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Tuesday, May 16, 2000

Japan still has its strengths

PRODUCTIVITY IMPROVEMENT: How Japanese Enterprises Meet the Challenge, by Hirotoshi Shibuya and Hideyuki Kamiryo. The Japan Times, 2000, 209 pp., 3,000 yen (cloth).

While corporate philosophies and principles may change from country to country, the basics of finance are constants. "Productivity Improvement" introduces those fundamentals and applies them in a Japanese context. First published in Japanese in 1992, "Productivity Improvement" has become a standard treatise on business management. The authors are notable in their fields. Hirotoshi Shibuya is president of Shibuya Kogyo and Hideyuki Kamiryo is dean of the Faculty of Commercial Sciences at Hiroshima Shudo University's Graduate Division.

The first third of the book is an introduction to the fundamentals of business finance. It covers such topics as how to look at a balance sheet, the meaning of the various components, and how to understand such critical concepts as working funds, productivity, financial ratios and break-even points.

Parts 2 and 3 offer case studies of productivity and the application of those basic concepts. Of special interest is the application of the basic principles to Shibuya Kogyo, drawing on the experiences of Shibuya himself and the research by Kamiryo.

Shibuya Shoten was founded in 1931 as a small trading company. In 1949, the name was changed to Shibuya Kogyo, and the company was transformed into a small bottling-machine manufacturer and sales company. Over the past half-century, it has diversified, thriving all the while. Today, the company is listed on the First Section of the Tokyo Stock Exchange, and its products include laser, cleaning, semiconductor and medical-equipment systems.

The key principle, argues Kamiryo, is productivity. "From a national economic viewpoint, an increase in the productivity of labor is the only source of sustainable growth if the growth rate of employees or population is zero. The increase in the productivity of labor is a vital concern for both U.S. and Japanese management.

The authors believe that U.S. businesses focus on profit while Japanese companies concentrate on the productivity of labor. But profit and productivity of labor cannot be truly separated.

Japanese management has lost sight of that fundamental truth, argues Kamiryo. The loss of a "real cooperative relationship between labor and capital productivity" has been the cause of Japanese woes during the last decade.

He believes that Japanese companies have invested too heavily in capital. The proof is in the factories idling or running at less than full capacity. He concludes that "too much capital accumulation has prevented Japanese management from improving the productivity of labor and thus having sustainable growth."

But the emphasis must not be overdone. Sustainable growth is the key; only a balanced perspective will work.

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