Weekly Brief: Lasting Presence of General Trading Companies
- Waseda Economics and Finance Forum
- Dec 29, 2021
- 3 min read
Updated: Feb 23, 2022
The Ministry of Economy, Trade, and Industry (METI) and the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) on the 24th announced the result for the public competition bid, appointing Mitsubishi Corporation for the installment project of offshore wind power generators in the three waters off the coast of Akita and Chiba Prefecture. These areas are selected as promotion zones for the Maritime Renewable Energy Resource Law (official name: Act of Promoting Utilization of Sea Areas in Development of Power Generation Facilities Using Maritime Renewable Energy Resources) and by 2028, total of 134 wind tower units are expected to be installed in the said areas.
Mitsubishi Corporation and other trading companies known as Sogo Shoshas have been involved in many infrastructure and energy-related projects, and this would be the first ever large-scale domestic wind power installment project in Japan.
What is Sogo Shosha?
”From cup noodles to rockets”
Sogo Shosha, or general trading company, is a business unique to Japan which has its origins in the Meiji Period when family trading companies began operating international import and export of products and materials. Today, they engage not only in trading products and materials but also in other broad ranges of businesses. Other businesses include providing information services, logistics, financing, risk management, and other functions related to international and domestic trade, as well as investment in many sectors such as infrastructure, energy, etc.
Why Is It Important?
Sogo Shoshas laid the foundation for the modernization of Japan after the Meiji Restoration and continues to play an important role in connecting Japan with international markets. They have contributed to the economic growth and globalization by importing products and materials into resource-scarce Japan. It’s business strategy and future prospect has also led to Warren Buffet’s Berkshire Hathaway acquiring around 5 percent stake ($7 billion in total) in each 5 major Japanese general trading companies (Mitsubishi, Mitsui, Sumitomo, Itochu, Marubeni) in August 2020.
Business Model
Sogo Shosha’s business lies in the three pillars: trading, investment, and business management.
- Trading: Trade intermediary across all supply chains.
- Investment: Investing resources in businesses of all sectors.
- Business Management: Management and development of businesses invested.
Business Model Example: Convenience Store
Sogo Shoshas are involved in the convenience store business in Japan. Lawson (subsidiary of Mitsubishi) and FamilyMart (subsidiary of Itochu) are strongly dependent on general trading companies as they assist in not providing materials, but in the development and retail phase of their products as well.
List of Sogo Shoshas
Seven major general trading companies include the following:
1. Mitsubishi Corporation: https://www.mitsubishicorp.com/jp/ja/
2. Itochu Corporation: https://www.itochu.co.jp/ja/
3. Mitsui & Co.: https://www.mitsui.com/jp/ja/
4. Marubeni Corporation (丸紅): https://www.marubeni.com/jp/
5. Sojitz Corporation: https://www.sojitz.com/jp/
6. Toyota Tsusho Corporation: https://www.toyota-tsusho.com/
7. Sumitomo Corporation: https://www.sumitomocorp.com/ja/jp
References
Nozawa, K. (2020, October 29). Warren Buffett’s Japan trade: The changing world of “sogo shosha.” Nikkei Asia. https://asia.nikkei.com/Business/Business-Spotlight/Warren-Buffett-s-Japan-trade-The-changing-world-of-sogo-shosha
Quick, B. (2020, August 31). Warren Buffett’s Berkshire Hathaway buys stakes in Japan’s five leading trading companies. CNBC. https://www.cnbc.com/2020/08/30/warren-buffetts-berkshire-hathaway-buys-stakes-in-japans-five-leading-trading-companies.html
Ryan, P. (2018, December 25). Reflecting the nation’s history, “sōgō shōsha” are unique to Japan. The Japan Times. https://www.japantimes.co.jp/news/2018/10/16/business/reflecting-nations-history-sogo-shosha-unique-japan/
ついにファミマまで. . .商社が「コンビニ取り込み」に必死になってる意外なワケ. (2020, July 21). 現代ビジネス. https://gendai.ismedia.jp/articles/-/74272?page=2
商社とコンビニの熱い関係 三菱商事・ローソン、伊藤忠・ファミマ. . . | 就活ニュースペーパーｂｙ朝日新聞 - 就職サイト あさがくナビ. (2017, February 9). 就職サイト あさがくナビ. https://asahi.gakujo.ne.jp/common_sense/morning_paper/detail/id=2056
日本経済新聞社. (2021, December 24). 秋田・千葉3海域の洋上風力、三菱商事などが事業者に. 日本経済新聞. https://www.nikkei.com/article/DGXZQOUA249K50U1A221C2000000/
結局商社ってなにやってるの？ 商社ビジネスを簡単解説！. (2021, November 30). 外資就活ドットコム. https://gaishishukatsu.com/archives/146714
Comments