Rudlin Consulting

Category: Japanese business in Europe

  • Japanese digital transformation in Europe

    Japanese digital transformation in Europe

    The digital transformation being undertaken by so many Japanese companies is beginning to have an impact on their European operations. One of my longstanding clients has notified me that their European HR and Learning & Development function in the UK has been outsourced to a company in India and the UK staff have been made redundant. I suspect this is not just happening in Europe but globally, as the company has divested many of its subsidiaries and is keen to consolidate and digitize the administrative functions of the remaining businesses.

    Several other UK subsidiaries of Japanese companies which had a regional coordination or regional sales function have transferred these functions to EU based subsidiaries. This was partly in response to Brexit, but it has also provided an opportunity to restructure their businesses. Some have become branches of Japan HQ or of the EU subsidiary, and still retain regional coordination functions and staff, funded by management service fees.

    Those that have continued as incorporated subsidiaries have found that although their turnover has dropped, their profitability has improved, partly due to the reduction in headcount but also because they are able to focus on their UK business, without having to carry the costs for coordinating across the region.

    I have seen the same influences improving the profitability of my own business this year. A few years’ ago, I transferred my EU business to my German partner, so I no longer have to bear the costs and complexity of coordinating it. This and implementing some new, user friendly, cloud-based accounting software meant that I didn’t need to pay for a bookkeeper to come in once a month.

    The pandemic pushed much of my training delivery online, permanently, which has meant it can reach a wider audience, so the contract sizes are larger than before. My main overheads are now software and IT related, not travel expenses or paying locally based subcontractors.

    Costs have also come down because I stopped my membership of various networking groups – partly because during the pandemic there were no in-person networking events to go to, but also because I was getting enough business from existing customers or through online enquiries, so there was no need to find new leads.

    From my experience of working in or for Japanese multinationals over the past 30 years, I suspect that these changes will prove to be cyclical. Individual subsidiaries will start to ignore the global outsourced administrative functions and quietly build up their own local capability again. Then to avoid duplication of costs, a regional function will be revived.

    My overheads are beginning to increase too. I’ve started renting an office, as I find my home office is too distracting, and it is good for my physical and mental wellbeing to walk to work. I may even re-join some networking groups, because after all, the point of digital transformation is not just to cut costs, but to innovate. And that is best done by meeting new people, in person, who have fresh perspectives.

    This article by Pernille Rudlin first appeared in the Teikoku Databank News in September 2022

  • Rhymes from history – the Japanese Business Mission to Britain – 100 years’ ago

    Rhymes from history – the Japanese Business Mission to Britain – 100 years’ ago

    I’ve been researching the visit of the Japanese Businessmen’s Mission to Britain, which ended a hundred years’ ago, to see if there are any parallels with today.

    The visit took place around the time that the Anglo-Japanese Alliance of 1902 became defunct, superseded by the Four Power Treaty of the Washington Conference between Japan, the UK, the USA and France. The conference ended in February 1922, but it was not until the treaty was ratified in August 1923 that the Alliance was officially terminated.

    The alliance was originally directed against Russian expansionism in the Far East, and latterly to deal with the threat from Germany, but by 1921 Britain no longer feared Russia, and Germany had been defeated in WWI. Instead, Britain wanted to maintain close relations with the United States, which had a more hostile attitude towards Japan and saw potential conflicts of interest in the Pacific region and China.

    The mission, led by Dan Takuma, visited the United States, Britain and France from October 1921 to February 1922, deliberately coinciding with the Washington Conference. There was some confusion in Britain over what to call the mission – sometimes it was referred to as an industrial mission, sometimes as a commercial mission, but it seems from accounts of the speeches that many of the British hosts were well aware that there was also a diplomatic agenda.

    Japan had become a net exporter and a creditor nation as a result of WWI, deeply involved in the international economy. Shibusawa Eiichi felt that this was the moment for Japan to strengthen its global influence, by ensuring its economic and social infrastructure was up to the level of a developed nation.

    As a consequence, the members of the zaikai (powerful business people) on the mission showed as much interest in British labour relations, the cooperative movement and the Federation of British Industries as visiting shipyards and factories or discussing tariffs and trademarks. They also were keen to understand Britain’s transportation infrastructure. After their tour of Britain, they went to France to inspect the newly formed International Chamber of Commerce.

    There was plenty of talk during the dinners and lunches for the mission, hosted by British businessmen, of keeping open doors in trade. However, it was clear the British were beginning to see Japan as a competitor in its colonies, particularly in cotton goods. Dr Dan responded to this by saying that the competition for both Japan and Britain would be China.

