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Journal of Management Science Vol.10
Contents

Refereed Papers
Evaluation of Intangible Assets Using Regression Analysis ...................................................................................... 1
YOSHIOKA Tsuyoshi
The Intangibles on Indigenization of Target Costing in Supply-chain Development in Malaysia: Case analysis of overseas advancement by parts suppliers....................................................................................... 9
Masakazu KOZAKAI and Kou TASAKA

Non-Refereed Papers
Intellectual Property Management Through Fruit Tree Club System: The Case Study of the Apple Cultivar "Cripps Pink".............................................................................................. 21

Mitsukazu SAKURADANII

Journal of Management Science Vol.10, 2021

[Refereed Paper]

Evaluation of Intangible Assets
Using Regression Analysis
YOSHIOKA Tsuyoshi
Teikyo Heisei University, Tokyo, Japan
E-mail address: t.yoshioka@thu.ac.jp

Abstract: Assets without physical substance, other than financial assets, are called
intangible assets. Since the 1990s, intangible assets have been an important determinant ofcorporate value. However, no established method is available for valuing intangible assets,
and only some of them are recorded on the balance sheet. In other words, currently, thebalance sheet does not accurately represent corporate value. One of the reasons may bethat it takes a huge amount of time and effort to evaluate intangible assets. In this study, I
evaluated intangible assets using multiple regression analysis in a wholly new approach tointangible asset evaluation. I obtained a regression equation using 27 stocks of the electricmachinery industry, selected from the 225 stocks that make up the Nikkei Stock Average,
with the intangible assets used as the dependent variable and total liabilities and net assets
as independent variables. Although the intangible assets evaluated by this equation would
certainly differ from the actual value, this prediction method does not require much timeand effort. This allows the firm to discover buried intangible assets not recorded in thebalance sheet.
Keywords: Intangible asset valuation method, Multiple regression analysis, Balance sheet

Received September 5, 2020
Revised October 10, 2020
Accepted October 15, 2020
Published January 15, 2021

1

Journal of Management Science Vol.10, 2021

1. Introduction

executed in the following order: obtaining priorinformation on the target company, identifying
intangible assets through interviews and other means,analyzing written materials and measuring intangible
assets, preparing reports and the like, and reviews andfollow-up by auditors (Tomoichiro HASEBE, 2019).
Because these processes require considerable time andeffort, it is impossible to deal with the countless
intangible assets of all companies.
The two factors noted above are the main reasons that only
some of the intangible assets are recorded on balance
sheets. As such, developing an intangible asset valuation
method that is not subject to revision by the appraiser anddoes not require immense time and effort is an imperativeneed. This study proposes a valuation method for
intangible assets based on multivariate analysis that has acertain degree of accuracy and does not require much timeand effort. The use of multivariate analysis, a mathematical
approach, solves the problem of evaluator and auditor
influence. Furthermore, the mathematical calculation
involved does not require much time and effort, as with theconventional valuation method.
Although regression analysis cannot provide an
accurate valuation of intangible assets, the predictedamount is recorded on the balance sheet with minimal timeand effort. This allows the company to dig out and value
intangible assets that have hitherto remained outside thebalance sheet.

Companies have a variety of assets. They are roughlyclassified as tangible and intangible (with no physical traits
but not financial) assets. According to various researchstudies worldwide, up until the 1980s, tangible assets werethe main determinants of corporate value. However, sincethe 1990s, intangible assets have had a greater effect on
corporate value (Ito Kunio, 2006). In other words, there has
been a major shift from tangible to intangible assets asdeterminants of corporate value (Margaret M. Blair andThomas A. Kochan, 2000). However, intangible assets are
only partly recorded on balance sheets (Baruch Lev andPaul Zarowin, 1999)—the unrecorded value is three to fourtimes the recorded value (Kevin G. Rivette and David
Kline, 1999). There is also a report that Microsoft's market
value in 2006 was about $250 billion, but its total assets on
the balance sheet were less than 30% of that, about $70
billion (Jonathan H. and Stian W., 2018). In other words,
balance sheets do not currently present an accurate pictureof the asset value of a company.
Why do intangible assets normally remain unrecordedon balance sheets? There are two possible reasons: (A) no
established method is available for intangible asset
evaluation, or (B) it takes much time and effort to evaluate
intangible assets. We look into both of these potential
reasons.
(A) No established method is available for intangible asset
evaluation
Of course, there are methods to evaluate intangible
assets. The three main methods respectively follow a
cost approach, a market approach, and an income
approach (Tomoichiro, 2019). Moreover, research isunder way to find more accurate assessment methods
for intangible assets. However, each company may
select a different evaluation method even when theasset type is the same because the intangible asset
must be evaluated according to its actual condition.
Furthermore, because the intangible asset valuation
for accounting purposes is subject to review by anauditor, the evaluation method may also varydepending on the auditor, besides the appraiser and theevaluation amount. Therefore, despite advances in
research on the three evaluation methods, they canhardly be regarded as established methods forevaluation of intangible assets.
(B) It takes much time and effort to evaluate intangible
assetsIntangible asset evaluation involves a set of processes,

2. Intangible asset
regression analysis

valuationusing

I propose a method to evaluate intangible assets based on
multiple regression analysis, a type of multivariate analysis,using only numerical data in the financial statements(YOSHIOKA, 2019). Here we use intangible asset
valuations of companies that have already been evaluatedand recorded on balance sheets, as well as the amount of
the account on the balance sheet. Multiple regression
analysis is performed with the valuation of intangible assets
as the dependent variable and the amount of the accounttitle listed on the balance sheet as the independent variable.
The specific intangible asset valuation method is asfollows:(1) The accounts listed on the balance sheet that arehighly correlated with intangible asset valuations are
selected.
For the accounts selected, a single regression is
performed between the evaluated amount and the2Journal of Management Science Vol.10, 2021

Using the above procedure, we can construct anequation as in Figure 1 to predict the value of unrecorded
intangible assets, using the evaluations of companies thathave recorded their intangible assets on their balance
sheets.
However, the coefficient ai and constant a0 willchange depending on the type of intangible assets. In
addition, since the value should be determined according to
the size of the company and the industry type, the equationfor evaluating intangible assets needs to be constructed bycompany size and industry type.

amount recorded on the balance sheet.
(2) A regression equation is determined through multiple
regression analysis.
Multiple regression analysis is performed between theaccounts selected in (1) (independent variables) andthe valuations of the company’s intangible assets(dependent variable) recorded on the balance sheet,calculated with the regression equation.
(3) The accuracy of the calculated equation is evaluated.
The accuracy of the equation used for the intangible
asset valuation in (2) is verified with the adjusted
coefficient of determination and significance F.

y = a0 + Σai xi
y : predicted amount of intangible asset
ai : coefficientsa0 : constantxi : amount of balance sheet accountFigure 1. Equation for intangible asset evaluation

3. Regression analysis of stocks that makeup the Nikkei Stock Average (Nikkei 225)

amount of intangible assets as the dependent variable andeach account in the balance sheet as the independent
variable. However, performing multiple regression analysis
on the accounts listed in the balance sheet is a uniqueattempt. Furthermore, regressing each account from the
beginning for the purpose of evaluation is likely to cost too
much. Therefore, regression analysis is performed withintangible assets as the dependent variable and total assets,
total liabilities, and net assets as independent variables.
First, I will attempt to verify from the statistics whether
performing statistical analysis on the accounts in thebalance sheet is a valid method. Of course, it is anapproximate analysis, and precise results cannot be
obtained since total assets include intangibles. However,
the intangible asset valuation varies depending on theevaluator and the auditor. After all, the aim of regression
analysis is not to calculate accurate values, but tomathematically compute predicted values with a certain
degree of accuracy. Therefore, we will perform regression
analysis, as a rough estimation method, using intangible
assets as the dependent variable and total assets, total
liabilities, and net assets as the independent variables, andvalidate the methodology. In addition, since regression
analysis of accounts listed in the balance sheet is rare, aresearch paper on the results obtained is consideredmeaningful.
Figure 2 shows a scatter diagram and the correlation
coefficients of (a) intangible assets and total assets, (b)In this section, we verify whether a regression equation canbe constructed to evaluate intangible assets as described in
Section 2. As mentioned at the end of the section, theregression equation needs to be constructed according to
the size and industry type of the company. Therefore,
regression analysis is performed using the balance sheets of
27 companies’ stocks that make up the Nikkei stock
average (Nikkei 225), which is one of the representative
stock price indexes of the Japanese stock market, and 27
stocks in the electric machinery industry1. I selected oursample from the stocks that make up the Nikkei 225
because they represent large companies and are therefore
more or less similar. Furthermore, we can assume, without
further discussion, that large companies use moreadvanced intangible asset valuation methods than small
and medium enterprises (SMEs). The reason the electricmachinery industry was selected is that it has the largest
number of brands among the 36 industry types so that the
regression analysis would be relatively more accurate. The
second column of Table 1 shows the values of intangible
assets, including goodwill, of the 27 Nikkei 225 companies
in the electric machinery industry. These values are
obtained from the consolidated balance sheet of the latest
annual securities report as of September 18, 2020.
The goal is to construct a regression equation with the1

Nikkei Inc., https://indexes.nikkei.co.jp/en/nkave/index/
component?idx=nk225, September 18, 2020．

