* * * * * * * * * T E R R I E 'S T A K E * * * * * * *<br>A weekly roundup of news & information from Terrie Lloyd.<br>(<a href="http://www.terrie.com">http://www.terrie.com</a>)<br><br>General Edition Sunday, July 31, 2011, Issue No. 624<br>
<br>+++ INDEX<br><br>- What's New -- Is Rakuten Over-extending?<br>- News -- Jump in single-person households a social problem<br>- Candidate Roundup/Vacancies<br>- Upcoming Events <br>- Corrections/Feedback<br>- News Credits<br>
<br>SUBSCRIBE to, UNSUBSCRIBE from Terrie's Take at:<br><a href="http://mailman.japaninc.com/mailman/listinfo/terrie">http://mailman.japaninc.com/mailman/listinfo/terrie</a><br><br>BACK ISSUES<br><a href="http://www.japaninc.com/terries_take">http://www.japaninc.com/terries_take</a>, or,<br>
<a href="http://mailman.japaninc.com/pipermail/terrie/">http://mailman.japaninc.com/pipermail/terrie/</a><br><br><br>----------- UPGRADE TODAY TO PBXL IP TELEPHONY ------------<br><br>PBXL has the solution for your office. PBXL will purchase <br>
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<br>------------ PBXL is BUSINESS COMMUNICATIONS --------------<br><br><br>+++ WHAT'S NEW<br><br>This week Rakuten, Japan's largest Internet company, <br>announced that it is acquiring Tradoria GmbH, Germany's <br>
largest online shopping firm. With the acquisition, Rakuten<br>is now in eight international markets and is on track to be<br>knocking on Amazon's door in the next three years to become<br>the largest online shopping company globally in terms of <br>
net profits. For comparison, Amazon had 2010 global sales <br>of around US$34bn and net earnings of US$1.2bn, while <br>Rakuten's 2010 global sales were roughly US$4.2bn with a <br>net profit of US$428m. But Rakuten profits are growing the<br>
quickest.<br><br>It's interesting to see that even though Rakuten's revenues<br>are just 15% or so of Amazon's that its net profit ratio is <br>double that of the US firm's. Commentators say this is <br>primarily because Rakuten doesn't operate physical <br>
warehouses, and it is much more deeply into the financial <br>sector, cross-feeding customers into financial services from <br>its customer base. No doubt it is also because Rakuten is <br>strategically choosing to only set up in high-growth <br>
countries at a time when it doesn't have to invent a new <br>business model. Being Number Two can be helpful sometimes.<br><br>The Tradoria business was purchased for an unknown sum, but<br>given the size of the business, we expect that they paid <br>
more than the US$263m paid for France's PriceMinister last <br>year. This acquisition and a number of others made by <br>Rakuten in the last 12 months underscores the relative <br>advantage that Japanese companies have in making foreign <br>
high-grade purchases using cheap funds from home. Tradoria <br>will add another 8m products and 4,400 member stores to <br>Rakuten's Japanese empire of 37,000 merchants and 75MM <br>SKUs.<br><br>The Tradoria acquisition comes hard on the heels of another<br>
purchase by Rakuten, this time in Brazil, of one of the <br>leading e-commerce companies in that country, Ikeda. Also <br>this year, Rakuten set up in Indonesia a joint venture <br>with domestic media conglomerate PT Global Mediacom. The <br>
new Internet shopping mall there is called “Rakuten Belanja <br>Online” and will compete with a number of incumbents.<br><br>[Continued below...]<br><br>----------------- Would You Write to Eat Out? -------------<br><br>Metropolis' <a href="http://www.metrodining.jp">www.metrodining.jp</a> website is gaining followers<br>
at a prodigious pace, and we need more expertly written <br>food reviews. <br><br>If you can write, and if you eat out a lot anyway, just<br>how many reviews of places you have already been to would<br>you be willing to write, in return for a meal out for two<br>
as payment? <br><br>We're interested to know the answer to that question and <br>invite readers to contact us and share their opinions.<br>Better still, if you would like to be a guinea pig in a<br>new barter payment program we are considering for <br>
Metrodining.jp, then let us know that too.<br><br>Contact us at <a href="mailto:terrie@metropolis.co.jp">terrie@metropolis.co.jp</a> to kick things off.<br>------------------------------------------------------------<br><br>
[...Article continues]<br><br>So, if you include the Baidu joint venture and Buy.com in <br>the USA, in the last 14 months Rakuten's international <br>M&A and investments have almost hit a billion dollars:<br>* 2010 May -- Rakuten bought Buy.com in the US for $250m<br>
* 2010 June -- Priceminister in France for EUR200m, company <br>had EUR40m revenues in 2010, so Rakuten paid 5x<br>* 2010 October -- Rakuten/Baidu j/v, Lekutian, opens website,<br>Rakuten will put US$50m into j/v over 3 years<br>
