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Vol.9, Dec. 2019ԣԸԵӨԤՂԺՃՂӨՃԶӨԌՉՇԺՂԵՇՇӨԚԱՂԱԷԵՁԵՂՈӨԋՇՇՃԳԺԱՈԺՃՂՇӨԺՂӨԕԱՄԱՂӨ

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Journal of Management Science Vol.9, Dec. 2019
Contents

Refereed Papers
A Marketing Study of Agriculture as a Job Option for a Younger Japanese Generation: Using the Miyazaki Student Attitude Survey of Agriculture .................................................................................... 1
Kenichi TANAKA
Possibility of Creating Value that Society's Integrated Thinking Brings to Society and Environment: A Case of LIXIL's “SATO” Business Model............................................................................................................. 9
Tsuyoshi SAKAMOTO
Relationship between Target Costing Activity and Intangibles in the Japanese Firms in Malaysia....................... 17: A Consideration Based on Field Surveys on Establishing Human Capital, Information Capital,
and Organizational Capital
Masakazu KOZAKAI and Kou TASAKA

I

Journal of Management Science Vol.9, 2019

[Refereed Paper]

A Marketing Study of Agriculture as a Job Option
for a Younger Japanese Generation: Using the Miyazaki Student Attitude Survey of Agriculture
Kenichi TANAKA
Social Science Research Center, Miyazaki Sangyo-keiei University, Miyazaki, Japan
E-mail address：k-tanaka@mail.miyasankei-u.ac.jp

Abstract: This study aims to ascertain the attitudes of the local younger generation toward
agriculture and to understand how to motivate them to get involved to help secure newleadership in the industry. To achieve these things, I deliver a questionnaire survey to highschool and university students in Miyazaki prefecture. These folks have little experience withfarming during their school days. Whereas farming concepts are unusual to most city dwellers,
the local young rural folk enjoy fewer inhibitions. This study discusses the effective peripheral
factors for promoting agricultural careers. We perform factor analysis to assert the attitudestructure of students and to classify their results into explanatory groups. We uncover four
attitude factors, which are composed by the groups that are “positive attitudes about engaging
in farming under certain conditions”, “interested in agriculture, but retain a negative attitude
to farming”, “feel a gap between farming and their own life” and “a positive image about acareer in farming”. Two of those groups are marketing targets.

Keywords: Farming business, Job option, Social-science approach, Entrepreneurship,
Agropolis

Submitted March 12, 2019
Accepted July 31, 20191

Journal of Management Science Vol.9, 2019agricultural surety by employing a directed marketing
approach.

1. Introduction
This study proffers a scheme to influence younger generations
having little farming background to enter agricultural careers.
It is beneficial in urban environments to portray agricultural
careers as attractive job options. The farming economies of theNetherlands comprises our model. Compared to the Dutch,
Japanese agricultural technologies and management systems
have not resulted in high productivity. In Miyazaki, the ratioof full-time farmers over 65-yrs old is 57.7%1. This rate ismuch higher than the national average of 38.6% in careers
across Japan. Thus, because farmers tend to age more rapidly
than other career denizens, we must address the aging
agricultural workforce2 and focus on the inheritors.
“Recirculation” of the workforce is crucial. The JA
Miyazaki group has executed various efforts with the local
government regarding agricultural careers 3 . Efforts have
proven successful, and the number of new farmers from
Miyazaki (including successors) reached 396 people in 2016.
The number of new farmers in Miyazaki increased 58%
compared to 2013 4 . Unfortunately, more than 70% of
graduates from agricultural high schools or junior colleges
choose an unrelated profession after graduation5. 90% of highschool graduates do not enter farming businesses. These
towering facts imply that farming requires directed marketing.
Generally, farming has a hard-working look and feel. People
get dirty and endure small incomes for long periods of time. I
have decided to understand how the younger generation in
and around Miyazaki perceives agricultural business and to
propose a high-level strategy.

3. Previous research
Wada and Kinami (2012) determined that the motivation foryoung people to engage in a farming career was formed only
after long-term and varying factors. Moreover, they insisted
that, by enhancing their motivation when they are young, there
is a greater chance of success. Hidano and Hiraizumi (2012)provided a questionnaire survey to farming successors in
Niigata and determined that they were motivated as
youngsters because of their experiences and family. A survey
to junior high-school students in Fukushima showed thatfarming experience in later childhood influenced participants’attitudes about considering the profession. This are important
anecdotes, because it is crucial to initiate career design andplanning at a young age. Thus, this study addresses theperipheral elements (i.e., factors) associated with promoting
farming careers during the human formative process byanalyzing questionnaire results.

4. Research method
4.1 Survey subjects
I provided the Agricultural Consciousness Questionnaire
Survey to high-school and university students in Miyazaki
prefecture, regardless of participants’ origin. Survey entries
missing values were excluded. Respondent attributes are as
follows: high school, N = 176; university, N = 58; Male, N =91; and Female, N = 143 (N = 234).
Respondents partially comprised commercial highschool students. Thus, their gender was predominately female.
In this context, the survey is executed to respondents in limited
fields of study (management and commerce), so, there might
be a bias in comparison with unlimited survey. Prior to thesurvey, I visited the high school and explained the research
object and application method. I also targeted university
students at the college I attend.

2. Research object
This study aims to understand how younger people in
Miyazaki perceive agricultural careers. I provided aquestionnaire to Miyazaki high-school university students,
who generally have no direct engagement in agriculture. They
are composed by commercial department. Through this study,
I aim to build a high-level strategy of farming promotion,
instead of the vague and abstract image-building we are used
to. Based on data reflecting the attitudes and consciousnessesof younger people, I work toward a solution to improve

4.2 Questionnaire survey contents
The questionnaire provided 22 questions to gather the students’1 Miyazaki prefectural statistics in agriculture.
2 Miyazaki’s agricultural statistics (2017), Miyazaki local
government.
3 Engagements include Miyazaki agricultural practical seminar,
Hinata MBA, Program for new farmer supported by JA Miyazaki,

and more.
4 Securing new leaders in agriculture, forestry, and fishery.,Miyazaki local government.
5 In reference to interviews at educational institutions.

2Journal of Management Science Vol.9, 2019degrees of agricultural involvement and their interest in
pursuing farming as an occupation. Each question was
answered on a 4-point scale, comprising “absolutely agree,”“partially agree,” “partially disagree,” and “absolutely
disagree.” See Table 1.

No.
1
2

3
4
5

6

7
8
9
10
11
12
13
14

15

16
17
18

Table 1: Questionnaire items
Classification
Item
Contact point Are you aware of Miyazaki’s localof agriculture production inventory?
Would you be pleased if
Miyazaki’s local products becamefamous?
Have you ever learned about
agriculture?6
Have you ever participated in an
outside agricultural seminar?7
Have you ever participated infarming or a promotional event for
Miyazaki’s agricultural products?
Do you wish to participate infarming or a promotional event for
Miyazaki’s agricultural products?
Do you have farmers in yourfamily?8
Agriculture’s Do you think farming provides aimage
low salary?
Do you think farming is hardwork?
Do you think farmers have noholiday flexibility?
Do you think the income offarming depends on the weather?
Do you think that farming requires
skills and experience?
Do you think farming businesses
require a lot of startup money?
Do you think that you must be a
successor in a farming business toengage the career?
Do you think farming is relatively

Motivation to
engageinfarming as acareer

19

20
21

22

easy with regards to cultivating
human relationships?
Do you think farming is rewardingwork?
Are you interested in farming?9
Do you want to work in farming if
the income can be relatively highcompared to other businesses?
Do you want to work in farming if
it seems like smart and cool job
requiring fashionable working
clothes and workspaces?
Do you want to work in farming if
it is as stable as other careers?
Do you want to work in farming if
there is established and clarified
education system?
Do you want to work in farming if
itisa
short-cuttoentrepreneurship?

5. Results and interpretation
5.1 Frequency table concerning contact points
This paragraph provides a quick overview of contact points
between agriculture and respondents, based on analysis of thesurvey dataset. Table 2 indicates the frequency of loyalty
toward Miyazaki’s local products. The table is sorted bygender.
Table 2: Loyalty toward Miyazaki’s local products(Question No.1, Table1)
Total

Male

FemaleAbsolutely agree

10 (4.4%)

5 (2.2%)5 (2.2%)

Partially agree

39 (17%)14 (6%)

25 (11%)

Partially disagree

132 (57.6%)

51 (22%)81 (35.4%)

Absolutely disagree

48 (21%)20 (9%)

28 (12.2%)

N = 234
The intent was to grasp whether respondents preferred to

6 Provide options for the answer as follows: “4. Participated in
lecture more than 3 times. 3. Participated in lecture more than 2times. 2. Participated in lecture at least 1 time. 1. Neverparticipated in lecture.
7 Provide options for the answer as follows: “4. Participated in
lecture more than 3 times. 3. Participated in lecture more than 2times. 2. Participated in lecture at least 1 time. 1. Neverparticipated in lecture.

8 Provide options for the answer as follows: “4. Parents own
farming business. 3. Grandparents owns farming business. 2.
Relatives own farming business 1. No farmers among family andextended family.
9 Provide options for the answer as follows: “4. Feel very interested.
3. Feel interested, if anything. 2. Do not feel interested, if anything.
1. Do not feel interested at all.

3

Journal of Management Science Vol.9, 2019buy local products. Around 80% answered “absolutely
disagree” or “partially disagree.” Thus, they do not seem tocare about where their products come from. As told in theprevious discussion, agriculture is major industry of Miyazaki,
so respondents tend to have extended family who engaged inagriculture. Moreover, it is debatable whether respondents
from high school usually go shopping for ingredients. So,
there might be some bias. these issues will be discussed infurther study in detail.
When assessing whether respondents felt superiority interms of the fame associated with local products, 80%
answered “absolutely agree” or “partially agree.” Moreover,the “absolutely agree” category netted more than 50%. Thistendency is presumed to be much higher than younger
generations in an urban province because they have more
opportunities to interact with agriculture and local government
provide more effort to enlighten local agriculture compared tourban area. (see Table 3)

Almost 50% of respondents felt strongly interested orinterested in agriculture as an occupation (see Table 5).
Granted, there are many challenges to starting a farming
business or even job hunting in the industry, respondents
presented a relatively decent understanding of farming
business.
Table 5: Consciousness toward farming as a job option

Male

FemaleAbsolutely agree

97 (42.4%)

35 (15.3%)

62 (27.1%)

Partially agree

87 (38.0%)

34 (14.8%)

53 (23.1%)

Partially disagree

38 (16.6%)

21 (9.2%)

17 (7.4%)

Absolutely disagree

7 (3.0%)0 (0%)

7 (3.1%)

Male

FemaleVery interested

18 (7.9%)9 (3.9%)9 (3.9%)Comparatively

89 (38.9%)30 (13.1%)

59 (25.8%)

96 (41.9%)

38 (16.6%)

58 (25.3%)

26 (11.3%)

13 (5.7%)

13 (5.7%)

interested
Comparatively
uninterested
Not interested at all

N = 234

6. Factor structure on attitude

Table 3: Consciousness toward a sense of superiority overthe fame of Miyazaki local products
Total

Total

Thus far, I have addressed the likelihood younger people toshow an interest in agricultural careers. This section presents afactor analysis 10 of Miyazaki prefecture’s youth attitudes
toward agriculture, providing a trend classification via its
factor structure. Factor loadings indicate that less than 0.3
were excluded in the first trial. Then, four factors wereextracted via eigenvalues, indicating more than 1.0. Table 5shows the eigenvalues and the contribution ratio of each factor.