    The Japanese mission was worried that the end of the Anglo-Japanese alliance might therefore lead to more trade barriers, as well as harm Japan’s global standing, as the alliance had been proof of Japan’s creditworthiness.

    It seems they were right to be worried. Once the Great Depression hit in 1929, the US became more protectionist. In 1932, Britain implemented the Imperial Preference tariff policy, of home producers first, empire producers second, and foreign producers last – the same year that Dan Takuma was assassinated.

    This article was originally published in Japanese in the Teikoku Databank News on 9th March 2022

  • 77% of Japanese companies in Europe say the Ukraine war has had a negative impact on their business

    77% of Japanese companies in Europe say the Ukraine war has had a negative impact on their business

    77% of Japanese companies in Europe have had their business negatively impacted by the war in Ukraine, according to a survey conducted by JETRO in September 2022. The manufacturing industry was particularly hard hit, at 83.7% and Japanese companies in Belgium (92.5%), France (87.5%) and Spain (86.2%) had the highest proportion of all countries reporting a negative impact. This may be linked to the industries most expressing concern about negative impacts – food, automobiles/motorcycles and electrical and electronic equipment. France is host to a number of Japanese food related companies and Belgium is the European headquarters of Toyota and other related automotive companies.

    The main negative impacts were an increase in energy price, an increase in raw material and resource price and confusion and congestion of logistics.

    The main responses to negative impacts of the invasion of Ukraine were “passing on price rises to customers” (50.5%) and diversifying procurement sources (27.5%). Manufacturers were also increasing inventory more than they were trying to find new customers.

    More general concerns were rising and persistently high costs, including energy, and the extension of the frontiers of the war, the use of nuclear weapons and attacks on nuclear power plants, as well as any increase or prolongation of uncertainty about the future – when the war would end, when it would be possible to resume business with Russia.

  • Continued fall in UK employment by Japanese companies

    Continued fall in UK employment by Japanese companies

    Around a half of the 1,100 or so Japanese companies in the UK have filed their annual reports for the financial year 2021/2. Most paint a positive picture of recovery from the pandemic and resilience to any impact from Brexit. However, the employee totals show a more worrying trend emerging.

    Overall, the total number employed by those Japanese companies in the UK who have reported their results has fallen by 8% over the past year. This is an acceleration of a decline which started three years ago – employee numbers had fallen 3% the previous year, and 2% the year before that. This was preceded by a couple of years of growth from 2016/7 to 2018/9. Projected, this suggests that the number of people employed by Japanese companies in the UK will fall to 158,000 by the end of the financial year 2021/2, below the 161,000 that were employed by Japanese companies in 2016/7 and a 14,000 drop on the numbers employed in 2020/1.

    A number of factors might be behind this rise to 2018/9, followed by a fall, and more recently a sharp fall. It could be that Japanese companies continued to invest in growing their UK businesses, until the likely Brexit deal became clearer towards the end of 2019, and then the impact of Brexit played out after 31 January 2020 through to when the transition arrangements ended on December 31 2020.

    It could also be that Japanese companies laid off people during the pandemic (although the decline in employment started before early 2020 in some sectors) and then were hit further by the Great Resignation in the past year.

    It is certainly partly due to the impact of Honda closing its Swindon factory in July 2021. That meant the loss of nearly 3,000 jobs and it looks likely a further 5,000 jobs will have been lost in the automotive sector over the past year – many of which were dependent on Honda.  The decline in employment in the automotive sector began in 2018/9, a year or two before other sectors began to lose jobs.

    So what about the 6,000 jobs that look to be disappearing in other sectors?  Finance seems to have stayed steady, even growing slightly, employing around 14,000 people, but non-financial services, after years of high growth, are beginning to show a decline, maybe by 1,000 or so to around 55,000.

    Wholesale (not including automotive), having grown strongly to 2019 has dropped around 5,000 or so jobs in the past couple of years, employing around 38,000 people. This could be reflection of the change in structure of Japanese wholesalers in Europe, who have moved their EU logistics and warehousing to the continent. There are also another 1,000 or so jobs likely to be lost in non-automotive manufacturing sectors.