* 2011 June -- Rakuten/MNC j/v opens website, undiclosed <br>investment amount but probably US$20m or so<br>* 2011 June -- Ikeda purchase in Brazil, undisclosed amount <br>but our guess is around US$50m<br>* 2011 July -- Tradoria purchase in Germany, undisclosed <br>
amount and again, our guess is around US$300m<br><br>This seems like a lot of activity, given everything the <br>company is also doing here in Japan and in a number of <br>other countries (Taiwan, Thailand, etc.) and makes us <br>
wonder if Rakuten isn't running the risk of over-expansion <br>before it is internally capable of managing the pressures of<br>an international business.<br><br>Now we don't know what measures are being put in to place <br>
to cope with the new companies and people becoming part of <br>the global Rakuten network, but looking at the Amazon <br>financial report for 2010, they very helpfully list up the <br>four major challenges that they face with their <br>
international business: Management, Operations, Financial <br>and Other. For Rakuten, let us recast these risks slightly as <br>Internal and External, then pick up on a few that we see as <br>being threats that hopefully they are focusing on.<br>
<br>Internal<br>==========<br>1. Continuity and Consistency<br>Rakuten CEO Hiroshi Mikitani has stated that his key to <br>expansion is the "federation" of different businesses in <br>different countries, and to keep local management in place.<br>
This may sound good as a concept, but in pursuing <br>convenience for a rapid-fire M&A strategy, it is also <br>creating a negative balancing factor, which is <br>inefficiency. To really keep Rakuten's margins where they <br>
are -- and they are excellent -- the company needs to <br>figure out how to roll out common systems (managerial and <br>IT) amongst all its properties. This is only going to get <br>harder as more acquisitions get done.<br>
<br>2. HR <br>Unlike Japan, most employees at the newly acquired <br>businesses will owe little loyalty to a company in far off <br>Japan and as the founders leave with their buy-out <br>packages, the middle managers and those close to them will <br>
leave as well. In other large Japanese firms, the solution <br>has been to send out Japanese top managers to run each <br>country, and have these people provide the communications <br>and controls lifeline back to headquarters. We presume that<br>
Rakuten plans to do the same, but since it's a young <br>company, one wonders if they can hire the quality and <br>experience needed for such positions. Lack of experienced, <br>loyal managers has been the undoing of many a fast-growing <br>
company in the past.<br><br>Back at Headquarters in Tokyo, another challenge is for <br>Rakuten is to internationalize and bring in more <br>experienced foreign managers. Currently on the board of 16 <br>directors there are only two foreigners, and neither <br>
appears to be involved in an executive role. This means <br>that day-to-day operations don't have international depth <br>and this probably needs to be fixed fairly quickly.<br><br>3. Complexity<br>The company is a reflection of the founder, who has an <br>
interest in a wide range of industries and segments. Some <br>of these have been really well chosen, such as matching <br>finance to shopping -- and follows the examples of <br>successful US companies such as GMAC (now Ally Financial). <br>
But with such broad scope, the ability for operations <br>people to keep a handle on all the moving parts, especially<br>as the company starts linking the businesses together <br>internationally, will create some massive logistical and <br>
technical headaches. We can only imagine that this has <br>already started and is probably the strongest point of risk<br>to the company. This is a risk that can only be resolved <br>with some serious top-level policies and procedures being <br>
put into place.<br><br>External<br>==========<br>1. Reputational risk through software malfunction<br>What if it was revealed that Rakuten systems had a piece of<br>"back door" code, or incorrectly processed certain <br>
transactions over a long period of time? We're not saying <br>these problems exist, but if they did, then Rakuten could <br>have a situation similar to Toyota with sticking gas pedals. <br>As Rakuten rolls out its own software into multiple <br>
acquired firms and j/v's, the risks involved in possible <br>flaws in the software magnify tremendously, and the company<br>may not be ready to address multiple law suits in multiple <br>countries, let alone handle the massive PR fall-out that <br>