N = 234
From these results, respondents tend to feel affirmation
when any local product gets famous.
More than 40% of respondents have family or extended
family engaged in farming, and almost half associate
agriculture closely to their surroundings (see Table 4). Thus,
they sometimes handle and eat fresh vegetables, and theysometimes work on their family farm during holidays. This
result implies that they could deepen their experiences andknowledge by engaging in more opportunities.

Table 6: Eigenvalues and contribution ratio of each factor
Factor
Eigenvalue Contribution
Cumulative
ratio
contribution
ratio
F1:
4.229823.50%
23.50%
F2:
2.410913.39%
36.89%
F3:
1.9307
10.73%
47.62%
F4:
1.1678
6.49%
54.11%
Cronbach’s alpha = 0.7489

Table 4: Farmer in family or extended family
Total

Male

FemaleParents own farm

9 (3.9%)3 (1.3%)6 (2.6%)Grandparents own

50 (21.8%)

21 (9.2%)

29 (12.7%)

Relatives own farm

39 (17.0%)

11 (4.8%)

28 (12.2%)

No relation in farm

131 (57.2%)

55 (24.0%)

76 (33.2%)

The cumulative contribution ratio of F4 comes to54.11%, which is relatively high. Table 6 presents each factor
and their loading in descending order. Each structure is
explained by the factor items whose loadings are more than
0.3 for each. Thus, 17 items were extracted as interpretational
items.

farm

N = 234

10 Maximum likelihood method, Promax rotation.

4

Journal of Management Science Vol.9, 2019

promotional event.
Table 7: Factor items and loadings
Factorloading

Factor item

Think farming is rewarding work.

0.422

Are interested in the farming business.

0.331

F1: Respondents with positive attitudes aboutengaging in farming under certain conditions.
Wish to engage in farming if there is anestablished and clarified education system.

0.813

Wish to work in a farming business if it seems
like smart and cool job.

0.809

Wish to work in a farming business if income
is relatively high, compared to other businesses.

0.737

Wish to work in the farming business if it is a
shortcut to entrepreneurship.

0.706

Is interested in farming business.

0.391

The first factor (F1) shows that respondents are positive
about becoming farmers under certain conditions. However,they presume that farming is not a fulfilling workplaceenvironment. The second factor (F2) shows a relatively
positive attitude towards farming. However, farming does not
suit to them as a full-time job, owing to hard work, unstable
income, large investments, fluctuating holidays, etc. The third
factor shows that respondents are interested in agriculture andtend to be highly conscious of local products, but they do notembed farming into their daily life. The fourth factor (F4)indicates that respondents have some inclination to be farmers
and feel that farming experiences are rewarding. Furthermore,they want to participate in future agricultural events. 75%
stated they have family engaged in farming, and 45% statedthose members are parents or grandparents. The data suggeststhat this group either recognizes themselves as successors, orthey feel that farming could be a job option.

F2: Respondents interested in agriculture, but
retain a negative attitude to farming.
Believe farming business is hard work.

0.624

Believe income depends on the weather.

0.596

Believe farming requires a lot of start-up
money.

0.585

Believe farmers cannot enjoy flexible
holidays.

0.496

Believe farming
experience.

0.439

requiresskillsandBelieve farming is rewarding work.

7. Examination of the factor structure
concerning farming promotion with amarketing approachThis section discusses a marketing approach of engaging
young people with agricultural aspirations, leveraging two of
the four factors (F1 and F4), as provided by the survey results.
From the survey results, the elements that encourage
young people to enter an agricultural career include stabilityof occupation, systematic and guided education from scratch,manageable work, good earnings, easy access toentrepreneurship, and high-contact frequency with local
agriculture. Alternatively, there is no evidence that subjects
believe they would be required to acquire special skills or
experience to start a farming business.
Many agricultural corporations in Miyazaki (e.g.,
Kushima Aoi Co., Synergy, Nakamura, Shinpuku Seika Co.,
Ltd, Shinkado, and Okumatsu) are well known for their bestpractices via local media or government reports. These firms
are sophisticated, and they tend to prepare their employeeswith systematic programs and clear jobs using an evaluation
system. Regarding production activities, owing tomechanization and process controls, they tend to improve
employee satisfaction by lightening workloads and improving
working conditions. JA Miyazaki has worked hard on Dutch-

0.368

F3: Respondents who feel a gap between
farming and their own life.
Have some agricultural experience from theirschool.

0.794

Have experience from an outside seminar.

0.572

Are conscious of Miyazaki local products.

0.446

Have experience with farming or agricultural
promotional events.

0.361

F4: Respondents with a positive image about acareer in farming.
Wish to participate in farming or a

0.669

5

Journal of Management Science Vol.9, 2019style farming, even sending frequent delegations to theNetherlands to acquire greater agricultural mechanization
systems. This fact and others are commonly reported to
citizens by the local media, causing local young people toretain a positive image of farming.
The presence of a higher educational institution isimportant to bolstering positivity toward agricultural career
aspirations. A social-science university, for example, could
greatly contribute to lessening the gap between agriculturalindustries and young aspirations. Normally, one must deciderelatively early to enter an agricultural high school or college.
However, as this study showed, only 30% of young people
who enter agricultural high schools or colleges become
farmers. The Miyazaki local government now enthusiasticallyprovides a “bridging” effort between farmers who wish to
retire and young people who want to become farmers. In fact,
they drew up a 2019 budget for cultivating new farmers11.
However, there has been insufficient effort applied toincreasing young people’s farming interests. Thus, this study
insists that a new viewpoint is needed, guided by a marketing
approach.
Since 2015, Miyazaki Sangyo-keiei University (MSU)
has led a study on local vitalization of the agricultural industry,called “Agropolis.” This project has involved many
participants, including local governments, JA Miyazaki
cooperatives, and farmers. it provides a tool for leading acharge to market careers to young people who may notinterested at the moment. They leverage entrepreneurship and
explore new business models resembling general corporate
enterprises. They offer a practical marketing approach that is
not normally seen in agricultural situations. The project has
been subsidized by Miyazaki Enterprise Promotion
Organization since 2016. The program is expected to lead
students without an agricultural background to recognize theindustry as one with a key management specialty.
Entrepreneurship is not a familiar aspect of Japanesefarming. However, it is a key factor to profit-making. We
together with Dr. Jos Verstegen from Wageningen Economic
Research, Wageningen University, the Netherlands, will
design the agricultural business administration curriculum in
our local university based on the concept of training young
entrepreneurs via research activities as a conclusion of former
study.

8. Conclusion
This research was performed to discuss the development of amarketing program for agricultural careers local to Miyazaki
prefecture. I used questionnaire survey results to develop a
discussion about the importance of universities providing amarketing function between agriculture and eager young
people. Results showed that the cultivation ofentrepreneurship in farming could be effective, especially withan entrepreneurial social-science university approach. It is
crucial that we continue to discuss how to systemize
promotional programs as a regular curriculum in our local
university that encourage young people to enter the farming
business. This will be a topic for a future paper.

References[1] T. Wada and R. Kinami, (2012). “Study on the formationof young people's consciousness of being a farmer,”
Report of Department of Agriculture at Niigata University
Vol. 64, No. 2, pp. 93-99.
[2] T. Lans, M. A. van Galen., J. Verstegen., H. J. A. Biemans,and M. Mulder, (2014). “Searching for entrepreneurs
among small business owner–managers in agriculture,”
NJAS-Wageningen Journal of Life Sciences, Vol. 68, pp.
41-51.
[3] O. Hidano and K. Hiraizumi, (2012). “A study on
securing agricultural successor: influence of the school
child's agricultural experience on becoming farmers,”
Nogyo fukyu kenkyu, Nihon Nogyo fukyu gakkai.
[4] K. Wada., S. Ito., H. Isoda., and Y. Amekawa, (2016).
“The characteristics and challenges of community-based
group-farming corporations in Yamaguchi prefecture,”
Nogyo keiei kenkyu, Vol. 53, No. 4, pp. 19-24.
[5] T. Uchiyama, (1996). “The employment of non-farmer ina farm corporation; the present condition and prospect,”
Nogyo keiei kenkyu, Vol. 34, No. 3, pp. 70-73.
[6] S. Ogata, (2015). Gaika wo kasegi jyunkan wo okosu,
Komyakusha.

11 The name of activity is “Project on Miyazaki’s management
resource inheriting model in agriculture.” Total budget is ¥3M.
Project aims to study and build a structure for transferring land of

old farmers to farming freshman. (Reported by Miyazaki
Nichinichi press on 15th Feb. 2019.)

6

Journal of Management Science Vol.9, 2019

[Refereed Paper]

Possibility of Creating Value that Society's Integrated
Thinking Brings to Society and Environment: A Case of LIXIL's “SATO” Business Model
Tsuyoshi SAKAMOTO
Osaka-City University, Osaka, Japan
E-mail address：osakasakamoto@gmail.com

Abstract: SDGs, which are global missions, have become the norm for 21st century activities.
Companies are also in full swing to select materiality (important issues) corresponding to ESG
investment and SDGs, and to formulate KPIs (Important Performance Indicators) based on
the selection. However, although the three systems of economy, society and environment havetheir respective circulation independently, it is thought that there is a chasm (separation area)that makes cooperation difficult among the three areas. Therefore, it is not easy to create avalue network that exchanges economy, society and environment. In this situation, this study
examined the possibility of a business model based on a new value structure by integrated
thinking, which is the basic concept of integrated reports. Companies are not just profit
centers, but also regional entities that are involved in values other than financial indicators by
the creation of social and environmental values. By creating a system that can connect
economy, society, and the environment, companies are considered to have their own
significance. LIXIL's SATO business was adopted as a verification example. About a third of
the world's population (32 billion people) are living without a toilet. In a sanitation-freeenvironment, around 15,000 children under the age of 5 die a day all over the world. In orderto improve this situation, SATO was developed as a simple toilet in developing countries.
Although the SATO business model belongs to the BOP business, it aims to improve the global
sanitation environment more than the realization of profitability. SDGs theme 6 "Safe waterand toilets all over the world" is a related business, and it is established as a business, inparticular, by contributing to the improvement of environmental and social value in developing
countries. As a result of verification of the case analysis, it was able to be derived as a findingthat it is effective to create a bridge-like structure that crosses different value systems ofenvironmental issues and economic issues. Demonstration of these activities has enabled us tofind new possibilities in the design of the indicators targeted by the integrated report.
Furthermore, it is thought that the usefulness of future problem solving business can also besuggested.