3

Journal of Management Science Vol.10, 2021

Table 1. Intangible assets, total assets, total liabilities, net assets 27 Nikkei 225 brands in the electric machinery industry(Millions of yen)
Intangible Assets
Total Assets
Total Liabilities
Net Assetsa(including goodwill)
NISSHINBO HOLDINGS INC.
12,203
617,527
364,992
252,535
MINEBEA MITSUMI INC.
32,424864,481462,205402,276
HITACHI, LTD.
1,115,721
9,930,081
5,663,342
4,266,739
MITSUBISHI ELECTRIC CORP.
146,323
4,409,771
1,870,912
2,538,859
FUJI ELECTRIC CO., LTD.
24,606996,827
590,825
406,002
YASKAWA ELECTRIC CORP.
24,899450,127
218,960
231,167
OMRON CORP.
62,052
758,124
225,535
532,589
GS YUASA CORP.
6,426
385,416
180,098
205,318
NEC CORP.
381,427
3,123,254
2,008,731
1,114,523
FUJITSU LTD.
143,922
3,187,445
1,839,010
1,348,435
OKI ELECTRIC IND. CO., LTD.
11,288266,030
266,030
106,440
SEIKO EPSON CORP.
29,052
1,040,910
534,873
506,037
PANASONIC CORP.
620,611
6,218,518
4,062,650
2,155,868
SONY CORP.b
1,690,198
23,039,343
18,242,041
4,789,535
TDK CORP.
240,693
1,943,379
1,094,815
848,564
ALPS ALPINE CO., LTD.
28,259625,542
269,926
355,615
YOKOGAWA ELECTRIC CORP.
22,766489,679
198,206
291,472
ADVANTEST CORP.
51,025355,777
124,325
231,452
DENSO CORP.
96,3885,651,801
2,092,932
3,558,869
CASIO COMPUTER CO., LTD.
8,459
334,100
131,561
202,539
FANUC CORP.
10,2191,512,499
149,634
1,362,865
KYOCERA CORP.
330,740
3,250,175
795,933
2,454,242
TAIYO YUDEN CO., LTD.
1,293
343,122
132,667
210,454
SCREEN HOLDINGS CO., LTD.
6,167
347,964
173,822
174,142CANON INC.
1,246,582
4,768,351
1,876,433
2,891,918
RICOH CO., LTD.
231,898
2,867,645
1,008,527
231,898
TOKYO ELECTRON LTD.
10,921
1,278,495
829,692
10,921
Source: EDINET, Financial Services Agency, https://disclosure.edinet-fsa.go.jp/, September 18, 2020.
aCapitals and net assets are collectively referred to as net assets.
b
Excludes redeemable noncontrolling interest.
This is probably due to multicollinearity between the
independent variables. Table 3 shows a correlation matrixof total assets, total liabilities, and net assets, which are
independent variable candidates, for a multicollinearity test.
The result shows strong correlation between total assets,
total liabilities, and net assets, indicating thatmulticollinearity exists. In particular, considering the strong
correlation between total assets and total liabilities andbetween total assets and net assets, I excluded total assets
from the list of independent variables candidates andperformed multiple regression analysis with total liabilities
and net assets as independent variables and intangible
assets as dependent variables. The results are shown inintangible assets and total liabilities, and (c) intangible
assets and net assets. Since the correlation with intangible
assets is sufficiently high for total assets, total liabilities, andnet assets, multiple regression analysis is performed withthese three as independent variables.
Table 2 shows the results of multiple regression
analysis, performed with Microsoft Excel, at a significancelevel of 5%, using intangible assets as dependent variables
and all independent variable candidates (total assets, total
liabilities, and net assets) as independent variables. Here,the coefficient of total assets is a negative value, but thesimple correlation between intangible assets and total
assets in Figure 2 (a) is positive, which is a contradiction.

4

Journal of Management Science Vol.10, 2021

(a) Intangible assets and total assets(b) Intangible assets and total liabilities(c) Intangible assets and net assets
Figure 2. Scatter diagram and correlation coefficient of intangible assets, total assets, total liabilities, and net assets.
shown in Figure 3.
Table 5 shows the amount of intangible assets
calculated using the regression equation. The amounts
calculated for two companies are negative. This is probably
due to the large P-value of the intercept, as shown in Table
4. Therefore, performing multiple regression analysis using

Table 4. This multiple regression analysis is consideredmeaningful because there is no multicollinearity, theadjusted R Square (adjusted coefficient of determination) is
0.76658, which is sufficiently large, and significance F issufficiently small. The regression equation for calculating
the amount of intangible assets, based on these results, is

5

Journal of Management Science Vol.10, 2021

Table 2. Results of multiple regression analysis with intangible assets as dependent variables
and total assets, total liabilities, and net assets as independent variables
Regression Statistics
Multiple R
R SquareAdjusted R SquareStandard Error
Observations

0.88580.78460.7566
21340
27

ANOVA
Regression
Residual
Total

df
3
23
26

SS
3.816E+12
1.047E+12
4.864E+12Intercept
Total assets
Total liabilities
Net assets

Coefficients-38014-0.2171
0.27820.3610MS
1.272E+12
4.554E+10

Std Error
59748
2.076
2.076
2.083

F
27.93

t stat-0.6363-0.1046
0.13400.1733Significance F
7.585E-08

P-values
0.53090.9176
0.8946
0.8639Lower 95%
-161610-4.512-4.016-3.949Upper 95%
85583
4.078
4.573
4.671

Table 3. Correlation matrix of total assets, total liabilities and net assets
Total assets
1.00000.98110.8601

Total assets
Total liabilities
Net assets

Total liabilities
0.98111.00000.7452

Net assets
0.86010.74521.0000

Table 4. Results of multiple regression analysis with intangible assets as dependent variables
and total liabilities and net assets as independent variables
Regression Statistics
Multiple R
R SquareAdjusted R SquareStandard Error
Observations

0.88570.78450.766620895027

ANOVA
Regression
Residual
Total

df
2
24
26

SS
3.816E+12
1.048E+12
4.864E+12Intercept
Total liabilities
Net assets

Coefficients-36372
0.06110.1432MS
1.908E+12
4.366E+10

Std Error
56446
0.01727
0.04569F
43.69

t stat-0.644
3.537
3.134

6

Significance F
1.000E-08

P-values
0.52550.001682
0.004497

Lower 95%
-1528700.025440.04892

Upper 95%80126
0.09670.2375

Journal of Management Science Vol.10, 2021

y = - 36372×10 6 + 0.061093x1 + 0.14322x2
y : value of intangible asset
x2 : amount of net assets
x1 : amount of liabilities
Figure 3. Equation for intangible asset evaluation of 27 Nikkei 225 brands in the electric machinery industry
assets calculated by the regression equation, and 19% of
the companies recorded (a) less than half of (b). The lastcolumn shows the ratio of (a) - (b) to total assets. These
results could be an error, but a large negative amount may
also suggest the presence of buried intangible assets notrecorded on the company’s balance sheet.

the account recorded on the balance sheet as theindependent variable would be necessary for creating amore accurate regression equation. Furthermore, as shownin the column of the ratio of (a) to (b), 48% of thecompanies recorded (a) the amount of intangible assets on
the balance sheet less than (b) the amount of intangible

Table 5. Comparison between amounts of intangible assets
as recorded on the balance sheet and as calculated by the regression equation(a) Amount of intangible
assets recordedon the balance sheet
NISSHINBO HOLDINGS INC.
MINEBEA MITSUMI INC.
HITACHI, LTD.
MITSUBISHI ELECTRIC CORP.
FUJI ELECTRIC CO., LTD.
YASKAWA ELECTRIC CORP.
OMRON CORP.
GS YUASA CORP.
NEC CORP.
FUJITSU LTD.
OKI ELECTRIC IND. CO., LTD.
SEIKO EPSON CORP.
PANASONIC CORP.
SONY CORP.
TDK CORP.
ALPS ALPINE CO., LTD.
YOKOGAWA ELECTRIC CORP.
ADVANTEST CORP.
DENSO CORP.
CASIO COMPUTER CO., LTD.
FANUC CORP.
KYOCERA CORP.
TAIYO YUDEN CO., LTD.
SCREEN HOLDINGS CO., LTD.
CANON INC.
RICOH CO., LTD.
TOKYO ELECTRON LTD.

12,20332,424
1,115,721
146,323
24,60624,89962,052
6,426
381,427
143,922
11,28829,052620,611
1,690,198
240,693
28,25922,76651,02596,388
8,459
10,219330,740
1,293
6,167
1,246,582
231,898
10,9217(b) Amount of intangible
assets calculated
by regression equation
22,09549,479920,701
441,543
57,871
10,11353,684
4,036
245,969
269,101-4,87568,780520,591
1,764,046
152,045
31,05017,482
4,372
601,193673
167,959
363,7501,874-812
492,445
58,454
15,880(Millions of yen)

Ratio of(a) to (b)Ratio of(a) - (b)to total assets

55%
66%
121%
33%
43%
246%
116%
159%
155%
53%
-232%
42%
119%
96%
158%
91%
130%
1167%
16%
1257%
6%
91%
69%
-759%
253%
397%
69%

-1.60%-1.97%
1.96%-6.69%-3.34%
3.28%
1.10%
0.62%
4.34%
-3.93%
6.08%-3.82%
1.61%-0.32%
4.56%-0.45%
1.08%
13.11%-8.93%
2.33%-10.43%-1.02%-0.17%
2.01%
15.82%
6.05%-0.39%

Journal of Management Science Vol.10, 2021

4. Summary
Since the equation for intangible asset valuation shown in
the previous section is statistically calculated throughmultiple regression analysis, the value is certainly notaccurate. However, an approximate amount is sufficient.
This regression equation provides an estimated intangible
asset valuation that is not subject to change by the evaluatorand does not require much time and effort. This allows thefirm to discover hidden intangible assets not recorded on
the balance sheet.
In this study, we verified the valuation method for
intangible assets using regression analysis, but we could
not provide regression equations for practical use. Derivingsuch equations is our next priority. To do so, however, we
would need to create a regression equation for eachindustry type and every company size, using the accounts
in the balance sheet as independent variables. The
intangible assets could then be evaluated collectively, but aregression equation will need to be established for each
type, considering that companies have various types ofintangible assets.

Acknowledgment
The author is grateful to Professor Isosi NAIKI of Instituteof Tokyo for useful discussions.

References
Baruch Lev and Paul Zarowin (1999), “The Boundaries ofFinancial Reporting and How to Extend Them”,
Journal of Accounting Research, 37, pp.353-385.
Ito Kunio (2006), “Accounting for Intangible Assets”,
Chuokeizai-Sha (in Japanese).
Jonathan H. and Stian W. (2018), “Capitalism Without
Capital”, Princeton University Press.
Kevin G. Rivette and David Kline (1999), “Rembrandts in
the Attic: Unlocking the Hidden Value of Patents”,
Harvard Business Review Press.
Margaret M. Blair and Thomas A. Kochan (2000), “TheNew Relationship: Human Capital in the American
Corporation”, Brookings Institution Press.
Tomoichiro HASEBE (2019), “An Analysis of Intangible
Asset Valuation”, Patent Studies, No.67, pp.34-46 (inJapanese).
YOSHIOKA Tsuyoshi (2019), “Proposing an Intangible
Asset Valuation Method that Uses Multivariate
Analysis”, International Conference on Business
Management 2019 in Tokyo Conference Book ofProceedings, pp.5-6.

