Sunday, July 23, 2017

Japanese companies falling behind in portfolio restructuring

The Japanese government recognizes rapid and flexible business restructuring as an issue for Japanese companies to improve international competitiveness.

The chart, which is included in the material distributed in the Industrial Structure Council, shows the distribution of profit rate in all business segments of Japanese companies, in comparison with American companies and European companies. Over 60% of businesses of Japanese companies have less than or equal to 5% in operating profit on sales.  On the other hand, for US companies, more than 70% of businesses have higher than or equal to 10% in operating profit on sales. It is pointed out that the Japanese companies cannot make a decision promptly to restructure their business even when it carries low margins, and they finally decide to restructure it  when they have to cut their losses. 


Restructuring of patent portfolio seems to fall further behind the business restructuring. A typical pattern is:
1. An organization dissolved by withdrawal from business.
2. No one remained in the company who can assess the value of the related technologies and IP assets.
3. IP department maintains the IP assets, because they can not decide to abandon or sell them out.
4. IP department asks an outside IP service company's advice, when a problem (e.g. budget cut) occurs or asset maintenance management draws the attention. 


A patent portfolio manager who is independent from a business division and well-established in the related technologies surely can solve such a problem. But if your company does not have the patent portfolio manager and faces the problem, contact me!

2 comments:

  1. Watanabe-san - Very interesting data in the pie charts. Scary for Japan and pretty scary for Europe too. Is this data for all companies or technology companies? If all companies, then it would be nice to see data for technology companies. Any thought on whether the numbers are better or worse for technology companies in Japan? Thanks ... - Darrin

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    1. Darrin, thanks for your comment. This data should be for all companies, not focused on technology companies. However, you may have an interest in the page 105 of the original material (linked from my article). This is written in Japanese, but you can see company names of American and European companies in the left. This chart shows how chemical companies have restructured their businesses since the late 1990s, compared between American/ European companies and Japanese ones. Each line shows a business of their portfolio (e.g. fiber, bio, medical). The colors shows the status, where red indicates they improved the business by acquisition, and blue indicates they downsized or withdrew the business. You can see that there is fewer blue in the right side which is for Japanese chemical companies. It means that Japanese companies have improved their businesses by acquisition, but they have not downsized or withdrawn their businesses, maybe even when they are not profitable enough.

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