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Tuesday, June 11, 2013

No. 31: Focusing on promising business instead of pursuing the please-everyone policy (2/2) (June 11, 2013)

Management:
A company has to make the utmost efforts to develop its technology. Naturally, it is hard to keep creating innovations, but it harder to maintain the craftsmanship because every worker gets older and has to retire soon or later. Developing human resources who can inherit traditional craftsmanship is one of the big problems in heavy industries companies. As they fostered the diversification strategy, they decreased the number of recruits for the manufacturing scene. For example, the largest shipbuilding yard of Mitsubishi Heavy reduced the number of recruits starting in the mid-1970s. Accordingly, workers older than 50 accounted for over 60% in this shipbuilding yard in 2006, but they accounted for 25% in 2011. In exchange for the decreasing share of experienced workers, the share of workers younger than 20 increased to over 30%. It takes 10 years to develop human resources who can succeed craftsmanship of welding in the shipbuilding industry.

It is urgent for every Japanese shipbuilding companies to develop skilled workers in foreign countries to compete successfully with China and Korea. IHI is one step ahead of others, and it has developed more than 1,000 skilled workers in Vietnam and Indonesia. IHI enjoys a reputation of a company excel in developing skilled workers, and the good reputation worked very well to the company. A Brazilian shipbuilding company, Atlantico Sul Shipyard, changed its partner from Samsung Heavy to IHI. Negotiations on capital alliance are in progress between Atlantico Sul and IHI. In fact, Japan can be proud of its tradition to inherit craftsmanship from one generation to the next.

The shale gas revolution in the U.S. invited a worldwide attention and Japan will import shale gas from the U.S. In addition to shale gas, development of ocean resources will provide a tailwind to heavy industries companies. Ocean resources are expected to create a huge market for drilling ships and floating liquefied natural gas (FLNG) production facilities, and the market will increase about two times over the current level to 10 trillion yen by 2020. MODEC received an order from Malaysia for the design of a Malaysian FLNG last year. The total construction cost is estimated at 200 billion yen.

No company can be free from ups and downs in business, as the stock market. And most companies react nervously to the fluctuations, as most stockholders do. What is important for a company is to abandon unpromising business and focus on promising business, and the decision should be based on the technology including craftsmanship that it has accumulated. One of Japan’s leading consumer-electronics companies suffered from a huge loss as a result of its policy to please everyone. In the age of accelerating technological progress, no company can cover lots of business domains simultaneously however big it is. Develop technology and human resources that can inherit craftsmanship, while abandoning unpromising business fields. Unpromising business, in most cases, remains unpromising however hard you may try.  

A triangular ocean bed research vessel

Scientific deep sea drilling vessel (Chikyu: the Earth) 

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