sony Archives - Rudlin Consulting

Japan’s lost three decades – what are the causes?

The 1990s were called the Lost Decade in Japan, and then as the economy seemed to stagnate in the 2000s, it became the Lost Two Decades. Now the Nikkei Business in a recent special series seems to be saying it has been a lost three decades. Turnover and profitability were growing through to around 1990 when the economic bubble burst. Then profits fell – although since 2010 they have been growing again. The total revenues of Japanese companies (excluding financial services) has been static, with only a small bump upwards around 2005-2008.

Nikkei Business says the lack of growth in turnover is the key problem. Even sales overseas, which were meant to be the growth driver, have not shown much of an upward trend. According to Nikkei Business the root causes of this lack of growth are:

low investment (1991 capital investment as a percentage of cashflow was 133%, compared to 82.2% in 2018)
low wages (106.5 in 1990 indexed against 100 in 2015, down to 99.6 in 2019)
low efficiency (return on assets was 4.3% in 1990, down to 3.8% in 2018)

It cites Panasonic as an example of #1. Every time profits rose, Panasonic increased its investment, but every time profits shrank, it cut investment back, since 2001. As for #2, Nikkei Business lists all the major restructurings since 1999 with major Japanese companies, which makes for sobering reading for a country famed for lifetime employment:

1999 – Nissan plan to cut 21,000 from its workforce, closing 5 factories
2008 – Sony announced it would reduced its electronics workforce by 16,000
2009 – Panasonic announced it would cut 15,000 people and 27 factories. Pioneer axed 10,000 jobs.
2010 – All Nippon Airways proposed reducing its workforce by 16,000 as part of its revival plan
2011 – Ricoh announced a mid term plan aiming at reducing its workforce by 10,000
2012 – NEC announced a workforce reduction programme of 10,000 job cuts
2013 – Fujitsu announced it that by axing its semi-conductor business, it would remove 5,000 jobs.
2015 – Toshiba announce it would erduce its workforce by 15,0000
2017 – Mizuho Financial Group announced an administrative work reduction programme targetting 19,000 roles.
2019 – Nissan restructuring to impact 12,500 personnel

The low efficiency seems to be in the service sector, where there has been a lack of economies of scale. The number of Japanese companies with turnover of over Y100bn/$1bn doubled from around 40 to 80 from 1980 to 1991, but has not risen much since – apart from a blip in 2008 – after the birth of Japan Post, and is still heavily manufacturing oriented.

I will cover the analysis and suggestions from the rest of series for how Japan can “wake up” in my next blog posts.

For more content like this, subscribe to the free Rudlin Consulting Newsletter. 最新の在欧日系企業の状況については無料の月刊Rudlin Consulting ニューズレターにご登録ください。

The fourth industrial revolution should not be mercantilized

UK is the birthplace of innovation and will not sink, despite Brexit, says Toru Sugawara, the deputy editor of the Nikkei Business magazine – Japan’s equivalent of The Economist (only with more business, less economy).

He acknowledges that Brexit is casting a shadow on the world economy, and that the problems will not end just with an extension, as the negotiations will drag on, unless the result of the referendum is reversed.

He points to how employment remains buoyant in the UK, despite GDP growth being the lowest in 6 years, and says that this could be because immigration from the EU is decreasing – which was one of the reasons people voted to leave. He does not mention that net immigration has not dropped, as more people are coming from non-EU countries. So unless you believe that EU immigrants only have jobs which UK natives could do, and non-EU immigrants only do jobs that UK natives couldn’t do…

He believes the UK’s resilience derives from an inner strength which helped it to lead the industrial revolution as the “birthplace of innovation.” Because the UK has worldclass universities “UK research levels are extremely high. Even if they leave the EU, there are researchers who want to learn from the UK” – according to an engineer from a major Japanese electronics company.

The UK is similar to Japan, Sugawara notes, in that neither was able to match Silicon Valley in terms of being able to turn innovations into world changing businesses. He thinks the UK is changing, however, dating from when the British Business Bank launched in 2014, bringing together various funds for startups and small businesses and also the introduction of the regulatory sandbox, to allow new kinds of financial services to test their products.

