Confidential

International BusinessTransactions and Conflict
Management

Presentation for: Kobe
University, Summer School of
Asian Law and Dispute
Management

Promising Future of JapanASEAN Business Cooperation

Summer, 2014

By Loong Kok HongTel: + 60 (12) 278-0708
email: loong.kokhong@gmail.com
Reference: 001lkh_salad14

Promising ASEAN

Introduction

0Boom and DoomJapan is the first advance country to experience asset bubble
Nikkei Stock Index
Japan as No. 1

World Biggest Debt Nation• Land price: x100 of US• For only 1/25 the size

• >250% GDP of public debts• Severe aging population• Almost no economic growth… there are many lessons for us to learn from1

Promising ASEAN

Introduction

Key Objectives

This lecture aims to inspire participants to go beyond the boundary foropportunities‘There is no security on this earth. Only
opportunity.’…by Douglas MacArthur• This lecture highlights several useful thoughts that may serve as ‘pointers’ for participants
who are in search for their respective future paths;• A list of reading materials is provided. Participants are encouraged to read through themin order to participate actively in the lecture.

2Promising ASEAN

Trends

Cross Border Capital FlowJapan strives hard for economy breakthrough: Japanese companies are
increasingly active in expanding to overseas; M&A is gaining popularity

Source: RECOF Corporation3

Promising ASEAN

TrendsNew Normal

The objective for international expansion is different this time: COEs wantoverseas market expansion – not just a production base内なる充実、外への発展

Bob McDonald「グローバル10」戦略

新興国でシェアを拡大…

佐光正義
東南アジア…本格参入「グローバルな成長」

Promising ASEAN

Trends国内は勝ち残り 海外で事業拡大

4

New NormalWhy?

“The Japanese market is shrinking while overseas
markets are expanding,”…. Professor Hideki Yoshihara

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TrendsNew Normal

At the same time, an unusual trend has emerged: Japanese companies adopt
English as corporate language…

2013

2013, Global Operation2012
2011, R&D

2010
2003

The reason: seeing the horizon beyond
Japan - the global market!
6Promising ASEAN

Global Perspectives

Asia Market

Asia, for example, as compared to Japan is by far a much bigger market,
offering tremendous opportunity for growth

India
Population: 1.1bn
GDP growth: >4.5%pa

JapanPopulation: 0.127bn
GDP growth: ~2.0%pa

China
Population: 1.3bn
GDP growth: >7.5%pa

ASEAN
Population: 0.6bn
GDP growth: >5%pa

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Global Perspectives

ASEAN Market

Even ASEAN is six times bigger than Japan, in terms of population…

…but with diverse income levels, languages, religions, and cultures.
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Promising ASEAN

Global Perspectives

Strategy

Imagine that if you were a CEO, how would you globalize your business?
Blanked on purpose

9Promising ASEAN

Global Perspectives

StrategyLet’s treat it like a baseball game: first, get on to first base! (be clear on yourobjective)
http://en.wikipedia.org/wiki/Batting_order_(baseball)

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Promising ASEAN

Global Perspectives

Ground Zero

Case Study on Japanese Fast Moving Consumer
Goods (FMCG) Companies:
Is Japanese company competitive?

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Global Perspectives

Ground Zero - Malaysia

Japanese companies can be very competitive, and has the ability toredefining the market;
Diaper Industry••

Detergent Industry

Comparatively ‘young’ industry
No clear winner in the industry••

Very matured industry
Went through many rounds of consolidation…but they must address the market appropriately from the beginning
12Promising ASEAN

Global Perspectives

Ground Zero – Malaysia, Diaper Industry

Diaper Industry

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Global Perspectives

Ground Zero – Malaysia, Diaper Industry

Unicharm is leading diaper player in Japan, making it the benchmarking
targetUnicharm is No.1 in Japan

Market share ranking
1) Unicharm2) Kao3) P&G4) Daio5) Oji Nepia

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Promising ASEAN

Global Perspectives

Ground Zero – Malaysia, Diaper Industry… and the target to follow through illusive data

… however, data released could be illusive and misleading15

Promising ASEANGlobal Perspectives

Ground Zero – Malaysia, Diaper Industry

As a result, many follow Unicharm’s footprints

High end
High end

High end
High end

High end only

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Promising ASEAN

Global Perspectives

Ground Zero – Malaysia, Diaper Industry

It’s the same old, same old… many bound to fail, or at best: no different as inJapan!
High end
High end

Problem: lack of
critical thinking
ØSame markets;

High end
High endØSame products…

High end only17

Promising ASEAN

Global Perspectives

Ground Zero – Malaysia, Detergent Industry

Detergent Industry

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Promising ASEANGlobal Perspectives

Ground Zero – Malaysia, Detergent Industry

Detergent: Traditionally controlled by European and American companies…
Changes in Detergent Market Share
1995

2013

… however, LION is a clear winner today
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Global Perspectives

Ground Zero – Malaysia, Detergent Industry

From 1998, LION’s market share continued to increase to >50%; it is number
1 in Malaysia far ahead of Kao (5% market share)

Growth:1,400 times!
In 25 years.