Keywords: Integrated Thinking, Integrated Report, Non Financial Information, Social
Impact, SDGs

Submitted April 14, 2019
Accepted August 17, 20197

Journal of Management Science Vol.9, 2019and long-term risks can not be visualized and CSR reportinghas difficulty in seeing the actual results. The integrated reportis aimed at a new accounting framework to improve each such
merits and demerits. Traditional business activities haverealized productivity by using only the capital that belongs tothe organization. However, actual corporate activities aremaintained by incorporating external resources belonging to
the environment and society into the organization. In thecurrent situation where the finiteness of external resources hascome to be pointed out, entities such as companies are
considered to be responsible for external resources as well.
Producers / suppliers do not just consume environmental
resources and social resources, but aiming at sustainable
development with consideration to their reproductivity has
become a global issue. Because of these trends, keywords
such as ESG and sustainability have come to the fore. The
new business model in the 21st century is considered to meanthat companies shift from resource consumption entities toresource value creation entities.
The international integrated reporting framework
announced in 2013, The international <IR> Framework, has
the following description. “The company’s next development
can be considered as communication about value creation.”“The main purpose of the integrated report is to explain to thefinancial capital providers how the organization creates value
over time. The integrated report includes all stakes interested
in the organization's ability to create long-term value,
including employees, customers, suppliers, business partners,
communities, legislators, regulators and policy makers. It isuseful for holders.” “It also aims to explain how theorganization interacts with the external environment andcapital to create value in the short, medium and long term.”
The integrated report is a communication tool that conveys
expected results in the medium to long term, and is said toshow the interaction between external environmental capitaland corporate organizational capital. Particularly considering
the usefulness of the integrated report, of the six capitals
proposed by IIRC, four corporate capitals (finance, intellectual,human, manufacturing) and two external environmental
capitals (social relationships, environment) . The purpose ofthis research is to clarify the possibility that such interaction
between corporate capital and external capital can develop
21st century business models through the example of acorporation.

1. Introduce
1.1 The era of international initiatives
One of the changing times in the 21st century is the creationof international initiatives. Specifically, it is as follows.
1997 Global Reporting Initiative
1999 Global Compact 10principles
2000 Millennium Development Goals（MDGｓ）
2006 Principles for Responsible Investment（PRI）
2010 ISO26000
2010 IIRC
2013 Social Impact Task Force2014 RE100
2015 Sustainable development goals（SDGｓ）
It is considered as a symbolic social phenomenon thatsuch global initiatives are progressing around the beginning of
the 21st century. Common to these activities is the sharing of
global problem solutions, and in particular, global
environmental issues are considered to be important issues. In
the world, there are diverse societies by countries and regions,and people with diverse values live. But global issues like theglobal environment require a code of conduct with uniform
values. International initiatives are underway to discuss therelevance of three global solutions. The issues areenvironmental issues (global warming, biodiversity etc.),
social issues (disaster prevention, food hygiene, child laboretc.), economic issues (poverty, population increase etc.).It isdifficult to think that each of these three tasks is completely
irrelevant. For example, much of the world's cotton
production uses large amounts of pesticides and insecticides,
and workers are mainly at low-paying children. Such current
situation is concerned about the combined occurrence ofenvironmental load, child labor, health and safety, andeconomic exploitation. The occurrence of environmental,social and environmental issues from the same social
phenomenon means that three issues can be solved
simultaneously, depending on the policy and businessactivities. In this research, we will examine the possibility thatvalue creation based on relevance in multiple issues will
become a new business model.
1.2 Overview of integrated report
IIRC is a non-profit organization that aims to create new value
through new accounting standard "Integrated Report" torealize sustainable investment like ESG. In particular, the issue
is focused on the relationship between the company's efforts
to realize a sustainable society and financial indicators.
Financial statement reporting has the disadvantage that mid-

1.3 Social impact investment
Since the UN announced the PRI (responsible investment
principle) in 2006, ESG investment balance at the end of 2017has been announced as $ 31 trillion. In addition, a UK call at8

Journal of Management Science Vol.9, 2019the 2013 G8 Summit created the Impact Investment Task
Force. The main large-scale funds for ESG investment have astrong factor in selecting an investment destination with lowsocial risk as a stable investment destination. On the other
hand, social impact investment is defined as “social andenvironmental outcomes resulting from the project or activity,
including short-term and long-term changes” (2016 Cabinet
Office).

required in the integrated report is the standard of corporate
activities in the 21st century, and it is a network structure thatorganically connects three value systems of environment,
society and economy. Deduce the hypothesis that it is useful.
1.4 What is required of a company's consolidated report
In KPMG's Survey on Integrated Reporting of JapaneseCompanies 2018, three recommendations are made to
improve the quality of the integrated reporting.
1. Communicate the value creation story that managementand directors consider.
2. Show management based on integrated thinking
without being confused by popular keywords.
3. Show the reality and progress of the value creation story
as a pillar.
In these three points, the first characteristic is the value
creation story. Financial indicators symbolized by earnings aremonetary indicators as a result of the realization of a value
system such as philosophy and vision held by management
etc. Not only financial indicators that show results, but also
explanations that have elements that will lead to financial
results in the future are more required. KPMG proposes thatsuch future results can be explained by the "value creation
story". In the financial indicators, it is the integrated report thattries to evaluate the importance of what the management itself
can use as a story to make something in the future so that past
results will be the outcome. The system to decide how todesign the first point value creation story is the second point
integrated thinking. KPMG explained “The relationshipbetween economic value and social value is explained
regarding integrated thinking, and if specific strategic goals ofenvironmental and social related outcomes are indicated,
understanding about the long-term survival of a company It
will be deepening too. " Furthermore, the third point shows thefeasibility and achievements of the value creation story interms of "actual situation" and "progress". The integrated
report is considered to clarify and show the structure andprocess of value creation of a company to stakeholders suchas shareholders. The purpose of this research is to clarify theframe of value creation in the new business model brought
about by integrated thinking by case verification.

Figure 1. Changes in social impact investment balance 1
Figure 1 shows the social impact market size in Japan from2014 to 2017, but it is confirmed that it has been expanded
more than four times in four years. ESG investments andsocial impact investments, by their nature, require social orenvironmental returns in addition to financial returns. In sucha situation, it is important to explain how many reports such as
integrated reports have for many stakeholders, mainly
investors and shareholders. With the background to solving
global issues through ESG investment and social impact
investment, corporate activities are also required to create a
corporate brand other than direct financial indicators. In
particular, shareholders and investors in recent years tend to berequired to establish a framework for new corporate activities
that will result in financial results in the medium to long term.
There is an integrated report in the form of strategic reporting
based on unique resources and business vision for thecompany to achieve results. The integrated report uses six
capitals (finance, manufacturing, intellectual, humanresources, society / relations, and nature) as inputs to show the
impact of outputs from business activities. It is the two capitalsof "society and relationship" and "nature", and has theproperty that it does not belong to the corporate organization.
This research is based on the premise that the framework

2. Hypothesis and verification method
2.1 Significance of non-financial information

1 Global Social Impact Investment Steering Group (GSG) website,“Current status of impact investment in Japan” (last accessed

2019-11-30) ,http://www.siif.or.jp/wp-content/uploads/2019/04/
G8-Impact_Investment_2018-2.pdf

9

Journal of Management Science Vol.9, 2019

The rationale for value creation stories that are important inbusiness in the 21st century are not yet financial indicators, but
assume conditions that will lead to financial results in the
future. The purpose of the integrated report is to integrate
financial and non-financial information, and the rationale forvalue creation stories is considered to be non-financial
indicators.

information and non-financial information in a systematicmanner and explaining in an easy-to-understandmanner.( Corporate Vitality Research Institute 2012) “Thetwo major issues of disclosing and explaining non-financial
information in connection with future corporate value andlinking business and non-financial information in the main
business.” (Corporate Vitality Research Institute 2018) . In
other words, the important points in integrated thinking are thefollowing two points.
1. Relationship between non-financial information andfuture corporate value
2. Relationship between non-financial information andfinancial information
From this premise, it is thought that what is required of
the integrated report is the mid- and long-term value creation
story of a company, but also indicates the possibility that it canbe explained by future financial information.
2.3 Structuring Problem Solving Models
In order to consider the accountability of non-financial
information and its relevance to the business itself, it isnecessary to identify the unclaimable factors and the factorsthat inhibit the relevance. According to the Corporate
Governance Code (CGC), which was revised in 2018, theimportance of non-financial information is important, yet its
explanatory power is low, in order to ensure appropriate
disclosure and transparency in the third place. It is pointed out.
Furthermore, as specific elements of non-financial
information, it is clearly stated that “Financial status of thecompany, business strategy, risks, matters concerning
governance, social and environmental issues, etc. (so-called
ESG elements)”. Among them, in this research, we will
analyze "matters related to social and environmental issues"
as factors that make it difficult to see the corporate value andthe connection with the business.
In the figure 3, the reverse T-shaped part that straddles theenvironment, society and individuals is the Missing Area, and
it is thought that the problem solution in the 21st century is toconstruct a "bridge" that straddles the divided area. In
traditional business, these activities tended to be typified bycharity. However, in the 21st century society, BOP market
targeting the poor has come to focus on strategic value fromthe management aspect. One of the reasons is the huge market
size that can cover 40 billion people even if the customer unit
price is low. However, from the medium- and long-term
perspective, the BOP market is considered to have a very highFigure 2. Changes in investments
in tangible and intangible assets 2
The above Figure 2 shows the ratio of financial assets tonon-financial assets in S & P 500 by Ocean Tomo LLC(developing the financial services business related tointellectual capital in general). It can be read that the
explanatory power of financial assets (Tangible Assets) has
become significantly lower after the 1990s. Instead, it reveals
that the ratio of non-financial assets (Intangible Assets) is high.
From these facts, it is considered that non-financial
information is indispensable for explaining a company's value
creation story by non-financial information. For many
stakeholders surrounding a company, the disclosure of nonfinancial information in the company is necessary toaccurately evaluate the company information.
2.2 Results of Non-Financial Information
If non-financial information is an argument for a value
creation story, it is considered to be a source of future value
creation for the company. Regarding the significance of nonfinancial information, "Even if a vast amount of information
is disclosed without association, it is said that it is not effective
as a material for investment decisions. Therefore, Japanesecompanies are appropriately evaluated by investors In order togain understanding, it is important to strategically disclose,
based on one's own volition, correlating corporate financial

2 Ocean Tomo website, “Intangible Assets Market Value Study”(last accessed 2019-11-30), https://www.oceantomo.com/

intangible-asset-market-value-study/

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Journal of Management Science Vol.9, 2019

Hypothetically, corporate activity that creates a bridgeconnecting the three domains of environment, society andpeople is the structure that contributes to sustainable
development. It is expected that this value creation will be a
new market formation through specific corporate activities,
and it will be a framework with the potential to realize thecontribution to the environment and society and the result tocorporate finance.

growth potential. Economic exchanges with developed
countries can be expected to improve economic levels incertain BOP countries. It contributes not only to the global
problem of poverty but also to market growth. So to speak,associating problem solving with economic growth is themost realistic business model.

