Facilitating SMEs Internationalization - Identifying Infrastructure Required-

Transcription

1 Facilitating SMEs Internationalization - Identifying Infrastructure Required Yoichi KATO President, JETRO Bangkok 0

2 Opening the Door to Business in Japan Bangkok Government-related organization working to promote mutual trade and investment. Headquarters in Tokyo and Osaka with more than 30 domestic offices in Japan Extensive overseas offices in more than 50 countries worldwide 1

3 I. Fusion of Three Factors 1. Fusion of Markets 2. Fusion of Transactions 3. Fusion of Policies 2

4 Fusion of Three Factors 1. Fusion of Markets Internal and external markets coalition to a business field Establishment of a firm business platform Formation of a base to pursue profitability 3

5 Factors of Site Selection by Industries Size and growth power (economic dynamism) are key factors for luring industrial activities In the more matured economies, stability of investment environment is an important factor China India Vietnam Russian Federation Brazil Mexico Factors of investment for 10 most attractive countries Size of local market Growth of local market Lowcost labour Skilled labour Poland Germany U.K. Australia World average 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Source ; UNCTAD Survey Stable investment environment Follow the leader Access to regional market A 4

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7 Significance of SMEs Overseas Development A win-win relationship : expansion abroad brings about positive effects to domestic performance it is important to secure profits through establishment of optimum product development, production, and marketing systems both domestically and abroad Effect of expansion abroad on domestic office performance 海外進出が企業の国内部門のパフォーマンスに与える効果売上高経常利益率 (2002 年度 %) ~ 海外進出をした企業の方が国内の売上高経常利益率が向上 ~ 7.0% 6.0% 6.5% Sales volume of HQ expansion (rising profits) Performance of HQ in Japan after expansion abroad (within past 10 years) increase Little change decrease 2002 Operating profit margin (%) 5.0% 4.0% 3.0% 2.0% 1.0% 1.9% expansion (falling profits) Companies without a base in E. Asia Operating profit margin of HQ expansion (rising profits) expansion (falling profits) Companies without a base in E. Asia 0.0% Companies that expanded abroad in 1995 Companies that didn t expand abroad 1995 年度に海外進出した企業海外進出していない企業 Source: Basic Research on Overseas Business Activities, 資料 : 経済産業省 企業活動基本調査 再編加工 METI ( 注 )(graph 1. 中小企業製造業のうち 海外進出企業 revised) Note: The (1995 subjects 年度 ) と海外未進出企業 of this ( study 年度 were ) を対象とし SMEs た that expanded overseas (in 1995) and SMEs that had 2. 推定方法の詳細は 付注 参照 not yet expanded overseas (between ) in the manufacturing industry. Source: Study on recent changes in the business environment surrounding the manufacturing industry, Mitsubishi UFJ Research & Consulting Co. (Nov, 2005) Note: Companies that expanded into East Asia between for the first time were categorized as either showing positive growth, or showing negative (or no) growth, in terms of sales turnover/ profit margins. Trends in those companies sales turnover/profit margins were then calculated over the subsequent ten years ( ), and compared with companies who did not develop a base in East Asia. (2006 White Paper on SMEs) 6

8 Fusion of Three Factors 2. Fusion of Transactions Regardless of: Company size Business field Capital origin (home country) 7

9 Current state of SME s Overseas Development Purpose of manufacturing operations at a time of expansion into East Asia (year of establishment) -Change in purpose of establishment as contemporary conditions change- To reduce costs (use of cheap labor, etc.) Independent decision to follow customer overseas Other In response to customer request To enter market in host country (2006 White Paper on SMEs) 1986~ ~ ~ since % 20% 40% 60% 80% 100% The number of companies who were requested or decided by themselves to follow their customers into overseas, increased To secure profits, it is essential for SMEs to develop overseas. 8 5

10 Breakdown of customers of Thai companies Malaysia 15% United States 13% Japan, Taiwan, China, Australia 5% Other Thai companies 88% Japanese companies 6% Export sales, 18% Domestic sales, 82% Source: The Thai local SME field survey conducted by SMRJ, March,

