miyawaki is a leader in the development of high-performance steam traps, pressure reducing valves, air traps and air vents, which are tried and trusted by some of the biggest manufacturers in Japan, for whom quality has always been a priority over cost.
“At Miyawaki we are dealing with the area of steam traps, which is a very specialized field. We do everything in-house, from product design, material procurement, product assembly and handling customer service,” explains president and grandson of the founder, Kensuke Miyawaki.
“As a result of doing everything from scratch to producing the end product, we have gained a lot of experience, wisdom and knowledge over the years. Also, although we do provide our products at a higher cost, the quality of our products is higher. Consequently, our customers continue to work with us as they can trust our higher quality.”
Energy conservation, of course, all the more important today than it was in the 1970s. Miyawaki’s TB steam traps are among the most energy efficient on the market. Meanwhile its computerized steam trap management systems, ‘Dr. Trap PM500’ and ‘Dr. Trap Jr.’, further increases energy efficiency substantially.
“Additionally, we also provide consultation services where we give our clients hard facts on how they can be more energy efficient,” adds Mr. Miyawaki.
“In a year, the number of steam traps we actually inspect is 60,000, so basically almost every day our maintenance team in Japan surveys the steam traps at our client’s site. Moreover, our distributors also provide steam trap survey services in the area of our affiliated company for energy saving.”
Having helped companies across Japan to increase their energy efficiency through its services and products, Mr. Miyawaki is now looking at global expansion and believes his company has the potential to grow “from an SME to become a truly international company”.
The global expansion being pursued by Japanese SMEs like Higashio Mech, Morita Iron Works and Miyawaki Inc. is of paramount importance amid the demographical challenges in the domestic market, points out Toshihiro Matsumoto, president of JESCO Holdings, Inc.
“For Japanese companies to continue operating, going abroad has become extremely important. International expansion offers great opportunities, both in terms of revenue and employment, but also comes with many challenges; especially for corporations with limited amount of information and know-how on foreign markets,” he explains.
“Our company has been able to successfully enter international markets. Strong of my experience, I got an offer from MLIT (the Ministry of Land, Infrastructure, Transport and Tourism) to travel around Japan and give seminars to share my knowledge with other SMEs who have the ambition to expand overseas.”
JESCO is a comprehensive engineering enterprise undertaking everything related to electrical and communication equipment, from engineering and construction to maintenance and service. The company has been extremely successful in introducing its sophisticated technology cultivated in Japan to markets elsewhere in Asia. And from its base in Vietnam, it is developing business throughout Asia to meet growing infrastructure demand.
“I believe that the time for further collaboration between Asian nations has arrived. Japan’s character is never to back down and continuously try to improve. This ethos allowed us to foster world-leading techniques,” says Mr. Matsumoto.
“Consequently, I believe that Japan can contribute to the development and unification of Asian countries by exporting our best practices. We need to find the courage in our hearts to expand to Asia. We must show to the world our technological know-how by adding value locally and promoting collaboration and trust.”