    We have not been able to publish a final Top 30 UK for 2020/2021 of the largest Japanese corporate groups, as there are still outstanding annual reports due to be filed at Companies House for NTT and NEC. Taking both of those groups out, it seems the biggest employers are cutting back, deliberately or through passivity, on their employee numbers in the UK. The decline represents around 5,000 jobs, 5% of the 97,000 who were employed by the big corporate groups in 2019/20, and it seems likely the total will fall further in 2021/2022. This is not just because of the Honda Swindon closure feeding through, but also from factoring in the 700 or so fewer staff at SoftBank-owned ARM, down from the 3,700 peak a year or so ago, when it fulfilled its 2016 promise to double its workforce in the UK.

    The key question, particularly for Brexit watchers, is whether this decline in employment by Japanese companies in the UK is also occurring in the rest of the region. The Top 30 Japanese companies in Europe, Middle East and Africa employed around 577,000 people as of the annual reports for the year ending 2022. The data for Yazaki is yet to come in, but for the remaining 29 companies (which includes Honda), there was a 2% increase in employees in the region. Without the loss of 4,500 jobs at Honda UK companies, this would have been a 3% increase. So while EMEA has seen gradual growth in numbers employed by Japanese companies in the past couple of years, the UK has seen an accelerated decline. 

  • The energy crisis

    The energy crisis

    With warnings of train strikes in the summer and power cuts in the winter, and rising inflation, it really does feel like Britain has returned to the 1970s.  I was a little girl, living in Japan, during most of the 1970s, but was still in Britain for a year or so when the first power cuts happened. I remember being quite excited about having to do everything by candlelight. I doubt the adults were as thrilled, however.

    Memories of my childhood in Japan came back to me as I was looking for alternative heating for our house that was not reliant on mains electricity or gas. I discovered that Japanese manufacturers are selling wick type paraffin heaters in Europe, just like the ones I remember from my childhood in Sendai, only less smelly.

    I shared this with one of my friends, about the same age as me, and she told me that her family home, in 1970s Britain, was also heated with paraffin heaters. They did not have any central heating, and, she added, the paraffin heaters were used to heat the bathroom on bath night. In those days, it was quite common just to have a bath once a week, often sharing the dirty water with other members of the family.

    For many homes then, there was only enough hot water for two bathfuls a day, coming from an immersion tank, which ran on electricity and would often be set to switch on at night, when electricity was cheaper.

    Now most British people shower once a day, getting their hot water “on demand” from a combination gas boiler, which also runs the central heating. Even before the threat of power cuts, the government has been considering incentivising households to switch away from gas boilers to air source heat pumps for their central heating and water heating. So far, however, there has not been a big take up.

    One of the issues, apart from the high upfront cost of installation, is that planning permission may be required for an outside unit. This also caused difficulties in the uptake of solar panel installation. Many British people live in old houses, or conservation areas, where visible changes to the houses that are not in harmony with the surrounding environment cannot be made.

    This may also prove to be an issue with the new home batteries that Japanese companies such as Toyota Motor have been introducing.  Because they are also used to charge cars, they need to be outside – which is fine for those who have homes with a parking space incorporated. But many city dwellers park their cars on the road in front of their house, and this means that they have to run a cable out of their front door and across a pavement to charge their cars.

    No doubt the energy crisis will eventually provide ingenious answers to this, but this winter I think it might have to be candles and paraffin heaters for many of us.

  • Top 30 Japanese employers in the Netherlands 2022

    Top 30 Japanese employers in the Netherlands 2022

    While there is no doubt that Japanese companies have expanded at a very high rate these past few years in the Netherlands, measuring this in terms of numbers of employees or companies has become increasingly complex.

    Partly this is due to the large proportion of potentially “brass plate” type Japanese companies, with no employees in the Netherlands – often the regional holding company for a group of companies. Partly it is due to the lack of disclosure – information on companies in the Netherlands does not seem to be as readily available as it is in the UK, where data on Companies House can be freely accessed.  As a result, even when an employee figure is disclosed for a Japanese company in the Netherlands, it can sometimes turn out to be the employee total for the whole of the European or EMEA region. The Japanese Ministry of Foreign Affairs data also shows this in the large number of Japanese companies it labels “uncategorised.”

    With those caveats in mind, we have attempted a Top 30 largest employers for the Netherlands (which can be downloaded below this post). If you would like a more detailed, company by company analysis, giving all 123 companies within the 30 corporate groups, and their size where available, this is available as a pdf for £9.99/€12.  Please contact us for payment via PayPal.

    Look out for the regional headquarters

    The pdf also indicates whether a company is the regional headquarters. Whether you’re targetting Japanese companies as potential customers or employers, it is important to understand this, as the regional headquarters tend to be where the decision makers, big budgets and the most interesting career paths will be based.  The number of Japanese expatriates in the country is also an indication of where the decision making influencers are. Although the Netherlands is only the 5th largest host of Japanese nationals in Europe, after the UK, Germany, France and Italy, this number has grown 41% since 2015.