11 Requirements to expand transactions with Japanese companies Quality improvement of local company Cost reduction of local company Strict observance of local company's delivery Change of company product design Localization of technical authentication (D) (C) (Q) Localization of R&D Improvement of infrastructure The affiliated's local entry Requirements to expand local procurement of materials and parts Others Establishment of credibility of local SMEs Business upgrading (Improvement of Quality/Cost/Delivery) 10

12 Fusion of Three Factors 3. Fusion of Policies Regional and business promotion policies Financial policies and actuarially Employment stability and enterprise promotion Domestic and international policies 11

13 II. Why SMEs? Because of Quantitative wait Number of Enterprises 4.3 million companies LEs Number of Employees 28 million employees Value of Shipments (Manufacturing sector) 144 trillion yen SMEs: approx. 99.7% LEs SMEs: approx. 70% LEs SMEs: approx. 50% Source: 2006 White Paper on Small and Medium Enterprises in Japan 12

14 II. Why SMEs? Because of Contribution to advancement of social economy; Flexibility Able to respond in accordance with demands Mobility Able to make a decision quickly Capability Able to upgrade technology capability 13

15 II. Why SMEs? Because of UBIQUITOUS - Balanced development nationwide, and eliminator of regional divisions 14

16 Major SME Policies in Japan 1.Building Infrastructure 2.Technical Assistance 3.Providing Management Information 4.Human Resource Developing 5.Financial Assistance 15

17 Changes in SME Policy Philosophy 1963 Establishment of Small and Medium Enterprise Basic Law Japan s High Growth Period (mass consumption era) SMEs State: Too many non-modernized micros. The entrepreneurial era in the midst of High Growth. Basic philosophy: Rectify various gaps between LEs and SMEs in terms of productivity, etc. (save the weak) Main measures: Grouping and modernization, technical training, management consulting, and optimization of subcontracting works 1999 Amendment of Small and Medium Enterprise Basic Law Japan s Stable Growth Period (diversification of consumer s demands, internationalization, IT era) SMEs State: Advent of advanced SMEs. Less entrepreneurs. Basic philosophy: Promoting Diverse and Vigorous Growth and Development of Independent SMEs (promoting SME s self-help efforts) Main measures: Start-up and business innovation support, industry-academia-government collaboration, industrial cluster, and regional revitalization. 16

18 III. Changes in Business Environment Need to take a position in the global value chains Intraregional trade ratios Dramatic increase in East Asia's intraregional trade ratio since1990 (%) Source: White Paper on International Economy and Trade 2005 E a s t A s ia EU15 EU25 NAFTA

19 III. Changes in Business Environment Business Process Innovation Concurrent engineering business schemes Front loading Value engineering leading-edge Business building in collaboration between company and customer 18

20 III. Changes in Business Environment Decrease of acute sites for commodity production 19

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22 N. company s success Location:Ota-ku,Tokyo Company size:127 employees Capitalization: 58 million yen Main business: Special cylinders for automobile and steel manufacturers 70% share in Japan -- Special cylinder for molds for car engine production 70% share in the world -- Rotary cylinder used in iron production Continuing to operate as a profitable company. 1 Enhance unique technology 1 patent/year 2 Factor in the desires of customers 3 A comfortable working environment 21

23 Striving Shopping Areas 77 A food stand street s success Location: Hachinohe, Aomori Main business: Offering food featuring local ingredients Over 1 million visitors since opening 3 years ago Advent of new entrepreneurs in the field of local food industry Realization of town development + regional revitalization 1 Offer place to young entrepreneurs 2 Promote local food & products 3 Most comfortable environmentally-friendly street for walking 22

24 Q. company s success Location: Fukuoka, Fukuoka Company size:5 employees Capitalization: 150 million yen Main business: PC manufacturing & sales, licensing, networking Financing allowed company to accept contracts from LEs and raise profile despite lacking personal funds Development basing patented techniques 1 Developed and patented core techniques 2 Reduced fixed costs by using an incubation facility 3 Received financing from SME support organization 23

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26 Thank you for listening. JETRO Bangkok Center TEL66(0) FAX66(0)