Thursday, July 28, 2005

Country Correspondent Report: Japan

Welcome from Japan  ...

In this month's Japan Inc. magazine, we have a story about a Japanese property manager. Nothing special about that, you might think, until we tell you that he manages temple cemetery plots and sells the tombstones that go in them. Apparently the headstone business alone is worth more than JPY300 billion (US$2.7 billion) annually, and with the current Japanese death rate, the nation's 75,000 temples receive about 40% of the funerary interments (ashes, not bodies), or about 200,000 customers a year -- all with little or no marketing cost.

The subject of our story is one Itsuro Mizukami, a 56-year old Chiba businessman, who has built a mini empire out of buying stone slabs from China, importing and finishing them into tombstones, then placing them in family plots old and new at Buddhist temples. He has assiduously developed a strong personal network with head monks of temples around Japan, and as a result is being asked to supply other services, such as property management and sales, temple repairs, craftsman dispatch, and a host of other related activities.

Mizukami got started in the headstone business after being assigned a project while in his previous job as a city government inspector. He discovered that there are probably about 30,000 headstone suppliers in Japan, but the sector is consolidating rapidly and most of these small family operations are dying out (pun intended). He felt that one problem is that the headstone business is a cottage industry, and that he could systemize it.

23 years later, he has done just that and is now starting to gain traction in both headstones and property management. Last fiscal year, ending March 2005, Mizukami's IM company had 16 branches nationwide, producing revenues of JPY1.5bn (US$14MM) and profits of around 15%. In the next 24 months, he expects sales to climb 25% annually, and within 3 years he plans to have seized 5% of the temple funerary business.

An IPO will come sometime in 2008-2009.

Mizukami's temple-related building maintenance business is quite interesting, and is a good reflection of how he has turned his inside knowledge of temple operations and personal network of head monks into win-win revenue. Many of the wooden temples in Japan are quite ancient and the building techniques needed to support such large structures using traditional means are both complex and arcane. Unfortunately, as renewal schedules fall due, temples around the country are finding that the expertise to repair and renew their buildings is in drastically short supply. Against this background, Mizukami has launched a specialist carpenter dispatch service, which sends skilled tradesmen all over Japan to work on venerable buildings. Not just temples, the tradesmen are also in demand by private building owners as well.

Back to the family cemetery plots, in case you're interested, Mizukami says the procedure for getting one is quite simple. Providing space is available at your local temple, you simply visit the temple's management office and negotiate directly to buy a plot. They're sold, not leased. Out in Nishi Funabashi, where Mizukami lives and operates, the Nichiren sect's Hokekyo Temple has a going rate for one square meter plot of about JPY1.3MM, then about JPY1,000 a year to get the plot maintained by temple monks -- although this second charge is not compulsory.

A cemetery plot can stay with the family for generations, and because people understand its permanence, they tend to want long-lasting memorials, hence the healthy business for the IM company in producing elaborate and expensive headstones. Mizukami says that his customers are buying an art object on which to focus their family's emotions when they pass away. As such, who would want a second-grade effort? Mizukami sells between 20-30 headstones a month, at prices ranging from JPY2-JPY4MM each … An amount which is sufficiently painful to be spiritually purifying!

Reported by Terrie Lloyd, where you can visit his website here.

Monday, July 25, 2005

Chair of Senate Committee Comments on China Revaluing Its Currency

U.S. Newswire

WASHINGTON, July 21 /U.S. Newswire/ -- U.S. Senator Olympia J. Snowe, Chair of the Senate Committee on Small Business and Entrepreneurship, issued the following statement in response to China's announcement today that it is upwardly revaluing its currency, the yuan, by 2.1 percent and that it has replaced its practice of a fixed dollar peg, for a system based on a basket of currencies:

Snowe: 'More Remains to Be Done to Address China's Currency Manipulation'; Senator Believes China's Actions on Currency Are a Step in Right Direction, But More Must Be Done