    Services is the growth sector

    It’s also useful to know which sectors and companies are growing – for the Netherlands the main focus is services – financial services such as Orix (who acquired Dutch asset management company Robeco), logistics companies such as Yusen Logistics, in the NYK group, and recruitment and staffing companies – Outsourcing Inc and Recruit Holdings have both grown rapidly recently through acquisitions of Otto Workforce and USG People.  Mitsubishi Corporation shot to near the top of the Top 30 with its acquisition of Dutch energy company ENECO in 2020.

    Overall growth picture

    As a result of this growth, we estimate there are now around 566 Japanese companies (excluding minority stake holdings and brass plates with no employees) in the Netherlands. The Ministry of Foreign Affairs data records 673 Japanese businesses (including joint ventures, equity stakes), an 86% increase on 2015.

    The companies we have identified employ around 48,000 people, a 29% increase on 2017/8 – the vast majority (39,000) of whom work for the Top 30 employers in the Netherlands. Japanese companies in the UK, by comparison, employ around 170-180,000 people, and there has been a slight decline in numbers over the past 5 years.

    Click the link below for a pdf download of the Top 30 largest Japanese employers by company grouping in the Netherlands:

     

    PDF DOWNLOAD OF THE TOP 30 LARGEST JAPANESE EMPLOYERS IN THE NETHERLANDS

     

  • The post-Brexit branchification of the UK for Japanese companies in Europe

    The post-Brexit branchification of the UK for Japanese companies in Europe

    The latest Japanese Ministry of Foreign Affairs data reveal that the number of Japanese businesses in the EU rose a further 2% from 2020 to 2021, to 8,464, up 28% on ten years ago.  The only EU country to show any decline was Belgium. The picture for the UK is rather different – an 11% decrease on ten years ago, from 1,083 businesses to 960. There has been a slight pick up in the past two years, from a low of 951 in 2019. 

    The branchification of the UK

    Digging further into the detail – and comparing the UK to other major hosts of Japanese companies such as Germany, France and the Netherlands – reveals some possible factors in this divergence. The numbers of businesses started in the UK by Japanese nationals showed the biggest decline. This could be because the businesses were bought out, the founder retired and shut down the company – or perhaps became British.

    There is also a confirmation of a trend we noticed previously, that the number of subsidiaries incorporated in the UK has fallen, but at the same time there has been an increase in the number of UK branches of European subsidiaries of Japanese companies. This probably includes those operations which were incorporated subsidiaries but have now become branches of the European HQ in Germany or the Netherlands – such as Sony, Panasonic, Nikon, Bridgestone and Alps Alpine.

    Switching to becoming a branch was partly a reaction to Brexit but in the former two cases may also have been a precautionary measure because of the change in Japanese tax haven laws. As we noted previously, the UK’s 2016 “open for global business” announcement that the corporation tax rate would fall to 17% in 2020 (it didn’t) would have meant that revenue from dividends and royalties received in the UK would be considered as tax avoidance by the Japanese tax authorities.

    The decline in Japanese businesses in the UK had set in as early as 2012, long before Brexit, but accelerated after Brexit – it precipitated trends that were already there, and prompted Japanese companies to do some long overdue regional consolidation and tidying up.

    This branchification of the UK and regional consolidation is reflected in the Ministry of Foreign Affairs data for Germany – the number of branches of Japan HQ in Germany has fallen by 45% and the number of incorporated subsidiaries has risen by 21% over the past 10 years. There has also been a significant decline, as in the UK, of the number of businesses started by Japanese nationals resident in Germany.

    As for the Netherlands, there has been a quintupling of the number of business classified as “uncategorised” from 61 in 2015 to 393 in 2021. These may be brass plate type holding companies. All other categories (incorporated subsidiaries, branches of regional subsidiaries and joint ventures/investments) have increased as well, apart from branches of Japan HQ (which may have now become subsidiaries) and those started by Japanese nationals in the Netherlands. There was an overall rise of 86% of Japanese businesses in the Netherlands since 2015.

    Cars for cheese?

    The number of Japanese companies in France only increased by 3% since 2015, but this conceals significant changes in the composition of those businesses – the number of branches of Japan HQ has dropped 45%, the number of incorporated subsidiaries has also fallen, by 31%, whereas there has been a significant increase in joint ventures and part investments, as well as businesses started by Japanese nationals in France. This is particularly marked since 2019, when the EU-Japan Economic Partnership agreement entered into force. Perhaps the “cars for cheese” deal encouraged Japanese nationals to set up food exporting businesses in France.

