Tokyo Intelligence Report

I believe that the following news encourage people working in advertising industry to allocate more advertising budget to digital signage in Japan. In addition, Seven Eleven Japan Co., Ltd. a king of convenience stores chain seems to be ready to roll out digital signage business for 12,349 outlets totally in Japan.

MediaPost
7-Eleven Launches In-Store TV Network 


Seven Eleven Japan Co., Ltd.

There are 47,714 convenience stores in Japan as of December 31, 2008, according to the data of the Japan Franchise Assosciation which are actually untapped market for digital signage.


Japan Franchise Assosciation

According to an article of the July 21th Online edition of Nihon Kezai Shinbun, Nagase Brothers Inc. (Nagase) , a preparatory school TOSHIN and swimming school ITOMAN operator aims to foray into the English language education market for children.

Nagase seems to be a latecomer to tap into the English language education for children. But the market for children could grow since English will become an official subject in elementary schools in fiscal year 2011. I, however, wonder whether or not its marketing strategy with the assistance of famous characters appeals to savvy consumers.


Nagase Brothers Inc.

Nagase will kick off the English classes tailored to 3-12 year-old children, starting in October 2010 under franchise arrangements in Japan. Tuition could account around 8,000 yen a month and franchisees will pay 30% of sales resulted from tuitions and materials as a royalty to Nagase. With a 10-year contract valued at 3 billion yen with Sesame Workshop, Nagase also plans to expand its franchise business with instructional materials featuring well-known Sesame Street Muppets to China, India and Vietnam.

Regarding of the assistance of famous characters, Nagase is not only one operator in the crowded English market. For example, Shogakukan-Shueisha Productions Co. Ltd. (Shopro)uses its flagship character Doraemon from a Japanese manga series and provides Young Children's Education Programs "Dora-Kids."


Shogakukan-Shueisha Productions Co. Ltd.

According to an article of the July 7th edition of Nihon Kezai Shinbun, Mizuno Corporation (Mizuno) , a leading sporting goods maker in Japan shutter around 200 outlets and shrink the number of total stores to 700, down more than 20% from a year earlier. Mizuno's sales in China remained at low 9 billion yen compared with sales target by 10% in 2009.

 
Mizuno Corporation

Mizuno had both 260 directly managed stores in department stores mainly and 642 franchise shops at the end of 2008. The incoming restructuring plan in Chinese operation would be taken in 2009 due to disappointing sales after the Beijing Olympics.

Mizuno rapidly increased its presence in China over a few years. It has employed marketing initiatives as supplying shoes to Chinese Olympic table tennis players and sponsoring China's baseball league for the Beijing Olympics but never kept up with international major brands Nike Inc. in the US and Adidas AG in Germany with huge advertising budgets.

Tokyo International Book Fair 2009 (TIBF2009) will be held at Tokyo Big Sight from 9 July (Thu.) to July 12 (Sun.) TIBF2009 had 61,384 of trade visitors and general visitors and 763 exhibitors in 2008 and it aims to attract more than 63,000 visitors with 800 exhibitors in 2009. It was huge numbers of visitors even among many of exhibits have held in Tokyo.

 
Tokyo International Book Fair 2009

According to the web site, TIBF2009 is explained as follows,

Quote: As the leading event in the world's 2nd largest publishing market, TIBF is the best venue to find the latest releases in all genres - fiction & non-fiction, business & economics, education, how-to's, manga & comics, all types of magazines, and many other specialty books.

The beauty of this event is that admission would be free if you register yourself through the section of Invitation Ticket Request.

Invitation Ticket Request

The second biggest economy of Japan after the U.S. has made Japanese golf goods companies introvert to deal with home market for few decades. Those companies, however, seem to change their risk-averse attitudes. They start aggressively deploying new markets in Asian region.

I would like to quote meaning comparisons of golf business environment between USA and Japan, based upon data of Accordia Golf Co., Ltd. a major Golf course and golf driving range management company in Japan.

 
Accordia Golf Co., Ltd

	USA	Japan
Number of golf course	16,000 courses	2,400 courses
Golf population	2,870M	830M
Penetration rate of golfers	12.6%	9.8%
Number of playing golf per year	18 times	11 times
Average Fee of playing golf	5,300 yen	11,850 yen

Japanese love golf in that penetration rate of golfers are just slightly smaller than that of U.S.A. although playing fee in Japan is twice as high as that in USA. In addition, golfers love consuming tons of money onto golf goods or wears.