Venture capital funding in the UK in 2018 was $7.9bn, double that of Germany or France (although what he doesn’t say is that this was down from a high of $8.1bn the previous year, and that Germany and France seem to be catching up) . Dr Yuri Okina of the Japan Research Institute points out that the UK’s strength is that as well as having the world’s financial centre, there is a rich source of accountants, lawyers, consultants and other specialists who support an ecosystem for new business.

If this network could be boosted further, then the UK could lead the 4th wave of the industrial revolution, asserts Sugawara. He warns that Japan, who puts its funds into propping up zombie companies, with regulatory systems that impede new industries from growing, will get left behind. “That’s the bigger worry” he concludes.

So he seems to be turning an encouraging pat on the back for the UK into a kick up the backside for Japan. What he says is not going to be news to many Japanese companies, who have reacted to the difficulties they face in Japan by investing in the UK (and elsewhere in Europe). Sugawara mentions SoftBank‘s acquisition of the UK’s ARM, but there have been plenty of other less spectacular investments. Much of it has to do with CASE (Connected, Autonomous, Shared, Electric) in the automotive industry – Sony Innovation has invested in What3Words (a geocoding system) – also invested in by Daimler. Itochu has invested in Hiyacar and I realise now that its acquisition of UK car repair chain KwikFit probably also fits into this automotive services play. Similarly Sumitomo Corporation has invested in the Nordic parking company Q-Park and Sweden’s car sharing service Aimo. Japan’s Park24 acquiring National Car Parks in the UK is probably also looking to a CASE future. Panasonic acquired Spanish automotive systems and parts company Ficosa in 2017.

So really, it’s not about any one country leading the fourth industrial revolution – it will be collaborative and global by its very nature. Both Japan and the UK need to keep their doors as wide open as possible to let everyone get on the ride.

Japan’s megabanks lose popularity with Japanese graduate hires

It’s not surprising that Mizuho, one of Japan’s megabanks, has fallen in popularity from the top spot for 2018 new recruits to #17 for those graduates aiming to join in 2019, according to recruitment agency Disco. As previously blogged, Mizuho’s former president, now chairman, Yasuhiro Sato has been very clear that the bank should lose around 30% of its workforce globally, through greater use of information technology, and yes, AI. His successor Tatsufumi Sakai shows no signs of reversing this.

The other megabanks have fallen less dramatically out of favour, from #2 to #4 in the case of MUFG (dropping the Tokyo from Bank of Tokyo-Mitsubishi UFJ as of April 1) and from #5 to #14 in the case of Sumitomo Mitsui Banking Corporation.

Japan’s airlines JAL and ANA have stayed in the top 5, at #1 and #3 respectively. Perennial favourites, the trading companies Itochu and Mitsubishi Corp have also gained popularity, up from #7 to #2 and #9 to #6 respectively.

Manufacturers such as Toyota (#5 from #12), Sony (#11 from #31) and Denso (#19 from #33) have become more attractive, as graduates realise that the Internet of Things means traditional companies are now moving into more innovative IT related areas.

Japanese graduates who have studied at foreign universities favour foreign companies operating in Japan such as Procter & Gamble, Google and Amazon, or management consultancies, whereas no foreign owned company is in the top 10 for domestically educated Japanese graduates.

Japanese top executive pay still low, unless you’re foreign – or selling wigs or pachinko machines

I often illustrate that Japanese companies are the “last functioning socialist organisations” in my seminars by pointing out that although they are very hierarchical, the top executives of Japanese companies only earn 10 or 20 times the average employee’s salary, compared to 160 times in the UK for FTSE 100 companies and more than 300 times in the USA for Fortune 100 companies.

Toyo Keizai have confirmed that this multiple still holds, by listing the highest pay differentials for TSE listed companies. The top 10 include new technology companies such as LINE (mobile apps subsidiary of Korean internet company Naver) at #1 with a multiple of 165 between staff and director salaries and Nexon (Korean owned video games company) at #2 with a multiple of 57.7 as well as founder run companies such as Fast Retailing (Uniqlo) at #3, with a multiple of 31.4.

