Iscar Ltd of Israel acquired Japanese tungsten carbide tool maker Tungaloy for US$ 1 billion

The Israeli company Iscar has completed the acquisition of Japanese competitor Tungaloy Corporation. Iscar acquired more than 90% of outstanding shares for around US$ 1 billion from Nomura Principal Finance Co.

Iscar is the world’s second largest maker of tungsten carbide cutting tools, and competitor Tungaloy is the world’s fifth largest. Iscar is controlled by Warren Buffet’s Berkshire Hathaway Inc. – Berkshire Hathaway acquired 80% of Iscar for US$ 4 billion in 2006.

The merged Iscar and Tungaloy will be better positioned to compete with global leader Sandvik AB, which has sales on the order of US$ 4 Billion.

Tungaloy Corporation emerged via a management buyout from Toshiba Tungaloy, with Nomura Principal Finance Co. as the largest share holder. Tungaloy has sales of YEN 50 Billion (approx. US$ 500 million), was founded in 1934, and has 2618 employees. Tungaloy is the fifth largest maker of Tungsten Carbide cutting tools in the world.

Iscar entered Japan’s market by opening a 100% owned subsidiary company in 1994, about 14 years ago.

To my knowledge this acquisition is also far larger than any acquisition in Japan by any European Union (EU) company this year (last year, in 2007 Permira announced the acquisition of Arysta LifeScience Corporation for US$ 2.2 Billion and completed the deal during 2008). The three largest acquisitions ever of Japanese companies by EU companies have been Vodafone’s acquisition of J-Phone (transaction value: about US$ 20 Billion), Daimler’s acquisition of Mitsubishi Motors (transaction value: about US$ 2-3 Billion), and Renault’s investment in Nissan (initial transaction value: about US$ 3 Billion) – of these three, only the Renault investment in Nissan was successful, the other two failed.

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H&M Japan entry: green field market entry to Japan

H&M Japan entry – H&M opened the first store in Japan in Ginza on September 13, 2008

H&M Japan entry – H&M opened the first store in Japan in Ginza on September 13, 2008:

Long queues on opening day: 8000 people/day visit the store in the first few days

H&M entered Japan’s fashion market initially using a green field strategy, opening stores. On September 13, 2008, H&M opened the first store in Japan in Ginza, and is planning two more stores in Shibuya (see picture below) and in Harajuku.

H&M Japan entry – adapt to Japan:

H&M adapted it’s global way of doing things to Japan’s market needs – for example, H&M introduced “Quality Managers in it’s Japan store, in order to match Japan’s consumers high expectations for quality (and I guess also to avoid problems with Japan’s recently introduced product liability laws).

H&M Japan entry – 8000 customers per day:

One week after opening, customers are queuing in line to enter the store – typical waiting time is about 2 hours, daily number of visitors to the store are estimated to be about 8000/day.

Closest foreign competitors in Japan include US retailer GAP, and Spanish retailer Inditex (Diseno Textil SA)’s ZARA.

Biggest Japanese competitor is Fast Retailing’s UNIQLO.

H&M is preparing to open the second and third stores in Shibuya (photo below) and in Harajuku.

H&M Japan entry – comments:

H&M has had a very successful start and has created a successful opening “event”. To be successful longterm H&M will have to:

  • sufficiently tune to Japan,
  • continue to innovate,
  • compete successfully especially with UNIQLO
H&M opening in Tokyo-Ginza on September 13, 2008
H&M opening in Tokyo-Ginza on September 13, 2008: long queues to enter the store in the first few days after opening
H&M opening in Tokyo-Ginza on September 13, 2008
H&M opening in Tokyo-Ginza on September 13, 2008
H&M opening in Tokyo-Ginza on September 13, 2008
H&M opening in Tokyo-Ginza on September 13, 2008
H&M building the second store in Tokyo: in Shibuya
H&M building the second store in Tokyo: in Shibuya

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XBOX Japan market entry strategy

XBOX Japan market entry: three years after market entry XBOX has achieved 0.2% sales market share in Japan. Will price cut help?

Three years after market entry XBOX has achieved 0.2% sales market share in Japan

Will XBOX price cut help?

Microsoft introduced the original XBOX game console in the USA on November 15, 2001, in Japan on February 22, 2002, and in Europe on March 14, 2002.

During the period January-June 2005, three years after introduction of the XBOX to Japan’s market, SONY sold about 2.4 Million game terminals in Japan, Nintendo sold about 1.9 Million, and Microsoft about 9000 XBOXes, about 0.2% marketshare.

As of August 24, 2008, Nintendo has sold about 6.7 Million Wii, SONY has sold about 2.3 PS3, and Microsoft about 380,000 XBOX-360 in Japan, a 4% share in this segment.

A few days ago, Microsoft announced a price cut of 30% for XBOX-360 in Japan – the video below gives our comments on this price reduction on CNBC.

Here is a short summary of the CNBC-TV interview:

Q: Do you think the price reduction is going to do the trick?

A: No. In other markets maybe, but not in Japan.

Q: Do you think XBOX can be successful in Japan? What will it take before Microsoft will give up and say it just isn’t working

A: Of course Microsoft can be successful in Japan with XBOX. There is no law that XBOX cannot be successful in Japan. Microsoft generally is a company that never gives up. But they have to change their strategy for Japan.

Q: So Microsoft isn’t doing the right things. What would the right things be?

A: Difficult to say of course, if it was easy Microsoft would already have done this. The situation is that Nintendo has completely changed the business paradigm of the game industry. Microsoft’s XBOX is still operating under the old paradigm.

Q: How long do you think Nintendo’s sweetspot is going to last?

A: Nintendo have reinvented the game industry, and completely changed the business models. They also make a lot of their own software. All this puts Nintendo into a very good position.

What can we learn about strategy for Japan from Microsoft’s XBOX experience:
Global products, not adapted to Japan’s market, often do not succeed in Japan. Microsoft’s XBOX is a very good example. Microsoft has one of Japan’s most famous brands, so its not a problem of the brand.

Microsoft faces three problems in Japan:

  1. XBOX is not made for Japanese users in mind
  2. Nintendo changed the paradigm of the game industry, and XBOX is still on the old track
  3. Of three global game console companies (Nintendo, SONY, Nintendo) two are both much stronger than Microsoft in games, and both are on their hometurf in Japan. Microsoft would need to invest more and focus efforts much more on Japan to succeed in Japan with XBOX.

Learn about Japan’s game markets

Japan game market report (398 pages, pdf-file):
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