• No. 1 in Malaysia• Detergent: >50% share• No. 1 in Malaysia•Bought a small ‘wornout’ factory• LION products in 50%households;•Sales: RM30,000/mth• Sales: >RM30mn/mth

1987• Sales: >RM42mn/mth

2007

2012
25th year

20Promising ASEAN

Global Perspectives

Ground Zero – Malaysia, Detergent Industry

Southern Lion was able to fully capitalized on its key strengths

50%50%Southern Lion Sdn Bhd• Establised a50-50 JV withLam Soon
1987

• Invested heavily to
expand capacity while
competitors relocatedproduction facilities toThailand and Vietnam
1998• No. 1 in Malaysia• LION products in50% households;• Sales: >RM30mn/mth2007• Further expanded
production capacity
by 300%2011
27th year

21Promising ASEAN

Global Perspectives

Ground Zero – Malaysia, Detergent Industry

LION is well supported by local knowledge••

Preferred 100% owned
Priority on BRICS markets

Strategy

50-50 JV with local partner

Sales and Distribution

Local partner

AgencyMarketingLocal staffs

Expatriate

Products

Manufactures in Malaysia

Imported from Thailand

Japanese Involvement

Technical support

Marketing decisionMarket share inMalaysia

>50%

~5%
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Global Perspectives

Ground Zero – Lessons Learnt

Lessons to take home• Don’t trust the data until you fully understand it.
• We must have inquisitive mind; and never shy from raising questions;• Be creative; and never follow blindly;• Follow you own path: capture lion share in market ignored by competitors• Compete based on local knowledge and capability• No.2 in Japan can be No.1 in overseas• Act local, think global

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Promising ASEAN

Implications for Students

Resource Scarcity

Students, please bear in mind that:
Human Resources (talent) is the scarcest resources in the world…

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Promising ASEAN

Implications for Students

Resource Scarcity

For example, for whichever overseas expansion path a company takes, theyneed talents to achieve success• Joint Venture?
• Acquisition?

• Build from scratch?

• Export?

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Promising ASEAN

Implications for Students

Resource Scarcity

M&A is comparatively an attractive option, but riskier - requiring a great dealof supports from talents to make it a success
Demand for…

JV

M&A

BuildExport

Financial outlay
Operational knowhow(HR, Finance, Resources)

Product knowhow(segment, pricing, channels)

Speed to market
Market/brand ownership
Risk = Attractiveness26

Promising ASEAN

Implications for Students

Resource Scarcity

This man know best!
Organisation and talent (people) are priority!

'We pursued growth over the speed
at which we were able to develop
our people and our organisation,
and we should sincerely be mindfulof that,'
事業規模の急な拡大で組織や、人材育成が遅れたとの反省を踏まえ、生産・販売台数より品質を最優先する考えだ
Written Testimony for US Congressional Hearing
24th Feb 2010

Mr. Aiko Toyoda, President of Toyota Motor Corp

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Promising ASEAN

Implications for Students

Opportunity

Common observations and problems faced by Japanese company’s M&A inoverseas
Observation on Japanese M&A practices

M&A is Not a smooth journey, many failures…

•Business Unit failed to delivered;•Second attempt directed from top down;•Very rush; and multiple deals in various
countries at the same time;•Determined and deal closed by a small groupof people at the most senior level;•Concrete Strategy, Processes, Resources
Allocation, and Organisation not available;•Fairly generous valuation, justify entirely byfinancial track records;•Very high priority on business growth andexpansion;•Emphasis on quantitative assessment thanqualitative assessment•Preferred to use Singapore as Arbitration
Centre for dispute.

What have I got
myself into!?

UnclearStrategy

Org &Culture

Resources
Allocation

Processes

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Promising ASEAN

Implications for Students

Opportunity

Lawyer plays an important role in business – multidisciplinary skills are ofgreat advantage!

Businessknowledge

Behaviouralscience

Drafting Salesand Purchase
AgreementLegalknowledge(Internationallevel)

Cross Cultural
knowledge andpractices

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Implications for Students

Competency

Talent can be trained and learned

Leadership

Adventurer

PoliticianDiplomatist

Educator

Courage in the pursuit of truth

Fundamental

Identify
problemSolveproblemLearn thesolution

Share theexperience

High moral quality

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Promising ASEAN

Implications for Students

Complications

Life is full of uncertainties, where do we begin?

OMG!
Uncertainty
Retirement

HealthFamil(ies)

CareerGraduation

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Promising ASEAN

Implications for Students

Inspirations

How about start by learning from these people?

Tina Seelig

Steve Jobs
•Kenichi Ohmae

Steve Jobs Stanford
Commencement Speech2005

http://www.youtube.com/watch?
v=VHWUCX6osgM

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Promising ASEAN

Implications for StudentsInspirations – Cross Culture… and also the aspect of working in a cross cultural environment

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Promising ASEAN

Reading List

Reading list
• What I Wish I Knew When I Was 20s, by Tina Seelig• Steve Jobs Stanford Commencement Speech 2005: http://www.youtube.com/watch?v=VHWUCX6osgM• 稼ぐ力, by 大前研一;• Cultures and Organisations – Software of the Mind, Intercultural Cooperation
and Its Importance for Survival; by Geert Hofstede, Gert Jan Hofstede• Agency for Economic Development– http://www.edb.gov.sg/content/edb/en.html– http://www.mida.gov.my/home/– http://www.boi.go.th/index.php?page=index&language=en– http://www2.bkpm.go.id/34