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The latest in Nidec President Nagamori’s string of acquisitions – a university

Shigenobu Nagamori, the founder of Nidec is interviewed in the Nikkei Business series on how to “wake up Japan” about his latest acquisition – not a company this time, but a university – Kyoto Gakuen. He feels that Japan has become too brand name obsessed about higher education and that 18 year olds should not have their future decided simply on the basis of their standardised score for the university entry exams.

“You get into university in Japan on rote memorization and exam technique, so when you graduate, you have a rather fake identity, with no real strength, so don’t know how to survive in society.” Nagamori is aiming for a university where “you graduate with fluent English [science graduates do not have to study English at university in Japan] and specialist skills that you can put to immediate use”. He has changed Kyoto Gakuen’s name to the Kyoto University of Advanced Science.

“Japanese university students aren’t fully formed human beings. They don’t know how to speak for themselves. They fall asleep in lectures or mess about on their smartphones. This has to change, starting with the teachers. That’s why I became the chairman of the university. Lectures will be in English. 1/3 of the teachers will be foreign. There will be some students who cannot cope with this, so we will have the same lectures in the evening in Japanese. We had 600 lecturers apply for 30 positions. The evening supplementary lectures wll be given by post doc students or research students. The lectures will not be 90 minutes of sitting down. There will be a 45 minute lecture and the rest will be doing experiments. ”

“The administrators become the elite in Japanese companies – hardly any technical specialists become CEO. This is completely different to the USA. We also need to encourage overseas study – and encourage overseas students to come to us – maybe half our students should be from overseas. If they achieve good results, we will fund their fees and living costs. If results fall off, they pay half, if they hit the bottom, they have to pay all of it. That’s what we’re thinking. This might seem extreme, but it’s normal in the USA.”

Most of the rest of the interview is about facing the threat from China. Nagamori finishes by comparing himself to Konosuke Matsushita, the founder of Panasonic. Matsushita developed his management philosophy, and set up the Matsushita Institute of Government and Management , “but I don’t have any interest in politics, so I want to develop people who can set up businesses in advanced science – kids from poor Asian families who can come here to study, and then go out into the world and start something new.”

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Nidec’s Nagamori on the root causes of Japanese corporate scandals.

The founder and President of Nidec Corp, Shigenobu Nagamori has been high profile in the Japanese media (again). As well as a long interview in Diamond magazine about why all 57 of his acquisitions (many in Europe) have been a success, he gives some punchy analysis in his final column for the Nikkei Business magazine on what the root causes of the succession of scandals coming out of corporate Japan.

“It is the top management’s fault if bad news does not reach them. If there is something wrong with the production process or sloppiness in quality control, this is a matter of life or death for a manufacturer. That such important information is not being communicated is because the management is not going to the genba (where the action is) and seeing what is going on for themselves.

4 root causes of scandals at the genba

Nare (becoming used to something) Thinking that a certain level of irregularity won’t be a problem, getting accustomed to it.
Amae (being indulged) – believing that you won’t get found out anyway
Tiredness – when the cost price seems to have reached rock bottom or kaizen has been continuing for a while
Takotsubo (octopus pot – for more uses of this analogy, see our post on octopus appointments) – silos where a problem in one unit is hidden and not communicated to other units

This happens because managers are not ensuring a sense of urgency in the genba. This doesn’t mean they have to keep pressurising employees. They should be making frequent efforts to strengthen and pull up the genba. That’s why they should enter the genba themselves and see for themselves what is going on in R&D and manufacturing, sales. This will naturally lead to a sense of urgency.

Of course managers set targets, but if they don’t know the genba, then these are just words, and feel very distant to the genba.

The need for “hands on”, “micromanagement” and “making responsible without giving away responsibility”

Hands on means the genba solves problems with the management alongside. Not just throwing problems at them.

Micromanagement is that managers make decisions about all the issues in the genba. When I acquire a company that is in trouble, in order to reconstruct it, I check purchasing for even 1 yen. Some people say this will undermine the ability to think for themselves but it’s quite the opposite. It is to make the employees think, come up with suggestions and work alongside managers to review it. Not just get told, in a one way fashion.

“Making responsible without giving away responsibility” means that I delegate authority, but I don’t just leave people up to it. Otherwise the genba logic just becomes stronger and they fail to see what is appropriate overall. So delegate, but regularly check, very thoroughly.

The importance of developing generalists

It’s also important to develop executives. Although there is a tendency in Japan at the moment to reject generalists, it’s no good if someone only knows one business area and has no idea about other parts of the business. While people are young, they should experience management in different divisions in order to become proper executives.

