This document discusses general trading companies (sogo shosha) in Japan. It defines sogo shosha as large diversified trading companies that trade a wide range of products globally. The document outlines the advantages of sogo shosha such as risk avoidance, market connections, and sophisticated systems. It provides examples of major Japanese sogo shosha like Mitsubishi, Mitsui, and Marubeni. The document also discusses the history and future prospects of sogo shosha in Japan and other countries.

1. 総合商社
The Special Role of
General Trading
Companies

2. Table of Contents
(1) What are the General Trading Companies?
(2) Developement
(3) Examples of General Trading Companies in Japan
(4) Other Countries
(5) Future Prospects
Definition Advantages StructureFunctions

3. Definition
 Over 8000 trading companies exist nowadays
 Around 300 of them are involved in foreign trade
Distinguish between:
 Sogo Shosha  Senmonshosha
 Senmonshoshas are less diversified
 Focus on particular product groups or geographic areas
Distinguish between:
Specialized product traders  Specialized regional traders

4. 総合商社
Complexity/
Diversity (to) unit/
(to) combine
Commercial /
Business Enterprise /
Organization
Definition

5. Definition
 A Sogo Shosha is a form of industrial organization,
orginated in Japan, which is trading a wide range
of products and materials
 They are characterized by colossal sales, by the
diversity of goods traded and, moreover, by the
global reach of their business network.

6. Top 5

7. Advantages
Sogo Shosha‘s
 provide a huge range of services to manufactures
 avoid risks whenever possible
 help the manufactures to connect with their markets
 have close relationships with the Keiretsu
 have sophisticated communications systems
 recruit the best employees
 have a loyal customer and supplier base

8. Functions
 Basic Function is  Trading
 Sogo Shoshas trade lots of different products in large volume
Economies of Scope and Scale
 The typical Sogo Shosha handles between 30000 and 50000
different products

9. Functions
Financial services
(primarly to
small and
medium-sized
manufacturing
firms)
 Sogo Shoshas are financial intermediaries between commercial banks and clients
Extend credits/
loans Provide loan gurantees
Develop venture capital

10. Functions
Information services
Sogo Shosha‘s supply information about:
 Product markets from all over the world
 Sources and capacity of raw materials
 Product trends
 Domestic and overseas demand
 Upward and downward movement of prices
 The size of potential markets for firms interested in
expanding

11. Functions
Risk Reduction services
Sogo Shosha‘s
 sign contracts to sell foreign currencies that they expect will
depreciate in the future
 offer knowledge to customers
 financial health through steady observation
 handle country risk management

12. Functions
Auxiliary services
 Insurance
 Warehousing
 Forwarding
 Investment in Real Estate
 Engagement in Tourism
 And many more......

13. Organization
 ‘‘Military-style‘‘  highly reglemented from the
chairman through chief of divisions and of
department or offices
 Unlike the military they are extremely flexible,
mobile and adaptive
 All of them are
joint-stock companies

14. Development
Meiji Time:
First Sogo Shoshas were founded
Until 1885, 9 were established
High growth rates in the following years
 strong relationships to the government
 Involvment in military conquest
American Occupation: (1945-1950)
Closure of the Sogo Shoshas
Afterwards: Rapid reestablishment

15. Development
1960‘s-1980‘s
Strong growth rates in export [Economic Miracle]
総合商社 +80%+110 %
High surplus in foreign trade
Best time of the Sogo Shoshas
1990
Collapse of the ‘‘price- bubble‘‘
 Decreasing importance of the Sogo Shosha due to the
globalization

16. Numbers and Facts
 The total sales are 15-18% of Japan‘s GDP
 Import Japan 2009: Export Japan 2009:
Sogo Shosha
 30% of their business included 3rd-country trading

17. Net Income
2011
17

18. 18
Net Income
2011

20. "Our mission is to trade with all countries in the world by
exporting surplus goods from Japan to other countries and
importing goods to meet domestic demand.“
Established in 1876
Export Import
 Machinery, Shipbuilding, Transportation and Logistics

21. From the 1930s on:
Involvement in heavy and chemical industries,
 machinery, chemicals and mining.
1959 Foundation of the New Mitsui & Co.
Discovering new branches
A good relationship to the government was consistently existing
2011: 40 000 employees

