[2017 White Paper on Small and Medium Enterprises in Japan]

Transcription

1 [217 White Paper on Small and Medium Enterprises in Japan] FY216 Developments among SMEs FY217 SME Policy Measures Outline April 217

2 About White Paper on Small and Medium Enterprises Annual Report Based on Article 11 of the Small and Medium-sized Enterprise Basic Act (Statutory White Paper) It is obliged to compile a report on the developments related to SMEs based on opinions of the Council for Small and Medium Enterprise Policy and submit it to the Diet every year. This is the 54th annual report after the enactment of the Small and Medium-sized Enterprise Basic Act. Small and Medium-sized Enterprise Basic Act (extract) (Annual Report, etc.) Article 11 (1) The Government must submit a report on the developments related to small and medium-sized and measures it has taken therefor to the Diet every year. (2) The Government must prepare a document clarifying measures it intends to take in consideration of the developments related to small and medium-sized compiled in the report referred to in the preceding paragraph, based on opinions of the Council for Small and Medium Enterprise Policy and submit it to the Diet every year. Medium : Approx..557 million 14.6% Definitions under the Small and Medium-sized Enterprise Basic Act and the Number of Enterprises and Employees SMEs Small Business type Stated capital or number of employee Number of employees Manufacturing industry and others Wholesale trade industry 3 million yen or less 3 or fewer 2 or fewer 1 million yen or less 1 or fewer 5 or fewer Service industry 5 million yen or less 1 or fewer 5 or fewer Retail trade industry 5 million yen or less 5 or fewer 5 or fewer Large : Approx..11 million.3% Large Number of Number of employees.11 million million SMEs: Approx million 99.7% Small : Approx million 85.1% SMEs 3.89 million million Small million million [Remarks] 214 Economic Census for Business Frame (rearranged and processed) 1

3 Outline of FY216 Developments among SMEs (i) While SME business conditions are slowly improving, there are ongoing structural challenges including stagnant business entries, slackening productivity, the aging of managers and growing labor shortages. Important under such situation is a lifecycle in which innovation takes place through business entries, existing pursue growth, and projects and business resources (including withdrawing ) are smoothly taken over by the next generation. Labor shortages common to all life stages and other challenges are analyzed. Fig. SME Lifecycle (image) Business succession Business entries Innovation sources New business development Succession /M&A Business exit Start-up stage Growth stage Maturity stage Human resources utilization unique to SMEs Human resources (a challenge common to all life stages) 2

4 Outline of FY216 Developments among SMEs (ii) Part 1 [Analysis of the Current Status] FY216 Developments among SMEs Chapter 1 Current Status of SMEs Chapter 2 SME Lifecycle and Productivity Chapter 3 Current Status of the SME Employment Environment and Labor Shortages Part 2 [Analysis by Theme] SME Lifecycle Chapter 1 Business Entries Chapter 2 Business Succession Chapter 3 Promotion of New Business Development Chapter 4 Overcoming Labor Shortages SME Policy Measures Taken in FY216 Chapter 1 Fine-tuned Support for SMEs in Disaster-hit Areas Chapter 2 Productivity Improvement Support for SMEs Chapter 3 Overseas Business Expansion Support for SMEs Chapter 4 Sustainable Development Support for Miro Enterprises Chapter 5 Vitalization of Regional Economies and Promotion of Corporate Metabolism Chapter 6 Development of the Business Environment Chapter 7 Policy Measures by Business Type and Area Chapter 8 Other SME Policy Measures 3

5 Analysis of the Current Status 1-1 Current Status of SMEs and Micro Enterprises (i) Ordinary profits of SMEs have remained at record-high levels and their business confidence has been improving. Changes in Ordinary Profits Changes in Business Conditions DI 12. (Trillions yen, fourth-quarter backward moving average) 中小企業 SMEs Large 大企業 (DI, %p) 3 Large 大企業 (TANKAN) ( 短観 ) SMEs 中小企業 (TANKAN) ( 短観 ) SMEs (Survey of SME Small (Survey of 中小企業 Business Conditions) ( 景況調査 ) SME 小規模企業 Business Conditions) ( 景況調査 ) (Years and quarters) Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ (Years and quarters) Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ : Financial Statements Statistics of Corporations by Industry (quarterly report) (Ministry of Finance) (Note) Large here are whose stated capital is 1 billion yen or more and SMEs are those whose stated capital is 1 million yen or more but less than 1 million yen. Fig, 2: TANKAN (Short-Term Economic Survey of Enterprises in Japan) (Bank of Japan) and Survey of SME Business Conditions (Small and Medium Enterprise Agency and Organization for Small & Medium Enterprises and Regional Innovation, JAPAN) (Note) Large in TANKAN refer to those whose stated capital is 1 billion yen or more, and SMEs are those whose stated capital is 2 million yen or more but less than 1 million yen. 4

6 Analysis of the Current Status 1-2 Current Status of SMEs and Micro Enterprises (ii) SME sales and productivity have been slackening Changes in Sales Labor Productivity Changes by Enterprise Size (Trillions of yen, fourth-quarter backward moving average) 17 中小企業 SMEs 大企業 Large 16 (million yen) Large Small 大企業中小企業 SMEs 小規模企業 Large SMEs and small (Years and quarters) 2 1 Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ (Year) : Financial Statements Statistics of Corporations by Industry (quarterly report) (Ministry of Finance) (Note) Large here are whose stated capital is 1 billion yen or more and SMEs are those whose stated capital is 1 million yen or more but less than 1 million yen. : Financial Statements Statistics of Corporations by Industry (annually) (Ministry of Finance) (Note) Large here are whose stated capital is 1 billion yen or more, SMEs are those whose stated capital is 1 million yen or more but less than 1 million yen and small are those whose stated capital is less than 1 million yen. 5

7 Analysis of the Current Status 1-3 Current Status of SMEs and Micro Enterprises (iii) - Business Practice Improvement Initiative - Ordinary profits of large have greatly improved, increasing their profitability margin over SMEs. To improve such situation, an initiative is being promoted to stabilize and spread appropriate transactions between subcontractor SMEs and their larger contractors to pave the way for SMEs to raise wages. Changes in Ordinary Profits Business Practice Improvement Initiative (Seko Plan) (Trillions of yen, fourth-quarter backward moving average) 中小企業 SMEs Large 大企業 Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ : Financial Statements Statistics of Corporations by Industry (quarterly report) (Ministry of Finance) (Note) Large here are whose stated capital is 1 billion yen or more and SMEs are those whose stated capital is 1 million yen or more but less than 1 million yen (Years and quarters) (i) Clarification and strict implementation of cross-sectoral rules Increasing the number of violation cases from 66 to 141 by including inappropriate cost-cutting activities and passing die storage costs to subcontractors Adding cooperation in improving productivity and other practices to desirable business practices for larger contractors and their subcontractors Larger contractors should make payments to their subcontractors in cash as much as possible and implement other measures to take leadership in improving business practices. (ii) Development of voluntary action plans by sector, etc. Of sectors that have developed subcontracting guidelines, the automobile industry and some other large were requested to develop and steadily implement voluntary action plans to improve business practices and increase added value. A follow-up to the request has been conducted. At the end of March 217, 21 groups in eight sectors had developed such plans. (iii) On-site inspection by business practice investigators (Subcontracting Supervising Inspectors) Subcontracting Supervising Inspectors have been deployed to hold more than 2, interviews with subcontractor SMEs annually and use the data from the interviews to improve business practices. 6

