FY2012 Survey (the 24th) Report on Overseas Business Operations by Japanese Manufacturing Companies

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  • Manufacturing and Services

December 7, 2012
  1. The Japan Bank for International Cooperation (JBIC; Governor: Hiroshi Okuda) released today the FY2012 Survey Report on Overseas Business Operations by Japanese Manufacturing Companies, the results of an annual survey on Japanese manufacturers' overseas business operations (the survey). The survey was conducted by sending questionnaires to 1,011 companies in July which were returned from July through September 2012, and 613 companies returned valid responses (response rate: 60.6%). Its objective is to identify the current trends as well as future outlook of overseas business operations by Japanese manufacturing companies with an extended record of overseas business. This year's survey is the 24th of an annual series that began in 1989. Moreover, during November 5 and 20, an additional survey (the additional survey) was conducted via the internet asking 613 companies who have previously returned valid responses about the effects on businesses in China, Taiwan and South Korea, and 327 companies returned valid responses (response rate: 53.3%). (please click here)
  2. As has been conducted in the past, the survey examined "medium-term business prospects," "evaluations of overseas business performance" and "promising countries or regions for overseas business operations," and, this year, "current status and issues of business operations control of overseas local subsidiaries" and "competition in global market and action plan for improving competitiveness" in particular. In the additional survey, considering the first survey results, the following were asked; "impact on business in China, Taiwan and South Korea," "concrete influence on current and future business operations in China," "behavioral change of Chinese clients," "changes in countries or regions for promising business operations," "changes in attitude in committing to Chinese business" and "sales level of Chinese business."
  3. Summary of results for this survey is as follows.*1

    Although overseas operations of Japanese manufacturing companies are in a state of reinforcement and expansion in the medium term, there is a sign of standstill with respect to the immediate situation. Also, a contractive stance of the domestic business has been intensified centering on the automobile and electrical/electronics industries. Approximately 80% of the companies which are strengthening and expanding their overseas operations plan to also maintain and expand their domestic businesses and three out of four companies project to maintain and expand domestic employment as well. However there are also some companies that responded by indicating that they plan to reduce their domestic employment. Also, it has been indicated that the rising labour cost, worsened prospect of electricity supply and continual advances of a stronger yen put the brakes on the strengthening and expansion of the domestic business.(→ChapterⅠ and ChapterⅡ)

    With respect to the evaluation of overseas business performances for the FY2011, not only has the degree of satisfaction of sales and profits declined for the first time since the Lehman Brothers shock due to the strong yen and intensified competition, etc., but the degree of satisfactions of profits fell short of initial plans in all areas and all industry categories. As a promising country for business operations in medium-term, China continued to secure the first position, but the number of votes suffered a sharp decline. On the other hand, Indonesia with a sharply expanding market has made a big leap to the third position, and Mexico and Myanmar newly entered the top ten. In the midst of a sense of occasional halt in the business expansive stance in China, the interest of Japanese manufacturing companies in promising countries for business operations is inclining to newer markets. (→ChapterⅡ and ChapterⅢ)

    While approximately 30% of the responded companies have interest in the introduction of a global personnel system, those companies that have already introduced such a system were limited. However, Japanese manufacturing companies are promoting use of local personnel proactively mainly in production and sales in order to cope with the expanding overseas business. Although there are divided views regarding the amount of procurement from Japan, approximately 65% of responding companies have a prospect that the rate of local procurement will continue to grow in the medium term. Also, two out of three responding companies recognize that profits of overseas local corporations will become an important source of funds in the future including domestic R&D and capital investments. Japanese manufacturing companies are in a direction to utilize increasingly more overseas personnel as well as parts and materials, and it ia also indicated that there is a prospect of a bigger role being played by the funds acquired through overseas business in domestic business. It can be said that the significance of commitment to overseas business has been enhanced for domestic business as well.(→ChapterⅤ)

