Four of the nine business units of Terumo, the Japanese healthcare company, have their headquarters outside Japan. Yutaro Shintaku, the President of Terumo, believes his company has been successful in globalizing by thoroughly integrating global acquisitions, so that the headquarters itself has changed. “As the Japanese domestic market is stagnating, overseas markets should not be seen as ’foreign’ but the platform for developing a market”.
Terumo is the 14th largest medical equipment manufacturer globally and is in the top 5 for certain devices, but “successful globalization is not about scale. What is important is to be able to motivate the acquisition, to bring into Japan their strengths and change the Japanese headquarters accordingly, and then further develop as a result of that integration.”
Terumo struggled when it first began to acquire overseas businesses, in the 1990s. They built a factory in Belgium and bought a business from 3M in the USA. Prices dropped radically in the EU however, so Japanese style high quality high cost manufacturing did not work. “We learnt we needed people who really could manage” but Terumo did not have many managers in Japan who could manage overseas business. “Nor is it a good idea to just leave everything up to the managers overseas. You cannot really develop products, execute your marketing and grow profits the way you want if you do that”.
In 2002 Terumo acquired the UK company Vascutek and initially left management up to the incumbent. When the incumbent executive retired in 2009, Terumo decided to get more involved. “But it was not in order to impose our way upon Vascutek. Rather, we sent one expatriate to the UK in order to work alongside the management”.
“Overseas management will tend to interpret what Japan headquarters say in the way it suits them. Also Japanese expatriates have a tendency to keep quiet, if the premise is that management should be left up to the local executives. So what is important is to find a ‘win/win’ – if we reform together, we will improve together.”
The example Shintaku gives of a ‘win/win’ was the introduction of the 5S methodology to the Vascutek factory. There was resistance at first, but when they saw how it made their jobs easier, and at the same time that it enabled a highly efficient but high quality production, then the mutual benefit was clear. The Japanese expatriate met with the new MD every morning for an hour so that there was joint ownership of all management issues.
Speed of decision making, particularly with regard to customer requests, in the US operations was one improvement that was brought back to the Japan headquarters.
If imposing your way is the first step in globalization, and leaving it up to the local management is the second step, then the third step is making the best of each others’ strengths. Terumo is now on the 4th stage, according to Shintaku, which is to change the Japan headquarters itself. A 3 company system was introduced in 2011 – Cardiac and Vascular, General Hospital and Blood Management. This is to provide the necessary management structure for further acquisitions.
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