"Good Companies in Japan" (Article No. 2): Seeking "Happiness" for All Stakeholders

JFS Newsletter No.186 (February 2018)

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This JFS newsletter series introduces selected examples of good companies in Japan as described in the book "Jizoku Kano-na Shihon Shugi" ("Sustainable Capitalism," published in Japanese) by Kazuhiro Arai, director and asset manager of Kamakura Toshin, a Japanese investment company. This month, in the second article of the series, we introduce four companies that have built unique and close relationships with clients, suppliers, shareholders, and consumers based on the view that companies should make not only their employees but also anyone associated with the companies and their brands happy.

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Steady Work for Suppliers' Employees through Stable Year-Round Production: Dainichi Co.

Dainichi Co., a Niigata-based manufacturer of products such as household kerosene-fan-heaters, commercial oil heaters, and humidifiers, is one of the "good companies," maintaining top production and sales shares in the domestic market. The company has a business policy that it should seek not only its own business sustainability but also the livelihood stability its own and business partners' (suppliers) employees.

Most heating equipment makers in Japan manufacture most of their inventory in the autumn and winter since product demand tends to focus on the winter season. By doing so, they can idle their factories in other seasons, but the result is unstable employment not only for their own factories but also suppliers who produce the parts.

Dainichi tackled this issue by adopting a year-round production system, which protects employment for not only its own workers but also those of its business partners. This means that Dainichi's factories need to carry inventories outside of the winter season, but on the other hand, constant production throughout the year brings merits. The company says it can manage with the optimal amount of production equipment and manpower. Employees become more skilled and produce better work. Suppliers also benefit. Getting orders all year round enables them to provide stable employment for their workers, which helps avoid the loss of workers to other industries.

About one thousand people are involved in the production of Dainichi heating equipment, counting about 500 Dainichi employees plus employees of suppliers' factories. The number of "beneficiaries" increases to a few thousand people when employees' families are also counted. Hisao Yoshii, president of Dainichi, says "The value of maintaining our business here in Niigata is that we can create local employment, and this supports and protects the livelihoods of people who live here. Creating many workplaces in Niigata is making a contribution to the region."

Supporting Business Clients with Free Management Consulting: Cota Co.

Kyoto-based Cota Co. is primarily engaged in the manufacture and sale of cosmetics and medical products for hair care, targeting beauty shops and hair salons all across Japan. The company provides unique management consulting services to its clients.

Cota's approach is to spread its share its management improvement system with beauty shops. Beauty shop owners may be highly skilled as hairdressers, but might not be strong in management knowledge, so Cota's sales force offers free management advice to their clients' shops.

The system encourages client shops to shift to a business structure capable of making a profit throughout the year. It also deals with the work environment and human resources development, aiming to help the shops grow their businesses.

Sales reps at Cota not only sell hair-care products but also give management consulting services to clients. New sales reps usually need at least three years to become proficient at this, but Cota believes that the efforts to nurture its clients' businesses will result in its own sales growth.

Business partners' growth leads to their own growth. In this sense, Dainichi and Cota have the similar management philosophies though they operate in completely different industries.

"Shareholder Fans" Support Long-Term Management Orientation: Kagome Co.

Kagome is a leading grower and supplier of tomato products in Japan, including tomato and vegetable juices, as well as other products made from natural foods. The company makes an active effort to attract individual shareholders it calls "fan shareholders."

Kagome declared an objective in 2001 to get 100,000 "fan shareholders." Since then, the company has worked to gain fans domestically by offering shareholder benefits, organizing factory tours, holding talk events with the president, and so on. As a result, the number of individual shareholders increased from about 6,500 to 200,000. The company's shareholder general meetings are unique in that they allow shareholders to speak directly with board members and employees to deepen their understanding of the company's activities and products.

Compared to other companies in the industry, Kagome's shareholders are less likely to sell their shares in spite of relatively high share prices versus earnings, so its share price did not fall much after the 2008 Lehman Brothers collapse that triggered a financial market meltdown and the 2011 earthquake and tsunami in Japan, when share prices of many companies in Japan dropped significantly.

As Kagome has cultivated many "shareholder fans" who support the company, it can avoid the pursuit of short-term profits and instead proceed with management based on the long-term view. The company is tackling such social challenges as using 100 percent domestically-grown tomatoes for its tomato juice, to contribute to sustainable farming in Japan. Through its efforts to support the sustainability of domestic agriculture as Japan's top tomato juice maker, Kagome can make a major positive impact on society.

Building a Community of Makers, Sellers and Customers: Motherhouse Co.

Under its mission to "show the potential of developing countries" by establishing a globally competitive brand with those countries, Motherhouse Co., based in Tokyo's Taito City, specializes in apparel products and handcrafts with a main focus on bags made in Bangladesh. The firm is involved in everything from product development, manufacturing and quality guidance, to marketing in developed countries.

After CEO Eriko Yamaguchi witnessed the reality of workers in developing countries, she launched Motherhouse to transform the pattern of workers having to work for low wages as a result of excessive price competition and low prices. To create comfortable workplaces in Bangladesh, like a "second home" for workers, the company established some of the country's best working conditions, with high salary levels, promotions based on skill, good pension and medical insurance programs, and fun events such as picnics once a year. The company also emphasizes worker training for the production of high quality products.

Bolstered not only by fans who support the corporate philosophy but also by high product quality, Motherhouse sells its bags at prices that are not particularly inexpensive in the Japanese market, and the firm does not discount its prices. With this pricing strategy, the company is able to ensure that adequate revenues can go to workers to pay decent wages.

Not merely satisfied with creating decent working conditions and offering education at its factories, Motherhouse aims to create a community that will "bring a smile" to all the stakeholders of the brand. The company hosts tours for customers to visit its factory in Bangladesh, with 250 participants so far. The company also invites to Japan factory workers who through their efforts have made a big contribution to the business, and facilitates communications with customers at events, to help nurture the workers' dreams. Such efforts foster feelings of belonging and trust in the company's stakeholder community toward Motherhouse customers.

Daisuke Yamazaki, vice president of Motherhouse, said "I want to change today's capitalism which is a system running out of control."

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In this article we have introduced examples of companies that emphasize the happiness of business partners and shareholders as well as employees. In the coming articles, we will cover more Japanese "good companies" from different perspectives. Please stay tuned!

See also:
"Good Companies in Japan" (Article No. 1): Valuing Employee Happiness and Trust
https://www.japanfs.org/en/news/archives/news_id035984.html

Edited by Noriko Sakamoto