Law­son CEO pack­ing bags for Shang­hai as Tokyo growth ebbs

The Pak Banker - - Company& -

SHANG­HAI: Law­son Inc. Chief Ex­ec­u­tive Of­fi­cer Takeshi Ni­inami aims to open al­most 10,000 stores in China by 2020, sell­ing drinks, food and mag­a­zines. To pull it off, the Toky­obased ex­ec­u­tive is pack­ing his bags for Shang­hai, Bloomberg re­ported.

As Ja­pan's sec­ond-largest con­ve­nience-store op­er­a­tor plans to boost out­lets in China more than 30-fold, Ni­inami, 51, will spend a month in the nation from May and an­other within less than a year, he said at a me­dia brief­ing in Tokyo on Dec. 20. Law­son is also train­ing Chi­nese re­cruits in Ja­pan to work as store man­agers in their home coun­try, where the com­pany lags be­hind ri­vals Seven & I Hold­ings Co. and Fam­i­lyMart Co.

"To get a feel for daily life in China and to take risks, I've got to live there a cou­ple of months," Ni­inami said. "Stay­ing all the time in Ja­pan, I tend to fo­cus only on down­side risks."

Ni­inami's plans un­der­score how Ja­panese com­pa­nies are count­ing on China, set to sur­pass Ja­pan as the world's sec­ond-largest econ­omy this year, as a shrink­ing and ag­ing pop­u­la­tion dims the out­look for growth at home. It is also an ex­am­ple of how ex­ec­u­tives in the nation are seek­ing to over­come a short­age of in­ter­na­tional ex­pe­ri­ence as they ex­pand abroad.

"Law­son's move shows how Ja­panese com­pa­nies are try­ing to glob­al­ize," said Tsuyoshi Ko­mori, pres­i­dent of Tokyo-based con­sul­tant Mercer Ja­pan Ltd. "Spend­ing time and pour­ing en­ergy into China will prove Ni­inami's com­mit­ment." Law­son rose 0.7 per­cent to 4,035 yen at the 3 p.m. close of trad­ing in Tokyo. The shares have fallen 1.6 per­cent this year, com­pared with a 1.9 per­cent drop in the bench­mark Nikkei 225 Stock Av­er­age.

Law­son op­er­ated 318 stores in main­land China as of Novem­ber, ac­cord­ing to the com­pany's web­site. The nation is Law­son's sole mar­ket out­side Ja­pan, where it had 9,935 out­lets.

The push in China is driven in part by a de­cline in Ja­panese con­sumer spend­ing, which fell in 2008 and 2009, ac­cord­ing to fig­ures re­leased by the Cabi­net Of­fice.

Ja­pan's pop­u­la­tion is de­creas­ing from a peak of 127.8 mil­lion in 2004 and may bot­tom out at less than 90 mil­lion in 2055, ac­cord­ing to the Na­tional In­sti­tute of Pop­u­la­tion and So­cial Se­cu­rity Re­search.

In con­trast, the num­ber of mid­dle-in­come and af­flu­ent con­sumers in China, the world's most pop­u­lous nation with more than 1.3 bil­lion peo­ple, may al­most triple to 415 mil­lion in 10 years, Bos­ton Con­sult­ing Group Inc. said in Novem­ber.

Com­peti­tors have out­paced Law­son in tap- ping China's growth. Seven & I Hold­ings, the world's largest con­ve­nience re­tailer, op­er­ated 708 7-Eleven out­lets in main­land China as of Novem­ber, said Mi­noru Mat­sumoto, a com­pany spokesman. Fam­i­lyMart had 492 stores in the nation, ac­cord­ing to its web­site.

Law­son opened its first Chi­nese store in Shang­hai in 1996, ac­cord­ing to its web­site. All three com­pa­nies are based in Tokyo.

"To reach a goal of 10,000 shops by the year 2020, not only the CEO's lead­er­ship ex­am­ple but also lo­gis­tics and hu­man re­sources are go­ing to be needed," said Naozumi Nishimura, an an­a­lyst at TIW Inc. in Tokyo with a "neu­tral" rat­ing on Law­son's shares. "I'll be pay­ing at­ten­tion to how fast they ex­pand and how fast they turn a profit from it."

Law­son's growth in China has been held back by a lack of hu­man re­sources, Ni­inami said in an in­ter­view in April. An ini­tial ef­fort to send Chi­nese em­ploy­ees to Ja­pan for train­ing proved too time-con­sum­ing, he said. Chang­ing its strat­egy, the com­pany be­gan hir­ing and train­ing Chi­nese grad­u­ates from Ja­panese uni­ver­si­ties.

"The new sys­tem started three or four years ago, and now I think we have the re­sources to ac­cel­er­ate our for­eign busi­ness," Ni­inami said in April. Cross-border train­ing and ex­pe­ri­ence is also a man­age­ment-level chal­lenge at Ja­panese com­pa­nies. Ja­pan ranked 49th among 58 coun­tries this year in in­ter­na­tional ex­pe­ri­ence for se­nior man­agers, ac­cord­ing to the World Com­pet­i­tive­ness Year­book 2010 pub­lished by Switzer­land's IMD In­ter­na­tional busi­ness school.

The num­ber of Ja­panese cit­i­zens liv­ing in China al­most tripled in a decade to 127,282 in Oc­to­ber 2009, ac­cord­ing to Ja­pan's Min­istry of For­eign Af­fairs. Shang­hai is home to 48,255, ac­cord­ing to the min­istry.

Ni­inami's own in­ter­na­tional ex­pe­ri­ence in­cludes start­ing the Chi­nese sugar-trad­ing busi­ness at Mit­subishi Corp., a Tokyo-based trad­ing com­pany, he said in an in­ter­view with THE 21, a monthly mag­a­zine in 2008. He is also a Har­vard Busi­ness School grad­u­ate.

He be­gan his ca­reer at Mit­subishi, Law­son's biggest share­holder, in 1981 and be­came pres­i­dent of the con­ve­nience-store op­er­a­tor in 2002. In 2005, he was named Law­son's CEO.

Un­der Ni­inami, Law­son's op­er­at­ing profit has in­creased in the past seven con­sec­u­tive fis­cal years. The com­pany fore­casts net in­come in the 12 months end­ing Fe­bru­ary may rise to 22 bil­lion yen ($266 mil­lion) from 12.6 bil­lion yen last fis­cal year, while rev­enue may fall to 430 bil­lion yen from 467.2 bil­lion yen. -PB News

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