     

     

     

     

     

    * Some notes on the Ministry of Foreign Affairs data: “Companies” include branches of the Japanese parent company, subsidiaries incorporated in Europe, branches of those subsidiaries, companies started overseas by Japanese nationals and joint ventures/investments of 10% or more equity stake. There is no detailed break down by type of organisation for 2018, when MoFA changed their methodology.

     

  • Top 30 Japanese Employers in Italy 2022

    Top 30 Japanese Employers in Italy 2022

    The 30 largest Japanese company groups in Italy employ around 30,000 people across 85 companies in 2022, a 4% increase on 2021.  This represents around two-thirds of the total number employed by Japanese companies in Italy.

    Some of this growth was driven by acquisition – for example the Hitachi group of companies (the second largest Japanese employer in Italy) now includes Hitachi Energy, as a result of Hitachi’s acquisition of ABB’s power grids business. Yamaha Motor has also acquired Motori Minarelli.

    The workforce of the largest Japanese employer in Italy, the NTT group of companies, has grown organically by 5.75% and Toyota Industries/Toyota Material Handling also has grown substantially.

    Automotive related companies such as Denso, AGC and NSG (the latter two making automotive glass) have shrunk slightly but tyre manufacturer Bridgestone has grown.  Other manufacturers such as Princes (foods company owned by Mitsubishi Corporation) and Ebara Pumps have cut back their workforce.

    The top 30 company groups can be downloaded for free below. We can provide more detail on the 85 companies within the Top 30 – each company name in full and employee total per company (a truer indicator of size of the company than turnover in our opinion)  for £9.99 – please email us for a PayPal invoice.

    DOWNLOAD FREE PDF OF TOP 30 LARGEST JAPANESE EMPLOYERS IN ITALY

  • Top 30 Japanese Employers in Germany – 2022

    Top 30 Japanese Employers in Germany – 2022

    The latest top 30 Japanese employers for Germany (download available below) show that even in manufacturing centric Germany, services are beginning to dominate. Outsourcing, a recruitment and staffing company are now the largest Japanese company in Germany, replacing Sumitomo Electric Industries, thanks to their acquisition of Orizon in 2017.

    We have shifted Sumitomo Electric Industries from the top spot to #23 – not because they have laid a large number of people off, but because we suspect that previous data regarding employee numbers contained a large proportion who were working in SEI factories outside of Germany.  We have had similar issues with the data for Panasonic and LIXIL.

    NTT has risen from #3 to #2 although it seems to have shed a few employees – conversely, Fujitsu has dropped from #2 to #4 as the consequences of closing the factory in Augsburg and other restructuring have fed through. DMG Mori may have expanded by over a third (but this could be double counting problems again, as there are around 20 DMG Mori subsidiaries in Germany), and is now the third largest Japanese employer in Germany, with 5,800 employees.

    There is an increasing issue with disclosure and therefore verifying employee numbers  – particularly with companies like Sony who have restructured their European organisation so that many of their subsidiaries are branches. We’ve put Sony at #30, with 1000 employees, but it probably has more than that.

    Hitachi has grown by over 1,000 employees due to the acquisition of the power grids business from ABB, now renamed Hitachi Energy and is the 8th biggest Japanese employer in Germany as a result.

    The Top 30 largest Japanese company groupings in Germany can  be downloaded below. If you would like more detail on the 206 companies included in the top 30 company groups of employers, each with full company name and employee number, for £9.99/€12, please contact us.

    PDF DOWNLOAD OF TOP 30 JAPANESE EMPLOYERS IN GERMANY 2022

  • Pernille Rudlin gives evidence to the UK Trade and Business Commission on UK-Japan trade and business relationships

    Pernille Rudlin gives evidence to the UK Trade and Business Commission on UK-Japan trade and business relationships

    Pernille Rudlin gave evidence on the impact of the UK-Japan Comprehensive Economic Partnership agreement to the June 6th session of UK Trade and Business Commission.

    It was interesting to discover that the trade statistics tracked by Dr Minako Morita-Jaeger, showing a decline in UK exports to Japan since around 2018, with particularly strong decline since 2020 in financial services match our observation that the number of people employed by Japanese companies in the UK has fallen, as have the numbers of Japanese companies and nationals in the UK from around the same time.