Figure 3. Structure of problem solving model
2.4 Hypotheses in this study
Based on that premise, the following two points are derived as
hypotheses.
 Hypothesis 1: Business activities expected in the 21st
century are closely related to contributions to solving
environmental and social problems.
 Hypothesis 2 : The environment and society symbolized
by ESG keywords have their respective domains,
including the economy, and value creation as a bridge
linking those domains is expected as a new business modelin the 21st century.
The above hypothesis 1 can be visualized by a so-called
2 × 2 matrix.
Hypothesis 1 shows the effectiveness of NEW
DEVELOPMNET AREA shown in Figure 3 as a medium- tolong-term business model as a new market creation of acompany. Although existing strategies have been considered
as non-profitable areas, there is a possibility that new strategic
significance can be found through the design of medium- andlong-term business models. Furthermore, this area is also a
blue ocean area with very few competitors, as it has been
considered difficult to obtain economic results. Therefore, inthe 21st century, innovative market development activities in
NEW DEVELOPMNET AREA are expected. In particular,
the BOP market is very useful as a solution to the global
poverty problem.
Hypothesis 2 is premised on Figure 2 “Structure of
problem solving model”. This is structuring the design of the
future society in environmental and social problem solving.

Figure 4. Structure by economic value and social andenvironmental value
Hypothesis 1 shows the effectiveness of NEW
DEVELOPMNET AREA shown in Figure 3 as a medium- tolong-term business model as a new market creation of acompany. Although existing strategies have been considered
as non-profitable areas, there is a possibility that new strategic
significance can be found through the design of medium- andlong-term business models. Furthermore, this area is also a
blue ocean area with very few competitors, as it has been
considered difficult to obtain economic results. Therefore, inthe 21st century, innovative market development activities in
NEW DEVELOPMNET AREA are expected. In particular,
the BOP market is very useful as a solution to the global
poverty problem.
Hypothesis 2 is premised on Figure 2 “Structure of
problem solving model”. This is structuring the design of the
future society in environmental and social problem solving.
Hypothetically, corporate activity that creates a bridgeconnecting the three domains of environment, society andpeople is the structure that contributes to sustainable
development. It is expected that this value creation will be a
new market formation through specific corporate activities,
and it will be a framework with the potential to realize thecontribution to the environment and society and the result to11

Journal of Management Science Vol.9, 2019

corporate finance.

where toilets are still under development. Localizing the
SATO business into a local corporation in the region of adeveloping country will realize value creation by solving
environmental and social issues as a problem-solving typebusiness. In addition, business methods enable sustainable
development of communities in developing countries. In sucha global sanitation situation, SATO may be a source of value
creation such as human value, hygiene value, economic value
etc. in the community. The SATO business is considered to bea practical method of common principles such as the SDGs
theme in the problem solution.

2.5 Method of verification
In this study, we conducted an analysis based on actual
company cases in verifying hypotheses. Specifically, on
November 24, 2017, we conducted an interview survey with
Mr. Ito of the Corporate Responsibility Promotion Group on
the environmental and social activities of LIXIL Corporation.
LIXIL Co., Ltd. is a company that was born in 2011 by five
manufacturers of construction materials and equipment. It
makes it possible to solve all issues in housing in a one-stop
way, and is considered to be a leading company that has wellbalanced its own profitability and the public benefit of theenvironment and society.
The verification example is the SATO business at LIXIL.
This project corresponds exactly to the NEW
DEVELOPMENT AREA in FIG. As a company, it is clearthat it will not lead to short-term financial results. As a point to
be noted in such circumstances, LIXIL develops the SATO
business not just as a social contribution, but as a businessmodel. It can be expected that clarifying why such a strategy
is practiced will lead to the demonstration of hypotheses in thisresearch. LIXIL's activity case is considered to be a newcorporate activity frame corresponding to social investment
like ESG by the relation of economic value, environmental
value and social value that integrated thinking aims at.

Figure 5. SATO3
3.2 SDGs sixth goal
The goal 6 of the SDGs is to "make water, sanitation andsustainable management available to all people". With theadvent of the 21st Century, one of the challenges of the UN
Summit was to improve the mortality rate of children under 5
years of age. The goal 6 of the SDGs is to "make water,
sanitation and sustainable management available to all
people". With the advent of the 21st Century, one of thechallenges of the UN Summit was to improve the mortality
rate of children under 5 years of age. The situation continues
to exceed 10 million a year until the end of the 20th century.
The goal of the MDGs (Millennium Development Goals) in2000 was to reduce the mortality rate of children under the ageof five to one third of the mortality rate in the 1990s. The
causes of death are usually pneumonia, diarrhea, malaria,
many of which can be improved by promoting preventive
medicine and public health. This goal has never been achieved,
but as of 2016 it has been achieved at about one-half level.In
addition, issues such as measures for daily life, hygiene
conditions including safe water, maternal health conditions,and provision of appropriate medical services are being
considered. One of the themes of SDGs is "water andsanitation". As a specific example of corporate activities, aninterview survey was conducted on the head office of Tokyo

3. Verification by company case
3.1 SATO business by LIXIL
About a third of the world's population (32 billion people) are
living without a toilet. In a sanitation-free environment,
around 15,000 children (five and a half million a year as of2016) die worldwide all day under the age of five a day. In
order to improve this situation, SATO was developed as asimple toilet in developing countries.
SATO is easy to install, can be cleaned with very small
amounts of water, and can maintain environmental health witha valve structure, making it a product that can greatly
contribute to the solution of health problems in developing
countries.
As of 2016, SATO has produced a total of 1 million units.
Of these, about 500,000 were donated to Bangladesh and soldlocally at a low price of $ 1 per vehicle. SATO can be expected
to be extremely useful in the emerging countries of the world
3 LIXIL Group CORPORATE RESPONSIBILITY REPORT
2019, 03 THREE STRAGETIC PILLARS, “GLOBALSANITATION&HYGIEN” (last accessed 2019-11-30,

https://www.lixil.com/en/sustainability/reporting/pdf/LIXIL_CR2
019_en.pdf#page=14

12

Journal of Management Science Vol.9, 2019

4.2 Bridge model with less than 5 years old
mortality
As a model of the value network, take “falling under 5 years
old mortality rate” as a common principle. Such global goals
need to be dropped for each country and company. The modelfor that is shown below.

on November 24, 2017 about the project of LIXIL
Corporation. LIXIL Co., Ltd. integrates five housing relatedcompanies that were group companies in 2010 as a newcompany. The three priority areas of LIXIL for a sustainable
society are (1) solving global sanitation problems, (2) water
conservation and environmental protection (3) respect fordiversity. These three items have very high affinity with the 17
goals proposed by SDG. In particular, (2) water conservationand environmental protection are SDG theme 6 "clean waterand sanitation" itself. LIXIL aims to solve environmental
issues through the toilet division, a business area as a company.
The LIXIL Group has commercialized the spread of SATO
(SafeToToilet), which has been used by 9 million people
around the world as a social activity to solve global sanitation
problems. SATO is a cheap and light plastic type simple toilet.
SATO was originally released from the American Standard,
supported by the Bill & Melinda Gates Foundation. Later,
with the American Standard becoming the LIXIL Group,
SATO also developed as the LIXIL brand. The LIXIL Groupaims to improve the sanitation environment of 100 million
people around the world by 2020 through social activities.

Figure 6. Bridge model in value structure
The above figure is a business model that divides thecommon idea "improvement of mortality under 5 years old"
as multiple values of economic problems and social problems.
Although it is difficult to relate various social issues based oninternational economic issues and regional culture etc., as in
the figure above, the common philosophy is derived byderiving two as multi-faceted elements of value in global
issues. It serves as a bridge connecting economic and social
issues, and can mutually realize value formation. Suchstructuring makes it possible to connect various value systems,
and realizes two-way value formation beyond the Missing
Area.
The decrease in mortality rates for children under five is
one of the goals of the SDGs, Goal 3.2.” By 2030, end
preventable deaths of newborns and children under 5 years ofage, with all countries aiming to reduce neonatal mortality toat least as low as 12 per 1000 live births and under-5 mortality
to at least as low as 25 per 1000 live births.”
Furthermore, in the target areas of developing countries, it canbe expected to achieve both economic and social value
creation. These two values are mutually related and contributeto global problem solving. Economic value and social value
become a business model that is connected by the principle of"decrease in mortality rate of children under 5 years old".

4. Hypothesis verification
4.1 Structuring by value network model
Integrating global issues such as environmental issues into
essential goals is considered difficult with just the diverse
value systems of individuals and societies. It is exactly due tothe Missing Area shown in FIG. Therefore, it is necessary toconcentrate on specific behavioral criteria. Many international
initiatives have proposed standardization and standardization
on global issues. Furthermore, in such an action plan (agenda),
as it is said that “having a common understanding of important
issues in the future is effective for forming a vision”, value
sharing such as CSV in the 21st century Highly useful as asocial environment solution model. What is important here isthat economic and social areas are not concepts integrated asa hierarchical structure, but can play a cooperative role as avalue network structure. In Hypothesis 2 of this research, it isnecessary to verify whether a business entity can properly
realize two different value systems. The enterprise value
system in the 20th century was a period where the influenceof the short-term and quantitative framework was strong. It isthought that the root cause of social investment is the fact that
actual economic phenomena are in need of a medium- to longterm framework that can not be explained using only shortterm figures such as financial statements.

