Pernille Rudlin - Rudlin Consulting

About Pernille Rudlin

Pernille Rudlin was brought up partly in Japan and partly in the UK. She is fluent in Japanese, and lived in Japan for 9 years.

She spent nearly a decade at Mitsubishi Corporation working in their London operations and Tokyo headquarters in sales and marketing and corporate planning and also including a stint in their International Human Resource Development Office.

More recently she had a global senior role as Director of External Relations, International Business, at Fujitsu, the leading Japanese information and communication technology company and the biggest Japanese employer in the UK, focusing on ensuring the company’s corporate messages in Japan reach the world outside.

Pernille Rudlin holds a B.A. with honours from Oxford University in Modern History and Economics and an M.B.A. from INSEAD and she is the author of several books and articles on cross cultural communications and business.

Since starting Japan Intercultural Consulting’s operations in Europe in 2004, Pernille has conducted seminars for Japanese and European companies in Belgium, Germany, Italy, Japan, the Netherlands, Switzerland, UAE, the UK and the USA, on Japanese cultural topics, post merger integration and on working with different European cultures.

Pernille is a non-executive director of Japan House London, an Associate of the Centre for Japanese Studies at the University of East Anglia and she is also a trustee of the Japan Society of the UK.

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Here are my most recent posts

Japan’s links to Glasgow

I was delighted to see that the train I took to travel from the south east of England, where I live, to Scotland, was a Hitachi Azuma. The journey was smooth and punctual, despite all the issues caused by the need for the trains to be bimodal (able to run on diesel), as the line is not fully electrified. The train was crowded, so it was good to see the seat reservation system was working too.

One of the reasons for it being crowded was that there are plenty of tourist destinations along the line. The journey along the east coast of England and Scotland has wonderful views of the cliffs and the sea, and takes in the ancient cities and cathedrals of Durham and York, going over the spectacular bridges in Newcastle and Berwick on Tweed and you can even catch glimpses of Lindisfarne, also known as the Holy Island, and Alnwick Castle.

I changed trains at Edinburgh, perhaps the most beautiful city in Britain, to travel to Glasgow. Glasgow has its own charm, full of ornate 19^th century buildings built when Glasgow was rich from textiles manufacturing, shipbuilding and coal mining.

The latter industry was what drew my great uncle, a Welsh geologist, to take up a professorship at Glasgow University. One of his areas of research was on coal deposits, but his real love was fossils. I remember looking through his fossil collection with him as a child and it was thrilling to walk round the fossil collections at the Kelvingrove museum and sense his presence.

My main reason for visiting the Kelvingrove museum, and also the other Glasgow museums, was to see what they had in the way of Japan related objects and art. The Japanese government donated over a 1,000 items to Glasgow in 1878, as part of a cultural exchange.

Although I tried to see every gallery in the museums, I did not find much that was Japanese. There were plenty of Chinese items on display at one museum, but I had to ask one of the attendants to show me where a particular Japanese print could be found. It turned out to be in the basement. He told me he well remembered the beautiful Japanese furniture and impressive samurai swords that used to be displayed.

It dawned on me that not only could this low profile for Japan be explained by the curator of the Far East collection being Chinese, but also that the museums recently revised their displays to take account of the views of local communities. Glasgow has become host to a large number of Chinese people, including 6,000 students. The old Chinatown and the area I stayed in are full of Chinese shops and restaurants. There are over 450,000 Chinese people in the UK, around a quarter from Hong Kong, compared to only 60,000 Japanese.

The Japanese links to Glasgow continue, however, particularly in energy related fields. For example, Marubeni opened an office last year in Glasgow, focused on offshore wind.

This article by Pernille Rudlin was first published in Japanese in the Teikoku News, 11th October 2023

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Italy’s heating and cooling economy

The European summer holidays have come to an end and although we only took short breaks to British locations, where the weather was cool and rainy, I was glad to have avoided the experiences of other Europeans, of unbearable heat.

My business partner in Germany had to cut short her family holiday in Sardinia because of the forest fires – joining the many tourists who were evacuated from Italian and Greek islands. This may have undermined Italian Finance Minister Giancarlo Giorgetti’s claims that the Italian economy could grow by as much as 1.4% in 2023, in expectation of a tourist boom in the first full summer season since the pandemic struck.