8

Journal of Management Science Vol.10, 2021

[Refereed Paper]

The Intangibles on Indigenization of Target Costingin Supply-chain Development in Malaysia: Case analysis of overseas advancement by parts suppliers
Masakazu KOZAKAI1* and Kou TASAKA2
1

Department of Engineering, Tamagawa University, Tokyo, Japan
Department of Commerce, Fukuoka University, Fukuoka, Japan2*

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

Abstract: This study is intended to analyze suppliers that have advanced overseas throughaccompanying assemblers and main suppliers and elucidate the current state of transfer
and development of human capital, organizational capital, and information capital bysuch firms, based on a field survey on indigenization of Target costing by Japanesemanufactures operating in Malaysia. Specifically, based on interviews with Japanese firms
operating in Malaysia, it will (1) reclassify the types of indigenization among Japanesefirms operating in Malaysia and (2) consider the state of transfer and development of
suppliers' intangibles (human capital, organizational capital, information capital) inoverseas supply-chain development. This study has been able to identify design-in
suppliers as a new type of indigenization of manufacturers advancing into Malaysia. In
conclusion, it finds that while intangibles have not developed to a high degree amongsuppliers of the design-in type, they have been able to transfer human capital, information
capital, and organizational capital from Japan at levels appropriate to their own roles visa-vis their main customers.
Keywords: Target costing, Human capital, Information capital, Organizational capital,
Supply chain management, Interorganizational management accounting

Received November 16, 2020
Accepted December 24, 2020
Revised December 30, 2020
Published January 15, 2021

9

Journal of Management Science Vol.10, 2021

1. Introduction

based on a field survey of Japanese manufacturers operatingin Malaysia, suppliers accompanying assemblers and major
suppliers overseas and elucidate the current states of transfer
and development of human capital, organizational capital, andinformation capital among such firms. First, we will postulate
the issues addressed in this study and make the objectives ofthe study clear. Second, we will review previous studies anddescribe the background of this study, making its researchmethodology clear. Third, we will consider the subject matterbased on the results of surveying three suppliers (parts
manufacturers). Fourth, we will examine the types of overseas
transfer among these three suppliers and the state of theirtransfer and development of intangibles.

This study describes the results of contextual analysis ofindigenization of Target costing based on review ofknowledge learned from a field survey (of nine companies,
conducted March 2016 – March 2018) on indigenization of
Target costing by Japanese manufacturers doing business in
Malaysia. Specifically, based on interviews with Japanesefirms operating in Malaysia, it (1) reclassifies the types ofindigenization among Japanese firms operating in Malaysia
and (2) considers the state of transfer and development of
suppliers' intangibles (human capital, organizational capital,
and information capital) in overseas supply-chain
development.

3. Review of previous studies, and researchmethodology

2. Objectives of this study

3.1 Previous studies
This section will review previous studies and then posit
hypotheses on the meaning of globalization of Target costing,the meaning of indigenization, and types of indigenization in
Malaysia. Target costing is "a method of strategic costmanagement 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" (Sakurai,
2015, p. 307).

Through now, Tasaka and Kozakai (2017; 2018) and Kozakai
and Tasaka (2018; 2019) have elucidated the current state ofindigenization of Target costing as well as transfer anddevelopment of intangibles, centered on information capital.
However, while the forms of transfer and development of
human capital (skills), organizational capital (organizational
cultures, systems, etc.), and information capital (ability toutilize information systems) at assemblers and Tier 1 suppliers
have been elucidated as important factors behind realizing
indigenization of Target costing, the current states andmethods of transfer and development of human capital andorganizational capital have not necessarily been made clear
from the perspective of supply-chain development overseas.
One remaining issue in particular is the fact that little progresshas been made on surveying concerning intangibles at firms
in charge of manufacture of parts, as suppliers at an even lower
level than Tier 1 suppliers. For this reason, it would be highlymeaningful to focus on suppliers that have advanced overseas
in the form of accompanying overseas supply-chain
development centered on assemblers.
Since such issues remain to be studied, a need can be
identified to study lower-level suppliers (specifically,
relatively small- and medium-scale manufacturers in chargeof parts manufacture), which play important roles indevelopment and design activities encompassing the entire
supply chain and in advancing Target costing practice.
Specifically, there is a need to investigate the degrees to whichhuman capital, organizational capital, and information capital
have been transferred or developed at suppliers lower than the
Tier 1 level in indigenization of development, design, andTarget costing of assemblers that have advanced into Malaysia.
Accordingly, the objective of this study is to analyze,(1) The background of research on Target costing
The number of studies that have addressed indigenization of
Target costing is not very large, and such studies as do exist
tend to concern suppliers in the auto industry (Itoh, 2004;
Kitahara, 2011; Nakazawa, 2012; Ota, 2014). The study ofTarget costing in emerging markets in Tasaka (2014)
considers a case of failure in deployment of Target costing
through reducing the functions of a product developed anddesigned for developed markets to lower prices for emerging
markets and the process through local sourcing of parts andanalyzes corresponding strategic patterns.
There are great expectations for Target costing as ameans of cost cutting and strategic profit management.
However, in transfer of Target costing overseas doubts remain
as to whether or not it can be transferred as is. On this point,
Tasaka (2014, 2016) discusses the kinds of points to note inorder to deploy Target costing overseas successfully.
The research by the authors of this paper is important inthat it elucidates the efforts of assemblers and suppliers inadvancing indigenization of production, development, design,
and Target costing as well as considering issues in10

Journal of Management Science Vol.10, 2021

organizational culture and organizational abilities. The
organizational abilities of a major assembler include supplychain management abilities.
Interorganizational management accounting is a domainof managerial accounting that is related to supply-chain
management. Interorganizational management accounting
refers to "a domain of managerial accounting intended tocollect and prepare accounting information to support
interorganizational management and utilize it acrossorganizational boundaries" (Kubota et. al., 2008).
Interorganizational management accounting is a relatively
new research domain. An important point is the fact that themethod of analyzing cost drivers based on the dichotomy
between structural drivers and executional drivers in strategic
cost management, employed in an early study by Shank and
Govindarajan (1993), has been used in later studies as well.

indigenization of Target costing by Japanese manufacturers
related to management of intangibles. For example, on thesubject of indigenization by Japanese manufacturers Ota(2014) points out that suppliers are quicker than assemblers toadapt to indigenization. However, Ota (2014) does notnecessarily consider the issue of transfer of Target costing. On
this point as well, there can be said to be a need for careful
study focusing on the point of transfer and development ofintangibles related to Target costing.
In addition to human capital, organizational capital, andinformation capital, intangibles also include factors such asbrand, corporate reputation, and intellectual property.
Intangibles are treated as the ultimate sources of sustained
value creation (Kaplan and Norton, 2004, p. 7). Transfer ofhuman capital, organizational capital, and information capitalis strongly related to research on international transfer ofTarget costing practice. Organizational capital includes(1) Transfer of production
1.JapanTarget costing
Advanced
Development

Preliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Mass
Production

Knock down
Preparation
for
Production

2.Local(2) Transfer of design
1.Japan

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
Advanced
Development

Preliminary
DesignDetailed
DesignLocalize
2.LocalPreliminary
DesignDetailed
Design(3) Transfer of Target costing
1.JapanTarget costing

Advanced
DevelopmentPreliminary
DesignDetailed
DesignPreparation
for
Production

Globally dispersed development bases
2.LocalPreliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Mass
Production

Target costing

Source: Kozakai and Tasaka (2019, p. 24)
Figure 1. Types of indigenization in Malaysia(2) Findings of previous studies
Tasaka (2016) identifies five types of indigenization of Target
costing. In the early stages of their study, the authors were able
to identify three types in Japanese firms operating in Malaysia:

transfer of production, transfer of design, and transfer of Target
costing. Accordingly, at first this study considered overseas
transfer by Japanese manufacturers in Malaysia by grouping
it into these three types (Tasaka and Kozakai, 2017; Tasaka

11

Journal of Management Science Vol.10, 2021

spreadsheet software was used in many cases. Overall,development of information capital tends to lag even if Target
costing is indigenized.
However, the issue remains that the research describedabove merely posits hypotheses, due to the small number ofsurveys of Japanese firms operating in Malaysia.
Furthermore, in many cases Japanese assemblers bringalong suppliers with which they already have transaction
histories when transferring operations overseas. That is,Japanese assemblers advance overseas while maintaining,
to some degree, their existing supply chains. Taking thispoint into consideration, it also can be considered highlymeaningful to survey firms in the future concerning
aspects of supply-chain management, while also
considering matters from an interorganizational
management accounting perspective.

and Kozakai, 2018; Kozakai and Tasaka, 2018; 2019). The
transfer of production type is one in which processes frompreliminary design through detailed design take place in Japanand knockdown production takes place overseas at the partslevel. The transfer of design type is one in which preliminary
design takes place in Japan and detailed design and production
take place overseas, or all three processes of preliminary
design, detailed design, and production take place overseas.
The transfer of Target costing type is one in which allprocesses from preliminary design through mass production
take place locally, and even Target costing is indigenized.
The authors' research through now has contributed bycontextualizing indigenization of Target costing andelucidating the contexts of information capital related to costs,
based on a field survey of Japanese firms operating in
Malaysia. As a result, it has been able to make clear thedifferences between Japanese assemblers and suppliers
operating in Malaysia in their progress on information-capitaldevelopment related to Target costing (Kozakai and Tasaka,2019). First, they have confirmed that materials OEM
suppliers, for which even Malaysian subsidiaries have highdegrees of freedom in information systems, transfer their own
individual Target costing systems. At the same time, they also
have confirmed that suppliers are quicker to conduct
indigenization. Second, they also confirmed that
accumulation of IT-related human capital is lacking, andFirst interviews(March 15-16, 2016)