    It was indicated that Japanese manufacturing companies recognize that the gap against Chinese, Korean and Taiwan companies in Asian emerging markets regarding sales power and speed in management cannot be narrowed  although , Japanese manufacturers get more superior in product development capacity and manufacturing technology and that European and U.S. companies are tough competitors in these markets, which surpass Japanese manufacturers in all four items mentioned above. Most of the Japanese manufacturing companies continue to maintain a strategy to establish a competitive advantage by differentiating quality, brand, and service, etc. with a recognition that enhanced quality, function and brand power are effective as measures to expand market share in Asian emerging markets based on their self-evaluation of strengths in know-how to produce high quality/high function products, brand power and after-service. While recognizing their weakness in price competitiveness, Japanese manufacturing companies which pursue a low cost strategy are limited to some of the automobile, electrical/electronic industries. It is also indicated that Japanese manufacturing companies seeking alliances with other companies such as local companies for establishing a competitive advantage remain approximately 30%. In the midst of intensifying competition with local companies worldwide, and in view of the present situation of a largely widening gap with competitors in terms of sales power and speed of management, it should be worthwhile considering the incorporation of the strengths of competing companies, efforts to reduce their own weaknesses, or promotion of alliances with other companies that may complement their weaknesses.(→ChapterⅥ)
  4. Summary of results for the additional survey is as follows;

    With consideration of the change in the situation over Takeshima and the Senkaku Islands, approximately 84% of the respondent companies this time do not think that the situation has any particular influence on their business operations in Taiwan or Korea. On the other hand, however, approximately 65% of the respondent companies centered on the automotive business recognize that the situation has been adversely affecting their business operations in China. In a similar question asked two years ago, approximately 23% of the respondent companies answered that their business operations were adversely affected. The survey this time indicates that the Japanese manufacturing companies recognize that the change in the situation has been more seriously affecting their business operations in China than two years ago.

    A large number of respondent companies pointed out that damage to their business partners and boycotts on Japanese goods adversely affected their production and sales or their voluntary restraint of business trips influenced the overall business. These companies predict that their production and sales will be adversely affected continuously. Approximately 53 % of the respondent companies answered that their sales levels have been declined since the change in the situation and approximately 51 % predict that the sales levels will not return to the previous state for half a year.

    With respect to the evaluation of China as a promising country for business operations over a medium-term, China continued to secure the 1st position in spite of nearly half of responding companies indicating that they considered the evaluation of China to have declined from results of questionnaire conducted in July 2012, while the gap with 2nd ranked India shrank further in terms of the ratio of votes as promising. On the other hand, the number of responding companies that regarded Indonesia, Mexico, Thailand and others as promising increased as well.

    With respect to change in attitudes related to commitment to Chinese business in the future, while over 60% of responding companies expressed "rethought" or felt "act cautiously", three out four of them responded that "While continuing commitment to Chinese business in the future, importance of risk diversification to other countries/regions is recognized". The 13 companies that responded to strengthen their engagement in other countries or regions have a policy to "conduct review so as to reduce the degree of dependency on Chinese business or market" mainly through "scale-back by reduction of additional and renewal investment", but none of them responded to "completely withdraw from business operations in China and Chinese market". It can be interpreted that Japanese manufacturing companies maintain a stance to continue to engage in Chinese businesses more cautiously, attempting to diversify risk involved.
  5. Based on the findings of this survey, JBIC will support the overseas business activities of Japanese companies operating under tough international competition, while conducting dialogues with governments and relevant authorities in foreign countries and regions in an effort to improve their investment climate.

    Appendix 1: (Extract) Trend of Overseas Production Ratio and Overseas Sales Ratio

    Appendix 2: (Extract) Trend of Ratio of Votes for Major Promising Countries or Regions for Business Operations over Medium-Term (next 3 years. or so)

    Appendix 3: (Extract) Impact to Business in China, Taiwan and Korea

    Appendix 4:(Extract) Ranks of Promising Countries/Regions for Business Operations over Medium-term after Re-aggregation Based on Additional Survey
  1. *1 Please bear in mind that this survey, in particular the analysis concerning promising countries/regions for business operations has mainly reflected responses received before the changes of situation surrounding neighboring countries since August of this year.
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