Friday, July 22, 2005

Selling Abroad Without the Pain

In Inc. magazine

Ignoring more than 1.3 billion potential customers isn't easy. Yet the thought crossed Dharmesh Shah's mind when he learned how expensive and complex cracking the China market would be. He wouldn't even have tried it if two things hadn't happened. First, Pyramid Digital Solutions Inc. (PDS), his $10-million software-design business based in Birmingham, Ala., received an additional $6 million in funding. Second, PDS was deemed a "partner" by $6-billion SunGard Data Systems, a monster in PDS's market of 401(k) plan software. Without SunGard's existing relationships, PDS wouldn't have had the wherewithal for an international debut, Shah says.

Monday, July 18, 2005

Small businesses tap outsourcing

In Journal Gazette

Many small-business owners have begun to follow a trend set by their larger corporate counterparts and outsourcing personnel tasks such as hiring and firing, measuring staff performance, payroll and benefits.

Wednesday, July 13, 2005

Gals Going Global!

In BusinessWeek

Women represent a powerful force both in the traditional and the new global e-business marketplace. Read "Gals Going Global" to find out why.

Monday, July 11, 2005

Country Correspondent Report: China

Welcome from China ...

Be a local Chinese company in China.

China is a strange country and market to enter for most foreign companies. If your company is seriously interested in China mainland market, you should dispatch some high level executives to work in China.

If your company does not have any office in China mainland, it is hard for you to know what is happening in China, and how to deal with your Chinese partners and customers. Sometimes your distributors will exaggerate their marketing investment, they may have some special discount with advertising media and exhibition organizers, and if you agree to share the marketing cost with them, you have to pay more than you should.

Chinese customers have different requirements from American customers, and if you do not understand and cannot meet their special requirements, you will not get the deal. One friend of mine works at an American company's Beijing sales office. After she negotiates with customers, her U.S. team leader always believes the contract items are ridiculous. He will ask her to talk with the customers again to let them reconsider their requirements. But of course, they will not modify their requirements. Then, he will fly to China to negotiate in person with the customers -- trying to encourage acceptance of U.S. business rules in vain.

If, by chance, the China office or company representing the U.S. firm is not authorized to run their business in China independently and operate like a Chinese local company, it is hard for them to compete with their local competitors in China. In turn, they are far from achieving success.

Dong Wang reporting from China.

Friday, July 08, 2005

Take Your E-Business Global

In Entrepreneur magazine

In spite of the risks, there are lots of great reasons to start thinking about going global.

[Up next week: Country Correspondent Report from China]

Thursday, July 07, 2005

Country Correspondent Report: The United Kingdom

We checked in with our U.K. correspondent first thing this morning to make sure he survived the "London terror" which he has, thank goodness. He recommended that if you want the best source of news on the situation to listen to BBC Radio Five Live through

Wednesday, July 06, 2005

Country Correspondent Report: India

Welcome from India ... from Jayanthi Iyengar

Small refers to smallness of investments.

Going global is a great option. Yet, what needs to be remembered is that just because one is successful at home does not necessarily mean that one would be equally successful overseas. This is because markets vary. So do the norms. Nothing bears this out as well as the small sector. For instance, if you are a Western company, you’d assume that an SME in the US is the same as one in Europe or in India. Yet, this may be a fallacy.

In many Western countries, an SME includes small and medium units. In a country like India, the tiny and small units are categorized separately and are referred to as the small scale industry (SSI). Hence, the division effectively becomes small and tiny units versus the others (that is the medium and large units).

The SSI categorization is relevant primarily from the following two angles:

• Tax concessions
• Exclusive rights to manufacture reserved items

In India, the government promotes the small and tiny sector through tax concessions, primarily excise concession, also called SSI concessions. This by itself is not new since many countries do promote their SME sector through fiscal and non fiscal incentives. India further protects its SSI units from competition by reserving certain items for manufacture, exclusively by manufacturers in this sector.

