Sunday, June 9, 2013

No. 30: Focusing on promising business instead of pursuing the please-everyone policy (1/2) (June 10, 2013)

Japanese three leading heavy industry companies – Mitsubishi Heavy, Kawasaki Heavy, and IHI – launched new products one after another for diversification to maintain domestic employment after the so-called depression on shipbuilding. They are sometimes dubbed the three machinery department stores. Because of the please-everyone policy, they were not able to make enough investments in promising markets and products, and they increased interest-bearing debt dramatically. Until quite recently, they recorded a 2-3% operating profit rate, less than half of Hyundai Heavy Industries of Korea.

Mitsubishi Heavy changed this stream. It started to reform its business structure and introduced the “strategic business evaluation system” in 2011. It integrated business operations and withdrew unprofitable business operations. As a result, it reduced the interest-bearing debt from 1,600 billion yen in 2009 to 970 billion yen in the current fiscal year, less than 1,000 billion year for the first time in the past 17 years. It will achieve sales of 190 billion yen, which is close to the highest sales in the past, and increase the operating profit to 6%.

The promising business field for them is the exploration of ocean resources where they can utilize their shipbuilding technology. The world ocean resources business field is expected to increase two times over the current level to more than 10 trillion yen by 2020, mainly thanks to the construction of drilling ships and offshore production facilities of liquefied natural gas. Mitsubishi Heavy delivered four resource exploration ships to Norway for about 100 billion yen. Its technology to minimize the engine noise and vibration was helpful for the successful order intake. 

It is not too much to emphasize the importance of technology. Hitachi Zosen delivered its reactor vessel to Sasol of South Africa. A reactor vessel is the core equipment of the gas to liquid (GTL). It is 50 m tall, and it weights nearly 200 tons. Precise welding is indispensable to building a reactor vessel. Hitachi Zosen’s technology to bend and weld a hug thick steel plate will allow the company to keep growing. The company dubs itself a shipbuilding company on land. Stick to the technology that you have accumulated, and you can open up the road for further growth.

Hitachi Zosen's reactor vessel 

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