Foreign executives head up Nissan at #4 and Takeda at #5 – both with multiples of just over 29. The rest of the top 10 are around the 20-25 x mark with Sankyo and Universal Entertainment – both pachinko gambling machine companies at #6 and #8 and Art Nature ( a wig manufacturer) at #7. Electronics company Tokyo Electron and chain restaurant company Skylark (Chairman Ralph Alvarez ex President McDonalds) at #9 and #10.

Toyota is at #14 and after #15, multiples are below 20 and cluster around the 10x mark for established companies that are in our European Top 30 such as Sony, Daikin, Panasonic, Itochu, Astellas – through to Canon bunched with 8 others at the bottom of the Top 500 with a multiple of around 6 between employees and directors.

Japanese companies divest as well as invest in Europe

The eagle eyed will have spotted that our revised ranking below for the top 30 largest Japanese employers in Europe for the year ending 2016 is not quite in rank order. Only a third of the reports covering the financial year ending 2017 are available but based on what we can dig out, we can say that acquisition hungry Nidec have topped 10,000 employees in Europe so will be higher than their 2016 ranking. Dentsu Aegis have also been gobbling up agencies and Bridgestone has acquired a couple of tyre companies in France.

Some of the more established technology brands have been acquiring around Europe too such as Panasonic (Ficosa in Spain, Zetes in Belgium), Konica Minolta (Mobotix in Germany, Dactyl & OMR in France) and Sony (eSaturnus in Belgium, Plumbee and Ministry of Sound and TruTV in the UK).

At the same time, Japanese companies are beginning to consider exiting investments, which is a relatively new development. Some have had this forced on them of course, like Toshiba selling Landis & Gyr and Westinghouse. Lixil was a new entrant into the top 30, having acquired Grohe, the German bathroom company and Permasteelisa, the Italian construction company but is now in the process of selling the latter to a Chinese company. “It may have been forced to sell assets it had trouble integrating” according to a source quoted in the Financial Times.

Hitachi, having acquired German company Metabo in 2015/6 is now selling it off with the sale of its power tools division to KKR.

Toshiba may well fall out of the rankings as a consequence of selling off its businesses and Takata may no longer qualify as a Japanese company, as it is about to be acquired by Chinese company Key Safety Systems.

For the full report of the M&A activities of the biggest Japanese companies in Europe, please contact Pernille Rudlin (pernille dot rudlinrudlinconsulting dot com)

Top 30 Japanese companies in Europe 2021

FREE DOWNLOAD

Send download link to:

*Best estimate as figures not disclosed in annual report

Japan’s “work style reforms” backlash grows

The number of articles I have seen in the Japanese media full of complaints about the “work style reforms” announced by the Abe government last year seems to have shot up, particularly since the introduction of “premium Friday” in February of this year, when everyone was supposed to leave work at 3pm on the last Friday of each month and go shopping.

The Nikkei Business magazine’s 24th July 2017 edition has highlighted 3 kinds of behaviour attracting criticism in an article entitled “That’s not work style reform!”

Dumping work on overseas subsidiaries…

Mr A, a 30 something manager in a famous Japanese electronics company, is well known for producing great reports and yet somehow always managing to leave work on time, claiming he needs to pick up his kids from school, or do the housework. He goes on business trips to Asia twice a month, as his area of responsibility is global sales, and is meant to meet customers to understand their requirements for automotive and electrical components. However according to the young staff (presumably either Japanese or Japanese speaking) in the Asian offices, he mostly gets them to write the reports.

This behaviour started when the work style reforms began to be implemented, such as receiving warnings the next morning if your PC was still on after 8pm. Mr A said he couldn’t take his laptop home because his young children make it hard to work, so asked the Asia office staff to draft reports for him. “If you try to refuse he starts talking about his kids. how he has to take them to hospital or it’s their birthday party”. I wonder though, unless he’s wrongly claiming credit, isn’t this just good delegation?

…and other complaints

Other behaviours which complaints have been received about include – refusing to read customer emails after 4:45, just moving the mouse around to show that you are working from home, lights going out in the middle of important meetings, “last orders” being 2 hours before the end of business.