8 Analysis of the Current Status 2-1 SME Lifecycle and Productivity (i) (Changes in the number of from business entries and business exits) The total number of has followed a downward trend, decreasing by 39, from 29 to 214. Small-sized business exits represent a large portion of this decline. This means a decreasing trend for small and an increasing trend for medium. Changes in the Number of Enterprises Breakdown of business entries and exits (29-214) (million ) (million ) (Year) From small to medium:.71 From medium to large: Small 3.25 Medium.56 Expanding sized.72 Large.1 (million ) Medium-sized entries.111 Medium-sized exits -.99 Fig. 3 Changes in Sizes of Existing Enterprises (29-214) Existing : 3.16 million firms Small-sized entries.546 Small-sized exits Large-sized entries.1 Large-sized exits Entries Exits Maintaining sizes 3. Reducing sizes.93 (Note) Enterprises that maintained their sizes unchanged include about 11, that failed to be identified in 29 and were identified in 214 due to enterprise split-ups and the improvement of statistical precision and exclude 4, that were identified in 29 and could no longer be identified in 214 due to mergers, etc. Figs. 1-3: Economic Census, Economic Census for Business Activity and Establishment and Enterprise Census (Ministry of Internal Affairs and Communications) (rearranged and processed) From medium to small:.92 From large to medium:.1 7

9 Analysis of the Current Status 2-2 (Changes in the number of employees from business entry and exit) While the overall number of employees remained basically unchanged from 29 to 214, employees at medium increased. Particularly, medium-sized business entries represent a significant contribution to the increase. The number of employees per enterprise increased particularly for medium. (million employees) (million employees) Changes in the number of employees Large 14.9 Medium 2.3 Small Enterprises 12.8 Breakdown of changes in the number of employees (29-214) 大企業 Large 中規模企業 Medium 小規模企業 Small 減少大企業減少中規模企業減少小規模企業 -1.8 Existing Start-up +5.5 Total % +9.9% -12.1% Large Enterprises 14.3 Medium Enterprises 22.3 Small Enterprises Closed -6.5 Fig. 3 1,3 1,28 1,26 1,24 1,22 1, Changes in the number of employees by enterprise size 1, (+3.3%) 1, (i) Large (ii) Medium +2.2 (+5.8%) (iii) Small (-.9%) Figs. 1-3: Economic Census, Economic Census for Business Activity and Establishment and Enterprise Census (Ministry of Internal Affairs and Communications) (rearranged and processed) (Year) (Number of employees) (Number of employees) (Number of employees) (Year) (Year) (Year) 8

10 Analysis of the Current Status 2-3 SME Lifecycle and Productivity (iii) (Business entry and exit rates by sector in FY215) The status of business entries and exists differs from sector to sector. 8.% (Business exit rate) 7.% Low entry rate High exit rate Average entry rate for all sectors 5.2% High entry rate High exit rate Lodging and food service industries 6.% 5.% Retail industry Real estate and rental industries Information and communications industry Life-related service and entertainment industries 4.% 3.% Manufacturing industry Wholesale industry Other services industries (mixed services, etc.) Academic research and special technical service industry Construction industry Average exit rate for all sectors 3.8% 2.% Transportation and mail industries Education and learning support industry Healthcare and welfare Other industries (mining, electricity, finance, agriculture/forestry/fisheries, public services, unclassifiable ) 1.% Low entry rate Low exit rate High entry rate Low exit rate (Business entry rate).%.% 1.% 2.% 3.% 4.% 5.% 6.% 7.% 8.% 9.% 1.% 11.% Remarks: Annual Report on Employment Insurance Services (Ministry of Health, Labour and Welfare) (Notes) 1. The business entry rate in the Annual Report on Employment Insurance Services is computed by dividing the number of business establishments where employment relationships were established in a fiscal year by the number of business establishments adopting employment insurance at the end of the previous year. 2. The business exit rate in the Annual Report on Employment Insurance Services is computed by dividing the number of business closings where employment relationships were closed in a fiscal year by the number of business closings adopting employment insurance at the end of the previous year. 9

11 Analysis of the Current Status 2-4 SME Lifecycle and Productivity (iv) (Current status of business exits) As SME managers are aging, the number of business exits has hit a record high, despite a decline in the number of bankruptcies. Enterprises with managers aged 6 or more and 8 or more hit their respective recordhigh shares of closed. (million managers) 3 歳 ~ 45 歳 ~ 6 歳 ~ 75 歳 (Number of SMEs) 3, Distribution of Ages of Managers of SMEs (by five-year interval) 1995 Mode value The largest age cohort of managers shifted from 47 years old to 66 years old in 2 years. Fig.1: COSMOS2 (corporate information file) (Teikoku Databank, Ltd.) (rearranged and processed) (Note) The mode value is the value that occurs most frequently. Changes in business exits and bankruptcies Number of business exits Number of bankruptcies years old 45 years old 6 years old 75 years old 29,583 Fig Ages of managers of closed 6 years old or older 7.5% 49 years old or younger 5-59 years old 6-69 years old 7-79 years old 8 years old or older years old or older 82.4% 25, 2, 2. 15, 1, 8, , (Year) Figs. 2-3: 216 Business Exit Trend Survey (Tokyo Shoko Research) Business exits (Year) 1

12 Analysis of the Current Status 2-5 SME Lifecycle and Productivity (v) (Relationship between Lifecycle and Productivity (i)) Influences of each lifecycle element s trend on SME productivity are analyzed. While start-up have boosted productivity, the latest productivity-boosting effect has declined. Existing with high productivity have been expanding their share and thus pushing up overall productivity. On the other hand, a decline in existing productivity, and bankruptcies and exits of with high productivity have pushed down overall productivity. Breakdown of productivity changes by element Business change Business exit Bankruptcy 業種転換効果廃業効果倒産効果 effect effect effect 参入効果 New entry effect Redistribution 再配分効果 effect 内部効果 Internal effect 合計 Total Entry of high-productivity Expansion of high-productivity market share Decline in existing productivity Bankruptcy of highproductivity Exit of high-productivity ( 第 1 期 ) ( 第 2 期 ) ( 第 3 期 ) (Year) : FY216 Analysis of Corporate Metabolism for SMEs under contract from the Small and Medium Enterprise Agency (Research Institute of Economy, Trade and Industry, December 216) (Notes) 1. Productivity here refers to total factor productivity, which indicates how overall value added changes when labor and capital change. 2. The business change effect refers to the overall productivity boosting or reducing effect of business changes. 3. Used here are financial data of customer SMEs that the CRD (Credit Risk Database) Association received from its members (credit guarantee associations and financial institutions). 11

