No. 4: Find sources of business around you (December 10, 2010)

At the beginning of the Genroku period (1688-1703) in the Edo era, production and distribution of products grew active and various new types of merchants were born. Takatoshi Mitsui is most famous as the new type of merchant of this period. He opened a kimono store under the name of Echigoya that later developed to Mitsukoshi Department Store in Tokyo. He set up a policy to sell kimonos in cash at the fixed prices instead of selling on credit. Most kimono stores then sold kimonos on credit and set the prices higher to prepare for uncollectible receivables. Takatoki’s new business approach hit the heart of shoppers, surpassed his competitors, and laid the foundation for future growth of Echigoya.

The birth of new types of merchants was observed in areas other than Edo (Tokyo). Emon Motoya in Nagano Prefecture was one of such new types of merchants. He is the founder of the Motokyu group headquartered in Nagano Prefecture that has annual sales of over 30 billion yen now. He opened a store in the temple town before the Zenkoji temple in 1717 and started to sell salt, rice, and cotton. The temple was a kind of trading post between Niigata Prefecture and Edo, and old and established wholesalers were dominant there. Emon Motoya, however, was brave enough to compete with the existing powers. What characterizes him from other merchants was that he made business trips to production areas to purchase products that he identified qualities and thought promising in the market. He later purchased and distributed raw materials for foods as a wholesaler and made a fortune.

The store opened by Emon Motoya was burnt to the ground by the epicentral earthquake that attacked the Zenkoji temple and its surrounding area in 1874, but the business in food materials helped the store reconstruct itself. Later, it added charcoal, coal, and coke to its product line. The store was incorporated under the trade name of Motokyu in 1948. Motokyu started to distribute cement, and later handled ready mixed concrete in 1964. As the wholesale business grew harder because of retailer’s strong requests for price reduction, Motokyu decided to start retailing in 1983 with an investment from a nationwide household retailer chain. It subsequently expanded business by adding production and designing of construction materials and road pavement materials. A holding company was established to manage these diverse business operations in 2000.

The company grew even more energetic after 2000, and it branched out to the restaurant business and hot-spring business, and added a leading hotel to the list of the group companies. Look around you, and you can find numerous numbers of sources of business however stagnant economy is and however hard the competition is. You should not bind you with hoops. Possibilities are infinite.

Motokyu’s strategy to diversify business radically is somewhat reckless from the viewpoint of today’s business theory. However, you have to learn that the Motokyu group remains tough despite the diversification strategy inherently risky. As the company teaches you, it is important to use your ingenuity to the maximum and find a way how to survive and expand your business.

No. 3: Three policies to tide over hardships (November 26, 2010)

Kuroeya was founded as the direct-managed store for lacquer products named Kuroenuri, a specialty in Wakayama Prefecture, in Tokyo in 1689. It became an affiliated company of the cotton wholesaler Kashiwaya (currently Kashiwabara Paper Shoji) in 1774. Since then, the Kashiwabara family, the family head of Kashiwaya, has been managing Kuroeya. Kashiwaya opened the Tokyo store in the Edo period and became one of the ideal merchants of those days, namely, a merchant who had the head office in Kyoto with an outlet in Tokyo.

The Kashiwabara family achieved a rapid growth in the 17th century through diversification. It did business in cotton, lacquer, and paper in three trade names, and established an affinity with one of the richest families in Kyoto. However, the business prosperity of the family did not last long because of the Reform of Kansei (1787-1793) conducted under the initiative of Sadanobu Matsudaira. Because of this reform that promoted the deflationary policy, rich families were badly affected. In addition, they increased bad debts because of the Tokugawa government’s policy of debt waiver and reduction or exemption of interest. In fact, the Kashiwabara family’s net asset decreased to one third.

Branching, Family law and store law, and Frugality
The Kashiwabara family paved a way to reconstruction through frugality and review of its assets. The three policies that save the family were “branching”, “family law and store law,” and “frugality.” The branching was to appoint an employee who worked for the store for long periods as director. Kashiwaya established the separation between capital and management. The head family in Kyoto controlled the capital, whereas the cadet family in Tokyo took care of management. And the cadet family in Tokyo had the function to keep close eyes on and sometimes dissuaded the head family in Kyoto whenever necessary. As a matter of fact, the cadet family greatly affected the rise and fall of the business.