Second interviews(March 14-15, 2017)

Third interviews(March 6-7, 2018)

3.2 Overview of the field survey
In addition to a literature review, this study is based on threeinterview surveys conducted in Malaysia. The first of these(conducted in March 2016) involved interviews with two
automotive assemblers and one automotive supplier, on the
topics of cooperation with local suppliers, revisions to Target
costing practice, standards in the home country and the local
country regarding quality, cost, and delivery time (QCD), andthe state of development and methods of use of information

Table 1. Overview of the surveys conducted while visiting Malaysia
Companies
Dates
Interviewees
Company B
March 15: 9:30 am - 12:00 CFO(auto assembler)noon
Company A
March 15: 2:00 - 4:30 pm Local manager(auto assembler)
Company X
March 16: 2:00 - 5:00 pm Local manager(auto supplier)Company Y
March 14: 2:00 - 4:00 pm Local manager(auto supplier)Company C
March 15: 9:00 - 11:00 am Operating Officer(home-electronics assembler)
Company Z
March 15: 1:00 - 3:30 pm Advisor(auto supplier)(responsible for Target costing)Company O
March 6: 10:00 am - 12:00 Managing Director
noon(Copier parts supplier)Company P
March 6: 2:00 - 4:00 pm
Managing Director(Spring Supplier)Company Q
March 7: 9:40 - 11:40 am
Managing Director(Steel pipe processing supplier)

12

Journal of Management Science Vol.10, 2021

and its Malaysian subsidiary handles development andproduction independently. It should be noted that information
concerning development and production of parts is sharedwithin the region and some information, such as know-how
on development and production, is provided as feedback toJapan.
Since Company O manufactures relatively simple andsmall parts, it does not play a leading role in any Target costing
practice. Company O's organizational ability to estimate parts
costs is based more on experience than on past data. Many of
its transactions employ the drawings-supplied method,
although it also produces drawings together with customers insome cases.
The production system used by Company O isstandardized globally, as are the items subject to costmanagement. However, each country has its own server, since
the company sees no point to preparing a shared information
system since no parts are completely identical between
domestic and foreign markets. Although Company O's
adoption of IT is not highly advanced overall, it is able to view
data in real time in its production system and its accounting
system. It uses spreadsheet software to process and analyze
these data. While it does have an information systems sectionin Malaysia, two or three of its staff members also perform
other duties concurrently.

systems.
The second interview survey (in March 2017) asked
about differences among manufacturer types in indigenizationof Target costing, differences between the home country andthe local country regarding standards for matters such as
quality, delivery time, and cost, and information management
using cost tables and other means. As content concerning cost
tables and IT, interview questions were added on subjects suchas standardization of cost tables and methods of sharing them,information management, and coordination among various
internal information systems, enabling the survey to be usedin consideration of information capital. In addition, thecompanies surveyed consisted of two automotive suppliers
along with one home-electronics assembler, to enable a surveyof matters such as differences between the automotive andhome-electronics industries. Furthermore, after the second
survey an additional survey was conducted concerningquestions that could not be asked in the first survey, by
emailing the staff responsible at the companies surveyed.
The third interview survey (in March 2018) involved
continuation of interviews on the same questions asked in thesecond survey in 2017. Survey subjects consisted of three
suppliers from industries other than automotive and homeelectronics.

4. Additional surveys of Japanese firms activein Malaysia

4.2 The case of Company P
Company P is a supplier of spring parts. It advanced into
Malaysia to secure orders from a main assembler customerthat had a production facility in the country. Its main
customers are Japanese and European firms, and it exports
65% of its production to customers outside of Malaysia.
All of Company P's transactions in Malaysia involve
production of products specially ordered by customers.
Company P engages in make-to-stock production. It
maintains internal inventories to take over inventory
adjustments for customers, delivering products in response to
individual orders. In light of the importance of inventory
adjustments, the level of detail of its production management
is key.
It employs the same standards for QCD as in Japan. The
parts in which it trades in Malaysia differ greatly in their
specifications from those in Japan. Even so, since the processused in spring production and standard workflows are
identical, the tasks that should be conducted for quality control
are the same as in Japan. Since product properties related todelivery time and cost are similar to those in Japan, it keeps
inventories for the same periods and manages the same cost
items as in Japan.

Table 2 shows the results of the surveys of supplier firms
among the companies surveyed in the three interview surveys
described above. The results for Company O, Company P, andCompany Q will be discussed in particular below.
4.1 The case of Company O
Company O is a supplier of parts used in office machines(mainly copiers). It advanced into Malaysia together with anassembler that was a major customer.
It is difficult for Company O to differentiate itself fromcompetitors in terms of QCD. Under current conditions, it isable to maintain transaction relationships by securing thequality of its parts and responding swiftly to customer orders.
There is little difference between its transaction relationships
in Malaysia and those in Japan, and the delivery timerequirements of its major customers remain unchanged. For
this reason, its standards for QCD in management of design
and manufacturing are the same as in Japan. However, there
are major differences in specifications between the parts inwhich it trades in Malaysia and those in Japan.
Company O has advanced the indigenization process,

13

14

Local formats
Spreadsheets

Common

Proprietary Target
costing system

Drawings Approved

Cost management items

Cost data management

Drawings

Drawings Supplied

Numerous (groupassembly)

Numerous (materials
OEM)

One local IT staff
member (concurrent
post)

Differencesin
specifications with homecountry

Head office in charge.
Some local outsourcing.

Information systems
sectionNo local sourcing. Cost
information managed
using spreadsheets.

Sharing of formats
Drawings Supplied

Partially Drawings
Approved

CommonTwo or three local staff
members (concurrent
posts)
Numerous (responding
to needs of eachcountry)

No local sourcing

Regional sharing

Design-in

NoneParts cost estimates

Local design (basic
design)Advanced development
conducted in China

Transfer of homecountry standards

Office machine (copier)parts

Spreadsheets

Both common formats
and local formats used

Differs for each part(group assembly)

Local IT section

Regional sharing

Partially standardized
for production andinventory

Exchange of
information with homecountry
ERP systemstandardized.
Others reused or sourced
independently.

Exchange of
information with homecountry

Marketing/sales
information

System differences
between homecountry/local market

Transfer of design

Transfer of production

Transfer of Target
costingType of indigenization

None

None

None

Local design (detailed
design)Indigenization

Development (planning)at regional acility

HighTransfer of homecountry standards

Automotive (group)

Indigenization of Target
costing

Indigenization ofdesign/development(start phase)

Local adaptation

QCD standards

HighTransfer of homecountry standards

Automotive (group)

High

Y

X

Automotive(independent)

Market share

Industry

Company surveyed

Table 2. Comparison of suppliers
Suppliers (parts makers)
Z
O

Drawings Supplied

Drawings Supplied

Spreadsheets

Local formats

Common (highprecision estimates)
Spreadsheets

Numerous (responding
to needs of eachcountry)

One full-time local staff
memberLocal sourcing

Locally closed

Design-in

NoneParts cost estimates

Local design (basic
design)Local adaptation-

TubingQ

Numerous (responding
to needs of eachcountry)

Head office in charge

No local sourcing

Locally closed

Design-in

Transfer of homecountry standards
Local design(Also participates insome advanced
development byassembler)
None
Parts cost estimates

Springs

P

Journal of Management Science Vol.10, 2021

Journal of Management Science Vol.10, 2021

standards employed in Japan were too strict. At the same time,requirements on major costs and delivery time are strict, andthe supplier must pay a penalty if a delivery is made after the
specified delivery time.
Indigenization of development and production has
advanced at Company Q, and most of these tasks are
conducted by the Malaysian subsidiary independently.
Advanced development takes place in Japan. It appears that
information such as know-how on development andproduction is not provided as feedback to Japan.
Company Q also does not employ Target costing practicein which it plays a leading role. In its high-mix, low-volume
production, it receives orders based on the drawings-supplied
method. While it manages cost-estimate items in great detail,some issues remain with regard to the precision of estimates.
For example, it employs a method in which drawings aresupplied to the production technology section and thenmaterials costs are estimated based on factors such as thelength and thickness of tubing.
Company Q says that it would like to use more advanced
information systems in production management it has notbeen able to do so because of the difficulty of drafting
production plans, since most of its processes are labor
intensive. Its current accounting system was adopted three
years ago (as of the time of the survey). It uses spreadsheet
software in cost estimation. Apparently some information
systems are sourced locally in Malaysia. It has one full-time
IT staff member in Malaysia.

Company P has advanced indigenization of both parts
development and production, and for the most part these areconducted by the Malaysian subsidiary independently. It
appears that information such as know-how on development
and production is not provided as feedback from Malaysia toJapan.
Since Company P is a manufacturer of relatively simple,
small parts, it does not play a leading role in Target costing
practice. In some cases, it participates in advanced
development by the assembler.
Repeat orders account for a large part of its transactions.
For drawings, it employs the drawings-supplied method.
However, although drawings are supplied for finished andsemifinished products, in 95-98% or more cases there are no
detailed drawings for the springs themselves. While it makes
only rough estimates of costs for each customer order, sincemost of the products it handles are ones ordered repeatedly bycustomers its costs estimates are highly precise.
Company P has a relatively advanced information
system. Production planning, inventory management, andcustomer management are integrated in a single system,
which can be used to monitor data in real time. A system forproduct traceability was under development (at the time of thesurvey).
Company P does not source information systems locally.
The system was developed by a Japanese developer and thenlocalized in accordance with the taxation systems ofindividual countries. A head-office section in Japan is incharge of matters related to IT, and no IT staff is assigned in
Malaysia. With regard to cost data, materials such as
reckoning tables and cost-verification tables are preparedusing spreadsheet software, although these data are not sharedwith Japan.

5. Implications
This section will consider the state of indigenization by
Japanese manufacturers in Malaysia, focusing chiefly on thethree companies Company O, Company P, and Company Q,
which provide a glimpse of overseas development ofassembler supply chains. Specifically, it will (1) reclassify thetypes of indigenization and (2) consider the state of transfer
and development of intangibles related to overseas supplychain development.

