Terrie's Take 904 - Old Man Funai and the Weakness of One-man Shacho Companies
terrie at mailman.japaninc.com
Mon Jul 10 00:06:39 JST 2017
* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.
General Edition Sunday, July 09, 2017, Issue No. 904
- What's New -- Old Man Funai and the Weakness of One-man Shacho Companies
- News -- Embryonic stem cells soon available for medical use
- Upcoming Events
- Travel Picks -- Alice in Wonderland in Harajuku, Cat Island in Miyagi
- News Credits
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+++ WHAT'S NEW
On Friday, the stock price of Funai Electric hit its highest point in
the last 18 months, gaining 2.83% to end the day at JPY1,053 per share.
This was rather surprising to us, because while the price represents
favorable news on recent deals and generally favorable financial
results, at the same time, on Tuesday the firm's iconic founder, Tetsuro
Funai ("Old man Funai" to many), died at the age of 90. At that age you
would expect that Mr. Funai would have been well out of the company thus
allowing the firm to run on its own merits (and thus insulated from the
eventual passing of its founder), but things are not that simple.
In fact, Mr. Funai retired from the CEO role of Funai Electric in 2008,
at 81 years old, and the company was run by a long-term trusted
lieutenant. But after his retirement and a nice but temporary 100% bump
in stock price, the lack of new technology to replace Funai's staple
businesses of TV and VCR/DVD manufacturing started to eat away profits,
and in 2012 the stock fell to its current low average of JPY1,000 or so.
The Funai board tried a variety of rejuvenation strategies, including
buying brands in sectors with razor-thin margins which the owners were
trying to get out of - like Lexmark's ink jet printer division - and in
the process also burned through 3 different CEOs. However, in the end it
took the return of Mr. Funai to the business to put the company back on
a stable footing. His final achievement before passing was to
re-introduce the Funai-brand LCD TVs into Yamada Denki stores across Japan.
But now he is gone.
Our take is that while shareholders may currently cheered by the fact
that the company seems to be on the mend, in fact, it were us, we'd be
dumping the shares per one simple premise - the driving force of the
company is gone. The problem for Funai, like many electronics companies
started after WW2, is that Mr. Funai ruled his company with an iron fist
and he was part of a generation of "One-man Shacho's" who made sure that
none of their employees got any strange ideas about just whose company
they were working for. Other such top-down run companies have included
Honda, Matsushita, Sony, Kyocera, and Fanuc.
However, unlike these other companies, which although after the passing
of their founders (well, Kyocera's Inamori and Fanuc's Inaba are still
around) had their existential threats and were able to overcome them
thanks to a deep pool of management experience and relatively
diversified businesses, Funai has always been laser focused on just a
few products, and their market positioning has been one of cost-cutting
rather than product innovation, which means a lack of emotional depth
and vision within the management.
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We heard a story a few years ago about just how autocratic and strict
the management methods of Mr. Funai were, which in the beginning no
doubt contributed significantly to his success in what essentially has
been a manufacturing and trading business. Even as he turned 80, Mr.
Funai would gather all the senior managers every morning in the office
at 08:00, and would spend an hour with them going over the business and
specific actions and problems that each division was facing. Notably, he
insisted that every manager know their business well enough that they
didn't take notes in or at those morning meetings. This was apparently a
source of huge pressure for those attending, and no doubt caused many
rising stars to leave the firm the closer they got to Old Man Funai's
orbit. At the same time, you have to respect Funai's own personal mental
acuity and physical stamina.
One-man Shacho's are not just an electronics company phenomenon, but are
most commonly found in those sectors in Japan which are tied to
innovation and which are largely free of incumbents. Currently, you can
find many such operators in the Internet space, and it is probably no
accident that many of these people have very similar problems to those
that the Funai company is facing. Fundamentally a One-man Shacho (and of
course it could be a woman CEO) runs the company as their fiefdom and
will do with it what they want. Whether this disadvantages the
shareholders and whether it breeds a generation of "yes men" around them
that weakens the company, is of little concern. We have had the
unfortunate experience of having to deal with a number of these types of
company owners over the years.
