Mavericks cut through old corporate Japan
By Andrew Cornell, Tokyo
2000-10-24 02:21:05
A banker, a restaurateur and a clothing maker are hardly the edgy business mavericks most likely to be revolutionising an economy like Japan's. They don't quite match the profile of someone like Softbank's Masayoshi Son.
Conventional they may sound but a handful of business people like these are leading a revolution from within, shaking the rigid world of Japanese business by running familiar businesses in radical ways.
Take Tadashi Yanai, 51, who took over several clothing stores owned by his father's construction company 27 years ago. A typical Japanese rag trader of the time, selling products made in Japan through traditional channels, the company was in trouble.
Yanai changed the name to Fast Retailing and, with the yen starting to appreciate, he began to look to Hong Kong for production, ignoring traditional suppliers from the heavily protected Japanese market.
Fast Retailing's Uniqlo - Unique Clothing Co - chain of basic clothing stores is now a retailing phenomenon in Japan, outgunning America's Gap company on its own terms and forcing other traditional Japanese retailers to rethink their costly strategies and launch their own basic labels.
Japanese consumers are always presumed to favour quality over cost, while being intensely status conscious. Yanai's willingness to test this myth was the basis of his success. Uniqlo's phenomenal rise is because Japanese consumers, in fact, prefer paying less for the same quality.
Yanai's strategy is revolutionary in the Japanese textile industry, where myriad middlemen, relationships, market cartels and change-averse management all cost the consumer.
Uniqlo, producing, distributing and retailing its own products, has gross profit margins nearing 50 per cent, more than 10 per cent higher than the average. Its best-selling fleece jacket is ¥1,900 ($33). The competing product in Gap last season was ¥4,900. A similar, Japanese-made jacket in a department store would be nearer ¥10,000.
"Uniqlo is the only Japanese company that concentrates on single-line private-brand products manufactured under a global procurement strategy," says Hiroshi Toshima, a clothing industry analyst.
But Yanai doesn't benchmark himself against the clothing industry. Instead, it is global, vertically integrated organisations like Dell Computer he watches.
Unlike many Japanese businessmen, he is prepared to change and - uniquely in a country where founders go on to be chairmen then senior advisers - hand over responsibility.
"Our company had grown under my autocratic management, but I found such a management style didn't work well after sales exceeded ¥100 billion," he says. "One of the steps in place is to have experts share management responsibilities. We also took steps to further motivate our employees."
Motivated staff are also the edge Kozo Hasegawa, a 50-year-old university dropout, has over his competition. Japan is not short of restaurants, of all kinds, price and shape. Yet Global Dining, newly listed on the Tokyo Stockmarket, boasts margins and profit growth the envy of the industry.
Its Italian, South-East Asian, Mexican and Japanese restaurants sit just below the upmarket level yet charge like family restaurants. Its operating costs are 20 per cent below the industry average while profits margins of 14.1 per cent last year beat McDonald's.
Hasegawa's secret is to eschew both the production line, faceless service of fast-food chains and the over-the-top pretension and prices of name restaurants. He does that by having a strictly merit-based remuneration system and allowing employees full participation in decision making.
Fifteen years ago, Global-Dining abandoned its conventional seniority-based wage system - something most Japanese corporates still struggle with - and began developing a merit and incentive-based system. "Hiring one competent person by paying ¥2,500 per hour improves our customer service far more dramatically than taking on three ordinary part-timers at ¥850 per hour each," says Hasegawa.
Japan's other management Trojan horses have in common that they are not assaulting the system directly, simply approaching it differently.
Not so jokingly referred to as the most hated man in Japan, Masamoto Yashiro, former head of Citibank Japan and before that an oil industry executive, now runs Shinsei Bank, the new name for the failed Long Term Credit Bank of Japan, which was sold to US investors last year.
Like hard-nosed bankers globally, he looks at credit risk, return on investment and won't invest in a new business without a clear idea of the pay-back time. But that's not what bankers in Japan do.
Traditionally, they caroused with the Ministry of Finance, played golf with corporate clients, paid almost no attention to credit quality and ran up the biggest pile of bad debts the developed world has ever seen.
Real-world banking may be turning Shinsei around but it has turned the world of Japanese banking upside down. "There is a view that we should forgive debts, keep companies alive, because LTCB received taxpayer funds, that we are hurting Japan," says Yashiro. "But the way we can help Japan and pay people back is to create a successful bank that pays more taxes and a return on that investment."
Japanese bankers tend not to think that way.
The outside world laments that Japanese business refuses to change despite a decade of economic stagnation. Japan is changing though; it's just that revolutionaries are doing it from the inside.
Tomorrow: Old companies doing new things.
This story was found at: afr.com.au |