A slowdown in the Italian economy was already showing through in the second quarter (April-June) of 2023, with GDP unexpectedly contracting 0.3%. Economists attributed this to low domestic demand, high interest rates, persistent inflation and a lack of net export growth. Industry and agriculture were particularly hard hit, with factory production down in both June and July.

Japanese companies have nonetheless been expanding in Italy over the past year or two, as I discovered through my recently completed my research on the 30 largest Japanese companies in Italy – they now employ over 31,000 people, up around 8% from the previous year, and more than half of the 50,000 or so people in Italy who work for around 400 Japanese companies. This makes Italy joint 4^th in Europe alongside the Netherlands in terms of numbers of people employed by Japanese companies, after the UK, Germany and France.

The largest Japanese company in Italy is NTT, thanks to its acquisition via NTT Data of Italy’s Value Team in 2011 and also Spain’s Everis, which had substantial presence in Italy, in 2013. The second largest is Hitachi, which completed its acquisition of Ansaldo STS, an Italian rail systems company, in 2019.

The biggest growth in employee numbers recently, however, were at Daikin and Panasonic, thanks to their acquisitions of Italian HVAC companies. Italy has been more proactive than other European countries in giving tax credits worth up to 110 per cent of the cost of energy efficiency upgrades. This has boosted sales of heat pumps to be the seventh highest in Europe last year.

Other countries besides Japan have woken up to the opportunity that Europe’s wish to reduce dependency on Russia and tackle climate change brings. China’s Midea is planning to build a heat pump factory in Italy, and Germany’s Bosch and Vaillant are expanding. The USA’s Carrier Global has spent €12bn on acquiring Germany’s heating equipment company Viessmann.

Here in the UK there are grants available for heat pumps but the lowest take up in Europe for heat pumps. This is explained by low gas prices (which fires most of our central heating) relative to electricity, the need for planning permission for heat pump installations, a lack of skilled labour to install the pumps and our miserable weather, which means we are not so interested in the air cooling side of heat pumps.

This article by Pernille Rudlin was first published in Japanese in the Teikoku News, 13th September 2023

A list of the 30 largest Japanese corporate groups in Italy can be downloaded here

Yoshinoya to open first European ramen restaurant in Edinburgh

Japanese food chain Yoshinoya will open its first restaurant in Europe in Edinburgh in the spring. Although Yoshinoya is most known for its beef rice bowls, this will be yet another ramen restaurant – Bari Uma, serving tonkotsu ramen for Y1,500 (£8). This is a much lower price point than all the other ramen chain restaurants in the UK (mainly London) currently, which are around £15 a bowl – such as Shoyu Ramen, Ippudo and Tonkotsu. Yoshinoya says they are targetting Germany and Italy next.

According to a survey by the Ministry of Agriculture, Forestry and Fisheries, the number of Japanese restaurants overseas is approximately 187,000, an increase of around 20% from 2021.

Japanese trading company Itochu acquires UK’s Fettle Bike Repair

Japanese trading company Itochu has acquired the British company Fettle Bike Repair, through its subsidiary Kwik-Fit and ultimately the holding company European Tyre Enterprises.

It’s a small scale deal – Fettle was only founded in 2019, is loss making on a £750,000 turnover, employing 24 people, but has been in an operational partnership with Kwik-Fit since March l2023, establishing a total of three joint centres: two in London and one in Bristol in South West England. Fettle will be accessing Kwik-Fit’s nationwide network.

Itochu see this deal as part of their commitment to sustainable development goals, as well as growth area, with the rise of e-bikes, and companies having fleets of e-cargo bikes and delivery bikes. Or as they put it “the realization of social systems that have a low environmental impact and the development of a sustainable society by meeting demand for the repair of diversified means of transportation and servicing of increasingly diverse means of transportation and building a network for after-sales services in the mobility market.”

Sumitomo Corporation and Osaka Gas sell Sutton and East Surrey Water

Japanese trading company Sumitomo Corporation and Osaka Gas have sold their 50/50 ownership of the UK utility Sutton and East Surrey Water for £380m (including £291m in debts) to the Pennon Group plc, a UK based water utility company. Sumitomo Corp and Osaka Gas set up a joint venture for the ownership of Sutton and East Surrey Water in 2013. In October 2023, Ofwat named SES Water among the four worst performing water companies financially in the UK, calling for them to turn around their finances. According to the FT, Sumitomo and Osaka Gas did not want to put equity in the business, so decided to sell and paid a £7.8m dividend last year.