4.3 The case of Company Q
Company Q is a supplier engaged in make-to-orderproduction of steel tubing used in air-conditioners and otherdevices. It came to Malaysia together with a major customer,a large home-electronics manufacturer.
It carries out high-mix, low-volume production, since the
lot sizes of orders from its main customer vary widely. It also
experiences substantial variation in monthly production
volumes, since its parts are used in seasonal products.
Specifications differ widely between the parts in which
Company Q trades in Malaysia and those in Japan. Its
standards for QCD are adapted to local conditions. Since thequality levels required by its main customer differ from thosein Japan, its quality standards also differ from Japan. At thetime of the interview, the view was expressed that, in fact, the

5.1 Reclassification of indigenization types in Malaysia
When surveying of the state of advancement of indigenization
among Japanese firms operating in Malaysia began, thefollowing three types of indigenization were chosen: (1)transfer of production, (2) transfer of design, and (3) transfer
of Target costing (Tasaka and Kozakai, 2017; 2018; Kozakai
and Tasaka, 2018; 2019). However, surveying and analysis of
the parts suppliers Company O, Company P, and Company Q
during the third survey in the field identified the (4) design-in

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Journal of Management Science Vol.10, 2021

development technologies and other factors. The reverse
innovation type refers to manufacturers that import to theirhome countries technologies and other factors developed atoverseas facilities. The reverse innovation type also is
included among the five types identified by Tasaka (2016).
These new discoveries from case studies have made it
possible to group Japanese firms operating in Malaysia into
five indigenization types. There is a need to propose a moredetailed framework for transfer of Target costing overseas
through continued progress on interview surveys in the fieldin the future. Doing so should make it possible to investigate
the state of intangibles management in indigenization of
Target costing.

type.
This paper defines the design-in type as one that involves
joint development in the form of the supplier dispatchingdevelopment personnel to the assembler. Companies
employing the design-in consist of both assemblers and Tier 1
and other suppliers as well as manufacturers that haveadvanced overseas, as parts of the supply chain. The subjectsof the third interview survey—Company O, Company P, andCompany Q—all belong to the design-in type. They advanced
overseas as part of the supply chain together with assemblers
and Tier 1 and other suppliers.
Further analysis showed that at Company P could be
detected early signs, although incomplete, of reverse
innovation in the form of transfer to Japan of local(4) Design-In
1.Local Assembler

Target costing
Advanced
Development

Preliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Mass
Production

Participation in design in assembler
2.Local Supplier

Preliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Mass
Production

Target costing(5) Reverse Innovation
1.Japan

Mass
Production

Reimport
2.LocalPreliminary
DesignDetailed
DesignPreparation
for
Production

Initial Flow
Control

Mass
Production

Target costing

Figure 2. The design-in type and the reverse innovation type
5.2 Transfer and development of intangibles inoverseas supply-chain development
This section will consider intangibles in transfer anddevelopment of Target costing by Japanese firms operating in
Malaysia, from the perspective of overseas supply-chain
development. The subjects under consideration in this paper
are human capital, organizational capital, and information
capital in connection with development and design activities
and Target costing practice. These intangibles include ones
developed throughout the entire supply chain, including not
only assemblers but also suppliers such as Company O,
Company P, and Company Q.
First, human capital related to development and design

activities and Target costing practice refers to the skills andcompetencies needed for successful Target costing practice
led by assemblers. Examples include cost-estimation skills to
prepare cost tables and problem-solving skills to devise ways
to cut costs through means such as value engineering.
Second, this study considers information capital as aconcept that includes organizational abilities related toutilization of information related to Target costing and of
information systems, as well as IT-related human capital. For
example, organizational abilities or skills capable of utilizing
IT and information systems for cost estimation in preparationof cost tables or for cost savings through value engineering
would qualify as information capital.

16

Journal of Management Science Vol.10, 2021

employees.
All three companies have transferred human capital
appropriately from their home countries with regard to parts
development and design. Consideration of the point ofprecision of cost estimates shows that while there is somevariation among the companies, when seasonal factors aretaken into consideration they can be considered to be attolerable levels. One issue is future local human-resources
development.

Third, organizational capital related to development anddesign activities and Target costing practice includes Target
costing practice know-how, internal organizational rules andpractices, and organizational culture. For example, anorganization's internal rules and procedures on deciding
whether to adopt the method of top-down Target cost goals,
the method of bottom-up responses, or the combination
method in order to calculate Target costs would qualify as suchorganizational capital. It also would include organizational
practices or culture with regard to whether Target costs are
considered targets that must be achieved or merely ones thatshould be strived toward.
In addition, organizational capital also includes
organizational abilities related to supply-chain management.
These are intangibles developed by the assemblers andsuppliers participating in a specific supply chain as a whole.
This paper will consider the three companies ofCompany O, Company P, and Company Q, which are designin-type suppliers. A design-in-type supplier can be said to be amanufacturer that is able to maintain continual transactions
because it can contribute to achievement of one or more of thethree aspects of QCD through participation in Target costing
practice led by an assembler. For this reason, it is likely to bemeaningful in some way for design-in-type suppliers toconsider the kinds of contributions to be enabled throughtransfer and development of intangibles, and how to conduct
such transfer and development.

(2) The perspective of information capital
Second, analysis from the perspective of information capitalshows that, in general, Company O, Company P, andCompany Q can be considered to have developed information
capital at appropriate levels for their own roles vis-a-vis theirmain customers, as design-in-type suppliers. Transfer anddevelopment of information capital have not advanced at
Company O and Company Q, while Company P is focusing
more on development of information capital compared tocompanies O and P. While none of the three companies hasachieved a very high degree of information capitaldevelopment, they have transferred it to a level that
corresponds to the information capital of local assemblers.
Previous research (Kozakai and Tasaka, 2018) has shown thatin general the degrees of transfer of information capital related
to Target costing are low. For this reason, design-in-type
suppliers transacting with such assemblers and major
suppliers do not need to develop advanced information capital.
When companies other than Company O, Company P,
and Company Q were surveyed about differences between thehome country and the local market concerning information
systems, only Company C answered that it employed global
standardization of information systems. Questioning thecompanies about systems and tools used in cost management
including measures other than Target costing showed thatlinkage with other systems had not been advanced to much ofa degree. With regard to obtaining cost data in local ERP
systems, which Company C and Company Z did link cost
data in ERP systems with cost management, each of thecompanies used spreadsheet software to analyze cost data
(Kozakai and Tasaka, 2019). While Company X, a supplierwith a globally standardized Target costing system, used it toestimate costs and to reduce costs in the design stage, this was
the most advanced example of information capitaldevelopment among the firms surveyed.
When Company O, Company P, and Company Q also
were surveyed about systems and tools for cost management
including means other than Target costing, Company P andCompany Q reported using spreadsheet software for analysis(1) The perspective of human capitalFirst, from analysis from the perspective of human capital, allthree of the companies Company O, Company P, andCompany Q can be considered to have transferred ordeveloped human capital to enable them to contribute toassemblers and other customers. It is essential to be able tocontribute to development and production of parts that canmeet QCD requirements in the design and development
activities and Target costing practice of assemblers andupstream suppliers who are design-in-type supplier customers.
The fact that transactions continue can be considered to meanthat the necessary human capital has been accumulated in theareas of both development and production.
In production, there appear to be some difficulties withregard to diverse views of work among local workers. Evenso, all three companies are able to continue transactions evenunder current conditions because they satisfy customer
requirements regarding quality (Q), cost (C), and delivery
time (D). Accordingly, all three companies can be considered
to have succeeded in transferring human capital from Japan
and/or developing human capital through training local

17

Journal of Management Science Vol.10, 2021

transfer of intangibles overall to be slower among Japanesefirms operating in Malaysia. In light of the fact that they do not
employ the cost management method of ABC/ABM, thelikelihood is low that analysis of structural and executional
cost drivers has permeated among them. Accordingly, there
would appear to be little likelihood that Japanesemanufacturers operating in Malaysia employ methods such as
value-chain analysis for supply-chain management.
On the other hand, with regard to sources of materials,
generally both assemblers and suppliers pay very close
attention to the three aspects of QCD among suppliers towhich they outsource manufacture of parts. In considerationof this point, it could be highly meaningful in the future to
conduct a survey on individual companies' supplier evaluation
systems, to analyze how assemblers and Tier 1 suppliers
choose suppliers.

in management of cost data and no linkage to other systems in
preparation of cost data. Only Company P linked this to
production management, inventory management, andcustomer management. Accordingly, it can be concluded thatwhile levels of information capital development are not highamong design-in-type suppliers, they are adequate for theirroles as parts of the supply chain.
(3) The perspective of organizational capital
Third, analysis from the perspective of organizational capitalshows that all three of Company O, Company P, andCompany Q can be considered to have transferred ordeveloped organizational capital capable of contributing totheir customers, such as assemblers. All three design-in-typecompanies did so mainly by transferring organizational capitalfrom Japan to Malaysia.
All three of Company O, Company P, and Company Q
receive drawings through the drawings-supplied method andparticipate in product development and design activities. Thisis a distinguishing feature of the design-in type. Since
suppliers in the design-in type are in a position to support thedevelopment and design activities and Target costing practiceof assemblers and other customers, it is rare for them actively
to prepare drawings themselves.
However, some differences were apparent among thethree design-in-type companies in their handling of standardsfor QCD. Since Company Q adapted such standards locallywhile Company O and Company P transferred standards fromJapan, indigenization can be considered to have advancedslightly more at Company Q than at Company O andCompany P. However, its standards on cost and delivery time
are largely unchanged from those in Japan. Only its quality
standards have been adapted to the standards of local
customers, which are not as strict as those in Japan. Company
Q is a tubing manufacturer that belongs to the group of a major
home-electronics maker. The parts it produces are notthemselves very complicated. In consideration of the above
points, all three of the design-in suppliers can be considered tohave transferred organizational capital to satisfy customer
QCD requirements properly, and not to have developed neworganizational capital locally to much of a degree.
Next, we will consider strategic cost management(Shank and Govindarajan, 1993) in the supply chain from theperspective of interorganizational management accounting.
None of the nine Malaysian subsidiaries surveyed so far was
implementing ABC/ABM. Unlike countries such asSingapore and Thailand, where regional facilities are located,most Japanese manufacturers advance into Malaysia on asecondary basis. For this reason, a tendency is apparent for6. Conclusions
This study's objective was to analyze three suppliers—
Company O, Company P, and Company Q— that advanced
overseas by accompanying assemblers and major suppliersand elucidate the current state of transfer and development of
human capital, organizational capital, and information capital
among such firms, through a field survey of Japanesemanufacturers operating in Malaysia. The observations in thisstudy were based on the results of three past interview surveys
conducted in Malaysia.
This paper considered the types of international transfer
and the states of transfer and development of intangibles atthree suppliers. It found that while intangibles had not beendeveloped to a high degree at design-in-type suppliers, they
had transferred human capital, information capital, andorganizational capital from Japan at levels appropriate for
their own roles vis-a-vis their main customers.
This study has made two contributions: (1) identificationof the design-in type of supplier and (2) elucidation of the stateof transfer and development of intangibles by design-in-type
suppliers. The need for further analysis of the supply chain asa whole from an interorganizational management accounting
perspective can be considered to be an issue to address in the
future.