4.3 Verification of hypothesis 1
The fact that these activities are realized is considered to be atest of Hypothesis 1. The SATO business will belong to the socalled BOP business. BOP business is an international
business activity that targets low income groups worldwide. It
generally refers to people whose annual income is less than3000 USD, which corresponds to 4 billion people, 70% of theworld's population. The distinctive feature of BOP business is13

Journal of Management Science Vol.9, 2019around the world. It is a central issue of this study to examine
whether it is possible to derive a corporate activity model thatsolves the 21st century environmental and social problems
from such design. Such a value system is expected tocontribute to health promotion of social capital andcommunities, and improvement of economic level. Common
philosophy> Value creation> The ability to realize value
cooperation such as social effects can be expected as a newmodel in the 21st century. Furthermore, increasing theeffectiveness and efficiency of this model is considered to be
the economic entity represented by companies.
In the field of social diversity, in contrast to the common
philosophy, the breadth of different value systems is important.
The realization of diverse societies is a very important
keyword for realizing the "world which nobody cares" which
SDGs advocates. According to a McKinsey survey, whichsurveyed 366 companies in the world in 2015, companies
with high managerial gender showed 15% higher
performance compared to other companies, and those withhigh ethnic diversity and high dispersion. The results areshown to be 35% higher than the comparison. It is thought that
common values, which can aggregate various values, can be
flexibly rebuilt as the times change.

that it defines the target consumer's task as a "BOP penalty"
and employs a business approach to its solution.
LIXIL's SATO project is a business model that
contributes to the solution of sanitation issues in communities
in developing countries and issues related to securing waterand toilets. Under these assumptions, we will examine therequirements for establishing LIXIL's SATO business as abusiness from the issues of Hypothesis 1.
In the actual interview survey, it was important whether
the SATO business was sustainable as a business. As a resultof investigation, it became clear that the business model of thininterest and high sales system is possible for the huge market
of BOP by making a local corporation. However, if it is abusiness of that much, it does not leave the area of social
contribution. In addition, the parallel research on the literature
revealed new facts.
According to the Nomura Research Institute (NRI) 's
original survey (2011), it is announced that the economic levelof 3.52 billion people, half of the BOP group, will improve in
2030 and move to the MOP layer. In such a case, it is expected
to create a very large and high value-added product market.
LIXIL is considered to adopt a strategy to increase brandpower and engagement as a company in the BOP market on
the premise of such medium- and long-term social change. As
proof of Hypothesis 1, it became clear that LIXIL uses as its
business scheme an activity that enhances medium- and longterm social value and environmental value.

4.5 Implications of this study
A case analysis of LIXIL's SATO business suggested that
global common goals such as the 17 themes in SDGs couldorganically link business with global issues. It is considered tobe the practice of integrated thinking in the integrated report.
The goal of integrated thinking is to realize both creation ofenvironmental and social value and creation of new businessareas. In the 21st century business model, it is expected that
non-financial information possessed by companies will be
more descriptive to business as value creation stories.
Furthermore, non-financial information is also required tolead to future financial returns. In order to establish such abusiness, business models in which the systems ofenvironment, society and economy are independent but
related to each other are effective. In order to design such a
new business model, we clarified that the “bridge” structurethat links the discontinuities of environmental value, social
value and economic value is important. This finding indicatesthat the future integrated report may be better engaged withinvestors, shareholders, etc.

4.4 Verification of hypothesis 2
LIXIL's SATO project based on SDGs theme 6 that links
economic issues in developing countries (such as poverty)
with environmental issues (such as lack of hygiene
management) is considered to be a demonstration of
Hypothesis 2.
LIXIL distributes SATO free of charge to many
developing countries, and implements a plan to make itsustainable by local incorporation. This is truly a long-termbusiness creation to realize solutions to environmental andsocial issues. Furthermore, such a business model is a bridge
between the economic system and the social andenvironmental system's Missing Area. Economic activity as aprofit structure for sustainable activities and social activity asa solution to environmental and health problems are notconsidered to be originally related to each other. By bridging
the situation based on the common philosophy, it is possible
to realize a business model connecting the three ESGs. This is
the activity system expected in the 21st century. Multi-facetedvalue development enables environmental issues to be sharedwith the cultural values of different regions and designs

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Journal of Management Science Vol.9, 201916

Journal of Management Science Vol.9, 2019

[Refereed Paper]

Relationship between Target Costing Activity andIntangibles in the Japanese Firms in Malaysia: A Consideration Based on Field Surveys on Establishing
Human Capital, Information Capital, and Organizational Capital
Masakazu KOZAKAI1 and Kou TASAKA2
1

Depatment of Engineering, Tamagawa University, Tokyo, Japan2

Depatment of Commerce, Fukuoka University, Fukuoka, Japan*

E-mail address：kozakai@eng.tamagawa.ac.jp

Abstract: The purpose of this study is to elucidate the context of information capital related
to cost information, by identifying the context of localization of Target costing based on afield study of Japanese firms in the Malaysia. Specifically, we will elucidate the degree as wellto which human capital has been built up in localization of Target costing and the types of
information systems used to manage cost tables. We confirmed that the degree of discretionon information systems was high, as pointed out by Mizoguchi (2012), and a materials OEM
supplier had transferred its own Target costing system. It is also confirmed that suppliers
were quicker to carry out localization, as pointed out by Ota (2014). Further, we confirmedthat accumulation of IT-related human capital was weak, and in many cases spreadsheet
software was used. It could be point out that overall, even if Target costing has been localized,building of information capital tends to be delayed.

Keywords: Target costing, human capital, information capital, organizational capital

Submitted February 25, 2019
Accepted November 18, 201917

Journal of Management Science Vol.9, 2019

Malaysia, the market focused on in this study, is
experiencing stable growth as a market for new vehicles, inwhich 667,000 vehicles were sold in 20151. This growth
can be considered to be backed by Malaysia’s per-capita
GDP of $11,307, much higher than other ASEAN nations.
Malaysia is experiencing stable economic growth, andmany manufacturers are advancing into the market totarget this growth.

Even so, the positioning of individual countries inoverseas expansion actually is dynamic, and the global
firms think about global expansion dynamically, taking
into consideration the economic, foreign-exchange, andpolitical conditions of each country. On this point,
Malaysia is well suited as a research site that enables
observation of stable conditions over several years, since itis experiencing stable growth and less susceptible to theeffects of dynamic fluctuations. In addition, in Malaysia’s
automotive and home-electronics industries, unlike thosein countries such as Thailand and Singapore that alreadyhave developed as regional centers, localization of
production and development now are in progress. For thisreason, the issues faced by Japanese manufacturers in
Malaysia are likely to be similar to those that they will facewhen advancing into, and localizing production anddevelopment in, markets such as Vietnam and Pakistan in
the future. Elucidation of these issues should provide
information useful to Japanese manufacturers.
Just as has taken place in developed countries by now,
the ASEAN nations also are experiencing diversification oflifestyles and preferences accompanying economic growth.
In response, each manufacturer needs to reflect thisdiversification steadily in its product development. Under
such conditions, some Japanese manufacturers can be seen
to be localizing not only production but also development
and design, and some also conduct Target costing locally.
Accordingly, it should be highly meaningful to proceedwith research on localization of Target costing at this time,in preparation for a future in which product development
will have been localized in various countries.
Among previous studies, Tasaka and Kozakai (2017;2018) have elucidated the current state of localization of
Target costing by Japanese manufacturers that have entered
the Malaysian market. However, they have not elucidated
to a very large degree the aspects of intangibles, such as
management of information on the cost tables that serve as
the basis for a system of cost estimating in Target costing.
Furthermore, since the degree of utilization of IT andinformation systems is related strongly to an organization’sorganizational culture and business processes,2 it should behighly meaningful to consider the building of information
capital, which is strongly related to the success or failure of
Target costing.
Thus, the need could be identified to research
information systems related to cost tables, which areimportant factors in realizing localization of Target costing,

1 JACTIM(2017, p.364)

2 Kozakai(2011; 2012a; 2012b; 2013; 2014a; 2014b; 2015)

1. Introduction
Since Japanese manufacturers began expanding
internationally in pursuit of new markets, they haveadvanced into countries in North and South America and inEurope, as well as Thailand, Indonesia, and others.
Japanese manufacturers were forced to advance into
overseas markets due to the contraction of Japan’s
domestic markets for products such as motor vehicles andhome electronics, resulting from the shrinking of thenation’s population.
Target costing has been positioned as a management
accounting method for more than 50 years since its
development. Furthermore, overseas transfer issues ofTarget costing have been dealt with as an expanded issue
on Target costing practice. This research would contributeto accumulate cases of applying Target costing fromJapanese companies.
This paper will report on the knowledge obtained
from a fact-finding survey of localization of Target costingat Japanese manufacturers operating in Malaysia andelucidate the outcome of analysis of the context of
localization of Target costing. Specifically, based on aliterature review and interviews with firms that haveentered the Malaysian market, it will consider (1) the
context of localization, (2) cost-table management, and (3)building of information capital, to elucidate the current
state of localization of Target costing and theaccompanying readiness in building information capital.
First, the purposes of this study will be described. Second,
the research methodology and research site will be
described. Third, the results of interviews in the field will
be considered. Fourth, the implications from the literature
review and interviews will be discussed.

2. Purposes of This Study

18

Journal of Management Science Vol.9, 2019from the perspective of intangibles, as an issue that remains
to be addressed. Specifically, there is a need to elucidate thedegree as well to which human capital has been built up in
localization of Target costing, the types of systems used to
manage cost tables, and the kinds of information systems
to which these are linked.
From the above considerations, the purpose of thisstudy is to elucidate the context of information capital
related to cost information, by identifying the context of
localization of Target costing based on a field study offirms that have entered the Malaysian market.

Thailand of a local supplier and a local subsidiary of aJapanese SME, that transfer and localization of Japanesemanagement methods was successful. However, theJapanese firm in this case study conduct preliminary designin Japan and left detailed design and preliminary mass
production, fitted to the distinguishing features of the local
market, to the local supplier. Also, although the company
was a primary supplier, it employed the method ofdrawings supplied rather than drawings approved, and in
this way its basic assumptions for localization can beconsidered to be similar to those of Ito (2004).
In response to these studies, in a study on Target
costing in emerging markets Tasaka (2013a; 2014)
considered a case study of failure of Target costing
deployed through reducing the functions of products
developed and designed for developed markets tointroduce them to local markets at lower prices and theprocesses through local procurement of parts, analyzing
and proposing strategic patterns.
There are great expectations for Target costing as ameans of lowering costs and strategic profit management.
However, it is not necessarily the case that Target costing
can be transferred unchanged to overseas markets where
cultures and systems differ. Tasaka (2014; 2016) discusses
the kinds of points that should be noted in order to deploy
Target costing successfully overseas.
The authors’ research is an extension of the course
trod by these previous studies. The significance of thisstudy is in the way it identifies clearly the efforts ofassemblers and suppliers in the advancement oflocalization of development and design and localization of
Target costing and discusses the issues faced by Japanesemanufacturers in localization of Target costing inconnection with practical information management.
The authors previously were able to elucidate thecontext of localization of Target costing in companies
operating in Malaysia5. An issue remaining to be addressedfrom that study was that of considering the development ofintangibles, which can be considered to play importantroles as success factors for Target costing. Accordingly, thisstudy will focus first of all on information capital, including
abilities to manage detailed cost tables, as one successfactor in Target costing.
Tanaka (1995) describes the five-stage cost estimate
system as a cost estimate system for use in cost tables. Also,
Tanaka and Xiaojia (2017) identified inadequacies in thecost estimate calculation systems of most major firms,