The three business operations were reorganized into paper business and lacquer business after the Edo period. The Great Kanto Earthquake burnt down the head office and warehouse of the paper business, but the paper business recovered thanks to the support from Mitsubishi Paper Mills. Although the paper business was seriously damaged, the lacquer business grew dramatically after the earthquake thanks to the great demand for lacquer products. That is, the strength of the diversification worked rather well to the Kashiwabara family’s business. Ironically enough, the relatively highly-profit paper business covers the relatively low-profit lacquer business at present.

As this case shows, it is not too much to say that the three policies of branching, family law and store law, and frugality saved the Kashiwabara family in the past hardships. The three policies can be said to be today’s important factors of running business: well-organized promotion system, well-established company law, and well-managed expenditure plan.

No. 2: Renew the consciousness of the strength (November 22, 2010)

Japan’s oldest company is unquestionably Kongo Gumi (Congo Construction) in Osaka that was established in 578 (not in 1578). The company specializes in the construction of shrines and temples, and it was involved in the construction of Horyuji Temple in Nara built by Prince Shotoku in 607. It lost independence and became a group company of a larger construction company in 2005 because of the inability to tide over the worldwide financial crisis. Many major construction companies, which specialize in real-estate development and condominium construction, entered into the shrine and temple market one after another to get orders.

The president of this company thought seriously about the strength of his company and found that his company had a group of shrine carpenters and the excellent ability to process wood. He formed a team made up of young engineers and put it under his direct control to improve the company’s brand. He collected the team members from five divisions: construction, design, purchase, quantity survey, and sales. Master carpenters delivered lectures on the company’s history of some 1,400 years and expertise of shrine construction. For example, hand-finished wooden buildings have a completely flat surface that can repel water without paint application. The machine-finished wooden building last 100 years, but hand-finished wooden building can last as long as 300-600 years.

Equipped with this kind of expertise and confidence of its technology, salespeople are developing the market nationwide focusing on big shrines and temples that the company has traditionally been hesitate to develop. Actually, it was totally satisfied with orders from the shrine and temples in the neighboring prefecture. Salespeople are now courageous enough to take orders from head shrines and temples across the country. As the marketing area expands, they are accumulating information and knowledge with the help of information technology and successfully increasing presence in the market.

Kongo Gumi maintains current-account surplus. It achieved current profit of 150 million yen against sales of about 50 billion yen for the fiscal year ended March 2010. The number of employees increased from 90 to 130 in the four years. Under the initiative of the president, employees are renewing the consciousness of the strength of their company quite rapidly. As the case of Kongo Gumi shows, reforming employees’ consciousness of what strength they have works well. In addition, the collaboration of the five divisions gives momentum to the company growth.

No. 1: Don’t be hung up on the tradition and goodwill (November 17, 2010)

Nakakita Yakuhin, a Nagoya-based drug wholesaler, was established in 1726. When the company was doing business with the shop name “Izutsuya” in the Edo era, a broke out at the bathroom of this shop in 1855, and the fire immediately grew to be a big fire and burnt neighboring houses. In 1966, it rebuilt the shop and made the roof lower than roofs of neighboring houses on purpose to show the apologies for having caused the big fire. With the advent of the Meiji ear that began in 1968, the company started to handle western-style medicine. Aggressive and energetic, the 7th family head visited the U.S. to see the rationalization of operation using computer in 1968 and 1969 and expanded the distribution network. Much affected by this father, the 8th family head integrated manufacturing and built a distribution center beside the manufacturing plant.

The 8th family head did not succeed his father’s name contrary to the tradition, saying “If I am hung up the tradition, no drastic reform can be achieved.” He took the initiative in constructing the state-of-the-art distribution center and introducing the information system to increase the efficiency of operation. In fact, no drug wholesalers introduced such advanced information system as Nakakita Yakuhin. His initiative helped the company strengthen the sales force. In addition, he set up the sales force specially dedicated to dispensing pharmacies despite the opposition of other directors who dislike increasing cost, knowing well the current system found it hard to take care of medical practitioners and dispensing pharmacies simultaneously.

The manufacturing division is expanding business under the theme of erasing, and disinfectants are growing to be one of the mainstays of this company. The 8th family head is planning to increase the outsourcee business of large pharmaceutical companies and spin off the manufacturing division into a separate company to give outsourcers sense of security about confidentiality obligation. As shown the above, he is working out new innovations from one after another. The courage to overcome the tradition is one of the secrets to keep a long-established company prosper.