That’s why I am always visiting our subsidiaries around the world. We have 300 companies and over 100,000 employees so I can’t do this by myself. So I get other people like our CSO (Chief Sales Officer) to travel around too. I am visiting somewhere pretty much every week. If managers had this attitude, the morale of the genba will also improve. You cannot take it easy.

Over half of Top 30 Japanese companies have their European HQ in the UK in 2016

A regularly cited statistic in the current EU referendum is that 60% of non-European companies have their European HQ in the UK. I have just revised our Top 30 Japanese companies in Europe and found that 16 out of the 30 biggest Japanese employers in the region (some companies cover Africa, Turkey, Middle East, Russia from their European HQ) have their regional headquarters in the UK – which is 53%, so slightly under the overall average. Together they directly employ nearly 420,000 people in the region.

I added Yazaki (a privately held, relatively unknown but huge automotive components supplier) – straight in at number 2. Their European HQ is in Germany, covering Europe and factories in Africa. The factories do of course bulk out the total of 45,200 employees in the Europe and Africa region.

If Brexit does happen, the UK could still cite historical and Commonwealth ties as a case for locating a Europe & Africa or EMEA (Europe, Middle East and Africa) HQ in London, but clearly for the automotive industry this is not a significant factor. Only Honda has their European headquarters in the UK, and automotive parts suppliers tend to follow their customers.

Most of the brand name electronics companies have based their European headquarters in the UK. The financial companies do not have such large numbers of employees, so whilst nearly all of them have their headquarters in London, they are not in the Top 30.

Adding Yazaki has pushed out electric motor manufacturer Nidec – but I suspect Nidec will soon be back in, given how acquisition hungry it seems to be.

For reports, profiles and other research on the Top 30 largest Japanese companies in Europe, Middle East and Africa please contact us.

“Japanese companies are too scared to touch their overseas acquisitions” – Nidec’s Nagamori

Shigenobu Nagamori, the billionaire founder of the world’s biggest manufacturer of micro-motors for hard disks and optical drives, Nidec, has acquired more than 40 companies in Japan and overseas. He comments in a Nikkei Business article that “you cannot just leave foreign acquisitions alone to get on with things by themselves. You need thorough mutual understanding and to even replace management if necessary.”

“Although you no longer hear about Japanese companies sending lots of managers over to their overseas subsidiaries who end up issuing all sorts of misguided directions, you now hear of companies who say ‘we think the same way as the counterpart management’ and so decide to buy the company and then just leave the management as is.”

“This is an illusion. Actually they are being left alone because the Japanese company doesn’t really understand what they are doing. It ends up with compromising on the necessary management reforms and profit targets.”

“I have regrets myself. We acquired 10 or so companies in Europe and North America from about 2010. We were warned by various companies who had M&A experience and financial institutions that we couldn’t restructure foreign companies the way we would Japanese acquisitions and that it was best to ‘leave it up to the foreigners’ otherwise they will quit”

“I thought that was true at the time. I also took on board the advice that Japanese managers needed to be people with Harvard degrees and a network amongst foreign executives.”

“However one company did not make any improvement no matter how often I set profit targets. I thought there must be something wrong with the company management as such a company should as a matter of course achieve profit margins over 15% but I was told that it was the limit for their industry.”

“In Japan you would try to persuade the management to adopt our “kaizen” knowhow (knowledge of how to improve) but we hit a wall with this in the West. So in 2012 we changed the management of the acquired company. But you can’t do it like pulling a trigger. I make a point of visiting each company at least once a year and have dinner not just with the executives but also the managers and discuss things with them. I also encourage them to send emails directly to me and I respond to them. I am trying to understand all the ideas people have for improving profitability.”

“It’s important that people in the company understand my thinking and I understand whether they are capable of understanding. If they are then it doesn’t matter if the CEO is changed. ”

“It’s the same in Japan. Communication is important. If you just cut back costs and improve profit, the company will not survive in the long term. Where is there waste, how can we make the most profitable products – the basics are the same in Japan or elsewhere. If this is understood, then overseas companies can be reformed too.”

“I think Japanese companies are too scared to touch their overseas subsidiaries. They overthink the differences. I used to be like that, but there is no need. The basics of management are the same everywhere.”

Octopus balls to Tokyo – why it matters where your company is from in Japan

Most countries have rival cities – usually the official capital city versus other cities which consider themselves to be the real business, historical or cultural heart of the country – think London versus Manchester or Birmingham, Berlin versus Dusseldorf or Frankfurt, Rome versus Milan, Madrid versus Barcelona. Japan is no exception and the rivalries go way back into history.