The source of a One-man Shacho's power to successfully intimidate their
employees is generally rooted in two things: i) Japanese graduates
coming into these companies are already used to a bullying culture at
school, and so while being in such a company is uncomfortable it is not
unmanageable. And ii) usually this kind of shacho has created a cash-cow
business and the staff know that they are lucky to be riding a winning
horse. So for them the need to get paid and eat is more important than
any feelings they may have about the methods the boss uses to achieve
Successfully dealing with these kinds of top-down companies is all about
how close you can get to the CEO and be his or her "buddy". If you have
something they want, and you have the time and willingness to deprecate
your interactions so as to feed their ego, you can walk away with some
very decent deals and a devoted remote workforce (i.e., their employees)
to support you. The problem comes when your One-man Shacho partner
decides that they don't like you any more or that you're becoming a
competitive threat. Then suddenly, instead of an orderly and cooperative
partner, you wind up with a CEO who makes increasingly unreasonable
demands coupled with a phalanx of yes-men co-workers who suddenly can't
make decisions on their own and have to keep referring matters upstairs.
In the end, such a relationship is down to how much patience you have
and how crazy/power obsessed the One-man Shacho is. One good tell-tale
clue is to check that company's previous record of legal actions in
In Funai's case, the company has very shallow management resources and
was mostly powered by Old Man Funai's trading mentality and the traders
he employed. Now, without recruiting someone with very similar
capabilities to take over the reins, we expect that the company will
once again lose momentum and eventually become a takeover target. We
give Funai Electric about 12 months before the cracks start to appear.
And because the trader nature of the company is not really that
attractive to fellow Japanese players, the likely buyers will be from
Taiwan or Hong Kong.
In the meantime, Rest in Peace, Mr. Funai. You were one of Japan's
post-War giants, a man of great self discipline, and salt of the earth.
...The information janitors/
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- Embryonic stem cells soon available for medical use
- Record fall in population
- GPIF shows greatest returns in two years
- World's most expensive bunch of grapes?
- Is Abe in danger of being ousted as PM?
=> Embryonic stem cells soon available for medical use
In a major advance for the use of embryonic stem cells in medicine in
Japan, Kyoto University has said that in cooperation with Kyoto's Adachi
Hospital it will make fertilized eggs from patients undergoing
infertility treatment available to other medical institutions wanting to
incorporate stem cell treatments for patients. The cells are expected to
be used for a variety of conditions, including spinal cord repair,
retina regeneration, diabetes treatment, and Parkinson's treatment.
(Source: TT commentary from japantimes.co.jp, Jul 05, 2017)
=> Record fall in population
Japan's demographic tsunami is gaining momentum and the population of
the nation's citizenry fell by a record 308,084 to 125.6m people. This
was partly offset by a 7% increase (148,959) foreigners living in Japan.
Both lower birth rate and aging were to blame. Births fell below 1m
babies for the first time in 37 years, with 981,202 new registrations.
Deaths increased to 1.3m. Japan is expecting its population to decrease
by as much as 900,000 people a year by 2045. (Source: TT commentary from
ft.com, Jul 05, 2017)
=> GPIF shows greatest returns in two years
The world's largest pension fund, Japan's Government Pension Investment
Fund (GPIF), enjoyed a 5.9% bounce back on its assets, an amount of
around JPY7.9trn, for the fiscal year ending March 31, 2017. As a result
the GPIF's assets have now hit a record JPY144.9trn. Before too many
congratulations are in order, it is sobering to think that the GPIF last
year had its worst performance ever. losing JPY5.3trn. This time around
the fund rose on the improvement in stock prices both locally and
overseas. The fund's biggest equities investments were in Toyota,
Mitsubishi UFJ, and Apple, while its largest debt holdings were in
Japanese government bonds (JGBs) and United States treasuries. (Source:
TT commentary from straitstimes.com, Jul 08, 2017)
=> World's most expensive bunch of grapes?
A bunch of prized Ruby Roman red grapes were auctioned off on Friday for
a record JPY1.11m, approximately JPY37,000 per grape. The grapes, a
high-brix variety developed in Ishikawa-ken about ten years ago, were
purchased by the delighted manager of the exclusive onsen Kagaya, which
is also located in Ishikawa-ken. Each Ruby Roman grape weighs 20gm or
more, and the prefecture expects to sell 23,500 bunches for about
JPY139m (i.e., for a more reasonable but still pricey JPY5,900/bunch).