would occur on multiple fronts.<br><br>2. Hackers<br>Rakuten handles cash, and profits from doing so, thus <br>putting more onus on it than some other players to be sure <br>that its systems are hacker proof. As we've seen with Sony,<br>
the more diverse a company becomes, the more likely it is <br>that it has weaknesses in the business and security systems<br>of its international operations. Further, given that <br>Rakuten is a Japanese company, we're surprised that it <br>
hasn't yet been the target of sustained attacks by Chinese <br>nationalists looking to "teach the Japanese a lesson". Loss<br>of user data, planting of viruses, or sustained Denial of <br>Service attacks are all likely scenarios.<br>
<br>3. Anti-monopoly laws<br>In some lesser developed countries, such as Indonesia, <br>Thailand, etc., it is likely that Rakuten's solutions are <br>sufficiently technologically advanced that over the next 3 <br>years or so the company will kill the competition -- much <br>
as Amazon has killed Borders in the USA. We imagine that <br>the governments of each country, where business and <br>government are tightly bound together, will not take such <br>successes lightly. <br><br>4. Taxes<br>Amazon is fighting interstate sales taxes in the USA and <br>
what is driving this development is the disparity between <br>tax levels of those various states. Since Rakuten wants to <br>open up cross-border sales as a major plank in its <br>expansion strategy -- Indonesian and Thai business <br>
operators are really excited about the opportunity to sell <br>directly to Japanese shoppers -- then we believe that <br>taxation differences will surely provoke new legislation as<br>trade levels increase.<br><br>*************<br>
<br>If Mikitani is able to overcome these risks, and given how <br>the quality of the business model is really starting to <br>produce some solid profits, then we think that Amazon <br>should see Rakuten as a major threat in the coming 3-5 <br>
years. The M&A strategy that Rakuten is following obviously<br>is a very compelling one. For the cost of 1% or less of the<br>purchase price of US$300m (our guess) to finance the <br>acquisition of Germany's leading online shopping mall, <br>
Rakuten has secured an additional chunk of EUR60m or so in <br>revenues and EUR15m in net profits (again, our guess). This<br>is a pretty good value proposition, and a strong reason for<br>the M&A activity by Rakuten to continue apace. <br>
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<br>Working with our fully licenced temporary dispatch group,<br>we are now able to provide Japan in-country workers<br>for companies not yet registered in Japan.<br><br>This innovative service is available for companies needing<br>
to hire staff for Japanese customers, but who are unable<br>to commit to the expense and infrastructure of maintaining<br>an office in Japan. We take care of all aspects of the<br>employment, contracting, and dispatch -- including<br>
management of the employee.<br><br>Also, if you're thinking of Cloud office solutions, take a<br>look at Microsoft's new Business Productivity Online<br>Standard Suite. Terrie mentions Exchange Online in TT602,<br>
and we can do the same implementations for you.<br><br>For more information on this and other SI and IT services,<br>in English or Japanese:<br><br>Phone: (03) 4588-2220, Email: <a href="mailto:solutions@biosjp.com">solutions@biosjp.com</a><br>
Web: <a href="http://www.biosjp.com">www.biosjp.com</a><br>-----------------------------------------------------------<br><br>+++ NEWS<br><br>- Jump in single-person households a social problem<br>- Unemployment numbers don't include Tohoku<br>
- Shinsei starts path to recovery<br>- One-time Yankee pitcher Hideki Irabu dies<br>- Japan Tobacco buys out Sudan tobacco company<br><br><br>-> Jump in single-person households a social problem<br><br>A report from last year's census has found that of the <br>
50.9m households in Japan, the number of single-person <br>residences was 32%, the first time that singles outnumber <br>those households with couples and children. Apparently <br>there are no 15.9m people living alone, up 10% over the <br>
last census in 2005. Trends show that by 2030 there will <br>also be more couples living together without kids, than <br>those with kids -- not a good omen for the nation's <br>child-support industries. Another fact to be highlighted <br>
was that of low salaries. In 1997, couples with children <br>had incomes of JPY5m-JPY6.9m, however, by 2007 the income <br>range had plummeted to JPY3m-JPY3.9m annually. (Source: <br>TT commentary from <a href="http://japantimes.co.jp">japantimes.co.jp</a>, Jul 31, 2011)<br>