Nikkei Business lists up the initiatives which have been taken:

Ajinomoto: changed the official end of the working day to 4:30 from April 2017 and shortened the working day from 7 hours and 15 minutes by 20 minutes
Honda: Introduced a “working interval system” whereby there must be a minimum of 12 hours break between two work periods
Fujitsu: Authorised unlimited working from home (but only twice a week maximum after the end of the working day) for around 25000 of its employees
Calbee: Has a bi-annual “get rid of unnecessary work” drive
Sony: promotes a “flex holiday” system of 16 day consecutive holidays including Saturdays.
Astellas: Introduced a “Family Friday” system where work finishes each Friday at 4:30

What Japanese companies should do instead

Nikkei magazine asked the Chinese founder of Japanese software company Softbrain Song Wenzhou what he thinks Japanese companies should do instead. “It’s pointless to expect Japanese people to become more efficient by themselves. Even if you start an initiative to get everyone to observe 9-5 working hours they will still stay in the office even if they don’t have anything important to do. Being more efficient is seen as leading to sloppiness and if you just do the essentials of your job this is seen as bad!”

He recommends:

The whole organisation – not just the individual – has to focus on how to improve productivity. I totally agree – leaving it up to the individual will not work in a collectivist, collaborative workplace.
Then you can reduce working hours

Mitsuo Sekiya, the founder of Disco Corporation, a Japanese manufacturer of precision machinery, led a true reform of work style, resulting in three consecutive quarters of highest ever profit this year. Sekiya’s view is that true work style reform requires a radical restructuring of the company and that the problem is that employees who increase their productivity are not rewarded either financially or in terms of evaluations.

Why work for a Japanese company? (#1) Corporate Social Responsibility

For most Japanese companies, despite recent changes to corporate governance and the occasional scandal, the main motivation is the long term survival of the firm, not shareholder value maximisation.

Obviously you have to make some money to invest back into the company to survive, but above all longevity means being a good citizen in the environment and communities you operate in. There are some exceptions to this of course, but by and large, Japanese companies are pretty sincere about corporate social responsibility, to the point where I used to joke when I worked in corporate communications in a Japanese IT company, that if we didn’t watch out, our mission statement would be identical to every other Japanese technology company’s mission statement as it could be summarised as “contributing to society through innovation”.

So if you are looking to work for a company that will be supportive of your wish to make a positive contribution to society, then you may find Japanese companies congenial places to work.

Some are more active in CSR than others, so when Toyo Keizai has published its latest rankings by industry, we matched these to our Top 30 Europe, UK and Germany largest Japanese employers rankings and put them in rank order as below.

As Toyo Keizai points out, it is easier for manufacturers to score highly in their CSR rankings, which is why they dominate the top 50 overall, and also why Toyo Keizai publishes rankings by industry, to ensure like for like comparisons are made. Banking and financial services are not included in their analysis. Toyo Keizai explains its scoring system (in Japanese) here. It has around 150 criteria, across the categories of diversity (gender, age, disability), environment, corporate governance and social contribution.

Fujifilm – #1 overall and #1 in pulp/paper/chemicals
Canon #4 overall and #1 in electronics and fine engineering
Denso #8 overall and #1 in automotive
Ricoh #9 overall and #3 in electronics and fine engineering
Konica Minolta #12 overall and #4 in electronics and fine engineering
Honda #14 overall and #2 in automotive
Nissan #17 overall and #3 in automotive
Daiichi Sankyo #25 overall and #1 in pharmaceuticals
Toyota #28 overall and #4 in automotive
Fujitsu #30 overall and #9 in electronics and fine engineering
Astellas #34 overall and #2 in pharmaceuticals
Sumitomo Rubber 36th overall and #2 in oil/rubber/glass/ceramics
Mitsubishi Corporation #42 overall and #1 among trading companies
Lixil 44th overall and #1 in metal products
Sony #45 overall and #12 in electronics and fine engineering
Nidec #49 overall and #13 in electronics and fine engineering
Takeda #50 overall and #4 in pharmaceuticals
Sumitomo Electric Industries #52 overall and #2 in metal products
Itochu #55 overall and #2 among trading companies
Panasonic #57 overall and #15 in electronics and fine engineering
NYK #58 overall and #1 in logistics
Japan Tobacco 60th overall, 3rd amongst food companies
Brother Industries #71 overall and #16 in electronics and fine engineering
Sumitomo Corporation – #73 overall and #3 amongst trading companies
NTT Data #75 overall and #4 in telecommunications
Olympus #84 overall and #17 in electronics and fine engineering
Dentsu #95 overall and #2 out of service sector companies
Sumitomo Heavy Industries #138 overall and #11 amongst machinery companies
Calsonic Kansei #138 overall and #18 in automotive
Fast Retailing (Uniqlo) #531 overall and #19 out of 20 amongst retailers