24. Established in: 1954
Employees 2011: 233

26. Don‘t mix it up with :
 Orginially no connection, however, Mitsubishi Corporation
made a large investment in Mitsubishi Motors

27. Number of Employees (2011):
Parent Company:
5,792
Parent company and all of its consolidated subsidiaries:
60,520
1954 Foundation
1968 First large-scale engagement
1986 Focus was shifted from operating transactions to profits
1990 Globilazition of company‘s operations and its people

28. Corporate Philosophy - Three Corporate Principles
 Corporate Responsibility to Society ("Shoki Hoko")
Strive to enrich society, both materially and spiritually, while
contributing towards the preservation of the global
environment.
 Integrity and Fairness ("Shoji Komei")
Maintain principles of transparency and openness, conducting
business with integrity and fairness.
 Global Understanding Through Business ("Ritsugyo Boeki")
Expand business, based on an all-encompassing global
perspective.

29. 1 Yen ~ 0,01 Euro

31.  Promotion of renewable energy businesses
 solar photovoltaic, solar thermal, and wind power.
 Electric vehicle and next-generation battery businesses.
21 offices & subsidiaries in Europe

33. Businesses are divided by industries
Machinery
Chemicals
Energy
Metals
Living
Essentials
Finance
and
Logistics
Foods Div. Textile Div. Motor vehicle Div. Industrial machinery Div.
Each of these divisions is like a mini-company  They are in charge of their own strategies

37. Number of Employees:
5887
Offices international:
118
120 corporate offices in 80
countries
 Over 500 group companies

38. Marketing Activities
The name is not on consumer products or retail outlets
Marubeni do not manufacture products with their name on it
Thus, mostly assume marketing activities
for small manufactures
However, the big companies conduct
increasingly marketing activities themselves

39. Other Countries
Nothing comparable nowadays
Lack of Know-How and Infrastructure
Many big industrial companies fulfill
similar tasks as the Sogo Shoshas
Companies prefer doing their own
supply and marketing responsibilities to
using intermediaries

40. Other Countries
Closest equivalent to Sogo Shosha‘s
e.g. LG Group, Samsung, Hyundai
 Began to establish Sogo Shosha style companies
in the mid 90‘s
Attempt of Replication in the early 80‘s
 Companies should join export trading
companies backed by banks offering fiancial
support

41. Future Prospects

42. Future Prospects
Sogo Shosha‘s:
know how to manage trade and asset risks
have low transactions costs due to large lots in standarized products
are able to dominate markets due to their size and financial power
use top credit ratings to acquire low cost funds that are loaned
are practised in financing and coordinating big projects in Third-World countries
expand through mergers, joint ventures and acquisitions

43. Future Prospects
Sogo Shosha‘s:
Strong competition through Non-keiretsu companies
and through manufactures and foregin companies  greater competition
Fear that fewer countries will accept the power of the Sogo Shoshas
Manufactures increase independence

44. Future Prospects
Main measurements for Sogo Shosha‘s to stay
successful over the next years
 Participation in manifacturing industries through
investment
 Responding to new inventions and developement plans
 Governmental support
 Expansion of third-party trading

45. Thank you for your
attention!

46. Any
Questions?

47. Sources
 Gödeke; Heinz (1991): Die Generalhandelsgesellschaften
(Sogo Shosha) in Japan; Hamburg: Verlag Dr. Kovac
 Herbig; Paul: Sogo Shosha in:
www.herbigandsons.com/lecture/sogoshosha.doc
 Simley; John: Sogo Shosha in: www.enotes.com/sogo-shosha-
reference/sogo-shosha
 Tanaka; Akira (2009): The Role of Sogo Shosha in Mass
Procurement System of Resource

48. Sources
 Yoshimo; M.Y. (1986): The Invisible Link: Japan‘s Sogo
Shosha and the Organization of Trade; Cambridge:
The MIT-Press
 Young; Alexander (1984): The Sogo Shosha; Tokyo:
Charles E. Tuttle Company
 www.marubeni.com
 www.marubeni-recruit.com/ms/contents/whatss.html
 www.mitsui.com
 www.mitsubishicorp.com