Japanese business in Europe

Clear trends from less data on Japanese companies in Europe

The latest data on the numbers of Japanese companies around the world from the Japanese Ministry of Foreign Affairs was published over the summer. It’s back down to one spreadsheet, in normal sized font, where the only colours used are to highlight the title of each region. The number of spreadsheets published had mushroomed from 1 to 5 between 2013 and 2018, and even with (or maybe because of) the copious use of tabs, freeze frames and various shades of yellow, orange, green and purple, the whole thing was extremely difficult to navigate.

I used to imagine the moans of the junior civil servants putting in long hours to compile this, the sighs of the middle management having to check its accuracy, and then the teeth grinding of the general managers who wished for the older, simpler days of a printed out hard copy. In the new stripped down MoFA world, the only data disclosed is the total number of Japanese organisations in each country. There are no longer any categories regarding whether they are public limited companies, joint ventures or branches. The data on Japanese nationals resident overseas used to be combined with the data on organisations, but is now published separately.

In a way less data* is less transparency, but perhaps usability is more important than the sheer volume. This seems to have been the decision that Hitachi has made too. The number of pages of its most recent integrated report has been halved from 106 to 53. In Hitachi’s case this can be excused by the sheer size and complexity of the organisation – 320,000 employees working in a huge variety of businesses. What led to the cull was that those writing the report – the investor relations department – were also the users, who talked through the report with investors. They themselves felt it was hard to explain, and feedback from the investors also pointed to usability concerns. Hitachi has won awards for its reports, so this was a bold decision to make.

According to a survey of 881 companies by KPMG, the average integrated report in Japan had 75 pages and 66% of all surveyed companies had 61 pages or more. This ratio has increased by 4 percentage points from two years ago, thanks to the increasing obligation felt to report on ESG metrics.

Anyway, the new simplicity means there is only one chart we can produce from the MoFA data, for countries with more than 100 Japanese companies in Europe, as below:

And yes, it does make certain trends very clear.

Germany still dominates as a host of Japanese companies, but there seems to be a tailing off of growth (+22% since 2013)
Conversely, the numbers of Japanese companies in the UK has fallen (-10% since 2013), but now stabilised.
France continues to grow as a host of Japanese companies (+21% since 2013), with quite a jump in the last year. This may be as a result of the 10 or so acquisitions made of French companies by Japanese companies 2020-2022
There was a significant leap in the numbers of Japanese companies hosted by Netherlands and Italy in 2019. It’s difficult to know whether this due to the “hard” nature of Brexit becoming clearer in 2018-9 or some change in the way MoFA was categorising its data.
Eastern European countries, probably due to automotive and other manufacturing costs and existing skills, have become popular – Poland, Hungary, Romania, Czechia
Smaller, more service sector oriented countries in the Nordics and Baltics are also becoming more popular such as Estonia, Denmark, Sweden
The above has meant that Switzerland, Belgium, Finland and Austria have dropped down the rankings

*Grammar pedants may recoil from the use of “less” with “data” here. Sorry. This may reassure.

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Toshiba launches quantum technology hub in Cambridge, UK

Toshiba launched its Quantum Technology Centre in Cambridge on 22nd September 2023. The centre has about 40 employees, with plans to expand the head count to 70. Toshiba will invest 20 million pounds ($25 million) in the facility over five years starting in fiscal 2023.

Toshiba already had a research laboratory in Cambridge, conducting research on artificial intelligence and quantum technology. Some engineers will transfer from there to the new quantum-specialized offshoot.

Japan’s M3 acquires British medical staffing company Messly

Japan’s M3, a healthcare services company listed on the Tokyo Stock Exchange Prime Market, has acquired UK start up Messly, a recruiting marketplace platform for U.K. doctors, for surgeries and hospitals to hire locums, or temporary doctors, at short notice. It was founded in 2017 and 70% of the UK’s trainee doctors are registered on it.

M3 has already acquired several healthcare software and services related companies in France, Germany, Spain, Sweden and the UK since 2011 when it acquired doctors.net.uk. We estimate M3 has over 500 employees in Europe, out of 10,533 worldwide.

Japan owned British crypto currency firm B2C2 acquires France based Woorton

B2C2 was established in 2015 and acquired by Japanese company SBI (Strategic Business Innovator group, formerly part of SoftBank) in 2020. It employs around 90 people in the UK and also operates in the U.S., Cayman Islands, and Japan. The acquisition of Woorton means B2C2 not only expands its European operations but acquires Woorton’s PSAN license which is regulated by France’s financial market authority, the AMF. As a result, B2C2 can now cater to clients in the European Union, aligning with the upcoming MiCA regulations.

SBI is still operating in Russia as SBI Bank LLC, employing around 245 people.

Dentsu acquires Germany’s RCKT

Dentsu Group has acquired RCKT “a leading German digital-first brand, communications and creative agency”. RCKT will join the Dentsu Creative part of the Dentsu Group. The RCKT brand will be retained during a period of integration, becoming known as “RCKT, a Dentsu Creative Company” with immediate effect. Given the recent reorganisation of Dentsu, where companies have been consolidated under the Dentsu brand, we predict the RCKT name will not last long.

Dentsu now has around 3,200 employees in its DACH organisation. Dentsu Creative employs 9,000 people across 46 markets.