13 Analysis of the Current Status 2-6 SME Lifecycle and Productivity (vi) (Relationship between Lifecycle and Productivity (ii)) Approx. 5% of start-up have raised SME productivity overall. The trend of raising productivity has recently declined due to a drop in high-productivity start-up. Breakdown of new entry effect Distribution of new entry (29-213) Positive new entry effect TFP growth.3% Shares of the total number of startup 58% Negative new entry effect.1% Shares of the total number of start-up 54% (%, accumulated new entry effect) Fig. 3 Business entry rate changes (29-213) Negative Positive 5% of positive effect 5% of positive effect 54% Positive new entry effect 5% 4% (%, Accumulated enterprise shares) Negative new entry effect The gap between business entry rates for high and low productivity has narrowed % % 8.3% 7.% 5.9% : FY216 Analysis of Corporate Metabolism for SMEs under contract from the Small and Medium Enterprise Agency (Research Institute of Economy, Trade and Industry, December 216) (Notes) 1. Productivity here refers to total factor productivity, which indicates how overall value added changes when labor and capital change. 2. The business entry rate here refers to start-up share of the total number of. 46% (Year) 12

14 Analysis of the Current Status 2-7 SME Lifecycle and Productivity (vii) (Relationship between Lifecycle and Productivity (iii)) Some 5% of closed have pushed down productivity. Half of closed, excluding those attributable to mergers and acquisitions and moving overseas, have substantially pushed down productivity. Such feature fewer employees and sales and higher profits than existing. The share of that have determined successors to owners is relatively small for closed, indicating it is important to reduce business exits resulting from successor shortages. Breakdown of business exit effect Distribution of closed (29-213).2%.1%.% -.1% -.2% -.3% Positive business exit effect Negative business exit effect (ii) Share of the total number of closed 54.8% 44.6% Negative business exit effect (i) TFP growth Share of the total number of closed 48.9% 5.3% (%, Accumulated business exit effect) % 5.3% Negative 5% of negative effect Closed (Negative (i)) 5% of negative effect Closed (Negative (ii)) 51.1% Positive (%, Accumulated shares) -.4% -.5% -.6% -.7% -.5%.6% -.6%.8% Fig. 3 Average characteristics of closed (business performance indicators) Closed (Negative (i)) 5.3% Closed (Negative (ii)).8% (Reference) Existing Closed (pushing up) 48.9% Number of employees Sales.19 billion yen 6.59 billion yen.34 billion yen.9 billion yen -.8% Sales growth.55% 3.54% 1.4% -3.8% Ordinary profit margin 3.93% 4.95% 1.9% -1.1% -3: FY216 Analysis of Corporate Metabolism for SMEs under contract from the Small and Medium Enterprise Agency (Research Institute of Economy, Trade and Industry, December 216) (Note) Productivity here refers to total factor productivity, which indicates how overall value added changes when labor and capital change. Fixed asset growth 1.% 8.% 3.9% -.5% Share for that determined successors to owners 42% 41.7% 45% 4.8% 13

15 1 2 3 Analysis of the Current Status 3-1 Current Status of the SME Employment Environment and Labor Shortages (i) SMEs have increasingly perceived labor shortages, especially concerning the high ratio of job offers to applicants. Particularly, the number of employees has been decreasing at smaller-sized SMEs. The background factors of such situation are job and wage gaps. (DI,%p) I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I Surplus Shortage Changes in Employee Overcapacity and Insufficiency DI Manufacturing industry Wholesale industry Service industry Survey of SME Business Conditions (SME Support, Japan, Small and Medium Enterprise Agency) (1, employees) Construction industry Retail industry (Years and quarters) Changes in the number of employees by employment size 1~29 3~99 1~499 5 or more : Labor Force Survey (Ministry of Internal Affairs and Communications) Managerial jobs (million yen) Fig. 3 (million persons) Special/ technical jobs Fig. 4 Gap between job offers and applicants by job type Clerical jobs Sales jobs 213 average 216 average Services jobs Security jobs Large (Regular employees) SMEs (Regular employees) Production Transport ConstructionTransport, process (Year) jobs and machinery operation jobs Changes in wages by enterprise size and mining jobs cleaning and packaging jobs Nursing Fig. 3: General Public Employment Placement Conditions (Ministry of Health, Labour and Welfare) (Notes) 1. Excluding agriculture/forestry/fisheries jobs and unclassifiable jobs 2. Nursing care jobs cover welfare facility instruction specialists, other social welfare specialists, domestic helpers and nursing care service jobs extracted from special/technical jobs and services jobs, based on Classification of Jobs (213 Revised Edition) by the Ministry of Health, Labour and Welfare. Fig. 4: Basic Statistical Survey of Wage Structure (Ministry of Health, Labour and Welfare) rearranged and processed (Notes) 1. Regular employees covered general workers with no specified employment periods until 24. Since 25, they have covered general workers described as regular employees by business establishments. 2. Wages represent regularly paid cash wages for June every year, covering basic pay, predetermined allowances and overtime money. 3. Enterprises with 299 or fewer permanent employees (99 or fewer permanent employees for wholesale, services, retail and restaurant industries) are classified as SMEs. The others are large. care jobs* Surplus Shortage.3 14

16 Analysis of the Current Status 3-2 Current Status of the SME Employment Environment and Labor Shortages (ii) (Utilization of various human resources) Smaller utilize more various human resources, including women and seniors. Many SMEs utilize or consider utilizing various human resources as core employees. Male and female shares of employees by company size (employees) (27) Males Females (212) Males Females or more or more Age distribution of employees by company size (employees) (27) years old years old years old 65 years old or older or more (212) years old years old years old 65 years old or older or more Fig. 3 Utilization of various human resources as core workers (SMEs) Women (n=2,791) Seniors (n=2,684) Utilizing Considering utilizing Not utilizing or considering utilizing % 1% Figs. 1-2: 27 Basic Survey of Employment Structure and 212 Basic Survey of Employment Structure (Ministry of Internal Affairs and Communications) Fig. 3 Survey on Recruitment and Job Retention at SMEs and Micro Enterprises under contract from the Small and Medium Enterprise Agency (Mizuho Information & Research Institute, November 216) 15

17 Analysis by Theme 1-1 Business Entries (i) In comparison with other countries, Japan features a lower business entry rate and a larger share of people who are indifferent to starting up. However, people attempting to start up in Japan are likelier to actually succeed in starting up those. Increasing public interest in starting up is important. A key motivator for people to start up seems to be recommendations from close friends International comparison of business entry rates Percentages of people indifferent to starting up (international comparison) Japan U.S. U.K. Germany France (Years, fiscal years) Japan U.S. U.K. Germany France (Year) Figs. 1-2: Prepared by the Small and Medium Enterprise Agency from a report on a FY213 Survey on Entrepreneurship (Venture Enterprise Center, March 214) Fig. 3 Percentages of people who are interested in starting up that actually succeed in starting up those (international comparison) Fig. 3: Prepared by the Small and Medium Enterprise Agency from International Comparison of Factors Influencing Business Start-up Activities (Research Institute of Economy, Trade and Industry, March 216) Fig years old or younger 5-59 years old 6 years old or older Motivations for entrepreneurs to start new Recommendations by close friends and the presence of entrepreneurs can become key motivations. Male (n=961) Female (n=75) Male (n=89) Female (n=17) Male (n=949) Female (n=99) Most frequently cited Second most frequently cited Third most frequently cited Influence of surrounding Failing to do what I want to Future uncertainties and entrepreneurs and managers do at my place of employment worsened treatment at my (4.7%) (29.2%) place of employment (27.5%) Recommendations by close friends (33.3%) Future uncertainties and worsened treatment at my place of employment (35.7%) Recommendations by close friends (37.4%) Influence of surrounding entrepreneurs and managers (25.2%) Failing to do what I want to do at my place of employment (3.3%) Home environment changes Influence of surrounding (marriage, child delivery, etc.) entrepreneurs and managers (25.3%) (22.7%) Failing to do what I want to do at my place of employment (28.4%) Influences of surrounding entrepreneurs and managers (27.3%) Home environment changes Failing to do what I want to (marriage, child delivery, etc.) do at my place of employment (29.%) (23.4%) Future uncertainties and Recommendations by close worsened treatment at my friends (21.9%) place of employment (21.7%) Recommendations by close friends (26.3%) Acquisition of licenses or qualifications useful for business operations (24.2%) Fig. 4: Survey on Business Entry Realities under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 216) (Notes) 1. Motivations for entrepreneurs to have interests in starting up before actually doing so are compiled. 2. Because respondents were allowed to cite multiple motivations, percentage shares may not necessarily add up to 1%. 13 Japan U.S. U.K. Germany France

