Industrial Automation Players - the Japanese

In my view and experience, the Japanese and Germans have similar cultural barriers that have inhibited growth through acquisition. (See JimPinto.com eNews, 18 March 2002). The Japanese cultural problem is exacerbated by their view of the acquirer as "conqueror" and the acquired as "defeated". They do not seem to be able to avoid this perception, internally and externally. This is why they have not made ANY acquisitions in the US. This view has been confirmed by my Japanese friends, in Japan.

Many people have observed that there is much more affinity between the Germans and the Japanese, than between either group and Americans. This shows up in a broad number of ways, ranging from where Japan favors investment, to where they favor development, to what development philosophy the products follow, relative hardware versus software strengths and weaknesses, "not invented here" attitudes, business philosophies, and more.

To generate growth in international markets, the Japanese develop partnerships and joint ventures (50/50 ownership). Japanese markets are notoriously hard to penetrate and so many US and European companies have also tried strategic alliances and joint-ventures in Japan. With a deep cultural divide - totally dissimilar investment timeframes and long-term goals - there are no successful Japanese JVs, either in the US or in Japan. The only exception is GE-Fanuc: GE and Fanuc own 45/55 in Japan, 55/45 in the US, and 50/50 in Europe.

Johnson Controls and Yokogawa started US and Japan joint ventures which inevitably fizzled out. More recently, Rockwell started a strategic alliance with Omron, which many thought would lead to a merger or acquisition. In my opinion, this cannot happen for the reasons I have mentioned. Similarly, Rockwell recently started a partnership with Korean Samsung - but this is only a systems integration alliance to help Rockwell develop SE Asia markets.

A long-time, senior US employee of a major Japanese company confirms that all Japanese automation suppliers seem to have characteristics that are similar to the ones I mentioned about Siemens - rigid long term planning that adapts slowly to changes in business climate and perceived opportunity in local markets. Also, there is extensive central control from the home market (where they are first tier suppliers), that doesn't apply favorably in foreign markets where the regional affiliates operate in the second tier.

There are NO Japanese companies in the US, or anywhere else for that matter, which have local or foreign top-executives. A Japanese company senior US employee complained that there seems to be a "collective subconscious inferiority complex" of sorts, which leads to (an also subconscious) need to perceive domination. It ends up becoming very limiting when dealing with their companies outside the "homeland".

Other problems relate to the business processes favored in Japan, which are very culturally tied and do not translate well outside. For instance, all subsidiaries are really run by the VP of Corporate Planning, not the President/CEO. This is how they retire presidents upon embarrassment, yet keep the business integrity. The president is a "figurative" leader, as opposed to the "Jack Welch" model that is prevalent in US. They believe that only a high level Japanese person can have the trust, integrity, and accountability to run the show.

Another issue is the fact that international "outposts" are used as training ground for future high-level managers. A typical tour of duty may be 3 years, and then they go back. Continuity of strategy, connection to the homeland, and inconsistent quality of top managers takes a huge toll. The need to position for a successful return to Japan influences motivation to act in the export company's best interest, or sometimes not to act at all. US executives complain that "just about the time we have them trained to the point that they can help us, they are gone, and we start over again".

Japanese companies like Sony are the exception - because they are truly international.

Financial information on Yokogawa website

OMRON - Financial Summary

Extract from JimPinto.com eNews - 9 May, 2002

Chris Carnavos [chris.carnavos@accelics.com] CEO of Accelics provided these first-hand insights:

For several years, I (along with another American, now retired) was running the instrument and systems business in the US for Yokogawa.

"Your comments relative to how the businesses are run are probably true today, but there are some important points that should be made:

"Yokogawa was a leader in making relationships with westerners in Japan - GE (Medical Systems), HP, and Johnson Controls. I believe these are all successful businesses today, thanks to Yokogawa.

"Originally, Yokogawa installed American management in its Yokogawa Corp of America (ex-Foxboro president, I believe) and that was not successful. Then they tried to make a JV with Johnson Controls, but in their eyes, eventually Johnson provided no value (different markets) and they were losing lots of money. So, after pouring mega millions into the US market, with Americans in charge, they decided they could do better themselves. I can't blame them for that decision, even though I did not agree!

"It is also important to understand that Yokogawa ranked their market priorities as 1.Japan; 2.Asia; 3.Western Europe; 4.USA; 5.Rest-Of-World. Therefore, their eventual strategy became one of maintaining a reasonable market share and trying not to lose too much money. They sent over one Japanese rising star after another to get some experience, watch competitors, and limit losses. It's as simple as that.

"In many respects, I miss working with and for Yokogawa. They always treated me well and with respect. However, as you pointed out, until they cease being a Japanese company with an export mentality, and truly are able to be an international company, their future potential is questionable.