Sumitomo say it has sold off its share as part of its portfolio reshuffle under its Medium-Term Management Plan “SHIFT 2023” and is “executing strategic asset replacement”. It will continue to reinforce and develop its primary earning pillars by “leveraging its strengths utilizing management capital including operation know-how acquired from this UK water business.”

Pennon also owns South West Water, Bristol Water and Bournemouth Water. South West Water was fined £2.15m for illegal sewage dumping in April 2023. SES Water was fined £300,000 in October 2022.

Japanese companies positive on growth and profitability in Europe, Africa and Middle East, but facing labour shortages

JETRO’s 2023 global survey has been published but as always, in Japanese only. 7,632 Japanese companies responded during August – September 2023, from 82 countries and regions. An English translation will no doubt follow in due course, but for the time being, here are the key highlights as relate to the Europe, Middle East and Africa region:

The outlook for Japanese companies in Africa and the Middle East is more positive, compared to a deteriorating view of performance and predictions for profitability and growth for China, and also Hong Kong, Vietnam, South Korea and Singapore
Profit – Proportion of companies in the major economies of the EMEA region expecting to be profitable in the coming year:
1. South Africa 86%
2. UAE 76.5%
3. France 75.7%
4. Netherlands 72.6%
5. UK 71.4%
6. Germany 68.2%
Growth – Japanese companies in Europe are showing stronger than global average intention to expand. Japanese companies in South Africa particularly cited increased exports to neighbouring countries such as Zambia, Namibia and Congo. Japanese companies in Germany cited a number of reasons – increased exports to Central and Eastern Europe, Africa, Turkey, etc, the expansion of the EV market, growth of the semiconductor market within Europe and increased demand due to environmental regulations (large companies, chemical products, petroleum products). The percentage of companies expecting business to expand in the next 1 – 2 years:
1. South Africa 57.7%
2. Germany 54.9%
3. UAE 53%
4. France 51.4%
5. Netherlands 51.2%
6. UK 43.9%
Labour shortages – Over 50% of Japanese companies are facing human resource shortages. The proportion is particularly high in large manufacturing companies. Labour shortages are being faced by more than 60% of companies in North America and Europe. The issue is particularly acute in the Netherlands, the United States, Germany, and France.
Japanese companies in the EMEA region note that trying to recruit internally first or rotating staff within the region can help with hiring. For retention, offering the ability to work from home and ensuring a steadily increasing salary in line with inflation have helped with motivation.

Sekisui Jushi acquires German traffic engineering company WEMAS Absperrtechnik

Japanese transportation, safety and construction manufacturer Sekisui Jushi has acquired German traffic engineering company WEMAS Absperrtechnik.

The transaction supports the Sekisui Jushi Group Vision 2030 strategy, through which the company aims to enable the safety, comfort and security of people across the globe.

Sekisui Jushi was originally a subsidiary of Sekisui Chemical. In August 2023 Sekisui Chemical sold off part of its stake in Sekisui Jushi with the result that Sekisui Jushi is no longer an affiliate of Sekisui Chemical by the equity method. The intent is “to continue to collaborate with Sekisui Jushi Corporation as a good business partner going forward.”

Sekisui Jushi already has a holding company for Europe and Sekisui Jushi Strapping in the Netherlands, employing around 45 people. The acquisition of WEMAS will add 130 more employees.

Sumitomo Heavy Industries opens new European HQ in the Netherlands

Sumitomo Heavy Industries employs over 4,300 people across Europe in a variety of sectors including cryogenics, energy, gears, motors and injection moulding machines. It acquired Invertek in the UK in 2019, Lafert in Italy in 2018 and FW Energie in the Netherlands in 2017.

Up until now the subsidiaries had been directly managed by Japan headquarters but from January 2024 they will be managed by a new European headquarters, Sumitomo Heavy Industries Europe, based in the Netherlands. The regional headquarters is intended to provide sales, accounting, and procurement-related support, as well as strengthen governance.