18 Analysis by Theme 1-2 Business Entries (ii) 5- to 1-year-old are classified into three types -- high growth, stable growth and sustainable growth. Services and manufacturing are dominant among high-growth. Their managers are young and indicate effects of entrepreneurial education. Growth trends after business entry Fig. 3 Entrepreneurs age distribution by growth type 39 years old or younger 4-49 years old 5-59 years old 6-69 years old 7 years old or older Overall (n=3,191) High growth type (n=129) Stable growth type (n=729) Sustainable growth type (n=2,174) All SMEs (n=3,184) High growth type (n=127) Stable growth type (n=74) Sustainable growth type (n=2,216) Industry shares by growth type Services industry (excluding healthcare and welfare service industries) Healthcare and welfare Manufacturing industry Construction industry Wholesale industry Retail industry Information and communications industry Other industries % 1% : Survey on Business Entry Realities contracted by the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 216) (Note) Growth types are based on quantitative data for this document. As some cannot be classified into the categories depending on their response to the questionnaire, numbers in these types may not necessarily add up to the total number Fig. 4 % 1% Details of entrepreneurial education at school by growth type High growth type (n=124~126) Stable growth type (n=691~713) Sustainable growth type (n=2,38~2,92) Learning accounting and financial knowledge Reading books on entrepreneurs Workplace experiences at or shops Leadership education Participation in entrepreneurs lecture and exchange meetings Participation in enterprise internship (Note) The data cover respondents who cited specific courses at elementary schools, junior high schools, senior high schools, technical colleges, vocational schools, junior colleges, universities or graduate schools. 17

19 Analysis by Theme 1-3 Business Entries (iii) Fundraising Family members Learning knowledge and 資金調達 understanding 家族の理解and knowhow 事業や経営に required for cooperation 協力 business 必要な知識 operations and management (2) Initial growth stage ノウハウの習得 Within each growth type, challenges shift from fundraising to recruitment as go to higher stages. Whether have realized target growth types depended on successful fundraising. (1) Start-up stage Challenges at each growth stage Challenges involving fundraising Start-up stage (n=2,781) Initial growth stage (n=2,762) Stabilization or expansion stage (n=2,69) Challenges involving Challenges sales channel involving recruitment exploration Securing highquality 質の高い human 人材の確保 resources Sales channel exploration 販路開拓and マーケティング marketing Use of loans without security or guarantee Loans without security or guarantee in the stabilization or expansion stage lead to stable or high growth (1) Use of loans without security or guarantee at stable growth Enterprises that failed to achieve the goal of stable growth (n=65~639) Enterprises that achieved stable growth (n=475~521) Start-up stage 1.1 (2) Use of loans without security or guarantee at high growth Stabilization or expansion stage Fundraising 資金調達 (3) Stabilization or expansion stage Securing highquality 質の高い human 人材の確保 resources 36.4 Securing labor 量的な労働力の in significant quantities 確保 Sales channel exploration 販路開拓 and マーケティング marketing Enterprise advertisement 自社の宣伝 PR and public relations Enterprises that failed to achieve the goal of high growth (n=29~21) Enterprises that achieved high growth (n=85~95) Start-up stage Stabilization or expansion stage 質の高い Securing highquality 人材の確保 human resources 企業の成長に応じた Reorganization 組織体制の見直し responding to enterprise growth 量的な労働力の Securing labor in significant 確保 quantities 資金調達 Fundraising Figs 1-2: Survey on Business Entry Realities under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 216) 新たな製品 商品 Developing サービスの開発 new products or services (Notes) 1. Here, in the start-up stage, there are no mainstream products or service sales, while in the the initial growth stage, sales have been reported, but operating income has not turned positive, and in the stabilization or expansion stage, sales have been reported, and operating income has turned positive for at least one fiscal period. 2. Here, Loans without security or guarantee are loans provided without security or guarantee due to high ratings for business operations and growth potential. 18

20 Analysis by Theme 1-4 Business Entries (iv) In the stabilization or expansion stage at high growth, there are strong needs for investment and for business advisers, internal managers, business planners and other human resources required for business expansion. Fundraising methods used in the stabilization or expansion stage (n=14) Fundraising methods that wanted to use in the stabilization or expansion stage (n=14) Fundraising methods at high-growth in the growth or expansion stage Most frequently cited Loans from private financial institutions (73.1%) Investment from venture capitals, investment partnerships, funds, etc. (78.6%) Second most frequently cited Loans from government financial institutions (45.2%) Investment from individual investors (71.4%) Third most frequently cited Enterprise managers own funds (36.5%) Loans from private or other organizations (71.4%) Fourth most frequently cited Using public subsidies (19.2%) Investment from private, funds, foundations or other organizations (71.4%) Fifth most frequently cited Loans from family members, relatives, acquaintances, etc. (13.5%) Using crowdfunding (64.3%) (Note) The five most frequently cited items are listed for fundraising methods that used and those that wanted to use. Human resources required at high growth in each growth stage 創業期 Start-up (n=95) stage (n=95) 成長初期 Initial growth (n=113) stage 安定 拡大期 Stabilization (n=19) or 66.1 (n=113) expansion stage (n=19) Close aides to Marketing and Finance and Internal Business Successor 経営者の右腕営業 販売人材財務 会計人材内部管理人材経営企画人材後継者候補人 managers sales personnel accounting managers planners candidates 人材 personnel 材 -2: Survey on Business Entry Realities under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 216) Specific case Robit Inc. (Tokyo) An enterprise that took advantage of speedy planning and development processes to enhance technology and gain success Robit Inc. in Tokyo, founded in June 214, develops IoT (Internet of things) systems, robots, etc. Robit's President Takahashi decided to start up an enterprise after winning first prizes at multiple business contests thanks to high ratings for his planning ability and sample products during his university days. After starting up the enterprise with marginal money including business contest prize money and business start-up and second startup promotion subsidies from the Small and Medium Enterprise Agency, President Takahashi planned products and developed samples repeatedly within a short period of time. The speedy product planning and development attracted individual investors, allowing him to successfully receive investment from them. Later, he took advantage of the investment to recruit some friends from his university days and enhance research and development. In the summer of 216, which was two years after the start-up, Robit successfully launched the Mezamashi Curtain mornin system to open and close curtains with smartphones. The product s shipments surpassed 2, units in the six months after its launch and its sales have smoothly grown. Robit is tackling the commercialization of new products and services. Robit s Mezamashi Curtain mornin 19