3. Previous Studies and Research
Methodology
3.1 Previous studies
Target costing is “a method of strategic cost management
to reduce costs and manage profits by building consensus
among related sections, such as technology, production,
sales, purchasing, and accounting sections, centered on the
product planning and design stages.”3 However, with theprogress of globalization, the ways of thinking on Target
costing have changed.4 In light of these changes, there is aneed to define localization with regard to Target costing.
At present, the number of studies addressing
localization of Target costing is not very large, and moststudies looked at auto-parts makers. Ito (2004) studied costmanagement in a developed-country market, based on thecase study of Denso in the United States. This study
assumed globalization in which preliminary design weredone in the home country (Japan) and detailed design andpreliminary mass production were conducted to fit thedistinguishing features of each country.
Kitahara (2011) and Ota (2014) describe in generalterms and discussed localization of development anddesign. Kitahara (2011) shows that in most cases basic
research, applied research, basic product planning,development, and preliminary design are conducted athead offices in Japan, while local engineering facilities act
in a coordinated and cooperative manner through divisionof responsibilities with the Japanese head offices. On theother hand, Ota (2014), while not addressing Target costing
directly, discusses separately the progress of assemblers
and suppliers.
As a previous study on Target costing in emerging
markets, Nakazawa (2012) shows, from case studies in

3 Sakurai(2015, p.307)
4 Tasaka(2013a; 2013b; 2014; 2016)

5 Tasaka and Kozakai(2017; 2018)19

Journal of Management Science Vol.9, 2019

arguing that it was essential to link cost estimate systems to
CAD, CAM, CAT, DFMA, BOM, ERP, and other systems.
This study also examines linkage to such systems.
However, Noda (1998) argues that there are four types ofcost tables, based on their purposes: (1) for rough designs,(2) for estimating costs, (3) for purchased parts, or (4) forcomparison of existing products. For this reason, linkage
with cost estimate systems and procurement/purchasingsystems also needs to be included in the subjects of study.
Furthermore, Mizoguchi (2012) considered
compatibility between the organizational properties ofoverseas subsidiaries and information systems. According
to Mizoguchi (2012), “subsidiaries have a high degree of
discretion in selection of information systems,”6 and there
are tendencies for integrated global SCM systems such as
ERP systems to be used in assembly businesses and forindependent SCM systems to be used in materials
businesses. In such cases, an SCM system can beconsidered to be information systems that integrates abackbone system with various systems for specificfunctions. This study will consider the building of
information capital in localization of Target costing byusing this argument from Mizoguchi (2012) as theanalytical framework.

paper considers localization of development and design torefer to localization conducted after the stage ofpreliminary design or detailed design.
Localization of Target costing practice refers to the
localization of Target costing activities accompanying
localization of development and design. Localization ofdevelopment and design is not the same thing as
localization of Target costing practice. This is because even
if product development and design facilities have beenshifted overseas (localized), that does not necessarily meanthat Target costing itself has been shifted overseas.
Second, in considering localization this paper also willconsider factors related to information capital. The effectsof IT investment are obtained not from IT investment alone
but in conjunction with investment in human capital andorganization capital. 9 Existing studies have looked at
topics including the organizational capability known as IT
capability. 10 Such research on IT capability has been
conducted within research on a resource-based view.11
These studies have been incorporated into a logicalframework by Kaplan and Norton (2004; 2006) and havedeveloped to the stage of research on information capital as
intangibles.12
In addition, although it is easy to confuse thesebecause in many cases Target costing is conducted throughcooperation between the home country and local facilities,
this study will identify separately information capital in thehome country, information capital in the country where afacility is located, and local (Malaysian) information capital(Figure 1 (B), on the right side). The study looked at typesof information systems including backbone (ERP) systems,
procurement/purchasing systems, production systems,
design systems (e.g., CAD, CAM, PDM), and cost-table
tools. Reflecting these considerations, this study proposes
the following research question: “Is it not the case that
where localization of Target costing has advanced, buildingof information capital (including IT-related human capital)
also has advanced, to improve the precision and efficacy of
cost estimates in cost tables?”3.2 Definition of localization in this study
First, this study will separate localization of production,
localization of development and design, and localization of
Target costing. Often, the term “localization” is used torefer solely to localization of production. However, since
the essence of Target costing is in cost reductions andbuilding in profit in the development and design stage for
new products, localization of development and design
alone cannot be described as localization of Target costing.
This study sees localization as illustrated in the left side of
Figure 1 (Figure 1 (A)).Localization of production refers to“production conducted through constructing plans andmaking capital investments in local markets, hiring local
workers, and procuring local materials and parts.”7 The
four reasons for localization of production by Japanesefirms are (i) in response to regulations requiring local
production, (ii) in response to economic friction, (iii) to
reduce foreign-exchange risk, and (iv) to reduce costs.8
Localization of development and design refers to
conducing development and design activities locally tosatisfy the required quality suited to local needs. Thus, this

9 Brynjolfsson(1993)
10 Aral and Weill(2007)
11 Grant(1991), Ross et. al.(1996), Powell and Dent-Michallef(1997), Bharadwaj(2000), Aral and Weill(2007), Mithas, et.
al.(2011)
12 Kozakai (2011; 2012a; 2012b; 2013; 2014a; 2014b; 2015)

6 Mizoguchi(2012, p.1)
7 Kitahara(2011)
8 Ibid.(2011)20

Journal of Management Science Vol.9, 2019①（B）Information
Capital（A）Organization Capitaland Human Capital

Japan
Target Costing
Advanced
Development

Preliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Information Capitalin Home Country(Japan)Mass
Production②

Transfer

2

1

Oversea
Localizing of Development
And Design
Advanced
Development

Preliminary
DesignDetailed
DesignTransfer of Information
CapitalLocalizing of Production

Preparation
for
Production

Local IC
Initial Flow
Control

Mass
Production(Thailand andSingapore)3

Local IC
(Malaysia)

Target Costing
Localizing of Target Costing

Figure 1: Definition of localization and relation to information capital factors

4. Overview of companies operating in
Malaysia

3.3 Local interviews
In addition to the literature review, this study also is basedon local interviews conducted in two stages. The March
2016 interviews with two automotive assembler
companies and one automotive supplier were conducted
and asked about matters including cooperation with local
suppliers, revisions to cost plans, QCD standards in thehome country and local market, and the state ofdevelopment of and methods of utilizing information
systems. At this stage, the study involved the issue of thesmall sample size of firms interviewed, with research on
suppliers being inadequate in particular.
The March 2017 interviews looked at differences inlocalization of Target costing by type of manufacturer,
differences between the home country and local markets
concerning standards on subjects such as quality, delivery
time, and cost, and information management for cost tables
and other subjects. As content related to cost tables and IT,
in addition to topics such as standardization of costs tables
and methods of sharing them, information management,
and linkage of information systems, these interviews also
were designed to enable consideration related to
information capital. Also, the companies surveyed included
two automotive suppliers, as well as one home-electronics
assembler to enable study of subjects such as differences
between the automotive and home-electronics industries.

4.1 Current conditions of the Malaysian market
The Malaysian automotive market is one
experiencing comparatively stable growth among ASEAN
markets. The market is large in size relative to the nation’s
population, with 667,000 new vehicles sold in 201513.
Malaysia is the only ASEAN country with its own national
automakers, and nearly one-half of new vehicles sold there
are domestic. Passenger vehicles account for a very highpercentage of the Malaysian automotive market. This isdue to the fact that the national automakers Proton and
Perodua both manufacture and sell only passenger vehicles.
Japanese automakers account for a share of roughly 42%of the market, and Japanese firms also account for a highshare of the automotive supplier (parts maker) market14.

13 JACTIM ( 2017, p.366)
14 Ibid.(2017, p.374)

21

Journal of Management Science Vol.9, 2019

First interviews (March 15-16, 2016)

Second interviews (March 14-15, 2017)

Company B (auto assembler)
March 15: 9:30 am - 12:00 noon
Interviewee: CFO

Company Y (auto supplier)March 14: 2:00 – 4:00 pm
Interviewee: local manager

Company A (auto assembler)
March 15: 2:00 – 4:30 pm
Interviewee: local manager

Company C (home-electronics assembler)
March 15: 9:00 - 11:00 am
Interviewee: Operating Officer

Company X (auto supplier)March 16: 2:00 – 5:00 pm
Interviewee: local manager

Company Z (auto supplier)March 15: 1:00 – 3:30 pm
Interviewee: advisor(responsible for cost planning)

Content of interviews(1)Cooperation with local suppliers, (2)Revisions to cost plans, (3)Home-country
and local standards regarding QCD,
(4)State of information-systemdevelopment/methods of use, etc.

Content of interviews (additional
elements)(5)Standardization of cost tables/methodsof sharing them/information management,(6)Linkage of information systems, etc.

Figure 2. Overview of interviews
While the home-electronics industry had grownsteadily until 2013, at present it is in the midst of apronounced downward trend. Total demand for home
appliances in 2015 was MYR2,573 million, down 10%,
while total demand for audio-video home electronics was
down 34% to MYR2,106 million15. While among home
appliances conditions are rough for air-conditioners,
washing machines, and refrigerators, but small kitchen
appliances and air purifiers are popular, chiefly in urban
areas. On the other hand, the spread of use of smartphones
and tablets, accompanying progress in enhancements to the
ICT infrastructure, has led to a contraction of the market
for audio-video home electronics as a whole, and thiscombined with falling prices has led to difficult conditions
for Japanese manufacturers.

investment in Malaysian manufacturing. From the start,
foreign firms have been required to obtain manufacturing
licenses, but this requirement is waived for companies withequity of no more than MYR2.5 million and less than 75
full-time employees. In 2003, ownership of capital in mostmanufacturing projects was liberalized, and inmotor-vehicle manufacturing the capital requirements havenot been applied, with some exceptions, since 201016.
The second most important factor facilitating Japanesemanufacturers’ entry to the Malaysian market consists ofthe good state of the nation’s road infrastructure, backed by
the growth of the automotive industry, and its low fuelprices. In fact, the condition of the nation’s roads is goodand its expressway network is increasing. Malaysia also isconcentrating on improving central arteries in rural
regions17. Also, fuel prices are relatively low thanks in partto government subsidies.
At the same time, compared to other ASEAN markets
Malaysia’s ICT infrastructure is relatively highly advanced,
and cloud computing systems are utilized widely. Market
penetration of mobile phones has reached 148.8%, withsmartphone penetration of more than 50%, and social
networking services (including audio communication and

4.2 Factors facilitating, and inhibiting, entry into
the Malaysian market(1) Facilitating factors
The most important factor facilitating Japanesemanufacturers’ entry to the Malaysian market is theconclusion of the Malaysia-Japan Economic Partnership
Agreement (EPA). The EPA is being utilized to important
products from Japan to Malaysia. It also stimulates foreign

16 Ibid.(2017, p.148)
17 Ibid.(2017, p.90)

15 Ibid.(2017, p.366)

22

Journal of Management Science Vol.9, 2019messaging services) are utilized widely in business18. The
Malaysian government also is promoting a wide range of
e-government initiatives19.
The third factor facilitating Japanese manufacturers’
entry to the Malaysian market is the trend toward
environmental-protection and energy-conservation efforts
in the home-electronics industry. At present, the Malaysian
government is moving toward passage of a law onrecycling of home electronics. Energy-conservation efforts
in particular are a strong point of Japanese manufacturers,
and they can be expected to have advantages in these areasin the future.

for the labor shortage. Also, competition is fierce in thehome-electronics industry, and retail prices show apronounced downward trend. In light of these conditions,some companies are choosing to enter other ASEAN
markets instead of Malaysia, or to shift their manufacturingemphasis to such markets.
The trend toward entry of Japanese manufacturers to
the Malaysian market continues today, and no mood
toward withdrawal from the market has been identified.
However, the local interviews described a tendency toward
intensification of competition with the entry of Chinese andSouth Korean manufacturers.

