The Japanese petrochemical industry has had a tough time due to slowing domestic demand and competition from developing countries. Mitsubishi Chemical has spent 10 years restructuring and shifting to new markets in automotive and IT sectors. In order to compete with major rivals, further restructuring of the Japanese petrochemical will be necessary, says Hitoshi Ochi, President of Mitsubishi Chemical Holdings in an interview in Nikkei Business.
Ochi was General Manager of the corporate planning office at Mitsubishi Chemical Holdings 10 years’ ago, when Yoshimitsu Kobayashi was president – together they embarked on the restructuring of chemical related Mitsubishi group companies which has resulted in Mitsubishi Chemical, Mitsubishi Rayon and Mitsubishi Plastics being merged into one, and brought together in 2012 in one building, with the classy address of 1-1-1 Marunouchi.
Mitsubishi Chemical has withdrawn from generic chemical production and is now focusing on high added value materials for the automotive and IT sectors as well as nurturing the pharmaceuticals side of the business.
According to Ochi, the reforms are not finished. “We now have to restructure our portfolio” he says. Reaching a certain scale in the business will still be important, but the new challenge is to get this to bear fruit. “We’ve grown into a large tree, but now we have to cut back some of the branches”. He does not rule out withdrawing from certain businesses. For example, transferring the ABS resin business to a new joint venture with JSR and Ube.
Mitsubishi Chemical was also able to combine sales of different product lines from Mitsubishi Chemical, Mitsubishi Rayon and Mitsubishi Plastics to win a combined order from Toyota for the Prius PHV.
Ochi says he really felt the walls dividing the organisations before they were combined, when he was President of Mitsubishi Rayon. If he asked something of the Mitsubishi Chemical President it would take at least half a year to be processed because of course the Mitsubishi Chemical President would put the profitability of his own company first. “Now I am the one President, I can just ask for something to be done and it’s done.”
“Former Mitsubishi Plastics people are becoming much more proactive about suggesting sales strategies – a world of difference from having to ask them to sell something before”.
Mitsubishi Chemical is also looking at new ways of conducting research and development – to become more specialised at developing new technologies. “The Germans are right about Industry 4.1. Using IT to build supply chains and create a virtual industrial cluster. This is a scary strategy for Japanese companies. Japanese companies will have to follow suit. There are several hundred Japanese chemical companies and we will have to collaborate. We need to earn money not from volume but functionality.”
Ochi does not rule out combining with Asahi Kasei or Mitsui Chemicals however. Japanese manufacturers have some strong product lines, and if there are synergies, it makes sense to combine, he says, agreeing that there are too many Japanese chemical companies to compete internationally, and that it might be better to only have 3 or so. “If you look at what is happening to chemical companies in Europe and North America, Japan is clearly behind. We also need to globalize further. Not just bringing generic products to Asia but value added products to Europe and North America. I keep saying that we cannot direct everything from Japan. We need to let the local managers develop new business lines. We can still do well in the West”
For more content like this, subscribe to the free Rudlin Consulting Newsletter.