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|Japanese business -- from old to new Japan|
|Sunday, 13 May 2012 00:55|
No-one knows Japanese business better than Ulrike Schaede from the University of California, San Diego. Her recent interview on "Japan's Evolving Business Strategies" is most certainly worth a read. Here are some of the key points:
Japan is not a country with just large, sluggish, bureaucratic corporate conglomerates. There is a strong new dynamic as its companies slowly throw off the old and embrace the new. In fact, it is more similar than many imagine to the US with its old companies like Kodak, Chrysler, or Sears, and new ones such as Apple and Google, and ones like IBM which totally reinvented itself.
What is mostly exported from Japan now are highly innovative, highly advanced parts and materials that feed into the making of electronics and cars. For example, Japanese companies combine to a 70% world market share in fine chemicals for electronics, and more than 60% of the machinery needed to make electronics parts such as LCDs. Japanese companies compete in the specialty steel markets, and they hold a 65%+ market share in carbon fiber (now used to make the Boeing Dreamliner, but soon probably also to be found in cars).
Surely the recent Olympus scandal is evidence that Old Japan is still alive and well? Even here, corporate governance is changing. As of 1989, some 70% of the shares listed on the Tokyo Stock Exchange were in the hands of domestic corporations, banks, and life insurers. The majority of these were “cross held,” meaning they were based on business ties and geared toward stability.
Corporate governance—monitoring managers—was done informally or through the main bank, and usually did not really happen unless a company got itself into deep trouble. There was very little pressure on companies that were inefficient but stable.
For a variety of reasons, these holdings have unwound. Now, foreigners hold about 27%, and a new category of “trust banks” hold 18%. Both of these investor groups invest more in companies with higher return on investment, and managers now face strong pressures to show results. Better access to corporate information through more stringent disclosure rules, such as obligatory consolidated accounting, have also empowered individual investors. And there have been some reforms of the governance system itself, such as rules on outside directors.