Tuesday, September 6, 2011

No. 8: Ways to make long-established companies survive (September 7, 2011)

About 1,800 companies are listed in the first section of the Tokyo Stock Exchange. Matsui Construction founded in 1586 was the oldest among them. The first generation took part in the construction of a castle in Toyama Prefecture. This was the initiation of Matsui Construction. The 15th generation listed his company in the Tokyo Stock Exchange in 1961. His decision was quite a touch decision, but it increased the presence of his company quite rapidly. In exchange for his decision, however, the founding family now owns only 6% of the total shares held of the company. It is a critical decision for the founding family whether or not it should be listed for further growth. Founding families of long-established companies need to make this critical decision, like it or not.
Okaya & Co., founded by the first generation in 1696 as cutlery in the castle town of Nagoya, was listed in the Nagoya Stock Exchange in 1995. The 13th generation who obtained a degree from the graduate school of an American university joined the company after having worked for Nippon Steel. His father was killed in a plane accident in 1958 and his uncle succeeded him. The 15th generation succeeded his uncle in 1990. He elaborated his plan to list the company since the inauguration because he wished to renew the atmosphere that prevailed with the family-oriented management without metabolism.
His courageous decision made his company prosperous greatly. The number of subsidiaries increased from 23 to 57, and sales increased more than 60% since the listing to nearly one trillion yen. With the rapid growth of the company, the share owned by the founding family decreased accordingly. The 15th generation has merely 5% of all the total shares held now. Okaya shows a way how to expand the business of the founding family, and Higeta Shoyu (Higeta Soy Sauce) gives another way.
The first generation founded Higeta as a soy sauce producer in Chiba Prefecture in 1616. Later, the founding family started the wholesale business in Edo (Tokyo) in 1716 to increase the presence of the Higeta brand soy sauce. In the Kanto area, soy sauce producers underwent a fierce competition, and they were restructured into three major brands of Kikkoman, Yamasa, and Higeta. To survive the tough competition, Higeta’s founding family decided to sell part of Higeta’s shares and become affiliated with Kikkoman. The head family survived the wholesale business in alliance with Kokubu that is the biggest food distributor in Japan to keep the Higeta brand alive.
There must be several ways to make a traditional brand survive in today’s turbulent business trends. It is not a question what of them is the best. What is important is the strong determination to make the long tradition alive forever.

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