We estimate that Dentsu employs around 13,000 – 14,000 people in the EMEA region – however it does not disclose any numbers in its annual reports on this.

Nippon Express acquires Switzerland based Tramo Group

Japanese logistics group Nippon Express has made another acquisition in Europe, the Swiss based luxury furniture specialist, Tramo Group, via Nippon Express Italia. It had already acquired the Austrian company Cargo-Partner earlier this year and in 2018 it acquired Italian luxury fashion logistics services company Traconf, as well as Franco Vago. In 2012 it acquired Swedish company APC Logistics.

Nippon Express is aiming to generate half its revenue from overseas business by 2037, up from the current 30%. It currently has around 3,500 employees in Europe (out of 72,000 globally, of whom 42,500 are in Japan) and the acquisition of Tramo may add up to 500 to that total. Tramo has operations in Italy, the UK, Netherlands, France and Spain as well as in the USA.

What Japanese companies need to know about ecommerce in Europe

I was browsing in a second-hand bookshop in my neighbourhood recently – with some difficulty as most of the floor was covered in boxes of newly purchased books. This led to a conversation with the owner about he managed his stock. I said I supposed that he put online the stock that he did not have room to display. He replied he did not have a website – he had tried to use e-commerce during the pandemic but it proved to be unprofitable.

He found he could not compete with Amazon and Amazon’s second book arm, Abe Books, in terms of search engine rankings. He could sell his books via Abe Books, but there is fierce price competition and if the book is not rare, the margins are very small.

As I write this, I am watching a British online art auction. Almost all British art and antique auctions are now online, since the pandemic forced them to switch – and these auctions are now consolidated on a website called saleroom.com, which also has auctions from continental Europe and the USA. Buyers have returned to the auction room in person too – and I would certainly prefer to see art and antiques in person before bidding. For signed art by known artists with known provenance, it is of course less of a risk.

On the other hand, a son of a friend of mine has become very rich selling online, even though his products are cheap, no-brand, highly commoditised products – for example lint removers – and are manufactured in China. The secret to his success is his total obsession with data – even when he is on holiday he is checking sales volumes and competitor prices and ratings and tweaking his pricing and his social media advertising.

Many B2C companies in the UK have become entirely online, with no physical retail presence. This is partly because the overheads, particularly energy costs, have shot up recently, as well as labour shortages. But the most successful b2c online businesses started with a physical shop, to establish their brand.

It’s no surprise then that one of the most cited barriers for Japanese companies in a recent JETRO survey, particularly small-medium sized businesses, to growing their e-commerce sales in Europe, is their lack of brand recognition. For Japanese companies who are already selling overseas via e-commerce, the second largest concern after lack of information about overseas markets is the difficulty in increasing brand awareness overseas – even for the larger companies.

Over 20% of the Japanese companies in the JETRO survey wanted to expand their e-commerce sales to Europe. If physical presence in Europe is not possible, then the digital first solution would be to hire a European specialist marketing agency. If you have the budget and a strong brand, they can run advertising and social media campaigns for you. For smaller budgets, or a commoditized or B2B product, then a smaller local agency can recommend specialist consolidated EC websites, analyse your sales and marketing data and make recommendations on pricing and product positioning.

This article by Pernille Rudlin first appeared in Japanese in the Teikoku Databank News in May 2023

Hitachi divests UK’s Temple Lifts

Hitachi has sold Temple Lifts to private investor Rcapital, five years after acquiring it in 2017. Temple Lifts has 125 employees and is headquartered in Bromley, Greater London with two regional offices overseeing approximately 5,000 lifts and escalators under maintenance contracts, supporting customers across multiple sectors. This is the latest in a long series of divestments by Hitachi as it focuses its business portfolio on energy, digital and social infrastructure.

GMO Internet to close GMO-Z.COM London forex brokerage

Japan’s GMO Internet group was to sell off its GMO-Z.COM London based forex brokerage to Australia’s Invast Global as of October 2022. However, the Financial Conduct Authority did not approve the transfer of shares in March 2023 so Invast has cancelled the transaction. GMO Internet has disclosed in the latest annual report of GMO-Z.COM that it now intends to close the operation within the year. GMO-Z.COM was established in London in 2012 and employed 10 people, 17 at its peak in 2019. It was trying to shift from individual client services to institutional client services.

SMFG continues its restructuring in EMEA

Sumitomo Mitsui Financial Group is to merge its banking and securities businesses in the UK. SMBC Nikko Capital Markets plc will be transferred to SMBC Bank International over the next year. SMBC Bank International was renamed from Sumitomo Mitsui Banking Corporation Europe in 2020 and has a branch in Paris. All other EU operations became branches of SMBC Bank EU AG, established in Germany. SMBC Bank International plc employs 1,561 people and SMBC Nikko Capital Markets plc employs 175, already half of the peak number of 378 employed in 2019/20.

SMFG claim this merger is to strengthen its offering to customers, and the numbers of people employed will remain the same. However, as the Nikkei points out, its medium-term management plan to FY2025 aims to reduce annual expenses by 25 billion yen and the workload of 500 people by improving the efficiency of overseas operations, such as reviewing the network of bases and integrating redundant functions.

Category: Japanese business in Europe