When I moved from Detroit to Nagoya in 1998, Toyota-owned automotive parts suppliers sold primarily to Toyota plants. Ditto for the Honda keiretsu companies whose mufflers and brakes usually ended up inside Civics, Accords and other Honda nameplates. Over the past few years, however, Tier 1 suppliers in Toyota’s heartland of Greater Nagoya have diversified their customer base and now sell to Honda and other automakers that compete with Toyota.
Such a weakening of the keiretsu system, unforeseen 12 years ago, creates a bounty of opportunities for non-Japanese parts suppliers who may have previously viewed Japan as being a closed market. Gone are the days when your target customer needed to be your primary shareholder in order to win the business. The move to a less vertically-integrated supply chain creates openings for Western companies who can offer a competitive product or service.
Illustration by Phil Couzens
Furthermore, the recent global financial crisis has made Japanese companies more risk-adverse and prompted them to diversify their customer base. As an example, Japanese automotive parts manufacturers have begun supplying Volkswagen with parts made in China. As German and American automotive manufacturers step up their procurement from Japan, they often specify that certain parts and special processes (only offered by Western companies) be used when manufacturing such products. This has created opportunities for my company and I have noticed the trend with other Tier 3 and Tier 4 companies as well.
Japanese manufacturers are also pursuing diversification by expanding outside their main industry. Lehman-shocked automotive suppliers in Japan are finding ways to enter the less cyclical aerospace industry. Mitsubishi Aircraft’s regional jet—60 percent of which is made from North American parts—is quickly becoming a success story for American manufacturers such as Pratt & Whitney and their supply chains in the U.S.
Similarly, indigenous industries from shipbuilding to rail need software designed by American companies such as The MathWorks. CRM solution providers including Salesforce.com have won over the hearts of Japanese firms who need to manage their growing international customer base.
In the field of renewable energy, the Japanese solar energy industry has become self-sufficient with few non-Japanese components. Wind energy, however, is an industry dominated by Western companies. European-based manufacturers, in particular, provide much of the technology used to operate wind farms in Japan. Other forms of renewable energy will also require expertise from firms in North America and Europe.
Supplying Japanese manufacturers is now easier than ever before, with fewer barriers to entry and more transparency. The financial crisis has further leveled the playing field, and non-Japanese suppliers are judged more on the quality of technology and service rather than on who owns shares. As Japanese conglomerates exit areas outside of their core competency in order to mitigate the inefficiencies of vertical integration, Western suppliers can quickly increase market share by making selective acquisitions. Indeed, these are very exciting times to be involved in B2B industrial sales in Japan!
Julian Bashore is Representative Director of Bodycote Japan K.K. He also serves as Chair of the Membership Relations Committee at the ACCJ Chubu Chapter.
www.bodycote.com/japan