Japanese automotive companies represent 1/3 of top 30 Japanese employers in the UK

Fujitsu continues to be the largest Japanese employer in the UK despite recent restructuring. We’ve added Sumitomo Rubber to the list, following its recent acquisition of UK tyre wholesaler and retailer Micheldever. Along with Kwik Fit, another UK tyre dealer and car servicing company is owned by Itochu at #3, this means that over a third of the companies in the list are automotive or have a substantial automotive component to their business.

We’ve also revised upwards our estimate of the total number of Mitsubishi Corporation employees, having confirmed from various sources that its main subsidiary in the UK, Princes, the foods company, has around 3000 of its 8000 employees in its UK operations.

The top 30 now cover around 80,000 of the 140,000 employees that Japanese companies in the UK employ. Individual profiles of each company, including trends in employment, regional headquarters, European organisation and CSR and diversity analyses are available – please contact pernille dot rudlinrudlinconsulting dot com

Rank	Company	UK employees 2016
1	Fujitsu	9,905
2	Nissan	7,657
3	Itochu	6,697
4	Honda	4,565
5	Ricoh	3,702
6	Mitsubishi Corp	3,482
7	Hitachi	3,317
8	Toyota	3,233
9	Sony	2,937
10	Canon	2,744
11	Dentsu	2,571
12	Nomura	2,468
13	NSG	2,167
14	Mitsubishi UFJ Financial Goup	2,100
15	Denso	1,925
16	NYK Group	1,919
17	Mitsui Sumitomo & Aioi Nissay Dowa	1,867
18	Yazaki	1,846
19	Calsonic Kansei	1,729
20	SoftBank	1,700
21	Sumitomo Rubber	1,574
22	JT Group	1,473
23	Sumitomo Corporation	1,366
24	Fujifilm Holdings	1,292
25	Brother Industries	1,174
26	Olympus	1,157
27	Fast Retailing	1,100
28	Unipres	1,095
29	Konica Minolta	1,055
30	NSK	866
TOTAL		80,683

Dramatic headcount reductions in Japan and Europe for Japanese electronics companies

Over 300,000 permanent staff worldwide, representing around 20% of total headcount have been “let go” at Panasonic, Sony, Sharp, Toshiba and other Japanese electronics companies over the past five years, according to analysis by Toyo Keizai.

Panasonic, Sony, Hitachi, NEC, Fujitsu, Toshiba and Sharp are all represented in the 10 companies who lost the most employees globally and the only company that isn’t electronics related amongst those 10 is Daiichi Sankyo – because of acquiring and then selling off Ranbaxy, the Indian generics drug manufacturer. The other companies making up the 10 are Renesas and Mabuchi Motors – both B2B electronics companies.

Panasonic lost nearly a third of its employees -117,417. Their turnover also shrank (but not by a third) over the same period and they reduced the number of consolidated companies (subsidiaries) from 633 to 474. Only around 4% (10,000 – of which around 700 in UK, 3000 in Germany) of its employees are based in Europe anyway, so it’s clear the bulk of the reduction happened in Japan and China.

Sony was second, with a reduction of 42,900 employees, representing around 26% of employees in 2010/11. This was largely through restructuring its electronics business in Japan and North America, with the film, music and finance segments remaining stable. Sony has also restructured its electronics business in Europe, losing around 40% (2,000) of its headcount (UK & Ireland = 22% reduction from 1,386 to 1,061, Western Europe 50% reduction from 3,271 to 1,635 and Eastern Europe only 11% down, from 423 to 376) The total of Sony’s employees in Europe including film, music and computer entertainment represents around 10% of the global total of 125,300.

Renesas – the semi-conductor manufacturer which was formed out of bits of NEC, Hitachi and Mitsubishi Electric has lost over half its employees – 27,470. Headcount is now 19,160 with the bulk of its European employees being located in the UK (805 employees in 2012, now down to 633) and Germany (831 employees).