Acknowledgements
This work was supported by JSPS KAKENHI Grant Number
20K02017. The authors would like to express their gratitude
to Nobuhiro Okajima, the CPA (Japan) and the staff
responsible at each company for their ready cooperation in theinterviews conducted during the field survey in Malaysia.

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Journal of Management Science Vol.10, 2021

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[Non-Refereed Paper]Intellectual Property Management
Through Fruit Tree Club System: The Case Study of the Apple Cultivar "Cripps Pink"
Mitsukazu SAKURADANI
Study Group, Certified Specialist Association of Intellectual Property Management,
Association of Intellectual Property Education, Foundation for Intellectual Property, Tokyo, Japan
E-mail address: msakure4507@gmail.com

Abstract: I examine the intellectual property management of the fruit tree “club system,”
focusing on trademark rights utilization, through a case study of the apple cultivar“Cripps Pink,” developed at a public experiment station in Australia. I find that, in
addition to acquiring plant breeders’ rights for the apple cultivar “Cripps Pink,” the rights
holder has also acquired the trademark “PINK LADY” in various countries. The club has
also acquired variations on its original trademarks and increased the designated goods
they cover as it has expanded its production and sales sites. Furthermore, I note that
focusing on acquiring popularity for the trademark rather than the variety name is aneffective strategy throughout the product lifecycle. Practicing this style of intellectual
property management will enable the trademark to accumulate goodwill and maintainmarket power even after the plant breeders’ rights have expired. Based on our results, I
find that in addition to plant breeders’ rights, the use of trademark rights is particularly
important for fruit trees that take decades to reach their full economic potential.
Keywords: Intellectual property management, Fruit tree club system

Received September 22, 2020
Published January 15, 2021

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Journal of Management Science Vol.10, 2021

1. Introduction

royalties from a license based on plant breeders’ rights islimited to one occasion, when seedlings transferred, unlessotherwise specified in the contract. On the other hand, withtrademark rights, as long as the harvest is sold with thelicensed trademark attached to it, it is possible to obtain annual
royalties as compensation for the license. In terms of theirrespective roles in “rotating” the intellectual creation cycle ofplant varieties, trademark rights are essential to successful“utilization,” while plant breeders’ rights are considered“protection.”
The fruit tree “club system” is an example of effectively
rotating the intellectual creation cycle for plant varieties.
Traditionally, a fruit tree breeder grants its cultivated varieties
to a seedling contractor. Then, a producer purchases andgrows the cultivated seedlings and sells the fruit produced.
However, since breeders cannot control the production
volume and quality, this type of production is likely to cause
prices to fall because of overplanting, planting crops in areas
unsuitable for cultivation, and distributing low quality fruits(the result of inadequate cultivation management). This leads
to a reduction in the value of the cultivated varieties. For thisreason, in the fruit tree club system was created. Here, theholder of the plant breeders’ rights, who has cultivated a newvariety, organizes a club consisting of sapling companies,
producers, and other companies along the value chain. The
breeder can then control quality and branding by limiting
production, allowing only members of the club to growseedlings and produce fruit, and only permitting fruit above acertain quality to be sold. In addition, the club system is amechanism for plant breeders’ and trademark rights holders tocollect royalties from licensing. As a result, this system is
attracting attention as a method of “utilizing” intellectual
property.
In this paper, I analyze the fruit tree club system andexamine its effects, particularly from the perspective ofutilization of trademark rights, in order to obtain knowledge
about “utilization” in terms of the intellectual property
management of plant varieties.

Like industrial products, plant varieties are also considered
intellectual property as they are produced through creative
human activity. As such,it is important to properly “protect”
this intellectual property, that is, newly developed plantvarieties. Patent rights and plant breeders’ rights are twomeans of protecting this type of intellectual property. In thecase of patent rights, it can be difficult for breeds cultivatedthrough traditional breeding methods, such as mating andselection, to meet patent requirements such as “novelty” and“inventive step.” It is also difficult to patent plant varieties
cultivated in different countries. For this reason, in many
countries, cultivated plant varieties are protected by plant
breeders’ rights. Some countries have banded together tocreate an international framework for protecting novel plantvarieties called the “Union for the Protection of New Varieties
of Plants” (UPOV). UPOV member countries havedeveloped the Seeds and Seeding Law, and new varieties thathave been cultivated are protected under plant breeders’ rights.
Since plant breeders’ rights do not require an “inventive step”
for registration as patent rights do, it is relatively easy toacquire these rights than patent rights. Under the UPOV
Convention, dual protection of fosterers’ and patent rights wasprohibited, but an amendment in 1991 eliminated this double
protection prohibition provision. In many countries, such as
Europe and the United States, the patent protection system coexists breeder protection. In addition, plants produced throughtraditional breeding and crossbreeding methods are protectedunder breeders’ rights, and plants produced as a result ofgenetic engineering are protected under patent rights.
Although the protected objects are different, it is also
possible to protect the names of cultivated plant varieties withtrademark rights. Although the duration of plant breeders’rights is 25 to 30 years, trademark rights can be permanently
maintained by renewing the registration. For this reason, thecombination of plant breeders’ and trademark rights has
become essential for protecting plant varieties as intellectual
property.
Moreover, protecting intellectual property solely by
securing these rights is not sufficient. Their value is only
realized when the new plant variety is effectively used. Theserights serve as “protection” for successful “utilization.”“Utilization,” in turn, expands the market, generates profits,
and brings about new “creation.” That is, proper protection ofplant-related intellectual property is a critical component of theintellectual creation cycle.
Focusing on the “utilization” of intellectual property,
such as licensing to third parties, the opportunity to collect

2. Literature review
Regarding the fruit tree club system, there was a survey
conducted by PIA Limited Liability Company (2009) in
FY2008 and FY2009. There are also studies by Kanda et al.
(2013). These surveys report on the status of breeder rights andtrademark licensing of "Cripps Pink" in each country. In Japan,
there has been no subsequent report on the "club system."On the other hand, overseas, Brown and Maloney (2009)
reported that there are more than 40 apple clubs around the22

Journal of Management Science Vol.10, 2021

public universities to some producers only. Alston and Plakias(2014) critically reported that exclusive licenses create
distribution problems among producers, and Lehnert
criticized the limiting of sapling production of the apple
cultivar “SweeTango,” which was developed by the
University of Minnesota (Lehnert, 2010). Specifically, there
are also critical opinions regarding club systems, specifically(Alston & Plakias, 2014; Lehnert, 2010).
Based on the above studies, I assume that the creationand licensing of overseas production sites and the resulting
year-round supply of products not only leads to higher
bargaining power for distributors but also monitoring by thelicensees for illegal cultivation. Drawing from various
databases, I investigate the use of intellectual property rights
in the fruit tree club system, focusing on plant breeders’ andtrademark rights. The target of our analysis is the apple cultivar“Cripps Pink.”

world, and there has been a rapid expansion of these club
system initiatives (Brown & Maloney, 2009, 2013). In
addition, they state that apples are better known to consumers
by their brand names than by their breed names (Brown &Maloney, 2013). Rickard et al. also note that apples are one of
the few agricultural products selected by consumers under thebrand name (Rickard, Schmit, Gómez, & Lu, 2013).
Luby and Bedford (2015) assert that the reason for the
popularity of the apple club system is that individual apple
varieties are appealing to consumers and can be easily
recognized by the appearance, texture, and taste of individual
varieties; they also point out the importance of using plant
breeders’ and trademark rights. In addition, Winton reported
that the apple cultivar “Cripps Pink,” cultivated by a public
experiment station in Australia, is the most successful club
system in the world, accounting for 2.23% of the global apple
production, excluding China (Winton, 2018).
This strategy has expanded beyond just apples. Indeed,
Roe and Brokaw reported on an intellectual property strategy
for avocados and mentioned the use of trademarks (Roe &Brokaw, 2007). In addition, Asioli et al. discuss the club
system for a pear variety called "Angelys" (Asioli, Canavari,
Malaguti, & Mignani, 2016), and Di Fonzo, Nardone,
Fathinejad, and Russo (2019) introduce a kiwi fruit club
approach in Italy. According to these reports, clubs havestrong restraints on producers, but they provide favorable
contract terms to encourage club participation. As a result,they are beneficial to producers. However, they point out thatretailers' interest may be limited because they need to sell fruit
at premium prices (Roe & Brokaw, 2007; Asioli et al., 2016;
Di Fonzo et al., 2019).
As for the importance of trademarks in the club system,
based on the results of interviews of food industry clusters in
Hungary and Serbia, Kranjac, Sikimić, Vujaković, andMolnar (2015) argue that the agricultural and food sectors
should employ protection and utilization of origin names andtrademarks to gain an international competitive advantage. In
addition, van Zoeren and Atucha (2016) reported that theapple cultivar "Honeycrisp," which was cultivated by the
University of Minnesota, continues to monopolize marketingrights through its trademark rights, even after the plant patent
expired. However, these papers did not conduct an in-depth
investigation on the use of a specific trademark. Furthermore,
no study has adopted a case of a particular club from theviewpoint of promoting the intellectual creation cycle that
protects and utilizes plant varieties.
In the United States, some reports point to issues from theperspective of public good regarding the control of production
volume by exclusively granting the varieties developed by