21 Analysis by Theme 1-5 Business Entries (v) Fundraising needs at stable growth shift from loans to public subsidies and investment as they go to higher stages. From the initial growth stage, needs increase for advisers to managers and various other human resources. (Start-up stage) Fundraising methods used in the start-up stage (n=677) Fundraising methods that wanted to use in the start-up stage (n=179) (Initial growth stage) Fundraising methods used in the initial growth stage (n=646) Fundraising methods that wanted to use in the initial growth stage (n=126) Fundraising methods used in the stabilization or expansion stage (n=546) Fundraising methods that wanted to use in the stabilization or expansion stage (n=11) Fundraising methods at stable growth in each growth stage Most frequently cited Enterprise managers own funds (82.3%) Loans from private financial institutions (45.3%) Most frequently cited Loans from private financial institutions (72.9%) Using public subsidies (44.4%) (Stabilization or expansion stage) Most frequently cited Loans from private financial institutions (78.4%) Investment from venture capitals, investment partnerships, funds, etc. (44.5%) Second most frequently cited Loans from family members, relatives, acquaintances, etc. (39.3%) Loans from government financial institutions (41.3%) Second most frequently cited Enterprise managers own funds (46.4%) Investment from private, funds, foundations or other organizations (43.7%) Second most frequently cited Loans from government financial institutions (42.6%) Using crowdfunding (44.5%) Third most frequently cited Loans from private financial institutions (39.3%) Using public subsidies (36.9%) Third most frequently cited Loans from government financial institutions (4.9%) Investment from venture capitals, investment partnerships, funds, etc. (42.9%) Third most frequently cited Enterprise managers own funds (4.2%) Using public subsidies (42.7%) Fourth most frequently cited Loans from government financial institutions (28.2%) Investment from venture capital firms, investment partnerships, funds, etc. (34.6%) Fourth most Fifth most frequently cited frequently cited Loans from family members, Using public relatives, subsidies (19.8%) acquaintances, etc. (22.%) Investment from individual investors (39.7%) Fifth most frequently cited Using public subsidies (12.6%) Investment from private, funds, foundations or other organizations (31.8%) Using crowdfunding (38.1%) Fourth most Fifth most frequently cited frequently cited Loans from family members, Using public relatives, subsidies (22.9%) acquaintances, etc. (13.8%) Investment from private, funds, Investment from foundations or individual other investors (37.3%) organizations (4.%) (Note) The five most frequently cited items are listed for fundraising methods that used and those that wanted to use Human resources required at stable growth in each growth stage Start-up stage Initial growth stage Stabilization or expansion stage 創業期 (n=524) (n=524) 成長初期 (n=626) 安定 拡大期 (n=637) (n=626) (n=637) Close aides to Marketing and Finance and Internal Business Successor 経営者の右腕人 managers 営業 販売人材 sales personnel 財務 会計人材 accounting 内部管理人材 managers 経営企画人材 planners 後継者候補人 candidates 材 personnel 材 : Survey on Business Entry Realities under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 216)

22 Analysis by Theme 2-1 Business Succession (i) Non-family business succession accounts for one-third of the total business succession cases. In many of nonfamily business succession cases, successors come from within the organization. In many cases where acquaintances recommended that managers prepare for business succession, successors were chosen. While the selection of successors takes time, that have not determined successors have generally failed to progress in enacting business succession measures. There are no successor candidate s, or successor s have not be determine d Fig. 3 There are successor candidate s Successor criteria and present status of non-family succession (medium-sized corporations) Successor selection conditions Successor s have been determine d (n=4,36) (n=1,75) Share of family business succession Family business succession 66.6 Share of having taken more than 3 years 37.1% 1 years or longer 5-1 years 3-5 years 1-3 years 1 year or shorter Non-family business succession 33.4 Time to receive consent from a candidate after beginning the selection process (n=2,357) Fig. 4 Breakdown of non-family business succession cases Outside people [ 値 ] Non-family employees [ 値 ] Business succession is felt as a challenge (n=1,336~1,44) Measures or preparations are being implemented (n=1,453~1,576) Non-family directors [ 値 ] (n=787) Shares of recommended to prepare for business or asset succession by successor selection stage The successor has been determined (n=1,369) There is a successor candidate whose consent has not been gained (n=95) We are looking for a successor candidate but have yet to find any candidate (n=453) The time is not mature to look for any successor candidate (n=41) We have never considered any successor candidate (n=248) Recommended Not recommended % 1% Business succession challenges, measures and preparations (the successor has been or has not been determined) The successor has been determined The successor has not been determined In-house organizational improvement Choosing the successor and gaining consent from the successor and other stakeholders Securing advisers for the successor Transferring power to the successor gradually Developing a post-succession business operation plan Negotiating with financial institutions on managers personal guarantees Business succession is felt as a challenge (n=2,18~2,216) Measures or preparations are being implemented (n=2,16~2,88) Figs. 1-4: Questionnaire Survey on Business Succession contracted by the Small and Medium Enterprise Agency (Tokyo Shoko Research, November 216) 21

23 Analysis by Theme 2-2 Business Succession (ii) Enterprises fail to make smooth progress in resolving challenges regarding non-family asset succession. Relevant challenges include time-consuming measures and preparations for asset succession methods. Top managers must select their successors and systematically make preparations for succession, while supporters and financial institutions must cooperate in providing fine-tuned support for resolving various challenges. Asset succession challenges, measures and preparations (family and non-family succession) Business succession is felt as a challenge (n=1,522~1,522) 69.7 Family business succession Measures or preparations are being implemented (n=1,341~1,481) 5.1 Considering optimum methods for transferring treasury shares and business assets Non-family business succession Business succession is felt as a challenge (n=832~847) 28.3 Measures or preparations are being implemented (n=725~78) Successors financial resources for paying taxes and purchasing treasure shares and business assets The appraisal value of treasury shares and business assets is high, placing great gift or inheritance tax burdens on successors Fundraising for purchase of treasury shares and business assets Appropriate appraisal of treasury shares and business assets Impressions of treasury share appraisal value viewed by the ordinary profit margin Fig. 3 Negative profit margin (n=319) -3% or less (n=1,364) 3-1 % or less (n=823) 1% or more (n=24) There are many loss-ridden whose stocks have unexpectedly high appraisal value Higher than expected As high as expected Lower than expected % 1% Figs. 1-3: Questionnaire Survey on Business Succession under contract from the Small and Medium Enterprise Agency (Tokyo Shoko Research, November 216) Advisers recommending preparations for business or asset succession by stage of measures and preparations regarding successors financial resources What is important for managers is advice from those who frequently meet them 27.1 Certified public accountants or tax accountants serving as advisers Correspondent financial institutions Business consultant Implementing measures and preparations (n=7) Not implementing measures and preparations (n=2,192) Relatives, Non-family directors friends/acquaintances or employees (Note) Successors financial resources refer to financial resources for successors to purchase treasure shares and business assets. 22