(Source: TT commentary from the-japan-news.com, Jul 07, 2017)
=> Is Abe in danger of being ousted as PM?
Readers outside Japan may not know that PM Abe's LDP political party
suffered a stunning defeat last Sunday (July 02) at the hands of Tokyo's
new woman governor, Yuriko Koike and her new "Tokyoites First" party.
This is the first really serious setback for Abe and the LDP since he
won a landslide victory over the opposition DPJ party back in 2012.
Koike got elected on several factors: 1) She is the first credible new
challenger since the 2012 landslide, 2) Abe has been caught up in a
number of embarrassing scandal accusations, and 3) the LDP's Tokyo
leadership came across as an "old boy" network looking after themselves
at the expense of the tax payers. The Nikkei summed up the loss as being
caused by: "Arrogance, complacency, fragility." Political commentators
say that although Abe's hold on power has been weakened, potentially
derailing his efforts to rewrite the constitution, but in the absence of
any serious contenders he is expected to stay in power at least until
his second term as the LDP leader ends in September 2018. (Source: TT
commentary from reuters.com, Jul 04, 2017)
NOTE: Broken links
Some online news sources remove their articles after just a few days of
posting them, thus breaking our links -- we apologize for the inconvenience.
+++ UPCOMING EVENTS
---------- ICA Event - Thursday 27th July -----------------
Speaker: John Kirch - Regional Director North Asia of Darktrace
Title: "Leveraging Artificial Intelligence to detect New, Emerging Cyber
Threats in Realtime "
Details: Complete event details at http://www.icajapan.jp/
Date: Thursday 27th July, 2017
Time: 6:30pm Doors open
Cost: 1,000 yen (members), 2,000 yen (non-members). Open to all. No sign
ups at the door!!!!!!!
RSVP: By 5pm on Monday 24th July 2017, Venue: Room F, 9F, Sumitomo
Fudosan Roppongi Grand Tower, 3-2-1 Roppongi, Minato-ku, Tokyo, 106-0032
No corrections today.
+++ TRAVEL DESTINATIONS PICKS
=> Alice on Wednesday, Harajuku, Tokyo
An Alice in Wonderland themed boutique
There are so many things to do in Harajuku: a visit to the Meiji Shrine,
a walk down the popular fashion street Takeshita Dori, and window
shopping around the larger streets, where popular brands from all over
the world have built their flashy multi-floor branches. Luckily for
those Alice in Wonderland fanatics, Harajuku will also be your go-to place!
"Alice on Wednesday" is tucked away near the entrance of a small street,
only a 7-minute walk from Takeshita Street. The store explains its name
choice: turning the boring day of Wednesday into a wonderland-filled
day. It is an Alice in the Wonderland themed shop with snacks, jewelry,
and accessories. It is very much like the accessory shops found along
the Takeshita street, with most of its customers browsing the jewelry
section of the store. Pleasantly unlike most accessory shops in
Harajuku, its products are moderately priced and less likely to frighten
those who have accidentally discovered the shop.The store's facade is
designed showing four different sized doors. Customers enter through the
smallest door and are transported to Lewis Carroll's whimsical world.
=> Cat Island of Tashirojima, Miyagi
Feline paradise south of Ishinomaki
Cat Island, otherwise known as Tashirojima, is located 50 min south of
Miyagi's Ishinomaki area, accessible by ferry from the mainland. There
are over 600 cats living on the island - six times the number of human
residents! With the island's population slowly declining over the years
and average age of its residents slowly rising, the island is
nonetheless supported by its small fishing port and several local
The two main areas include Oodomari to the north and Nitoda to the south
- the latter village the primary destination for visiting tourists from
the mainland. Venturing inland you can also find several points of
interest, including the Cat Shrine and Manga Island area.The Cat Shrine
is said to have been built by local fishermen in honor of a cat that
died in a fishing net accident.
SUBSCRIBERS: 6,460 members as of July 09, 2017 (We purge our list
+++ ABOUT US
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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