Outsourcing Inc to undergo Bain backed MBO

According to the Nikkei, Japanese human resources service company Outsourcing aims to take its shares private through a management buyout with Bain Capital, which will likely exceed 200 billion yen ($1.3 billion). It seems that rapid expansion through M&A has made the group difficult to manage. Outsourcing is currently listed on the Tokyo Prime market, and it may be that the increasing demands of maintaining this status have become too onerous.* Several other listed Japanese companies have undergone MBOs recently, such as Benesse, Taisho Pharmaceuticals and Sidax.

The Japanese version of the Nikkei report says that Outsourcing had 230 consolidated subsidiaries as of September 2022. As the number of companies within the group increased, the cost of maintaining the company’s listing increased, including the time-consuming task of preparing consolidated financial statements. In 2021, inappropriate accounting was discovered at 17 group companies. Outsourcing intends to use Bain to proceed with post merger integration, including the consolidation and abolition of group companies and strengthening corporate governance.

Of the 110,000 employees, 58.8% are overseas. We estimate around 1,200 of those employees are in the UK, and 5,000 or more are in the EMEA region. It is hard to estimate accurately as so many employees are despatched employees rather than core administrative and management staff and each country treats the status of outsourced employees differently. Outsourcing has not updated its fact sheets or fact books in English for several years, which is perhaps a reflection of the complexity they now face. The website features rather a lot of photos of the founder, Doi Haruhiko with the late Queen Elizabeth II , due to Outsourcing’s sponsorship of the Royal Windsor polo match.

The board of directors used to reflect two of Outsourcing’s biggest acquisitions in Europe, CPL Resources and Otto Holdings. Irish born Anne Heraty from CPL still seems to be on the board but Franciscus van Gool from Otto seems to have resigned.

*UPDATE

On 20th December 2023, the Tokyo Stock Exchange requested Outsourcing Inc to submit an Improvement Status Report with regard to the status of implementation and operation of the improvement measures, having found that multiple companies in the group made inappropriate applications for employment adjustment subsidies (the Japanese equivalent of the furlough scheme used in various countries during the pandemic) at the same time.

The EU’s Corporate Sustainability Reporting Directive

The EU’s Corporate Sustainability Reporting Directive came into force in January of this year, which means that individual EU member governments must now adopt the directive at a national, legal level. The CSRD strengthens the existing EU Non-Financial Reporting Directive rules, in that global companies who are not listed in the EU will also have to comply – this includes Japanese companies who may only have what they might see as a minor presence in the EU.

From 2024, the CSRD will compel all “large” EU companies or companies that have listed securities in the bloc, to produce extensive new reports on a range of environmental, social and governance impacts of their business and of their parent companies. Japanese companies who fall into this category include Omron and Ricoh, who are both listed on the Frankfurt Stock Exchange.

Most Japanese companies will fall into the group of global companies who are not listed in the EU, but are defined as “large”, who will need to disclose on a consolidated group level their 2028 financial year, in 2029.

The definition of “large” means any company that has a subsidiary or branch in the EU with two of the following three characteristics – assets over €20m, revenues of over €40m or 250 or more employees. It is estimated that overall around 50,000 companies will be subject to this new reporting requirement. I estimate that at least seventy Japanese companies would be in this category.

To ease the transition, from 2024 until 2030, the EU has a phase-in approach for international, non-EU companies, so that a parent company can voluntarily disclose at a consolidated group level, before 2029, on all its global entities. This would mean their large EU entities are exempt from reporting gradually and individually.

In other words, if the Japanese company is already reporting at a global consolidated level by 2029 the kind of data required by the European Sustainability Reporting Standards, then there is no need for any further reporting. The ESRS are still being defined but will include not only environmental protection but also social, such as treatment of workers across the value chain, and governance, such as diversity on company boards and internal controls and risk management.

Penalties for not disclosing under these standards include public denunciation, an order to change conduct and financial punishment.

Having read many hundreds of Japanese annual reports over the years, although the level of disclosure, in English, has improved, there are many who will not currently make the grade. For example, many only disclose data about Japan based employees.

You may still think your company will be exempt from these regulations, but one of the biggest changes to EU standards is that there is an element of extra-territoriality. Global supply chains are also to be included in the reporting. If your company supplies to a Japanese company with a significant presence in the EU, they may soon be asking you searching questions about your global environmental, social and governance activities.

This article by Pernille Rudlin was first published in Japanese in the Teikoku News, 9th August 2023

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