24 Analysis by Theme 2-3 Business Succession (iii) For that lack successors but want to continue business operations, business transfers, sales or integration (mergers and acquisitions) are important options. In general, most managers insist on not only maintaining positions for their employees but also the future development of their business. Enterprises fail to make progress in making preparations or taking measures despite abundant succession challenges. The share is low for that consult with specialists on succession. Support arrangements are necessary to find relevant needs and respond to various challenges. Consideration of sale, integration or transfer of business ownership (mergers and acquisitions) both for Fig. 3 with or without successors or successor candidates Considering or having made decisions on business transfers, sales or integration (mergers and acquisitions) Accepting business transfers, sales or integration (mergers and acquisitions) to continue business operations Not considering business transfers, sales or integration (mergers and acquisitions) Having a successor or successor candidate (n=2,141) Having no successor (n=1,94) % 1% Priorities for sale, integration, or transfer of business ownership (mergers and acquisitions) by company size (employees) or fewer (n=41) Maintaining or Monetary income securing continued from sales employment of employees 2-5 (n=282) Further corporate and business development 5 or more (n=178) Liquidating corporate debt Figs. 1-4: Questionnaire Survey on Business Succession contracted by the Small and Medium Enterprise Agency (Tokyo Shoko Research, November 216) Utilizing or developing inhouse technology and knowhow Fig Challenges, measures and preparations regarding business transfers, sales or integration (mergers and acquisitions) Even interested in mergers and acquisitions have failed to make progress in taking relevant measures or making preparations Continued employment and treatment of employees 59.1 Certified public accountants or tax accountants serving as advisers (n=716) Feeling challenges (n=839~856) Lack of information or knowledge about mergers and acquisitions Relatives, friends/acquaintances (n=691) Taking measures and making preparations (n=744~768) 73.5 Lack of legal, tax, financial and other special knowledge Correspondent financial institutions (n=698) Commerce and industry associations or chambers (n=638) Information leakage risk regarding consideration of mergers and acquisitions 7.8 Corporate culture differences Consultants on business succession for interested in sale, integration, or transfer of ownership (mergers and acquisitions) (three most frequently cited and 3 least frequently cited consultants) Consultants for are those that frequently contact the Business success support centers (n=627) Comprehensive Support Centers (n=626) 23

25 Analysis by Theme 2-4 Business Succession (iv) Specific case Autec Mechanical Co. (Minami-Alps City, Yamanashi Prefecture) Three generations tackling smooth business and asset succession Autec Mechanical is a manufacturer founded by its present chairman to design and produce automatic assemblers and automatic inspection devices, etc. Since the early stage, the chairman has not stuck to family management but has been conscious of developing a system for excellent employees to succeed to the top manager position and enable business operations to be maintained over the long term. The present chairman developed a corporate business philosophy and has held business plan presentation contests to spread the enterprise s business direction. The chairman picked an employee as a director in his 4s and appointed him as the present president who has now taken over the management of the business management. The enterprise picked a sales head as a director and a candidate for the next top manager in his 4s and dispatched him to an outside successor training course that the present president underwent in his 4s. The enterprise is proceeding with training of a business successor candidate. The chairman says: Large organizations can select business successors. However, SMEs must take much time to train successor candidates. Successor candidates are required to accumulate experiences as managers from an early stage. While implementing solid business management with the share price rising, the enterprise has transferred shares held by the chairman and his family to the present management and an employee shareholding association gradually to facilitate non-family succession. From the left, the sales head (candidate for the next president), the chairman and the present president 24

26 Analysis by Theme 3-1 Promotion of New Business Development (i) New business development contributes to SME growth. The success of new business development depends on target strategies and marketing initiatives. Relationship between new business development (new product development) and the ordinary profit margin Implementation of new business development Increasing Remaining unchanged Decreasing Implementing Not implementing Implementing (n=67) New market exploration strategy (n=2,959) New product development strategy (n=2,928) Not implementing (n=2,142) Diversification strategy (n=2,959) Business switch strategy (n=2,875) % 2% 4% 6% 8% 1% % 2% 4% 6% 8% 1% (2) New product development strategy Fig. 3 Challenges for that are successful and unsuccessful in new business development (1) New market exploration strategy Lacking personnel who has necessary technology or knowhow Difficult sales channel exploration 24.7 Massive costs required for new business development Successful (n=288) Marketing-related challenges Insufficient knowledge on market needs 1.8 Unsuccessful (n=73) 2.1 Insufficient communication of products or services to markets Difficulties in identifying a project in which the enterprise can take advantage of its strength (2) New product development strategy Lacking personnel Massive costs who has necessary required for new technology or business knowhow development Marketing-related challenges Insufficient knowledge on market needs Successful (n=281) Difficult sales channel exploration 8.5 Unsuccessful (n=679) 18.1 Insufficient communication of products or services to markets Difficulties in identifying a project in which the enterprise can take advantage of its strength Figs. 1-3: Survey on SMEs Business Strategies for Growth under contract from the Small and Medium Enterprise Agency (Nomura Research Institute, November 216) 25

27 Analysis by Theme 3-2 Promotion of New Business Development (ii) Enterprises that are strong in finding market needs among marketing operations are successful in new business development. At such, business planning divisions as well as sales divisions are opt to find market needs. Enterprises that evaluate and verify marketing operations benefit from employees improved motivations and personnel training effects Ordinary profit margin trends by presence and absence of marketing operations (1) Implementing all marketing operations (n=328) 65.4 Flexible production and provision of products or services according to requests Development capabilities for products or services reflecting market needs Increasing Remaining unchanged Decreasing Successful (n=264) Production and provision of high value added products or services (2) Not implementing all market operations (n=75) Unsuccessful (n=616) Brand power of and products or services 29.3 (Note) Marketing operations include finding enterprise strengths, finding market needs, information strategies and verification of marketing operation effects. Enterprise strengths for successful and unsuccessful in new business development Technological, and research and development capabilities Figs. 1-4: Survey on SMEs Business Strategies for Growth under contract from the Small and Medium Enterprise Agency (Nomura Research Institute, November 216) Fig In-house sales division members or representatives Fig Divisions to find market needs for successful and unsuccessful in new business development Obtaining new customers 39.2 In-house business planning division members or representatives Successful (n=242) In-house marketing In-house research planning division and development members or division members or representatives representatives Unsuccessful (n=564) Relationship between marketing operations and new business development effects Improving enterprise awareness Improving employees motivations 1.5 Oher division members and representatives All of the four (n=336) Finding market needs and enterprise strengths and PR operations (n=197) Finding market needs and enterprise strengths (n=158) Finding strengths alone (n=74) Implementing no market operations (n=77) None or no division exists to find market needs Human resources development (Notes) 1. Among new business development effects, qualitative ones alone are tabulated. 2. PR operations include not only advertisement but also strategic information collection and communication activities such as finding enterprise ratings and effective utilization of various media. 26