<br><a href="http://search.japantimes.co.jp/mail/ed20110731a1.html">http://search.japantimes.co.jp/mail/ed20110731a1.html</a><br><br>-> Unemployment numbers don't include Tohoku<br><br>We wonder if the Ministry of Internal Affairs and <br>
Communications is doing anyone any favors by not publishing<br>the real total number of unemployed in Japan. The <br>government put out the seasonal adjusted numbers, showing <br>that unemployment was up slightly at 2.89m people, or 4.6% <br>
of the population. However, by our reckoning the real <br>number if it included about 400,000 unemployed in Tohoku, <br>would be more like 5.3%. There were 59.63m people working <br>in Japan in May, 2011. (Source: TT commentary from <br>
<a href="http://e.nikkei.com">e.nikkei.com</a>, Jul 29, 2011)<br><br><a href="http://e.nikkei.com/e/ac/tnks/Nni20110729D29JF112.htm">http://e.nikkei.com/e/ac/tnks/Nni20110729D29JF112.htm</a><br><br>-> Shinsei starts path to recovery<br>
<br>Investors in Shinsei bank must be relieved to know that it <br>seems to be on the path back to recovery, after a <br>near-death experience relating to its consumer finance <br>business. The bank said that consolidated net profit for <br>
the first quarter (Apr-Jun) was up 31% over last year, to <br>JPY18.1bn. A statement said that the improved performance <br>was due to reduced consumer finance business costs and <br>gains from foreign shareholdings. (Source: TT commentary <br>
from <a href="http://e.nikkei.com">e.nikkei.com</a>, Jul 28, 2011)<br><br><a href="http://e.nikkei.com/e/ac/tnks/Nni20110728D28SS057.htm">http://e.nikkei.com/e/ac/tnks/Nni20110728D28SS057.htm</a><br><br>-> One-time Yankee pitcher Hideki Irabu dies<br>
<br>We were a bit shocked to hear that Japanese pitching <br>pioneer in the US Major Leagues, Hideki Irabu, was found <br>dead at his Los Angeles home aged just 42. Police said <br>that he had hanged himself. This is a sad end for someone <br>
who followed Nomo in the relatively recent trend of <br>Japanese baseball stars moving as a free agent to the USA,<br>in 1997. Irabu had a great start with the Yankees, but <br>faded quickly and bounced around the Minor Leagues for a <br>
while after that. He is survived by a wife and two <br>children. (Source: TT commentary from <a href="http://nytimes.com">nytimes.com</a>, Jul 29, <br>2011)<br><br><a href="http://nyti.ms/okUV16">http://nyti.ms/okUV16</a><br>
<br>-> Japan Tobacco buys out Sudan tobacco company<br><br>Facing falling sales at home, Japan Tobacco has long since <br>embarked on a foreign expansion strategy based on M&A and <br>cheap funds from Japan. The company has reportedly agreed <br>
to buy for US$450m the Haggar tobacco firm in the newly <br>established Republic of South Sudan. The price paid was 9.9<br>times FY2010's earnings -- less than the premium it paid <br>for the Gallaher Group in the UK back in 2007. ***Ed: The <br>
M&A strategy has been good for Japan Tobacco and the <br>company expects net income of JPY161bn for FY2010, up <br>JPY16bn from the year before. (Source: TT commentary from <br><a href="http://bloomberg.net">bloomberg.net</a>, Jul 29, 2011)<br>
<br><a href="http://bloom.bg/prvRkY">http://bloom.bg/prvRkY</a><br><br><br>NOTE: Broken links<br>Many online news sources remove their articles after just a<br>few days of posting them, thus breaking our links -- we<br>apologize for the inconvenience.<br>
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<br><a href="http://www.cchjapan.jp">www.cchjapan.jp</a><br>-----------------------------------------------------------<br><br>***------------------------****-------------------------***<br><br>+++ CANDIDATE ROUND UP/VACANCIES<br>
<br>=> BiOS, a Division of the LINC Media group, is actively<br>marketing the following positions for customers setting up<br>or expanding in Japan, as well as other employers of<br>bilinguals.<br><br>** HIGHLIGHTED POSITION<br>
<br>BiOS is urgently looking for a Vendor Manager with <br>experience developing a framework for strategic sourcing <br>and vendor management along with business strategies at our<br>client’s office in the Tokyo area. The candidate will be <br>
responsible for managing overall vendor-related activities <br>(i.e. proposal review, information request, vendor <br>registration, etc.), as well as manage risk for vendor <br>activities by reviewing current status of contracts, <br>
evaluations, etc..<br><br>You will also be responsible for for acting as a single <br>point of contact for all vendors, procurement, and asset <br>management teams.<br><br>Due to the technical nature and demanding work environment,<br>
this position is suitable for someone with solid experience<br>in vendor management of multiple sites, with vendors <br>located both in and outside Japan. In addition, since this <br>role requires direct negotiations with both Japanese and <br>