Kyoto used to be the capital of Japan, before Tokyo (or Edo as it was then) began to usurp it in the 17th century. If you ask Japanese people today about Kyoto, they joke that Kyotoites still think Kyoto is the real capital of Japan, and the Emperor is just temporarily visiting Tokyo (he moved there in 1868, when Tokyo became the official capital) – and will return one day.

Tokyo literally means the Eastern Capital and is part of the Kanto region, where the ruling feudal Tokugawa shogunate was based from the 17th century. Kanto means East of the Barrier (usually considered to be the Hakone checkpoint) and Kansai – the region where Osaka, Kobe and Kyoto are based – means the West of the Barrier (originally the Osaka Tollgate).

Before Kyoto’s reign as capital for a 1000 years, Nara (also in the Kansai region) was the capital and seat of the Emperor but is now a quiet backwater, more visited by tourists than business people. Kobe is the other main city in the Kansai region – a port with a strongly cosmopolitan feel and very close to Osaka geographically. Whilst Kyoto remains aloof and quietly superior (and has some very successful high tech companies of its own such as Kyocera and Nidec), the real battle now in business culture is between Osaka and Tokyo.

Osakans see Tokyo as standardizing, dull and full of bureaucrats and view Osaka (which historically had very few samurai but plenty of merchants) as the real money maker, with vastly superior food. Many of Japan’s celebrities, comedians and musicians come from the Kansai region too.

So what does this mean for corporate cultures? Osaka companies often have merchant roots – the joke goes, when you meet an Osakan, you don’t ask “how are you” (ogenki desuka) but “how’s business” (moukarimakka). To which the correct response is “bochi bochi denna” – a wonderfully vague way of giving nothing away, like saying “plodding along nicely thank you”. Osaka companies are brash, tough negotiators and mean with the money. “They’d skin the fleece off a gnat” said one British engineer to me, describing his colleagues in the Osaka HQ of a consumer electronics company.

Tokyo companies are gentlemanly but at the same time highly political. You need to have a good understanding of their organisation, the factions and the individual relationships to understand how to get things done. Mitsui and Mitsubishi, both Tokyo based corporate groups, are distinguished by the saying “Mitsui is people – Mitsubishi is the organisation”. It’s hard sometimes to understand how exactly this is different, but it seems to boil down to the idea that if an individual is powerful enough at a Mitsui group company, they can get things done, whereas at a Mitsubishi group company, the whole organisation has to support an action.

The other main corporate groups, Sumitomo and Itochu, are Kansai based companies. Both have strong “mercantile” roots – Sumitomo in metals trading, hard-nut, conservative and domestically focused and Itochu – strong in fashion and consumer goods, and seen as the more maverick, progressive and international in outlook. The regional cultural differences don’t seem to have been that strong between Sumitomo and Mitsui as various mergers have taken place between their respective member companies, particularly in financial services. However regional cultural differences have definitely had an impact on Astellas Pharma, the product of a merger between Yamanouchi (Tokyo) and Fujisawa (Osaka). Apparently many Fujisawa employees were horrified that Yamanouchi was going to be the dominant partner in the merger. Fujisawa had a strong tradition of innovation and had regarded Yamanouchi as “Mane-nouchi” (Mane = imitation) – a bunch of play-safe Tokyo bureaucrats.

Those who know Japan well will have spotted that there is an important region missing from this analysis – Chubu. Literally and metaphorically this is the midlands of Japan. Just like the Midlands in the UK it is the historic heart of the car industry. Nagoya is the main city, and teased just as Birmingham in the UK is for being ugly and soullessly modern. The area has the last laugh though, as it is the most wealthy in Japan – thanks to the enduring success of Toyota (so mighty their home town was renamed Toyota City) and its corporate group of suppliers such as Denso.

So, where are the top 30 Japanese companies in Europe from?

Kanto/Tokyo based companies:

• Asahi Glass
• Astellas (but Fujisawa originally Osaka)
• Canon
• Daiichi Sankyo
• Fujifilm
• Fujitsu
• Hitachi
• Honda
• Kao Corporation
• Mitsubishi group
• Mitsui group
• Nissan
• Nomura (but was Osaka originally)
• NTT group
• NYK group
• Olympus
• Ricoh
• Sony
• Toshiba

Kansai based companies:
• Horiba (Kyoto)
• Nidec (Kyoto)
• Nippon Sheet Glass (Sumitomo Group)
• Omron (Kyoto)
• Panasonic (Osaka)
• Sharp (Osaka)
• Sumitomo group (Osaka)
• Takeda Pharma (Osaka)

Chubu based companies:
• Denso
• Seiko Epson
• Toyota

Chugoku (Hiroshima etc) based companies:

• Fast Retailing/Uniqlo

Top 30 Japanese companies in Europe 2021

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Last updated by Pernille Rudlin at 2022-12-12.

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