28 Analysis by Theme 3-3 Promotion of New Business Development (iii) It is effective for to utilize outside business resources for responding to labor shortages, a common challenge for new business development. Utilizing outside resources has a positive effect on the profits. Enterprises that have utilized outside resources have not perceived many problems. Evaluating and verifying marketing operations (n=341) Relationship between utilization of outside resources for evaluating and verifying marketing operations and the ordinary profit margin (successful in new business development) Ordinary profit trends Utilizing outside resources Utilizing outside resources (n=49) Considering utilizing outside resources while failing to utilize them (n=582) 18.4 (n=4) Increasing Remaining unchanged Decreasing Utilization of Appropriate Outsourcing effects Concern regarding outside resources may cost more than securing in-house personnel or arrangements contract prices are unknown fail to meet costs the leakage of technology and knowhow to competitors Not utilizing outside resources % 2% 4% 6% 8% 1% Ordinary profit trends Outside resources are less flexible than in-house resources Outsourcing contract procedures are cumbersome (n=23) Increasing Remaining unchanged Decreasing Challenges for that have utilized and have not utilized outside resources No particular problems arose Figs. 1-2: Survey on SMEs Business Strategies for Growth under contract from the Small and Medium Enterprise Agency (Nomura Research Institute, November 216) Specific case Tanaka Metal Factory (Yamagata City, Gifu Prefecture) Taking advantage of outside resources for a brand strategy to create a niche market Tanaka Metal Factory develops, produces and sells copper and stainless steel parts and shower heads. It had been producing water faucet valves as a subcontractor. In response to stagnant demand and fiercer price competition under slack housing starts, however, the enterprise has sought to develop proprietary products and explore sales channels for them without depending on subcontracting deals. When considering a new core business, the enterprise paid attention to water-saving shower heads that were selling at high prices. It proceeded with new product development and successfully developed shower heads featuring water-saving and beauty care effects. When launching a new product for consumers, the enterprise outsourced branding strategy development and successfully increased customers awareness of the product by clarifying the concept and advertisement points for the product. Tanaka Metal Factory took nearly three years to establish its proprietary brand products targeting women in their 3s who are sensitive to beauty care and health. As a result, its sales have doubled. 27

29 1% Analysis by Theme 3-4 Promotion of New Business Development (iv) SMEs do not utilize IoT and other new technologies to a large extent but have some interest in them. Nonmanufacturing SMEs could take advantage of new technologies for visualizing things to raise productivity. SMEs have relatively high interest in the sharing economy that can become their new business chance. [Manufacturing] 8.8 Utilization of IoT, big data, artificial intelligence and other new technologies by business category % % Finding customers and trading partners needs (n=995)(n=1,912) Automating and streamlining backyard and assistant operations (n=985)(n=1,885) Grasping and controlling orders, production and inventories integrally (n=988)(n=1,887) Finding product and service operations and customer needs to develop new products (n=994)(n=1,96) Visualizing traffic lines of employees to improve business processes (n=989)(n=1,886) Interest in the sharing economy As platform providers (n=692) As goods and services providers (n=694) As space, goods and services users (n=699) [Non-manufacturing] 6.1 Utilizing Considering utilizing % 5% 1% Having interest in and considering participating in the sharing economy Having interest in but not considering participation in the sharing economy Having no interest Figs. 1-2: Survey on SMEs Business Strategies for Growth under contract from the Small and Medium Enterprise Agency (Nomura Research Institute, November 216) % 1% Specific case Tokachi Bus Co. (Obihiro City, Hokkaido Prefecture) Tokachi Bus is a regional enterprise that positively utilizes IoT to improve customer satisfaction. It is a bus operator founded in 1926, providing bus operations in one city and 13 towns/villages in Tokachi, Hokkaido. The enterprise seeks to increase bus users instead of viewing their decline as natural in a state of despair. In 28, the enterprise launched marketing house-to-house visits along bus routes to find reasons for falling demand. In a bid to resolve bus users concerns about uncertain bus stops and routes, it joined hands with an information technology vendor to develop a bus transfer guidance service. The enterprise provides an application for searching a bus route by destination even if bus stop locations are unknown. The enterprise has also introduced a system for bus location users utilizing IoT technology, providing a service to visualize bus operations on an application and notify customers of arrival times. The service has resolved bus users concerns about volatile arrival times in winter, increasing customer satisfaction. The enterprise is considering installing sensors in buses to count incoming and outgoing passengers and using sensor data for revising bus schedules. Various initiatives successfully led the enterprise to achieve sales growth in 211. Furthermore, it is trying to increase tourists to revitalize the Tokachi region by providing regional tourism spot information and bus routes to such spots. 28

30 Analysis by Theme 4-1 Overcoming Labor Shortages (i) Enterprises seeking growth and expansion strongly feel shortages of both core and labor personnel. Particularly, core personnel shortages prevent from responding to weak new business development and demand growth, affecting new business development at focused on growth and expansion. Labor shortages by industry and business category Manufacturing Non-manufacturing Growth and expansion Stabilization and maintenance Growth and expansion Stabilization and maintenance Total Total Total Total Production Business Production and 5.4 Business Production planning and 47.4 Business planning and transportation transportation planning transportation Marketing, Internal Marketing, sales and Internal Marketing, management sales and Internal services 15.4 management sales and services management 18.3 services Production and transportation Marketing, sales and services Research and development, and engineering Information systems Finance and accounting Core personnel (n=218~229) Labor personnel (n=28~228) Research and development, and engineering Information systems (Note) The length of a spoke of the radar chart is proportional to the seriousness of labor shortage rates. Finance and accounting Core personnel (n=399~416) Labor personnel (n=387~421) Research and development, and engineering Information systems Finance and accounting Core personnel (n=681~79) Labor personnel (n=649~696) Research and development, and engineering Information systems Business planning Finance and accounting Internal management Core personnel (n=1,272~1,41) Labor personnel (n=1,24~1,362) Core personnel shortage s influences on business by type of business development policy Stagnant new business and area development Growth and expansion (n=531) 45. Stabilization and maintenance (n=777) Losing opportunities by Difficult technology and Difficult business size failing to respond to demand growth knowhow succession maintenance Growing recruitment costs -2: Survey on Recruitment and Job Retention at SMEs and Micro Enterprises under contract from the Small and Medium Enterprise Agency (Mizuho Information & Research Institute, November 216) (Reference) Personnel classification in 217 White Paper Personnel classification Core personnel in each division that undertake advanced and difficult business operations Personnel responsible for management and operations of the organization Core personnel Personnel directing and managing multiple people Personnel with high specialization, skill and educational levels Personnel in each division that undertake relatively routine work Personnel not responsible for organizational management or operations Labor personnel Personnel working under core personnel s direction and management Personnel doing auxiliary work for core personnel Personnel providing indispensable labor for business operation while lacking special skills 29

