総合商社 The Special Role of

General Trading

Companies

Table of Contents

(1) What are the General Trading Companies?

(2) Developement

(3) Examples of General Trading Companies in Japan

(4) Other Countries

(5) Future Prospects

Definition Advantages Structure Functions

Definition

Over 8000 trading companies exist nowadays

Around 300 of them are involved in foreign trade

Distinguish between:

Sogo Shosha Senmonshosha

Senmonshoshas are less diversified

Focus on particular product groups or geographic areas

Distinguish between:

Specialized product traders Specialized regional traders

総合商社

Complexity/

Diversity

(to) unit/

(to) combine

Commercial /

Business

Enterprise /

Organization

Definition

Definition

A Sogo Shosha is a form of industrial organization,

orginated in Japan, which is trading a wide range

of products and materials

They are characterized by colossal sales, by the

diversity of goods traded and, moreover, by the

global reach of their business network.

Top 5

Advantages

Sogo Shosha‘s

provide a huge range of services to manufactures

avoid risks whenever possible

help the manufactures to connect with their markets

have close relationships with the Keiretsu

have sophisticated communications systems

recruit the best employees

have a loyal customer and supplier base

Functions

Basic Function is Trading

Sogo Shoshas trade lots of different products in large volume

Economies of Scope and Scale

The typical Sogo Shosha handles between 30000 and 50000

different products

Functions

Financial services

(primarly to

small and

medium-sized

manufacturing

firms)

Sogo Shoshas are financial intermediaries between commercial banks and clients

Extend credits/

loans Provide loan gurantees

Develop venture capital

Functions

Information services

Sogo Shosha‘s supply information about:

Product markets from all over the world

Sources and capacity of raw materials

Product trends

Domestic and overseas demand

Upward and downward movement of prices

The size of potential markets for firms interested in expanding

Functions

Risk Reduction services

Sogo Shosha‘s

sign contracts to sell foreign currencies that they expect will

depreciate in the future

offer knowledge to customers

financial health through steady observation

handle country risk management

Functions

Auxiliary services

Insurance

Warehousing

Forwarding

Investment in Real Estate

Engagement in Tourism

And many more......

Organization

‘‘Military-style‘‘ highly reglemented from the

chairman through chief of divisions and of

department or offices

Unlike the military they are extremely flexible,

mobile and adaptive

All of them are

joint-stock companies

Development

Meiji Time:

First Sogo Shoshas were founded

Until 1885, 9 were established

High growth rates in the following years

strong relationships to the government

Involvment in military conquest

American Occupation: (1945-1950)

Closure of the Sogo Shoshas

Afterwards: Rapid reestablishment

Development

1960‘s-1980‘s

Strong growth rates in export [Economic Miracle]

総合商社 +80% +110 %

High surplus in foreign trade

Best time of the Sogo Shoshas

1990

Collapse of the ‘‘price- bubble‘‘

Decreasing importance of the Sogo Shosha due to the

globalization

Numbers and Facts

The total sales are 15-18% of Japan‘s GDP

Import Japan 2009: Export Japan 2009:

Sogo Shosha

30% of their business included 3rd-country trading

Net Income

2011 17

18

Net Income

2011

"Our mission is to trade with all countries in the world by

exporting surplus goods from Japan to other countries and

importing goods to meet domestic demand.“

Established in 1876

Export Import

Machinery, Shipbuilding, Transportation and Logistics

From the 1930s on:

Involvement in heavy and chemical industries,

machinery, chemicals and mining.

1959 Foundation of the New Mitsui & Co.

Discovering new branches

A good relationship to the government was consistently existing

2011: 40 000 employees

Established in: 1954

Employees 2011: 233

Don‘t mix it up with :

Orginially no connection, however, Mitsubishi Corporation

made a large investment in Mitsubishi Motors

Number of Employees (2011):

Parent Company:

5,792

Parent company and all of its consolidated subsidiaries:

60,520

1954 Foundation

1968 First large-scale engagement

1986 Focus was shifted from operating transactions to profits

1990 Globilazition of company‘s operations and its people

Corporate Philosophy - Three Corporate Principles

Corporate Responsibility to Society ("Shoki Hoko")

Strive to enrich society, both materially and spiritually, while

contributing towards the preservation of the global

environment.

Integrity and Fairness ("Shoji Komei")

Maintain principles of transparency and openness, conducting

business with integrity and fairness.

Global Understanding Through Business ("Ritsugyo Boeki")

Expand business, based on an all-encompassing global

perspective.

1 Yen ~ 0,01 Euro

Promotion of renewable energy businesses

solar photovoltaic, solar thermal, and wind power.

Electric vehicle and next-generation battery businesses.

21 offices & subsidiaries in Europe

Businesses are divided by industries

Machinery

Chemicals

Energy

Metals Living

Essentials

Finance

and

Logistics

Foods Div. Textile Div. Motor vehicle Div. Industrial machinery Div.

Each of these divisions is like a mini-company They are in charge of their own strategies

Number of Employees:

5887

Offices international:

118

120 corporate offices in 80

countries

Over 500 group companies

Marketing Activities

The name is not on consumer products or retail outlets

Marubeni do not manufacture products with their name on it

Thus, mostly assume marketing activities for small manufactures

However, the big companies conduct

increasingly marketing activities themselves

Other Countries

Nothing comparable nowadays

Lack of Know-How and Infrastructure

Many big industrial companies fulfill

similar tasks as the Sogo Shoshas

Companies prefer doing their own

supply and marketing responsibilities to

using intermediaries

Other Countries

Closest equivalent to Sogo Shosha‘s

e.g. LG Group, Samsung, Hyundai

Began to establish Sogo Shosha style companies

in the mid 90‘s

Attempt of Replication in the early 80‘s

Companies should join export trading

companies backed by banks offering fiancial

support

Future Prospects

Future Prospects

Sogo Shosha‘s:

know how to manage trade and asset risks

have low transactions costs due to large lots in standarized products

are able to dominate markets due to their size and financial power

use top credit ratings to acquire low cost funds that are loaned

are practised in financing and coordinating big projects in Third-World countries

expand through mergers, joint ventures and acquisitions

Future Prospects

Sogo Shosha‘s:

Strong competition through Non-keiretsu companies

and through manufactures and foregin companies greater competition

Fear that fewer countries will accept the power of the Sogo Shoshas

Manufactures increase independence

Future Prospects

Main measurements for Sogo Shosha‘s to stay successful over the next years

Participation in manifacturing industries through investment

Responding to new inventions and developement plans

Governmental support

Expansion of third-party trading

Thank you for your

attention!

Any

Questions?

Sources

Gödeke; Heinz (1991): Die Generalhandelsgesellschaften (Sogo Shosha) in Japan; Hamburg: Verlag Dr. Kovac

Herbig; Paul: Sogo Shosha in: www.herbigandsons.com/lecture/sogoshosha.doc

Simley; John: Sogo Shosha in: www.enotes.com/sogo-shosha-reference/sogo-shosha

Tanaka; Akira (2009): The Role of Sogo Shosha in Mass Procurement System of Resource

Sources

Yoshimo; M.Y. (1986): The Invisible Link: Japan‘s Sogo Shosha and the Organization of Trade; Cambridge: The MIT-Press

Young; Alexander (1984): The Sogo Shosha; Tokyo: Charles E. Tuttle Company

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