international parties both internally and externally, <br>business-level communication skill in both English and <br>Japanese will be required.<br><br>Remuneration is JPY8m – JPY11m depending on your experience<br>and skill level.<br>
<br>** POSITIONS VACANT<br><br>- Project Manager, global bank, JPY8M – JPY10M<br>- Network/VoIP-PBX engr, global marketing co, JPY5M – JPY6M<br>- Jnr iPhone Developer, multinational IT, JPY3.5M – JPY4.5M<br>- MAC Coordinator, global ibank, JPY4M – JPY5M<br>
- System Engr (Bank Account System), IT co, JPY5M – JPY7M<br>- Helpdesk Engr, global med equipment co, JPY4M – JPY5.5M<br><br>Interested individuals may e-mail resumes to:<br><a href="mailto:tomohiro.kimura@biosjp.com">tomohiro.kimura@biosjp.com</a><br>
<br>** BiOS Job Mail<br><br>Every 2 weeks BiOS sends out a regular communication to its<br>job seeking candidates, called BiOS Job Mail. Every edition<br>carries a list of BiOS's current and most up-to-date<br>vacancies, with each entry featuring a short job<br>
description and a direct link to the main entry on the BiOS<br>home page. Regardless of whether you are unemployed and<br>searching, thinking about a career change, or just curious<br>to know if there is something out there that might suit you<br>
better, the BiOS Job Mail newsletter is an easy and<br>convenient way for you to stay informed. If you would like<br>to register for the BiOS Job Mail, or to find out more,<br>please email <a href="mailto:kenji.sakota@biosjp.com">kenji.sakota@biosjp.com</a>.<br>
<br>Interested individuals may e-mail resumes to:<br><a href="mailto:tomohiro.kimura@biosjp.com">tomohiro.kimura@biosjp.com</a><br><br>-----------------------------------------------------------<br><br>***------------------------****-------------------------***<br>
<br>+++ UPCOMING EVENTS/ANNOUNCEMENTS<br><br>--------------- Start a Company in Japan ------------------<br><br>Entrepreneur's Handbook Seminar 10th of September, 2011<br><br>If you have been considering setting up your own company,<br>
find out what it takes to make it successful. Terrie Lloyd,<br>founder of over 17 start-up companies in Japan, will be <br>giving an English-language seminar and Q and A on<br>starting up a company in Japan.<br><br>This is an ideal opportunity to find out what is involved,<br>
and to ask specific questions that are not normally <br>answered in business books. All materials are in English <br>and are Japan-focused.<br><br>For more details:<br><a href="http://www.japaninc.com/entrepreneur_handbook_seminar">http://www.japaninc.com/entrepreneur_handbook_seminar</a><br>
-----------------------------------------------------------<br><br>***------------------------****-------------------------***<br><br>+++ CORRECTIONS/FEEDBACK<br><br>In this section we run comments and corrections submitted<br>
by readers. We encourage you to spot our mistakes and<br>amplify our points, by email, to <a href="mailto:editors@terrie.com">editors@terrie.com</a>.<br><br>*** No feedback or corrections today.<br><br>***********************************************************<br>
END<br><br>SUBSCRIBERS: 8,914 members as of July 31, 2011<br>(We purge our list regularly.)<br><br>+++ ABOUT US<br><br>STAFF<br>Written by: Terrie Lloyd (<a href="mailto:terrie.lloyd@japaninc.com">terrie.lloyd@japaninc.com</a>)<br>
<br>HELP: E-mail <a href="mailto:Terrie-request@mailman.japaninc.com">Terrie-request@mailman.japaninc.com</a><br>with the word 'help' in the subject or body (don't include<br>the quotes), and you will get back a message with<br>
instructions.<br><br>FEEDBACK<br>Send letters (Feedback, Inquiries & Information) to the<br>editor to <a href="mailto:terrie.lloyd@japaninc.com">terrie.lloyd@japaninc.com</a>.<br><br>ADVERTISING INFORMATION<br>For more information on advertising in this newsletter,<br>
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or, <a href="http://mailman.japaninc.com/pipermail/terrie/">http://mailman.japaninc.com/pipermail/terrie/</a><br><br>Copyright 2011 Japan Inc. Communications Inc.<br><br>----------------- Japan Inc opens up Japan ----------------<br>
<br>J@pan Inc is Japan's only independently published English-<br>language business website. Authoritatively chronicling<br>online the business trends in Japan, each posting brings<br>you in-depth analysis of business, people and technology in<br>
the world's second largest economy.<br><br>Visit <a href="http://www.japaninc.com">www.japaninc.com</a> for the best business insight on<br>Japan available.<br>-----------------------------------------------------------<br>
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