Characteristics of Century-Old Japanese Companies

Characteristics of Century-Old Japanese Companies

In the global ranking, Japan ranks first (33,076), the USA (19497) second, and Sweden (13,997), Germany (4947), and the UK (1861) come next

A coveted goal for many companies is to survive for a long time, even for over a century, in the face of competition. This desire has been expressed by the founders of Alibaba and Lenovo, two Chinese companies. This is not, by any means, a simple task. A company's success is determined not only by its own efforts but also by the external environment. A little carelessness can have disastrous consequences, let alone surviving for over a century.

According to statistics, the average life expectancy of Chinese companies is 7-8 years, and that of small and medium-sized companies in China is only 3-4 years, which is a far cry from the average life expectancy of European and American companies of 40 years and Japanese companies of 52 years.

It is said that there are more than 70 century-old Chinese companies that are still operating. After preliminary analysis, there are 6 well-documented Chinese businesses with a history of more than 150 years: sauce and pickle maker Liubiju (founded in 1538), pharmaceutical company Chan Li Chai (1600), scissor maker Zhang Xiaoquan (1663), pharmaceutical company Tong Ren Tang (1669), herbal tea maker Wong Lo Kat (also known as Wang Laoji, founded in 1828), and restaurant chain Quanjude (1864). For Chinese companies that are over a hundred years, but less than 150 years, there are tea sellers Wuyutai (1887), winery Changyu (1892) and Tsingtao Brewery (1903). As a result, there are only ten Chinese companies that can be proven to be more than a century old. It is unlikely that the number of such businesses will reach 20, let alone 70. Even if there are more than 70 century-old companies, the number is insignificant on a global scale.

According to statistics from Nikkei BP Consulting, in the global ranking based on the number of companies over a century old, Japan ranks first (33,076), the second is the United States (19497), and the other top rankings are Sweden (13,997), Germany (4947) and the United Kingdom (1861). Among them, Japan and the United States have obvious advantages.

Many analysts believe that this is because the effects of conflicts were less in these two countries. They point out that Japan is an island country that has not been invaded by foreign countries and has very few internal disturbances. The United States has only a history of more than 200 years, it ranks second among the countries that have the most century-old companies. The stability of American society, to a certain extent, contributes to this. Since the independence of the United States, there has been only one serious civil war in the United States. Compared with Europe, where wars were frequent, American companies have escaped World War I and World War II, which caused many other companies to perish.

The factors mentioned above only tell part of the true picture. It should also be noted that Japan is a country where natural disasters such as earthquakes, tsunamis, and typhoons occur frequently, and the effects of such natural disasters to companies are no less severe than those brought about by wars.

Statistics from research institutions show that there are 21 companies with a history of more than 1,000 years, 147 companies older than 500 years, 1,938 companies that are not less than 300 years old, and 3146 companies with a history of more than 200 years. In the long-term historical process, there were several wars involving Japan. One has to look beyond generic reasons as for the reasons why some Japanese companies could survive and stay strong for a century or longer.

In this regard, there are some objective and credible analyses, and some of the internal factors revealed in them are worth considering. For example, the Bank of Korea published a report in 2008 that the main reasons why these Japanese companies can survive longer: (1) Focusing on their main industries; (2) Management with integrity; (3) Takumi spirit, i.e. craftsmanship devoted to achieving perfection; (4) Choosing company heir beyond bloodline of the business owners; (5) Conservative business style. These reasons have gained more and more public recognition in recent years.

According to some observations, the presidents of long-surviving Japanese corporations are often the type of people who are no-nonsense and hard-working, simple and serious. Even during a bubble economy, they can stick to their own business and will not get involved in anything that has nothing to do with the business of their company. This not only improves the risk-resistance ability of these companies but also wins the trust of society in general. The business philosophy of a company is the foundation of its corporate culture and a guide for its business operations.

Teikoku Databank once asked 814 century-old Japanese companies to express their most important business philosophy in a single kanji, or Chinese character. 197 companies chose the character "shin (trust)" and 68 companies chose "sei (honesty)", ranking second. The kanji that follows is “kei (continuity)”, “shin (heart or mind, not to be confused with the previous “shin”), “shin (truthfulness, different character from the previous two)”. Management with integrity and honesty ensures that companies gain customer recognition, supplier support and social trust, and ultimately form good relationships with stakeholders. This is also the secret of the longevity of these Japanese companies.

The Takumi spirit advocated by Japanese companies is also indispensable. “Takumi” refers to craftsmanship devoting time and energy to creating delicate objects. Well-known all over the world, no matter how subtle or simple the work is, Japanese "craftsmen" will spend a lot of effort and time researching and polishing their skills. After constant repetition and exploration, they reached near perfection in their work. Sushi masters in Japan, for instance, are the example of such spirit. Likewise, for companies, when generation after generation focuses on the same industries, they can also produce high-quality products, to stand firm in the long river of history and enjoy the fruit of longevity.

In terms of corporate heritage, Japan is also rather unique. Among the top 10 oldest companies in the world, 9 of them are from Japan, and almost all of them are family companies. Another important reason for Japanese companies to achieve generational succession relatively smoothly is that the selection of successors is eclectic. Japanese family business inheritance pays more attention to the continuation of "family" rather than "blood ties" inheritance in narrow sense.

Japanese family businesses do not necessarily allow their sons to inherit, especially when they pass from the founder to the second generation, they tend to pay more attention to ensuring capable people for the inheritance, rather than focusing on people of the same bloodline. To solve the problem of "bloodlines", Japanese entrepreneurs will even adopt someone out of the bloodline or allow a son-in-law to change his surname and become one of the kin. Typical cases are Panasonic and Toyota Motor. This approach ensures the quality of the company's heirs. Although the current leaders of many well-known families have no blood relationship with their earliest ancestors, yet bloodline of the company can be passed on for a long time.

Not taking risks in business operation and development, and rather prioritizing on survival or stability, as well as refusing to earn profits that come with huge risks, might be contributing factors to the longevity of these companies. Toshio Goto, research professor at the Graduate School, Japan University of Economics, once pointed out that for these old Japanese companies, even if there are huge development opportunities, the companies may consciously avoid them for safety reasons. They aim at sustainable development and prosperity of the companies and reject short-term rapid growth, as they perceive rapid development in the short term would cost the companies to lack resilience and sustainability. In recent years, there have been many cases where some Chinese companies are facing predicaments due to radical management. The century-old Japanese companies can serve as a learning example for these Chinese companies.

It is undeniable that the characteristics of a century-old Japanese company may be accompanied by some unfavorable factors for the company's and society's development. More often than not, a high degree of stability also implies that the ability and willingness to innovate and respond to changes will be insufficient. In some industries in Japan where customer demand fluctuates and changes rapidly, it is difficult to produce long-lived companies.

For this reason, it can be difficult to start a business in Japan, and the whole society has little room for innovation and entrepreneurship. The atmosphere created by the widespread existence of longevity companies and its squeeze on the subsequent development space may also have something to do with this. However, it must be admitted that for Japan, these century-old stores are precious social wealth, and they are also an important driving force for Japan's rapid economic development in modern times, which allows Japan to enter the rank of developed economies.

Final analysis conclusion

There are historical reasons for China's lack of century-old companies, and objectively, this reality will be difficult to change. As China's economy continues to grow, whether more "century-old companies" can be established will depend not only on the external environment but also on the efforts of the corporate world. The characteristics of century-old Japanese companies may be exactly what Chinese entrepreneurs need to reflect on and learn from.

Source: ANBOUND Research Center (Malaysia)

 

Characteristics of Century-Old Japanese Companies

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