31 Analysis by Theme 4-2 Overcoming Labor Shortages (ii) Enterprises that successfully stabilize business operations focus on workplace environment improvements and work burden reductions and are successful in recruitment. Enterprises that can utilize various human resources take advantage of SME flexibility, including overtime work cuts and giving consideration to human relations, to improve the workplace improvement. Success or failure of recruitment and stabilization of Fig. 3 recruited human resources Unsuccessful in recruiting expected human resources in terms of number and skills (n=2,673) Successful in recruiting expected human resources in terms of number and skills Human resources failing to remain for three years or more after recruitment 9.4 Human resources remain for three year or more after recruitment 9.6 Initiatives viewed by SMEs as effective for stabilizing and nurturing human resources Enterprises successful in securing human resources (n=582) Enterprises unsuccessful in securing human resources (n=1,45) (n=849) [Manufacturing] Workplace environment improvement initiatives by presence or absence of various human resources (core personnel) [Non-manufacturing] Promotion of overtime work reduction and leave systems Utilizing various human resources (n=41) Considering doing so (n=128) Not considering doing so (n=93) Considerations given to the workplace environment and human relations Collection of employees opinions through in-house study meetings, proposal presentation contests, etc Development of resting rooms and other hardware Utilizing various human resources (n=1,543) Considering doing so (n=377) Not considering doing so (n=286) Reduction of work volume and burdens on human resources under working hours constraints Wage hikes and promotion according to skills and aptitudes Human resources rating responding to achievements and work details Promotion of overtime work reduction and leave systems Consideration given to the workplace environment and human relations Training and Securing higher capacity buildingwage levels than support at other Promoting reduction of work burdens and guaranteeing of work safety Flexible working hours Promotion of overtime work reduction and leave systems Considerations given to the workplace environment and human relations Collection of employees opinions through in-house study meetings, proposal Reduction of work volume and burdens on human resources under working hours constraints Development of resting rooms and other hardware -3: Survey on Recruitment and Job Retention at SMEs and Micro Enterprises under contract from the Small and Medium Enterprise Agency (Mizuho Information & Research Institute, November 216) (Note) Enterprises utilizing various human resources are those utilizing any of the classes of women, seniors, foreigners and handicapped as core personnel. Enterprises considering doing so are others considering utilizing any of the above as core personnel. Other are those not considering doing so. 3

32 Manufacturing 製造業 Nonmanufacturing 非製造業 Analysis by Theme 4-3 Overcoming Labor Shortages (iii) Enterprises that can utilize various human resources despite labor shortages accomplish rationalization and standardization useful for improving productivity, leading to greater earning power. [Manufacturing] 66. Utilizing various human resources (n=423) Considering doing so (n=132) Not utilizing them (n=94) Work rationalization and standardization initiatives categorized by presence or absence of various human resources (core personnel) Thorough promotion of 5S Visualization of work (organization, order, processes cleaning, cleanliness and discipline) [Non-manufacturing] Relationship between work visualization initiatives and earning power ( utilizing various human resources as core personnel) Enterprises implementing 合理化 標準化実施企業 visualization (n=187) (n=187) Enterprises 未実施企業 not doing (n=48) so (n=48) Enterprises implementing 合理化 標準化実施企業 visualization (n=47) (n=47) Enterprises not doing so 未実施企業 (n=225) (n=225) Clarification of each worker s job description and role sharing 増益 Increasing 横ばい Leveling-off 減益 Decreasing profits of profits profits Reform and reduction of job responsibilities Introduction of in-house common work tools Clarification of each worker s job description and role sharing Utilizing various human resources (n=1,563) Considering doing so (n=379) Not utilizing them (n=286) Thorough promotion of 5S (organization, order, cleaning, cleanliness and discipline) Visualization of work processes Reform and reduction of job responsibilities Introduction of in-house common work tools % 1% (Note) Enterprises implementing visualization are those that implement the visualization of work processes and any of the thorough promotion of 5S, the clarification of each worker s work details and role sharing, the reform and reduction of work details the introduction of in-house common work tools and the integration of work that overlaps among divisions or areas. Enterprises not doing so are those that implement no visualization initiatives. -2: Survey on Recruitment and Job Retention at SMEs and Micro Enterprises contracted by the Small and Medium Enterprise Agency (Mizuho Information & Research Institute, November 216) Specific case Sanshu Seika Co. (Kasukabe City, Saitama Prefecture) Sanshu Seika has realized a flexible work style featuring each worker playing three roles, with women playing active roles Sanshu Seika is a rice and western confectionery manufacturing and marketing company founded in 195. Women account for nearly 4% of regular employees, more than 9% of non-regular employees and more than 2% of managerial officials, playing great roles as a substantial part of the workforce. The president has taken leadership in promoting the active role of women, allowing the enterprise to be chosen as one of the Top 1 Diversity Employers and receive other relevant certifications and commendations. At Sanshu Seika, few employees take maternity leave, childcare leave or nursing care leave. The company features a childcare and nursing care system and allows employees to take paid holidays without any hesitation, regardless of their positions. The biggest secret behind the paid holiday system is a mechanism that allows each worker to play three or more roles through a system of cross-training for factory workers. In order to allow the three-roles-per-worker mechanism to smoothly work, the enterprise has established rules to standardize the work, visualize role sharing and regularly reflect these factors in personnel evaluations, reportedly leading to follow-up arrangements for employees on vacation, higher motivation and productivity improvements. This allows women employees who play core roles to demonstrate their potential while maintaining work-life balance through a flexible work style. The largest recent hit product is Fried Pasta, which was conceived by a shorttime regular employee engaging in childcare. The president describes the hit product as an achievement emerging from arrangements based on the three-roles-per-worker mechanism. Recent hit product Fried Pasta 31

33 Analysis by Theme 4-4 Overcoming Labor Shortages (iv) Enterprises that boost earnings even amid labor shortages are tackling labor-saving, information technology introduction, outsourcing and other initiatives. A rising number of are pursuing growth by outsourcing design marketing and other operations for which advanced skill level human resources are required Information processing Initiatives by facing labor shortages by ordinary profit (non-manufacturers) Mechanization Mechanization to save labor to improve and reduce value added work burdens Information technology introduction for frontoffice operations Business operations which have growing needs for outsourcing by business policy Growth/expansion-oriented policy (n=216) 23. General paperwork Information technology introduction for back-office operations Tax, accounting and other special areas Increasing profit despite core and labor personnel shortages (n=226~244) Decreasing profit due to core and labor personnel shortages (n=193~24) Stability/maintenance-oriented policy (n=243) Design and product planning Transportation, delivery, storage and other logistic operations Research and marketing -2: Survey on Recruitment and Job Retention at SMEs and Micro Enterprises under contract from the Small and Medium Enterprise Agency (Mizuho Information & Research Institute, November 216) 21.9 Outsources during busy periods Outsourcing advanced special operations Outsourcing non-core and nondifferentiated operations Switching to high-valueadded operations Mechanization/information technology introduction Outsourcing Others Capacity development to improve per capita productivity Specific case Waris, Inc. (Minato-Ward, Tokyo) An enterprise matching SMEs and venture firms with skilled women freelancers. Waris is a human resource matching service enterprise founded in 213. It matches willing to outsource PR, marketing and other operations with freelance-oriented women, particularly professionals with an arts background and extensive management experience, under outsourcing contracts. Some 7% of about 1,1 corporate customers are SMEs and venture firms. These customers can save costs by outsourcing new projects and other business operations requiring advanced strategists to well-experienced people, instead of recruiting advanced skill level human resources. Such outsourcing, unlike subcontracting, allows their employees to improve their capabilities by accumulating new knowledge and networks while working with freelance professionals. As SMEs are not well experienced with project-outsourcing contracts, Waris reorganizes or breaks down project operations, clarifies required skills, examines outsourcing contracts and conducts follow-up services during contract periods. It thus provides integrated services to allow customers to smoothly complete projects. Representative Director Tanaka says: Due partly to Japan s declining labor force, it is difficult for SMEs and venture firms to recruit advanced skill level human resources. If they base their recruitment on employment, they have a risk of failing to secure necessary human resources when they are required. I would like these to become more flexible and consider the option of outsourcing. Representative Director Miwa Tanaka 32