3. Survey method
I conducted an interview survey with the Japan Pink Lady
Association, which is a business association that has becomea master licensee of “Cripps Pink” in Japan, and grasped thecurrent situation and issues of the club system of “Cripps Pink.”
Since the contents of intellectual property strategies andlicense agreements are often managed as trade secrets, theliterature that have been published are extremely limited, andalso the actual situation cannot be sufficiently grasped only byinterview and questionnaire surveys. For this reason, I
investigated the status of acquisition of plant breeder’s rights
and trademark rights using various databases.
The status of variety registration of “Cripps Pink” wasconfirmed by using the “Plant Variety Database” provided by
the International Union for the Protection of New Varieties ofPlants (UPOV). In addition, I used databases provided bycountries/regions such as “PatFT” of the US Patent andTrademark Office (USPTO) and “CPVO varieties database”
of the European Plant Variety Office (CPVO).
The registration status of trademarks related to “Cripps
Pink” was confirmed using the “Global Brand Database”
provided by the World Intellectual Property Organization(WIPO). I also used databases provided by countries/regions
such as “Australian Trade Mark Search” of the Intellectual
Property Protection Authority of Australia (IP Australia) and“TM view” of the European Union Intellectual Property
Office (EUIPO).

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Journal of Management Science Vol.10, 2021

4. Status of intellectual property rights of"Cripps Pink"

European Union, the United States, Argentina, New Zealand,
and South Africa). According to the Japan Pink Lady
Association, DAFWA is the holder of the plant breeders’rights.
These applications were filed from 1990 to 1995. The
dates of application and expiration are shown in Table 1. The
registrations already expired in New Zealand and Argentina.
The plant patent rights in the United States expired in 2010.
The plant breeders’ rights expired on June 8, 2019 in South
Africa; they will expire in the EU on August 1, 2022.
However, two new varieties－“Rosy Glow” and “Lady inRed”－were born from the “Cripps Pink.” “Rosy Glow” wasregistered in Australia, New Zealand, the EU, and South
Africa, and “Lady in Red” was registered in New Zealand, theUnited States, and South Africa. These varieties wereregistered around 2005, so the plant breeder’s rights willcontinue to exist until around 2035.

4.1 Plant breeders’ rights
The apple cultivar “Cripps Pink” was developed in 1973 by
the public experiment station of the Department of Agriculture
and Food, Western Australia (DAFWA). It was created bycrossing “Lady Williams” and “Golden Delicious,” andcommercial cultivation began in the late 1980s. Based on the
hearing of Japan Pink Lady Association, DAFWA decided
that “Cripps Pink” could be used free of charge by domestic
producers because it was developed with state taxes, andvariety registration was not done in Australia. However, there
were rumors of a test cultivation by the French company Star
Fruits in 1988. Therefore, beginning in 1990, DAFWA began
applying for variety registration overseas. As a result, variety
registration was conducted in 31 countries (27 countries of theTable 1. Application status of variety registration for apple cultivar “Cripps Pink”
Country / region name
New ZealandApplication date

Registration date

Expiration date

April 12, 1990

July 30, 1993

July 30, 2016

Remarks

In the United States, theprotection period is 20
United State

October 18, 1990

June 9, 1992

October 18, 2010

years from theapplication forprotection by a plant
patent.

South Africa
Argentina

November 27, 1991

June 8, 1994

June 8, 2019

May 2, 1995

October 2, 1995

October 2, 2015
Application for

EU

August 2,1995

June 15, 1999

August 1, 2022

registration to theCommunity Plant Variety
Office (CPVO)

Note: Created based on the “Plant Variety Database” (UPOV) and the “CPVO varieties database” (CPVO) (as of April 2019).
4.2 Trademark rights
The trademark related to “Cripps Pink” (hereinafter referred
to as “Trademark ‘PINK LADY’”) was registered in France
in 1992 and was subsequently registered in more than 70
countries, including countries in Europe, the southernhemisphere, and Asia. Trademark rights in these countries
have not only been renewed and continue to exist, but new
trademarks have also been filed and registered successively
during the 2010s. The trademark holder is Apple and Pear
Australia Limited (hereinafter referred to as “APAL”).1
There are two types of trademarks related to “Cripps
Pink”: standard-character trademarks consisting only of theletters “PINK LADY” and composite trademarks thatcombine the letters “Pink Lady” and figures. There are several
types of composite trademarks in which the color and shapeof the figures are changed. These trademarks co-exist in eachcountry because of renewals. The status of trademark
registration shows that there were changes in trademark
strategy in the 1990s, 2000s, and 2010s (Figure 1). Viewed inchronological order, in the 1990s, standard-character
trademarks (word trademarks) were registered primarily inEuropean countries, such as France and the United Kingdom.
In the 2000s, in addition to expanding the word trademarks to
Asian countries such as Indonesia, Japan, and Brunei,composite trademarks were registered in Australia as well as
the EU. Furthermore, in the 2010s, composite trademarks

1 The trademark rights are owned by DAFWA, but it was determinedgovernment, so they were transferred free of charge to APAL in
1998.

that trademark management was not a central task of the state

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Journal of Management Science Vol.10, 2021

Figure 1. Registration status of “Pink Lady” trademark
were registered in which the text “PINK LADY” wascombined with the language spoken in the country whereapplication was filed, for example, “PINK LADY, MUCHOMAS QUE UNA MANZANA” in Spain, “ピンクレデ
ィー” (Pink Lady in Japanese) in Japan, a combination with
the national flag in the United Kingdom, etc. In addition, these
trademarks were for class 31 goods (fruits and trees) until the
1990s; however, since the 2000s, along with the expansion incultivation and sales areas, the scope of protection was
gradually expanded to include class 29 (processed foods),
class 32 (drinks), and others.
In this way, APAL initially focused on the “protection”
offered by trademarks, first registering word-based marks
with a wide range of trademark rights in each country, using
the name “PINK LADY” worldwide. As the cultivation andsales areas expanded in the 2000s, the scope of the trademark
rights narrowed even in countries where the word marks had
been registered. However, composite trademarks, with figuresthat aim to attract consumers with visual effects, were thenregistered, and the designated goods for the trademark
expanded, strengthening the scope of protection. Furthermore,when the “PINK LADY” trademark gained popularity in the2010s, the word marks, composite trademarks, language, andother components of the trademarks were changed to be
specific to each country. Yet, the composite trademarks always
contained the words “Pink Lady” as a trademark component,
so a consistent branding strategy was developed.
Although trademark applications were filed in many
countries/regions, the application using the Madrid system2
was conducted in 2016. In addition, trademark applications
with class 31 (fruit and trees) as the designated goods are often
rejected in Australia because the name “PINK LADY” isrecognized by consumers as a variety name.3 It can also be
pointed out that, by not using the Madrid system, it waspossible to avoid the risk of central attacks4 and to extend theappearance of trademarks and designated goods according to
the country of application.
On the other hand, trademarks that have agricultural
products as the designated goods are often mistaken for theoriginal variety name. Even if a trademark is registered, if afterthat it becomes a generic name, the trademark rights will nolonger be effective, and the unauthorized use of the registeredtrademark by third parties will not be eliminated. In addition,in the United States and the EU, when a trademark
subsequently becomes a generic name, the trademark can becancelled at the request of another person. Based on this,

2 The Madrid system is an international trademark application system.

recognized as a result of being used, and the trademark registration
for class 31 as designated goods was granted in 2004 for thecomposite trademark and 2009 for the word mark.
4 In this system, if the basic application or basic registration of thehome country is rejected or cancelled within five years from thedate of international registration, the international registration will
simultaneously expire.

Based on trademark application and registration in the homecountry, it is possible to submit applications to a number of Madrid
system member countries in one procedure.
3 Similar to Japan, the Australian trademark system examines on thebasis of the existence of absolute and relative reasons for rejection.
One of the reasons for absolute rejection is that the trademark does
not have distinctiveness. The distinctiveness of “PINK LADY” is25

Journal of Management Science Vol.10, 2021

efforts to prevent generic naming, such as not using
trademarks that can be mistaken as breed names from before
the trademark application, is important.
According to Winton, in 2017 about 600,000 tons of fruit
sold was under the trademark “PINK LADY.” (Winton,2018). Furthermore, according to Warner, the license fee fortrademark rights is approximately 77 euros per ton (Warner,2012). She also reported that 60% of the royalties earned areused for new product development, trademark protection, andmonitoring activities by master licensees in each country, andthe remaining 40% is used for marketing. From this, APAL
has earned approximately 46.2 million EUR in royalties per
year because of trademark licensing; it is estimated that 27.72
million EUR were used for new product development,
trademark protection, and monitoring activities by masterlicensees in each country, and the remaining 18.48 million
EUR were spent on marketing. The royalties obtained fromlicensing trademark rights not only make it possible toperform marketing comparable to a major food company, butalso helps to strengthen the “protection” of intellectual
property through monitoring activities of master licensees ineach country.