Hitachi‘s headcount reduction was only 7%, but as it was 7% of over 350,000 people, this still put it in the top 10. In the UK and Europe by contrast, Hitachi has grown due to acquisitions and expansion of their rail, consulting, finance and nuclear power businesses.

NEC cut its employees by 15% (17,114) and Fujitsu by 9% (15,821). Fujitsu’s employee numbers in the UK (where it remains the largest Japanese employer) over the past 5 years rose from 10,030 in 2012 to 11,765 in 2015, but a further restructuring has led to headcount dipping below 10,000 in 2016. The pattern across Fujitsu’s EMEA (or now EMEIA) region is similar – having been 31,000 five years’ ago, then reduced, then expanded again, and now another restructuring since 2015/6 to the current total of 28,707.

Toshiba has only cut 7% (14,829) of its headcount so far but this will change with the spin off of Toshiba Medical Systems to Canon and household appliances to Midea as well as the controversial sale of its chip business. There have been cuts to other businesses in Europe, with employee numbers dropping around 10% 2015/6.

Sharp, owned by Taiwanese company Foxconn/Hon Hai as of last year, cut 22% of its employees (12,069) over the five year period. Much of its consumer electronics business has been licensed to other manufacturers, resulting in the closure of Sharp Electronics UK and a new company, Sharp Business Systems being set up with its headquarters in the UK and business units headquartered in London (information systems), Hamburg (energy solutions) and Munich (visual solutions).

Brexit looks to accelerate these trends – companies such as Sharp, which were restructuring anyway, are using Brexit as a further stimulus. To ensure “maximum supply chain efficiency” Sharp has already transferred its European stock and logistics operations from the UK to its subsidiary in France (to be managed by its German subsidiary) in September 2016. At the same time it sold its energy solutions business in the UK to its German subsidiary and closed down Sharp Telecommunications UK (22 employees). Overall Sharp’s employees in the UK look to drop from 617 in 2015 to 553 in 2017, plus the factory in Wales which manufactures microwave ovens – licensed to Turkish company Vestel.

The story of Japanese companies in the UK continues to be the story of the UK economy overall in 2016

The number of people employed in the UK by the biggest Japanese companies in the UK rose by around 1% to 76,103 in 2016 – representing over half of the 140,000 or so the Japanese Embassy to the UK estimates are employed overall in the UK by Japanese companies.

Just as 80% of the UK economy is services, so too with Japanese companies in the UK. Although Nissan, Toyota and Honda attract most of the headlines thanks to Brexit – understandably as they represent around 15,000 of the 76,000 jobs – the vast majority of the rest are in the services sector.

Even Sony has only one small factory left in the UK, making high end audio visual equipment and employing less than 100 people. The rest of 3000 or so jobs are in Sony Interactive Entertainment, music and film & TV or in marketing.

Fujitsu is still the biggest Japanese employer in the UK but the gap with Nissan at #2 is narrowing, as Fujitsu have reduced their headcount by over 15% in the past year or so. Although Fujitsu is still seen as an IT & telecomms manufacturer in Japan, in the UK it is largely an IT services company.

Trading company Itochu may be a surprise at #3, but this is largely due to its ownership of tyre fitting chain KwikFit.

The Hitachi group of companies (#7) has grown by 17% over the year – thanks in part to expansion at Hitachi Rail and Horizon Nuclear Power – but the bulk of its employees continue to be at consumer loans company Hitachi Capital.

Dentsu Aegis Network, part of the Dentsu advertising agency, has continued to acquire across the UK and Europe, resulting in a 21% increase in headcount. Other notable increases thanks to acquisitions include Mitsui Sumitomo & Aioi Nissay Dowa acquiring Lloyds underwriters Amlin and of course Softbank, a new entrant to the top 30, with its acquisition of ARM.

The story of Japanese companies in the UK continues to be the story of the UK economy overall – a trend which will no doubt continue in 2017, with Japanese banks already strengthening and relocating to their other European Union based operations, or threatening to do so.

Customised reports, profiles and other research on the Top 30 largest Japanese companies in Europe, Middle East and Africa are available – please contact pernillerudlinrudlinconsultingcom for further details.

Free pdf of Top 30 largest Japanese employers in UK