Sunday, February 7, 2016

Business Longevity Japanese-Style

I found this piece of article from China Daily newspaper that I read somewhere in June 29, 2015. I think its good to read and share among ourselves. The author is China Daily's bureau chief in Tokyo Ms Cao Hong. Enjoy reading;


Japanese people have the longest life expectancy in the world - 84 years, according to the World Health Organization, or to be precise, about 80 years for men and 87 for women. 

The island nation is also home to around 40 percent of the world's longest-surviving businesess - the highest globally. A 2011 survey by the Tokyo Chamber of Commerce and Industry showed Japan had 21,666 business that were more than 100 years old, and 3,146 of them had been around for more than 200 years. 

In fact, quite a few flourishing Japanese family businesses can trace their origins to the 17th or 18th century. They include Mitsui, Sumitomo and department store chain Daimaru. Mitsubishi and Suzuki, founded in the 19th century, are much younger in comparison.

The latest story of succession is about Japan's electronics manufacturer Casio. Its 86-year-old president Kazuo Kashio will hand the reigns of power to his eldest son Kazuhiro Kashio in June after staying at the helm for 27 years.

According to the US-based Family Business Institute, 30 percent of family businesses survive into the second generation, 12 percent continue into the third generation and only 3 percent make it into the fourth generation and beyond.

So what has enabled so many of Japan's old-world companies to continue doing business this long?

My recent trip to Kyoto helped me find part of the answer.

In his office and at his home, Kizaemon Tsukamoto, president of Kyoto-based Tsukaki Group, was proud to present scrolls with credo the encourages family members to accumulate "merit" to benefit their descendants.

The statement is from I Ching, or Book of Changes, an ancient Chinese masterpiece the says the cosmos is ever-changing yet harmonious. Today, the book has become a guide for success in many fields.

The scrolls has been passed down to Tsukamoto, the sixth-generation keeper of the family-run business founded in 1867, from earlier generations. The company that started as kimono maker has grown into major enterprise dealing in garments, fir, jewellery and real estate. 

A museum on the outskirts of Kyoto exhibits the credos of may local business families. They share many values in common: Frugality, diligence, honest, restraint and sharing. These values are the basis of a strong corporate culture that unites the old companies, which earnestly live by the tenets instead of just highlighting them on their websites.

Such old companies are cohesive in their practice and have strong sense of purpose and identity.

By viewing their relationships with business partners and customers as something that goes beyond just an exchange of goods and services for financial gains, these companies have built supportive networks that have ensured their success, not just survival, in the long run.

These companies usually believe in leanness and efficiency, which could be termed frugality. They are conservative in terms of financing and do not risk their capital gratuitously. They understand the meaning of money in an old-fashioned way and know the value of having spare cash in the kitty.

Having cash in had gives them flexibility and independence of action. They can pursue options that their competitors cannot. They can grasp opportunities without first having to convince third-party financiers of their attractiveness.

Conservative financial practices also mean these companies tend to be very profitable. Studies done years ago showed the average net profit of old Japanese companies was 5.5 percent while that of all Japanese companies was 2.7 percent.

In Tsukamoto's words, businesses that treat their employees, customers, suppliers and the local community well can live and thrive long.

"Profitability is necessary condition for their existence and a means to more important ends, but it is not the end in itself" says Yohei Nakanori, the fourth-generation president of Tsukiji Tama Sushi, a restaurant founded in Tokyo in 1924.

Japan's century-old companies know the value of making their credos, passion and entrepreneurial skills and prowess a part of their DNA, and they cherish and protect it, as well as built upon it.

Of course, some have not succeeded, and others are struggling. 

Founded in 578 AD, Japanese temple builder Kongo Gumi was being run by the founder's descendant s until it succumbed to excessive debts and an unfavourable business climate in 2006.

Different management styles have fueled a family feud at Japanese furniture retailer Otsuka Kagu. Its 71-years-old chairman, Katsuhisa Otsuka, who founded the business in 1969, focused on high end customers.

His eldest daughter, Kumiko Otsuka, took over the company as its president in 2009 with sights on the mass market. During her 5 years tenure, the business returned to profitability in 2011 for the first time since the 2008 financial crisis.

But the senior Otsuka fired his daughter in July last year. The company board reappointed her in January while the shareholders voted for her on March 27.

The latest sentiment reading of small Japanese businesses has slumped to two-year low as the weaker yen continues to weight on smaller, domestic-oriented companies, while benefiting the nation's biggest exporters. 

The number of Japanese companies citing the weaker yen among the reasons for going bankrupt almost tripled in 2014 to 301 as fast-rising costs of imports squeezed small businesses, according to Teikoku Databank. It expects more such bankruptcies, especially outside large cities.

In this sense, the old companies could serve as valuable example for the younger ones.

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