BookTitleToyota Tsusho 70-Year History

Summary

Toyota Tsusho 70-Year History

managementissue.2 The Rise of the Theory That General Trading Companies AreNot NeededGeneral trading companies suffered from the same sluggish performance asother industries, leading to the re-emergence of the theory that general tradingcompanies were no longer needed. This theory was based on the old idea thatas manufacturers, increased in size and built their own sales networks, generaltrading companies would be rendered unnecessary. Or that as large-scaledistribution businesses such as supermarkets reformed their distribution systems,wholesalers (general trading companies) would no longer be needed. It was theview that trade-focused general trading companies could not survive because ofthese changes.After the mid-1990s, it was whispered that the IT revolution would eliminatethe need for the general trading company’s intermediary function. It was truethat general trading companies could no longer survive if their only business wastrading, and it was also true that there was no longer any need for a general tradingcompany to serve as in intermediary between manufacturers and users. It was adepression for general trading companies and their original functions.General trading companies began to tackle management issues, such as theconstruction and strengthening of business models that earned profits frombusiness operations and investment. In other words, they began shifting tobecoming profit oriented.3 General Trading Company Process RestructuringIn the“lost decade”of the 1990s, general trading companies that were unable toamortize bad loans in the aftermath of the bubble economy looked toward mergersand reorganization. One of them was Kanematsu Corp., which in 1999 under bankmanagement was rebuilt to reduce the size of its business to one-third. In addition,the Japanese financial world, deeply damaged by the bubble economy, had to copewith a storm of international financial liberalization, and the progress of financialsystem reforms known as the financial Big Bang. These financial system reformstriggered the movement toward a more robust financial industry by forcing theabandonment of the traditional“convoy system”used to protect the financialsector. General trading companies involved in production, logistics, trade, andcredit were similar in a sense to merchant banks and were greatly affected by thefinancial industry reorganization. Nissho Iwai Corp. narrowed down its businessareas, reduced debt and staff, and merged with Nichimen Corp., which was alsorestructuring, to be reborn as Sojitz Corp. This reorganization included a capitalalliance between Tomen and Toyota Tsusho and an absorption-type merger.In this way, Japan’s 10 major general trading companies were consolidated intoseven companies through mergers and reorganization from the 1990s to the 2000s,and each company sought to shape itself into the ideal general trading company.86