The popularity of playing golf in Japan is different story than how much golfers love playing golf, though. Japan Golf Association shows gloomy future of golf population in Japan. It foreseen that golf population in 2010 is 10.33 million, compared to 12.7 million in 1990, 14.5 million in 1994 and 12.9 million in 2000. So Japanese golf goods companies must play games outside Japan.

 

Japan Golf Association
Study of demographic change of golf population by generation (in Japanese)

In December 2007 Quiksilver, Inc. sold 100% of the stock of its subsidiary Cleveland Golf Company, Inc. to SRI Sports Limited, an owner of Srixon Golf with $132.5 million transaction value. Thus SRI Sports Limited announced that Cleveland Golf Company, Inc. acquired U.S. sales a subsidiary of SRI Sports Limited to sell two flagship brands such as Srixon and Cleveland Golf in October 2008. US Sales of SRI Sports Limited stayed at 2.3 billion yen in FY2007 while market shares of golf ball was merely two per cent. SRI Sports Limited aims to boost US Sales to 24 billion yen in FY2007 after the meager of Cleveland Golf Company, Inc.

 
SRI Sports Limited

The ongoing financial turmoil, however, is affecting the strategy of the third biggest manufacture of sportswear and sports-related products Descente Ltd. in South Korea.

According to an article “Descente to open fewer golf wear stores in S Korea” of Nihon Keizai Shinbun as of October 22, Descente Ltd. change its business plan to open more golf ware shops in department stores in South Korea. It aimed to open one or two shops of Munsingwear and 10 to 15 stores of Le Coq Sportif Golf to bring at least 10 billion yen of annual sales in South Korea within four years, compared to sales of 6 billion yen in 2007.

 
Descente Ltd.

Due to Korean won depreciation against Japanese yen and economic disorder, Descente Ltd. will scale down business operations: suspend any opening of Munsingwear stores and open only five stores of Le Coq Sportif Golf in FY2009.

There have been many of media coverage onto collapse of a study abroad agent Gateway21 Co. in Japan. It was the bigger news than Leman Brothers’ bankrupt or AIG bailout.

Tokyo-based Gateway21 Co. filed for a voluntary bankruptcy with the Tokyo District Court on October 1st., with estimated debts of about 1.3 billion yen as it failed to maintain cash to operate its sale team enlarged from stumbling revenues.

This is big new in that TV media have repeatedly covered a scene in which a president of Gateway21 Co. apologized to its hundreds’ creditors. The creditors were packed in a small meeting room and the president Tomomasa Fukui threw himself on the ground and bowed in apology while saying “I am really sorry that your dreams and lives fell apart,” according to an article of The Japan Times.

The Japan Times
Study abroad agent apologizes to clients, says it won’t pay them

Failure of overseas placement agency leaves many students in the lurch.

According to Gateway21’s lawyer, about ¥950 million in tuition and boarding fees paid by some 1,300 people who were planning to go overseas is unlikely to be recovered, even after bankruptcy procedures.

In addition, about 1,000 clients now abroad might have to interrupt their studies because Gateway21 has stopped paying its overseas business partners.

It is deja Vu what Japanese English learners have faced the last year. In 2007 Osaka-based Nova Corp., Japan’s largest language school chain, filed for bankruptcy with debts of about 43.9 billion yen and applied for protection from creditors under the Corporate Rehabilitation Law with the Osaka District Court as it failed to recover from a crippling penalty for false advertising.

Collapse of Nova Corp. spreads absolute nightmares across an estimated 420,000 students nationwide with no paybacks of tuition paid in advance. It also failed to pay about 2,000 Japanese employees since July 2007 and about 4,000 non-Japanese instructors since September 207.

I guess that some of Japanese English learners no longer trust business of private language schools nor rely on fly-by-night study abroad agents. Who could sell credibility and services together to Japanese people?

A corporate credit research company Teikoku Databank, Ltd.（TDB）conducted a research project towards both 6,725 would-be listed companies and 467 already-listed companies since 2005 to figure out possible IPO schedules of the the would-be listed companies and reasons or concerns of IPOs of the newly listed companies. TDB got respondents consisting of 984 would-be listed companies and 195 newly listed companies on February 2008.