property business that continuously earns royalties from those
trademark rights. By accumulating brand power and making
use of its power to attract customers, it can be a successful
example of maintaining market power even after the plant
breeders’ rights have expired.
Since fruit trees take several decades from planting to thenext breed renewal, there are many cases in which the plant
breeders’ rights expire while economic production is stilltaking place. As such, the period for royalty collection isshorter than the period in which the varieties will be of
economic use. Therefore, with plant breeders’ rights alone,
there are limitations in terms of the potential compensation forlicensing intellectual property. Thus, it is important to securecontinuous royalty income through trademark rights.
Figure 2 shows the intellectual property management
model of the fruit tree club system. It is organized from theviewpoint of the product life cycle, and the example if basedon the case of “Cripps Pink.”
First, from the introduction of a new variety to its growth
period, it is important establish a foundation for production
and sales by having integrated protections based on
trademarks and plant breeders’ rights. In particular, withregard to trademarks, it is best to apply for a word mark withstrong rights. Next, from growth to maturity, production andsales areas should be expanded through the active licensing,
thereby providing a year-round supply of fruit and expanding
trademark registration into new countries. Registration
requirements for trademarks do not include novelty (patentlaw) or non-transferability (seed and seedling law), so it ispossible to gradually expand the countries where applications
are filled according to expansions in production and sales
areas.
Next, from the growth period to maturity, it is importantto accumulate good will for the trademark through quality
control of the fruit shipped. At the same time, it is important tocarry out promotion activities to increase the popularity of the
trademark. If the trademark becomes popular both
domestically and abroad, it is highly likely that applications
by third parties will be rejected if the mark is well known,even for countries where registrations have not been carriedout.5 However, during the period from the first trademark
application until popularity is obtained, there is also thepossibility that an unrelated third party will file an application
to register the same trademark (misappropriated application).
In the United States, applications for the trademark “PINKLADY” have been rejected because of the possibility ofconfusion with similar trademarks registered earlier. In the

5. Intellectual property management of the
fruit tree club system
The fruit tree club system is characterized by integrated
protection, combining plant breeders’ rights and trademark
rights; production volume is controlled by using the plant
breeders’ rights, and the quality is controlled by using thetrademark rights. However, it will soon be 30 years since the“Cripps Pink” variety was registered, and the plant breeders’rights continue to exist only in the EU. Yet, the trademark
rights registrations have been continually renewed and new
trademark applications have been filed one after another. In
addition, “Rosy Glow” and “Lady in Red,” which are varieties
derived from “Cripps Pink,” are also sold under the “PINKLADY” trademark (Brand evolution for Pink Lady, 2018).
The trademark “PINK LADY” has accumulated good
will as a mark indicating high-quality apples, and it has beenused continually for nearly 30 years, since the trademark
application in 1992. Even after the plant breeders’ rights for“Cripps Pink” expires, it is possible to license the cultivationof “Cripps Pink” to third parties by taking advantage of thegood will of this trademark. “Rosy Glow” and “Lady In Red”
can also be sold as the second and third types of “PINK
LADY,” so it will be possible to operate an intellectual
5 Article 6-2 of the Paris Convention stipulates the protection ofwell-known trademarks.

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Journal of Management Science Vol.10, 2021

Figure 2. Intellectual property management of a fruit tree club systemseedling of “Cripps Pink” is legally transferred, no licensefrom the breeders’ rights holder is necessary to sell the harvest
under the name “Cripps Pink.” However, if the trademark
becomes more prominent than the variety name, theadvantage of selling under the variety name of “Cripps Pink”
will be limited. Also, in the case of plant breeders’ rights, it isdifficult to detect infringements, and it is difficult to prove
identicalness between a registered variety and an alleged
infringing variety, even if a suspected infringement is found.
On the other hand, in the case of trademark rights, it is easy todetect infringements, and since trademark infringement
lawsuits judge similarity based on appearance, there is no needfor comparative cultivation, DNA testing, etc.
From this perspective, it is important not to use variety
names for the components of trademarks. This is because thevariety names are often used in many countries as genericnames with no distinctiveness. Even if a composite trademark
combining “Cripps Pink” with a figure is registered by an
unauthorized party, the text “Cripps Pink” does not havedistinctiveness. Therefore, it may not be possible to enforce
the trademark rights. In addition, when a variety name is used
as a component of a trademark and a successor variety iscultivated, it will be necessary to change the trademark thathas accumulated good will over a long period of time to build
the brand from scratch.
In this way, the use of trademarks for “protection,” suchas the enforcement of rights, as well as “utilization,” such ascase of high-quality fruit tree varieties, I think that it isnecessary to consider trademark registration abroad even in
the period from introduction to growth. In addition, forcountries, such as Canada and the Philippines, that adopt
usage-based registration for trademark registration, it isimportant to begin sales from an early stage to create
trademark usage records. This is also important for China,
which requires the actual use of a trademark to enforce therights against alleged trademark infringers.
Then, by continuing to maintain trademark rights evenafter the plant breeders’ rights have expired, the brand value ofthe variety is protected, and continued royalty income issecured. In addition, successor varieties can apply for new
plant breeders’ rights, and by selling them under the samebrand, the premium price will be maintained.
The long-term use of trademarks and promotion will
increase the brand value of the trademark over time, but theeffect is considered to be effective not only in terms of“utilization,” promoting license negotiations in anadvantageous manner, but also in terms of “protection.”
Trademarks can prevent unauthorized cultivation in countries
without plant breeders’ rights. As with other intellectual
property rights, such as patent rights, it is impossible to enforce
plant breeders’ rights without registering overseas. Therefore,in countries where no plant breeders’ rights have beenregistered, such as Japan and Chile, or in countries where plant
breeders’ rights have expired, such as New Zealand, if a27

Journal of Management Science Vol.10, 2021

6. Conclusions

if protected by plant breeders’ rights, the rights holder must
enforce these rights by monitoring infringements andtaking legal action. Overseas licenses can also lead to“protection” of intellectual property by having licensees
take responsibility for infringement monitoring.
As mentioned earlier, it is reported that there are morethan 40 apple clubs in the world, but not all of these clubs are
thriving (Winton, 2018). In the future, it will be necessary to
expand the investigation to other clubs in order to conduct a
comparative analysis from the intellectual property
management viewpoint. In addition, it is necessary to advanceour understanding of this type of intellectual property
management for items other than fruit trees.
In this study, I analyzed the case of the apple cultivar"Cripps Pink" from the intellectual property management
viewpoint. However, an investigation into business strategy isoutside the scope of this study. In the future, it will benecessary to conduct this analysis from the management
perspective to evaluate the club system as a business.

In this paper, I examined the effect of the club system for theintellectual property management of fruit trees, with emphasison trademark rights utilization. Because fruit trees require
several decades to mature, the relatively short length of plant
breeders’ rights may mean that they expire well before salesof the fruit reach the peak. For this reason, trademark rights
allow the rights holder to continue receiving royalties on thesales for years to come. Thus, especially for fruit trees, it isimportant to secure both trademarks and plant breeders’ rights
to ensure continued income. I also note that, throughout the
product lifecycle, it is critical that marketing must focus onbuilding popularity for the trademark rather than the variety
name.
In addition to the importance of using trademarks, our indepth investigation of the “Cripps Pink” club system has
yielded the following implications: The market size can be increased by expanding production
areas through overseas licenses and acquiring plant
breeders’ rights in multiple countries. (Overseas licenses
allow, for example, breeders from northern hemispherecountries to license to countries in the southern hemispherethat have different seasons, allowing for a year-roundsupply of fruit without competing with exports from theirown country.) The establishment of a stable, year-round supply system
may enable profitable sales for distribution and retail.
 Plants can be easily grown, and it is difficult to completely
prevent the outflow of seedlings overseas and illegal
cultivation by unauthorized third parties. In addition, even

Alston, J. M., & Plakias, Z. T. (2014, July), “Optimal licensing
for public intellectual property: Theory and application toplant variety patents”, Agricultural and Applied
Economics Association (AAEA) 2014 Annual Meeting,Minneapolis, MN, USA: Agricultural and Applied
Economics Association.
Asioli, D., Canavari, M., Malaguti, L., & Mignani, C. (2016),“Fruit branding: Exploring factors affecting adoption of
the new pear cultivar ‘Angelys’ in Italian large retail”,
International Journal of Fruit Science, 16 (3), pp.284-300.
Brand evolution for Pink Lady (2018), Apple & Pear Australia
Ltd (APAL).
https://apal.org.au/brand-evolution-pink-lady/
Brown, S. K., & Maloney, K. E. (2009), “Making sense of
new apple varieties trademarks and clubs: Current status”,
New York Fruit Quarterly, 7(3), pp.9-12.
Brown, S. K., & Maloney, K. E. (2013), “An update on apple
cultivars, brands and club-marketing”, New York Fruit
Quarterly, 21(1), pp.3-10.
CPVO varieties database (2019), Community Plant Variety
Office.
https://cpvo.europa.eu/en/cpvo-variety-finder
Di Fonzo, A., Nardone, V., Fathinejad, N., & Russo, C. (2019),“The Impact of plant variety protection regulations on thegovernance of agri-food value chains”, Social Sciences,8(3), 91.
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licensing, highlight the importance of having a strategy forregistering trademarks for brand names that are different fromthe name of the variety. This also shows how important it isthat the brand be recognized as high quality before the variety
name is recognized as high quality.
Initiatives such as the club system naturally involve
costs, from launching the club, setting up operations,submitting applications, as well as the registration andmaintenance of trademarks. Also, in order to obtain royalties
from trademark rights licenses, there is no incentive forlicensees to use the trademark if the product cannot be sold at
a high price. For this reason, it is essential that club operators
carry out promotion. It would be impractical to implement thistype of intellectual property management for all cultivatedvarieties. Varieties chosen should be of superior quality intaste and appearance, so consumers will be willing t to buy
them at a premium price.

References

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Journal of Management Science Vol.10, 2021

Organization (WIPO).
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Bouekienkatsuka Suisinnzigyou Yushutusennryaku
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strategy report (Pink Lady)).
https://www.maff.go.jp/j/shokusan/export/e_enkatu/pinkl
ady.html
Rickard, B. J., Schmit, T. M., Gómez, M. I., & Lu, H (2013),“Developing brands for patented fruit varieties: Does thename matter?”, Agribusiness, 29(3), pp.259-272.
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Union for the Protection of New Varieties of Plants. (2019).
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and trademark varieties of fruit: How intellectual property
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https://www.wiscontext.org/rise-apple-clubs-andtrademark-varieties-fruit.
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Editor’s Notes
We are now issuing the tenth edition of the Journal of Management Science. Several articles
in a variety of areas of study are submitted in the Journal of Management Science Vol. 10, forexample Finance, Information Management, Tourism Management, and Business
Administration.

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.10
Jan. 15, 2021
Edited by Editorial Board of Journal of Management Science Vol.10
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
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