‘SOGO SHOSHA’ COMPANIES

[Mr. M. GOVINDARAJAN]

‘Sogo Shosha’ , a Japanese expression, can be transliterated as a general trading.  ‘Sogo’ means general and ‘shosha’ means a trading company.   The sogo shosa handle a wide range of products.  They are characterized first by colossal sales, secondly by diversity of goods traded, from noodles to missiles, engage in both import and export with every major market in the world and thirdly by global reach of this network.

In business parlance a sogo shosha is something much more than a general trader.  It is a unique business model in the world of commerce.   It cannot be equated with a general trading company in all material respects.  It is form of industrial organization and a kind of vertically integrated trading company.  At the center of these organizations is a trading company that arranges financing, co-ordinates activities and handles marketing functions for the companies in its group of companies.   These subordinate companies may be considered operating companies, because they specialize in certain type of business.  Japan has emerged as one of the dominant world traders since World War II, because of the sogo shosha.

The term generally refers to the entire group of operating companies that comprise the conglomerate or sogo shosha.   Unlike typical Western trading companies and Japan’s some 9000 other trading companies, the sogo shosha are distinguished by their international networks, their trade of numerous commodities and their large market shares.   A sogo shosha may control about 10% of Japan’s trade, hand a range of 10000 to 20000 products including food, clothing, automobiles and appliances, and have a network of over 200 offices throughout the world.

These companies are also characterized by their ability to issue large volumes of credit and to help small manufacturers buy and sell goods in the global market.  They serve as intermediaries for distribution at home and abroad for Japanese companies.   The responsibilities of these companies extend beyond trading because they take active measures to ensure stable levels of supply and demand over long periods.   In addition to their ability to make the greatest use of the marketing intelligence network, the sogo shosha work on extremely thin margins, commonly little more than 1.5%.  For this purpose the companies are to maintain very high sales volumes and remain focused on a long term business development.

Prof M.Y. Yoshino, a Harvard Business School Professor and Thomas B Lifson, an associate in US Japan Relations Program in Harvard University in their book ‘Japan’s Sogo Shosha and the Organization of Trade’ explained about this company that it is like no other type of company.   It is not defined by the product or even by the particular services it performs, for it offers a broad and changing array of goods and functions.   Its business goals are equally elusive, for maximization of profits from each transaction is clearly not the major goal, either at operational or philosophical level.   There are really no other comparable firms, though the Governments in United States and elsewhere have become convinced on these companies.

The authors further indicated that even in Japan, the sogo shosha is indeed regarded as a mysterious entity, difficult to know about or understand but universally acknowledged as a powerful force in the economy.   But one common thread in all descriptions of ‘sogo shosha’ is whatever be the source, is sheer complexity of its business model, range of its activities and integrated link it provides between the buyer and the seller.

Seven major ‘sogo shosha’

In millions of Japanese Yen

Name	Earnings (FY 2015)	Total assets (March 2015)	Net assets (March 2015)
Mitsubishi	400574	16,744,366	5,570,477
Mitsui	306490	12,202,921	4,099,795
Sumitomo	-84,374	9,021,370	2,481,432
Itochu	300,569	8,560,701	2,433,202
Marubeni	105,604	7,673,064	1,518,515
Toyota Tsusho	67,571	4,533,693	1,125,512
Sojitz	33,075	2,297,358	550,984

Source: www.en.wikipedia.org.      

Sumitomo Corporation’s Core Competence: Integrated Corporate Strength

Trust: Based on Sumitomo’s business philosophy, it has cultivated the trust of r customers over the years. This is the most fundamental and valuable asset of business.

Global Network: With offices, subsidiaries and associated companies worldwide, the  business network provides a basic platform for the prompt and secure transfer of goods, funds and information.

Global Relations: This Company has established close and multifaceted relations with over 100,000 business partners around the world across all industries.

Intellectual Capital: The wealth of know-how, experience and information accumulated by the skilled personnel of the company in diverse fields is also an important element of their solid business foundation.

Risk Management: Only an integrated trading company with decades of business experience can expertly manage diverse risks associated with credit standing, market, and enterprise operations.

Financial Services: This includes fee collection/payment, provision of capital, project financing and advanced financing services such as securitization of assets.

Business Development: The company excels in business creation, which involves identifying promising new products, developing new markets, and organizing appropriate business operation.

Logistics Solutions: In addition to the ability to provide a wide range of integrated logistic services, the company  also has the capacity to develop and deploy services to match demand and supply of cargoes, trucks, and warehouse space.

IT Solutions: This involves the ability to build Supply Chain Management (SCM) systems and to support network business.

The original purpose of the general trading was to serve Japanese companies only,  but today a substantial and growing part of their activity consists of imports and exports of goods on behalf of manufacturers and buyers of commodities in other nations. Yet the Sogo Shosha remains uniquely Japanease. They derive their business philosophy from the Confucian cultural tradition, which emphasizes harmony and community. They operate like an extended family unit, following principles of filial piety and loyalty toward their clients.

Sogo shosha will be needed in the years ahead in the following two points. That is-

• to be a step ahead of potential needs of the market and show to the industries in Japan and the other countries while market-oriented system of world economy progresses; and
•  to be the one to discover and bear true national interest while globalization of politics and economy progresses.

References:

1. www.en.wikipedia.org.
2. www.sumitomo.corp.co.jp/
3. www.jftc.or.jp/shosha/publish/2012_13_en.pdf