 
Teikoku Databank, Ltd.

TDB Watching (in Japanese)

The following key findings teach what IPO in Japan is all about,

･43.6 percent of the respondents out of 984 would-be listed companies answered that they plans to be listed under their schedules. This is the first time the drop in percent has happened since the last four years.
･Only 9.5 percent of the respondents answered that the would-be listed companies want to be listed in stock exchanges in 2008 or 2009, dropping by 6.1 % from the last year research.
・391 respondents （39.7％） would select TSE Mothers as the most favorable stock exchange, followed by JASDAQ with 347 respondents (35.3％) and with 173 respondents (17.6％).
・Most of the respondents answered that they aims to be listed with a reason to increase name recognition and creditworthiness. It occurred 756 respondents of the would-be listed companies (76.8％) as well as 176 respondents of the newly listed companies (90.3％).
・Both respondents of the would-be listed companies and the newly listed companies agreed that it is the most challenging hurdle to establish an internal audit system and function the system. It occurred 639 respondents of would-be listed companies (64.9％) as well as 157 respondents of the newly listed companies (80.5％).
・Around 70 percent of the respondents considered that Japanese-version Sarbanes-Oxley Act (J-SOX) affects their IPO schedules to establish a viable internal audit system. 　

J-SOX is an unofficial term which refers to requirements for all of listed companies in stock exchanges similar to Sarbanes-Oxley Act Section 302 and Section 404 in the US. The J-SOX requirements are incorporated in the Financial Instruments and Exchange Law Act which was newly promulgated on June 14th, 2006 and became effective in April 1st, 2008.

I read an article of Canada.com “Canadian firm considers funding options for Asian casino” recently and want to add information of other casino resort projects in Asia region by explaining what irrational competition is surely ahead of casino operators.

Canada.com
Canadian firm considers funding options for Asian casino

The Canadian firm is Asian Coast Development Ltd. which plans to develop the Ho Tram Strip, an exceptional vacation destination that spreads across 157 hectares and features casinos and five Las Vegas-style integrated resorts in southern VietNam. I quoted an explanation of the initial development plan onto the Ho Tram Strip of as follows,

Designed to highlight the lush natural beauty of the area, Phase I of the Ho Tram Strip will be themed on the concept of environmental preservation and conservation. Nestled in a pristine and safe environment, will be two five-star hotels with a combined 2,300 luxurious rooms and suites, Vietnam’s first Las Vegas-style casino - featuring live entertainment stages and an exclusive VIP area to compliment a gaming floor consisting of more than 500 slot machines and approximately 90 table games.

 
Ho Tram Strip

 
Asian Coast Development Ltd.

I am wondering if casino market in Asia region is going to be crowded in couple of years later although time schedule of development and operation of Ho Tram Strip or the number of visitors given by a web site Ho Tram Strip is not clear at all.

Thus there are two big casino resort projects going on: Resorts World at Sentosa planned by Resorts World at Sentosa Pte Ltd in Singapore and Bagong Nayong Pilipino planned by Philippine Amusement and Gaming Corporation in the Philippines.

Resorts World at Sentosa will be open as a casino resort in spring 2010 and expects 15 million visitors annually. Genting International Plc whose subsidiary is Resorts World at Sentosa Pte Ltd has already secured $4.19 billion in syndicated funding that will pay for about two-thirds of the integrated resort in February 2008. It comprised $4 billion in loans and a $192.5 million banker’s guarantee facility from DBS Bank, OCBC Bank, HSBC, Royal Bank of Scotland and Sumitomo Mitsui Banking Corporation.

 
Resorts World at Sentosa

 
Genting International Plc

A Manila bay integrated tourism project Bagong Nayong Pilipino also plans to open casino resort in 2010 and expects 3 million visitors annually. Bagong Nayong Pilipino was planned by a state casino firm Philippine Amusement and Gaming Corporation and four consortium members have started to finance each of facility developments in 2008.

 
Bagong Nayong Pilipino

 
Philippine Amusement and Gaming Corporation

In 2005, Asian casino kingdom Macao had 18.7 million visitors while it had 10 million visitors from Mainland China. Resorts World at Sentosa and Bagong Nayong Pilipino will try to attract those Chinese customers to new facilities because other possible visitors such as Japanese or Korean are less interested in gambling resorts than Chinese. Gambling resorts should share a pie of Chinese travelers basically although the number of Chinese travelers are uncertain.