(2) Factors inhibiting market entry
On the other hand, there also are some factors that inhibit
entry by Japanese manufacturers to the Malaysian market.
These are two protectionist measures implemented by
Malaysia and the nation’s position within ASEAN.
One of the protectionist measures is excise taxes.
These taxes apply to specific products such as automobiles,
beer, and tobacco products. Furthermore, in the automotive
industry Malaysia has a National Automotive Policy(NAP) that serves to protect the domestic auto industry,
centered on the national automakers. High excise taxes(65–125%) as well as a system of promoting the domestic
industry through waiver of excise tax on the value of
locally sourced parts and the Approved Permit (AP)system of permits for importing vehicles still remain in
effect today. Since the AP system is intended to control
total imports by adjusting the number of APs issued, there
is a quota on the number of completed vehicles that can beimported from Japan. The system of franchise APs that
permit importing of new vehicles will not be liberalized
before the end of 2020.
Due to the high excise taxes, the number of completed
vehicles imported is not growing. For this reason, domestic
vehicles with high local content have an advantage, while
those from foreign automakers are at a disadvantage. Duein part to these circumstances, some auto assemblers
employ a complete knockdown method (in which allprocesses other than manufacture of parts are localized).
The second inhibiting market entry is Malaysia’s
position within ASEAN. The Malaysian economy ischaracterized by rising labor costs and chronic staffing
shortages, as well as a shortage of managing engineers. At
present, employers depend on foreign workers to make up

4.3 Types of localization in Malaysia
This paper divides localization into localization of
production, localization of development and design, andlocalization of Target costing. Localization of productionrefers to building plants in local markets, hiring local
workers, and producing products there. Localization ofdevelopment and design refers to conducting development
and design activities locally to produce products that satisfy
the required quality suited to local needs. Localization of
Target costing practice refers to conducting Target costing
activities locally to accompany localization of development
and design.
Based on the research of Tasaka (2013, 2016), thispaper groups international transfer by Japanesemanufacturers to Malaysia into three types (Figure 3).
While Tasaka (2013, 2016) proposed five types, at present
three types have been identified: transfer of production(type 2), transfer of design (type 3), and transfer of Target
costing (type 4). However, in reality companies such as
auto assemblers will employ different types for different
products, such as vehicle models. Also, this paper divides
the development and production processes into the six
stages of advanced development, preliminary design,detailed design, preliminary mass production, initial flow
control, and mass production.
(1) Transfer of production
Under the transfer type of transfer of production, processes
from preliminary design (the stages from system analysis
through preparation of basic specifications for hardware
and software) to detailed design (mass-production design,
application design, detailed arrangements for subsystems
and key equipment) are conducted in Japan (productplanning is included in preliminary design), and overseas
production is conducted on a knockdown basis at the partslevel.

18 Ibid.(2017, pp.115-116)
19 Ibid.(2017, pp.117)

23

Journal of Management Science Vol.9, 2019(1) Transfer of production
Japan
Advanced
Development

Target Costing
Preliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Mass
Production

Knock down
Preparation
for
Production

Local(2) Transfer of design
Japan
Advanced
Development

Initial Flow
Control

Mass
Production

Preparation
for
Production

Initial Flow
Control

Mass
Production

Preparation
for
Production

Initial Flow
Control

Mass
Production

Initial Flow
Control

Mass
Production

Target Costing
Preliminary
DesignDetailed
DesignLocalize

Local

Preliminary
Design(3) Transfer of target costing
AdvancedJapan

Development

Detailed
DesignTarget Costing
Preliminary
DesignDetailed
DesignPreparation
for
Production

Globally dispersed development bases

Local

Preliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Mass
Production

Target Costing

Figure 3. Types of localization in Malaysia
5.1 Localization of production, design, andTarget costing
Table 1 summarizes the content of localization by the six
firms surveyed. It shows that auto assembler Company A
and supplier Company Y, a member of the group ofcompanies of a major auto assembler, employed thetransfer type of transfer of production, while Company Z, a
supplier that is a member of Company A’s group ofcompanies, employed transfer of design and auto
assembler Company B, home-electronics assembler
Company C, and auto-parts supplier Company X
employed transfer of Target costing.
While five of these six companies have market sharesthat are somewhat high, auto assembler Company B has
not captured a very high share of the market. This indicatesthat localization of Target costing is not directly related tomarket share.

(2) Transfer of design
Under the transfer type of transfer of design, preliminary
design for overseas production is conducted in Japan while
detailed design and later stages are conducted locally (atthe overseas subsidiary or local suppliers). Alternatively,
preliminary design for overseas production and later stages
may be conducted locally. In some cases, products may be
exported to Japan. However, no double standards apply toquality, cost, and delivery (QCD) standards between thehome country and the local market.
(3) Transfer of Target costing
Under the transfer type of transfer of Target costing, thestages from preliminary design through mass production
are conducted locally, and processes are localized throughthe Target costing stage. In some cases, under this type,
QCD standards that differ from those in the home country
may be tolerated to fit local market conditions.

5. Findings of research on Target
costing in Malaysia

24

Journal of Management Science Vol.9, 2019

Table 1. Conditions of localization at manufacturers that have entered the Malaysian market
Assemblers
Suppliers(Parts makers)
Company surveyed
Company A
Company B Company C Company X
Company Y
Company Z
Industry
Auto
Auto
Home
Auto
Auto
Auto
electronics
Market share
High
Low
High
High
High
High
QCD standards
Transfer of
Local
Local
Local
Transfer ofTransfer ofhome-country
adaptation
adaptation
adaptationhome-country home-country
standards
standards
standards
Localization of
N/A
Local design Local design Developed
N/A
Local design
design/development(Preliminary (Preliminary
at regional(Detailed(initial phase)
design)design)base
design)(Planning)
Localization of
N/A
Localized
Localized
Localized
N/A
N/A
Target costingType of localization
Transfer ofTransfer ofTransfer ofTransfer ofTransfer ofTransfer ofTargetTargetproduction
development
production
Targetcosting
costing
costing
specifications between the home country and Malaysia. At
the assemblers Company A and Company B, there aredifferences in each part assembled, and Company C
employs numerous local specifications. At suppliersCompany X and Company Y, there are many differencesfrom use in the home country, and at Company Z there aredifferences in each product (constituent part).
Research on the differences between the homecountry and the local market with regard to information
systems shows that only Company C answered that it had
standardized these globally. Company Y, an assembly
manufacturer that is a member of an automaker’s group,
does not engage in local procurement. Generally, there is astrong tendency toward standardization of backbone
systems. While production systems, inventory systems,
procurement/purchasing systems, and other systems vary
among companies in terms of their details, there was astrong tendency to procure them locally and independently.
Each of the companies’ local information-systems
section had from one to a few staff members, and these do
not appear to be considered to be sections that would
locally manage IT proactively. For this reason, the degreeof readiness for building IT-related human capital is low.
The degree of utilization of the latest IT, such as IoT, also isquite low.
Four of the six companies answered questions
concerning cost management items, management of cost

A look at QCD standards shows that assembler
Company A and group-member suppliers Company Y andCompany Z had transferred standards from their homecountry. Company A and Company Y, which engage inlocalization of production in pursuit of lower costs, employ
quality standards in particular that are as strict as those in
the home country. Company Z, a supplier that is a memberof Company A’s group of companies, employs the transfer
type of transfer of design, conducting detailed design
locally, but as with Company A it prioritizes quality above
all, transferring quality standards from the home country.
On the other hand, assemblers Company B andCompany C and supplier Company X all employed thetransfer type of transfer of Target costing, while at the sametime employing QCD standards adapted to the local
market. Company X is a supplier that serves as an OEM
maker, and it conducts Target costing in the country where
its regional base is located and not in Malaysia.
5.2 Building information capital locally
Table 2 shows the results of research concerning
management of cost data at the six firms surveyed. It
mainly shows information concerning transfer of IT-related
human capital and information capital.
A look at the final products and parts provided bycompanies that have entered the Malaysian market showsthat, for the most part, there are considerable differences in25

Journal of Management Science Vol.9, 2019

Company
surveyed

Differenceswith homecountry inproduct
specifications
Differences
betweenhome-country
and local
systems

Table 2. Management of cost data among companies operating in the Malaysian market
Assemblers
Suppliers(Parts makers)
Company A
Company B
Company C
Company X
Company Y
Company Z(Transfer of(Transfer of(Transfer of(Transfer of(Transfer of(Transfer of
production)
design)production)
TargetTarget costing)Targetcosting)
costing)
Materials
Group
Group assemblyOEMassembly
maker
maker
Varies by part
Varies by part
Numerous
Numerous
Numerous
Varies byproduct

Backbonesystemprocured
locally

Some (e.g.,
procurement)
shared, highpercentage
procured
independently
IT section atregional baseLocal ITsection(small)

Cost
management
items
Cost-data
management

-

-

-

-

Linkage toother systems--

Information
systems
sectionSharedglobally(procured
independently
in othercountries)
Three staff
members forbackbonesystemLocal format(Comparison
difficult)Spreadsheet
basis
Linked with
CAD/CAM inhome country

Some (e.g.,
production
management
an inventory
management)
sharedMainlymanaged byhead office,with local
activities
outsourced
SharedShared Target
costingsystem-No localprocurement

Backbonesystem shared,
others reused or
procured
independently

One local
staff member(concurrent
post)

Local ITsection(small)

Local format

SharedSpreadsheet
basis

Spreadsheet
basis

CAD
partially
linkedNo linkage

found it difficult to carry out proper comparisons sincecosts turned out not to be comparable and processing costs
varied due to considerable differences in labor costs, so that
information from comparison was not useful for reference
purposes.
Company Y too has set up cost management items
using local formats. On the other hand, Company Z uses
the same cost items as in the home country, and these areshared through its information systems. Since Company X
employs the transfer type of transfer of design, without
conducting Target costing locally, it shares design
information and cost information with the Target costing

data, and linkage with other systems. These questions wereadded during the second field study in March 2016. The
answers from Company X were received throughadditional questioning by email after the interview.
Company C and Company Y manage costmanagement items using their own formats, while
Company X and Company Z do so using the same items
as in the home country. Even though home-electronics
assembler Company C manages cost-table information
using its own format, since many of its products are madeto local specifications, for some models it compared costs
among different countries. However, it appeared that it26

