It seems timely as the gold price plummets, to take a look at the Nikkei Business’s cover story for its 18th March edition on lessons learnt by Japanese trading companies in the aftermath of the commmodities bubble. Both the FT and the Wall Street Journal Europe chose to lead on gold price falls this morning, and the FT yesterday had a cover story and inside analysis on the profits reaped by traders from the boom in commodities.
Mitsubishi Corporation and Mitsui both were name checked in the FT article, but they are different beasts it seems to me to Glencore, Noble Group, Trafigura and Cargill, who are largely privately owned, or owned by their employees or founding families, whereas Mitsubishi Corporation and Mitsui are publicly listed.
The death of the Japanese trading company (sogo shosha) has been predicted more or less every decade since the 1980s, and somehow they have bounced back. The Nikkei wonders whether this time they have not lost touch with the “Gemba” (frontline) and lost their fangs.
The Nikkei asked the Presidents of the 5 main trading companies(Mitsubishi Corporation, Mitsui, Itochu, Sumitomo and Marubeni) three questions:
1. Are you still going to invest in natural resources?
2. How are you going to develop effective human resources?
3. Why is Japan still important?
As a former shosha-woman, who used to be involved with natural resources (well, granite) and then ended up in HR development, and finally quit because it became clear that Japan, and therefore Japanese managers, were still going to be the focus of everything, these are three very pertinent questions.
President Kobayashi of Mitsubishi responded that they will continue to invest in natural resources, but the days of “if you dig it out, you can sell it” are over, so any investment must be on a sound financial footing.The key will be cost competitiveness. For HRD, he stresses the importance of each employee being able to realise their abilities, and be treated fairly, no matter what the market is doing, and as for Japan, “We are ultimately a Japanese company. And Japan does not have natural resources”, so ensuring a stable supply of resources is “our number one priority.”
Mitsui’s President is also concerned about the stable supply of resources, specifically LNG following the Fukushima disaster – “as the world’s population increases, we will increase production and supply. Even if prices fall, we will increase supply, to maintain the base for earnings”. He stresses how important people are in order to be able to change as the environment changes, and the need for people to experience the “gemba” (frontline) when they are young. He is concerned that if Mitsui makes all its profits overseas, while Japan weakens, that profit could disappear instantly, as if it was built on sand. Mitsui must contribute what it can to reviving Japan’s economy.
So, not much change for the two big traditional houses. Unsurprisingly, Itochu, ever the slightly more edgy, progessive sogo shosha, are less interested in natural resources, and their president Okafuji has some interesting comments about the need for shosha employees to be true professionals in whichever field they are, not just generalists with language skills, as the markets in which Itochu wants to develop are highly complex, Rather than stressing the importance of contributing to Japan’s resource stability, Okafuji wants to export Japan’s hospitality and knowhow.
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