I focus on difficulty of Japanese venture capitals, based on both a Nihon Keizai Shinbun’s article “Venture Capital firms face bleaker earnings outlook,” as of September 11th and my yesterday’s blog. They are suffering from declines in capital gains resulted from decrease in the number of Japan’s IPOs in FY2008.

This article picked up listed venture capitals such as Japan Asia Investment Co., Ltd.(JAIC), SBI Holdings Inc.(SBI), Jafco Co. Ltd.(Jafco) and NIF SMBC Ventures Co. Ltd.(NIF SMBC). The recent financial results in FY2008 ending at March and forecast in FY2009 of those venture capitals are as follows. Regarding of forecast in FY2009, SBI, Jafco and NIF SMBC have not disclosed forecasts in net sales or earnings due to business characteristics where volatility in stock markets and the IPO environment in Japan. Therefore I show forecasts prepared by one of leading business magazine publisher Toyo Keizai Inc.

 
JAIC

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	21,444	5,172	1,512
FY2009(est.)	28,000	7,500	3,000

JAIC revised its original forecast into 20,700 million of Net sales, 5,900 million yen of Operating loss and 7,200 million of Net loss as of September 5th. The revision is attributed by a bankruptcy filing by Nissan Rinkai Construction Co. by which JAIC is likely to suffer about 6.2 billion yen in associated losses.

 
SBI

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	222,567	42,606	4,228
FY2009(est.)	200,000	33,000	21,000

Due to a bankruptcy filing by real estate firm Zephyr Co., SBI announced to book 9.469 billion yen as a special loss in FY 2009 as of July 30th. It should lower its full-year operating profit forecast substantially.

 
Jafco

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	67,937	12,813	7,684
FY2009(est.)	36,000	11,000	7,700

 
NIF SMBC

(Unit:Million yen)	Net sales	Operating profit	Net income
FY2008	19,876	-13,732	-5,485
FY2009(est.)	22,000	2,000	1,500

I believe that they don’t expect revival of IPOs in Japan at all. What is worse is that they seem to lag behind U.S., U.K. or Korea venture capitals in terms of business deployment in emerging countries such as India, Russia and Brazil for the next source of revenues. Thus how could they get capital gains of IPO?

According to the September 19th edition of Nihon Kezai Shinbun, the AirAsia Berhad group (AirAsia) plans to start serving Japanese cities the next year with fares 50-60% lower on average than major airlines.

 
AirAsia

It is really good news for budget traveler like me! However, I am still wondering which city in Japan AirAsia will chose to connect to Kuala Lumpur because I am living in Tokyo. AirAsia seems to have two options in 2010; a route to Tokyo’s Haneda airport which is slated to be expanded or another route to a new airport in Ibaraki Prefecture.

Expansion of Haneda airport is under construction to build the 4th runway by 2010 which would add 40% of the number of departure and arrival to the current capacity of 239, 000 times a year as of October 2005.

Ibaraki airport aims to open by March 2010 as well. I believe that most of residents in Metro Tokyo prefer to what AirAsia decides to choose Haneda airport because Ibaraki airport is not conveniently located in terms of public transportation. It might take one hour to ride express train starting from Ueno station in Tokyo and further to take bus to reach airport.

The worst case scenario for residents in Tokyo is that AirAsia will choose the second biggest city Osaka or other big cities as well as Jetstar Airways Pty Ltd, part of Australia’s Qantas Airways Ltd. in Australia or Cebu Pacific Air in the Philippines.

Both budget airlines, Jetstar and Cebu Pacific Air, started their flights to Osaka in August 2007 and in November 2008, respectively. Osaka is the second largest city having 8 million of population in Japan but there is no benefit for both airlines operating in Osaka, except reducing landing costs for departure and arrival.

Budget airline is relatively new for Japanese travelers who are still afraid of its safety. If budget airline wants to change mindset of those travelers, it could start its business in Tokyo where it is a center of broadcast marketing and buzz marketing to increase brand recognition.

 
Jetstar Airways Pty Ltd

 
Cebu Pacific Air