Journal of Management Science Vol.9, 2019and market share, but no clear relationship was identified.
While Company B, which transferred Target costing to the
local market in order to incorporate local needs, was unable
to secure a very high share of the market, Company C,
which similarly transferred Target costing to the local
market to incorporate local needs, had a higher market
share as a result. The high market share ofhome-electronics manufacturer Company C would appear
to be due to its high degree of differentiation in terms of its
organizational capabilities related to product design. Thissuggests that differences in market share among auto
assemblers could be due to differentiation in areas such asorganizational capabilities related to product design andTarget costing, brands, and sales capabilities.
Each of the three suppliers uses a different type of
localization. What should be noted here is the difference
between the group-member suppliers and the OEM
supplier. Company Y and Company Z, both of which are
members of assembler groups, would appear to be
influenced strongly by the assemblers, for example bytransferring home-country QCD standards, as theassemblers did. On the other hand, OEM maker Company
X trades with multiple assemblers. The findings can beinterpreted to indicate that, for this reason, it independently
transfers Target costing and adapts QCD standards to the
local market as appropriate.
Suppliers that are members of assemblers’ groups ofcompanies are advancing into overseas markets along withthe assemblers. For this reason, they are strongly
influenced by assemblers and they tend to use strict QCD
standards transferred from the home country. This can beconsidered an effect of the fact that the assemblers that are
their main trading partners originally prioritized quality
above all and the fact that these assemblers entered the
Malaysian market together with group-member suppliers.
As a result, it could be that these have a tendency totransfer no more than production or design since whentransferring home-country standards they did not alsotransfer Target costing, because doing so would have a low
level of benefits compared to costs.
On the other hand, OEM makers are not strongly
focused on independence because they maintaintransaction relations with multiple assemblers and alsoneed to respond to needs for localization. For this reason,
they could be more likely to transfer processes through thestage of Target costing because of the need for proactive
localization. It also is conceivable that they could decide
whether to conduct Target costing at regional bases alone
or to conduct in it other countries such as Malaysia tooteam in the home country.
In considering linkage with other systems, an ideal
information system for Target costing would include links
to not only backbone systems centered on accounting
information but also design, procurement/purchasing, andproduction systems, as well as business intelligence (BI)tools for analysis of data collected.
However, the results of the interviews showed thatoriginally three of the six firms employed transfer of Target
costing, and one-half of the companies had cost tables foruse in Target costing. Also, the results of the interviews andadditional questioning by email showed that almost no
progress had been made on linkage of cost management
systems and tools, including those for purposes other thanTarget costing, with other systems.
On the subject of obtaining cost data locally forbackbone (ERP) systems, while both Company C andCompany Z had the ability to link cost data in theirbackbone systems with cost management, each of themused spreadsheet software for flexible analysis in
management of cost data. Since they use spreadsheet
software, linkage with CAD/CAM and other systems was
weak at all three companies of Company C, Company Y,
and Company Z (Company X did not answer questions on
this subject). Company C is in the process of standardizing
its CAD/CAM systems globally, and it is subject tocentralized management in the home country.
Of note here is Company X, a materials OEM maker.
Company X processes materials and both delivers them toassemblers as parts and sells them to other customers ingeneral. Only Company X has a common global Target
costing system, which helps it prepare cost estimates andreduce costs in the design stage. For this reason, Company
X is one company that demonstrates best practices forbuilding information capital related to localization of Target
costing among companies that have entered the Malaysianmarket.

6. Implications
6.1 Consideration of the context of localizationof Target costingFirst, this section will make clear the implications from thecontext of localization of Target costing, based on the
results of the field study. Among assemblers, Company B
and Company C employed the transfer type of transfer ofTarget costing. Accordingly, an attempt was made to
identify a relationship between transfer of Target costing27

Journal of Management Science Vol.9, 2019

depending on whether or not it would result in benefits thatwould exceed the costs.

and this could lead to the delay in linkage with other thanbackbone systems.

6.2 Consideration of the context of information
capital in connection with cost information
Second, to make clear the implications from the context of
information capital based on the results of the field study,
this paper will consider aspects of information
management related to localization. Two implications canbe identified here: those regarding (1) linkage of cost
information with other systems and (2) transfer of Target
costing systems.

(2) Transfer of Target costing systems
Next, this paper will consider the degree of readiness forbuilding information capital in connection with transfer ofTarget costing systems (information systems for Target
costing purposes). Through research conducted by now,
the only confirmed case of transfer of a Target costing
system from the home country and sharing it globally wasthat of Company X.
Ota (2014) argues that progress on localization
proceeds at a faster pace among suppliers, although thisobservation is not limited to Target costing alone. On theother hand, Mizoguchi (2012) identifies a tendency toward
use of independent systems by overseas subsidiaries inmaterials businesses. Company X, which already has
transferred its Target costing system to Malaysia, is an
OEM maker in a materials business. For this reason, thisstudy was able to confirm that, as pointed out by
Mizoguchi (2012), even at local subsidiaries in Malaysia
the degree of discretion on information systems was high,and a materials OEM supplier had transferred its own
independent Target costing system. Its findings also would
seem to indicate that, as pointed out by Ota (2014),
suppliers were quicker to carry out localization thanassemblers. While the issue remains of the limited natureof the conclusion that can be reached at this time, since thenumber of companies surveyed remains small, these canbe considered important findings.

(1) Linkage of cost information with othersystems
The authors’ research question was “Is it not the case that
where localization of Target costing has advanced, buildingof information capital (including information systems andIT-related human capital) also has advanced, to improve
the precision and efficacy of cost estimates in cost tables?”However, the authors were unable to confirm the presenceof a company where linkage of systems had advanced to ahigh degree and was used in cost estimating. Overall,under current conditions building of information capital isdelayed.
First, The key to understanding this delay in buildingof information capital is the independent natures of
information systems and data due to the large number of
independent local product specifications. It is clear thatregardless of the type of transfer—transfer of production,transfer of development, or transfer of Target
costing—local specifications for products and parts are
relatively numerous. For this reason, it is not useful to refer
to cost-table information from the home country, andindependent local cost-management items are set up andused for management. Also, there would seem to be atendency to use spreadsheet software as an IT tool for
management of cost information in particular due to theease and flexibility it enables in data management and data
analysis.
Second, as pointed out by Mizoguchi (2012), thedegree of local discretion in information systems tended tobe high among companies that had entered the Malaysianmarket. This could even be one factor leading to increased
costs of integration with other systems. If cost management
items were established independently, then costs would
increase further. For this reason, it is more likely that
cost-benefit analysis in evaluation of IT investment would
lead to the conclusion that the benefits would not be high,

7. Conclusions
The purpose of this study was to elucidate the context of
information capital related to cost information byconnecting it to the context of localization of Target costing,based on field study looking at Japanese companies thathave entered the Malaysian market. The results made clear
the differences in readiness for building information capitalwith regard to Target costing among assemblers andsuppliers. This paper makes the following twocontributions.
First, it confirms that, as pointed out by Mizoguchi(2012), even at local subsidiaries in Malaysia the degree of
discretion on information systems was high, and amaterials OEM supplier had transferred its own
independent Target costing system. At the same time, italso confirmed that, as pointed out by Ota (2014), suppliers

28

Journal of Management Science Vol.9, 2019

pp.87-99. (in Japanese)[8] Kozakai, Masakazu. (2013). “Key Performance
Measures on the Strategic-Focused IT Organization in
Japanese Companies. A Empirical Study on The
Information Capital Readiness, IT Budgeting
Processes Organizational Cultures,” Business andAccounting Research, Vol.2, pp.23-32.
[9] Kozakai, Masakazu. (2014a). “Management ofInformation Capital for Knowledge Creation.
Integrated utilization information capital, humancapital, organizational capital, and customer
relationship capital,” Journal of Management Science,
Vol.5, pp.21-30.
[10] Kozakai, Masakazu. (2015). “The Integration ofInformation Capital, Human Capital andOrganization Capital in the Enterprise-wide IT
Solution. Relationship between Intangibles andPerformance Evaluation Systems in IT
Organizations,” Business and Accounting Research,
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[11] Kozakai, Masakazu. (2016). “Redefining the roles ofvalue engineering in new product development,”
Journal of Management Science, Vol.6, pp.1-8.
[12] Kozakai, Masakazu. (2014b). “Information CapitalManagement for Knowledge Creation: The
Knowledge Creation and Intangible Assets,”
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ManagementthAccounting, 6 ed., Dobunkan-Shuppan. (inwere quicker to carry out localization.
Second, it confirmed that accumulation of IT-related
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software was used. It could be said that overall, even if
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capital tends to be delayed.
However, it can be pointed out that since the numberof firms operating in Malaysia surveyed remains small, thisstudy can do no more than propose hypotheses. Probably
there is a need to increase the number of surveys in the
future. Furthermore, there also is a need to proceed withsurveys in countries where regional bases are located andregarding interaction with the home country, instead ofsurveying companies operating in Malaysia alone.

Acknowledgement
This work was supported by JSPS KAKENHI Grant
Number 16K04003.

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30Editor’s Notes
We are now issuing the ninth edition of the Journal of Management Science. The ICBM is aninternational conference where Researchers from Japan participate. Several articles in avariety of areas of study are submitted in the Journal of Management Science Vol. 9, forexample Finance, Information Management, Tourism Management, and Business
Administration.
ICBM2019, which was held at International Conference of Business Management in Tokyo,
October 2019, was closed over the course of raging session.

Editorial Board of Journal of Management Science
AdvisorProf. Masanori OKADA
Shukutoku University, Japan
Editor in Chief
Dr. Tsuyoshi YOSHIOKA
Teikyo Heisei University, Japan
Editor in Subchief
Dr. Kentaro Ouchi
Miyazaki Sangyo-keiei University, Japan
Editorial Board Members
Dr. Masakazu KOZAKAI
Tamagawa University, Japan
Nariaki NISHIYA
Miyagi University, Japan
Dr. Noriaki OKU
Tokyo International University, Japan
Prof. Isosi NAIKI
Institute of Tokyo, Japan

Journal of Management Science Vol.9
Dec. 26, 2019
Edited by Editorial Board of Journal of Management Science Vol.9
Published by The Union of Business Management Associations in Japan
Promotion Center for Academic Societies and Associations,3-24-11 Yayoi-cho, Nakano-ku, Tokyo, 164-0013 JapanTEL 03-6276-5623
Printed in Japan by Publishing Company of Japan Co., Ltd.