That sounds attractive -- tax concession as well as protection to boot. However, in order to draw tax benefits and receive protection, a unit has to meet the SSI norms. Under these norms, a tiny unit is defined as one where the maximum investment is Rs 2.5 million (US $ 57,405.31 ) while it is Rs 10 million ($229,621.76) for a small unit. This threshold has been set in rupee terms and hence the amount, when converted into US dollars may vary marginally, depending on the rate of exchange. Norms are also detailed on the manner in which the value of capital investments is arrived at. It goes at length into details such as whether fresh or second hand machinery imports would be included or excluded for purposes of arriving at the capital investments in the unit or not.

Reading between the lines, however, the message is simple: the Indian government does not limit the number of people employed in a small or tiny unit for purposes of drawing SSI benefits. However, it does limit the capital employed in order to regulate the size of the unit.

This limitation, which restricts growth through higher capital investments, must sound confusing to a foreign investor. However, it is easier to understand the genesis of such a norm, when one recalls the fact that India is a capital-deficient but labor-surplus nation, and the concept of SSI protection dates back to the socialist era, when creating and preserving jobs was a far more important than the efficient deployment of capital.

Such mind-set is undergoing a change in India and there is a greater understanding of the fact that limiting investments is tantamount to stifling the growth of the unit, as it cannot modernize, grow and compete by inducting costly but cutting edge technology.

That brings us to the crucial issue of whether foreign investment is allowed in the SSI sector, and why a foreign small business may want to come to India despite such restrictions on size.

The issue will be discussed in the forthcoming blogs, which would make it clear that though these restrictions exist, they become relevant only if a global business wants to enter the country as an SSI and qualify for the benefits. Otherwise, the field is open to foreign direct investors.

Some useful links:

Resource No. 1
Resource No. 2

Jayanthi Iyengar's backgrounder

Tuesday, July 05, 2005

Global Trade, Zero Angst

In Inc. magazine

International trade without the stress.

As business becomes increasingly global, many small companies are navigating the perilous waters of importing goods. For a small business that buys products from foreign suppliers, especially those in Asia, making payments can be tricky. Asian manufacturers typically require either payment in advance or a letter of credit from a bank. Neither option is great for cash flow. To obtain a letter of credit, importers put up cash as collateral or take out a line of credit so that their bank will guarantee payment. Bank fees for letters of credit usually run from several hundred to several thousand dollars, and the interest on credit lines can run even higher.

How do you manage the collection process on an overseas transaction without losing your shirt and pulling out your hair?

[Up tomorrow: Country Correspondent Report from Jayanthi Iyengar in India. Watch for it.]

Friday, July 01, 2005

Wharton's Globalization Forum: Looking At The Market's Successes and Failures

The Wharton Global Alumni Forum 2005, held in London earlier this month, brought together participants from all over the world to debate the impact of "250 Years of Globalization," the Forum's theme. While globalization has indeed changed how we allocate resources, settle disputes and sell products abroad, there are ways in which globalization has failed sizeable constituencies within the worldwide community, as Forum speakers pointed out.

They also discussed the uncertainty swirling around global financial markets, the inability of many companies to derive real value from investments in technology, and the potential fall-out from protectionist trade policies, such as those currently advocated by the U.S. and European Union.

Here are the five topics covered in Wharton's Special Globalization Forum. Be sure to check them all out. You'll have plenty of time to do so over the holiday. Enjoy and back with you next week!

1. From Trade Inequities to the 'Do-It-Myself' Customer: Globalization's Uneven Impact

2. Euros, Dollars, Sukuks and Yuans: Uncertainty Reigns in Global Financial Markets

3. Cosmetics and Steel: How Two Companies Defied Conventional Wisdom by Going Global

4. Why So Many Big IT Investments Do So Little for Shareholder Value

5. The WTO: A "Fragile" Body under Attack by Protectionist Policies in the U.S. and EU