"There is a TV program I wanted to watch after dinner. Why do we have to gather in the study room?" Takumi complained. Yuna glared at Takumi and said, "Shota's going to rehearse his homework assignment presentation, and we'll help him." Takumi clucked his tongue and stood by the door. Shota's father, mother and Yuna sat down on the chairs they moved from the living room.

"Well then. I'm going to present my homework assignment," Shota said. Takumi said sullenly, "Wait a minute. Why is the PC on when you're only reading a manuscript? You haven't even pressed the <<The end>> button, which you said appeared at the end." Yuna answered for Shota, "That's because Shota wants all the Bussan-jin, who are somewhere in the town, to listen to his presentation." Takumi sighed and leaned on the wall with his arms crossed.

Shota cleared his throat and announced in front of his family, "I'm going to give a presentation on 'Myself 10 years from now'."

10 years later, I'll probably have graduated from a university and started working. Since I was young, I had a dream. It was to "go out into the world and do a big job to help people living in different countries." But I didn't know in what kind of company I would be able to do such a job. However, my dream job existed. There is a company where the workers can go out into the world, develop while challenging their own possibilities, and on top of that help others. It is called a "sogo-shosha."

I think you are probably thinking, "What is a sogo-shosha?" like I was until a little while ago. So, I would like to tell you what I have learned about a sogo-shosha.

Shota paused and looked up from the manuscript. He saw his father smiling and his mother listening intently. Shota's elder brother Takumi had his arms crossed and his eyes closed. His younger sister Yuna was waiting excitedly for him to continue. Shota continued his presentation.

In the world, there still are many countries and regions where infrastructure that is essential for life, such as electric power plants, is not developed. In order to construct these much-needed large-scale facilities, we need to properly understand the country or region, culture and ideas of the people, their needs and requests. For such occasions, the "global power" of a sogo-shosha plays an important role, combining the experiences and energy of the employees working all around the world.

The "energy resource development" project involving petroleum and natural gas, which are vital to Japan today, is a very large-scale project. It is an important job for a sogo-shosha to work for "multi stakeholders," including the direct stakeholders such as the local government and municipality in need of resource development and partner companies participating in the project, as well as the indirect stakeholders such as the local workers and residents in the area surrounding the mine or pipelines.

In order to transport the mined natural gas to Japan, which has little in the way of natural resources, high-tech ships are needed, such as LNG ships loaded with the latest technologies. It is also the job of a sogo-shosha to support such transport from development and construction to financing and operation of ships.

Shota looked up from the manuscript and looked around at his family's faces. Everyone was listening to him seriously. Especially, Takumi looked surprised as if to say, "When did you learn how to write such fancy text?" Shota exhaled and said, "The story will get a little bit more intricate from here."

At the beginning, the sogo-shosha dealt mostly with overseas trading to mediate between the importer and exporter. Now, another pillar, business investment, was added. The sogo-shosha also participated in the management of the invested company and supported the development of its business. The major purpose of business investment by the sogo-shosha is to continuously expand the business while enhancing its value, together with the company it has invested in.

"Trading" and "business investment" are the backbones that support the sogo-shosha. There also are business methods and concepts that actually move the company and are unique to the sogo-shosha. These are "value chains." A value chain indicates "business connection" from where materials and services are born to the people and companies that are in need of them. In each phase of a value chain, "added value," which is beneficial to both the business partner and the sogo-shosha, is created.

Yuna was a little confused by the word she heard for the first time, "What is a value chain? Is it related to the environmental issues?" Behind Yuna, Takumi boasted, "This value chain is the key. You need to be smart like me to understand it." Shota said to Yuna gently, "It may be difficult for you, but I'll try to explain it as best I can."

Why is value chain a unique concept to the sogo-shosha? It is because there are no other companies like Japanese sogo-shosha, which are involved in all phases of business, including development/procurement/supply of resources (materials used for products), manufacturing/processing/sales of products, and distribution/logistics, in wide ranges of industrial fields.

Let's look at the automobile value chain as an example. The main material used for automobiles is iron. A value chain can be compared to a river, and the "procurement of iron ore," from which iron is made, is "upstream" in the value chain. The sogo-shosha is also developing an iron ore mine through business investment. Development of an iron ore mine is not only about digging up iron ore but sometimes even begins from building a town that includes houses for miners, schools for their children and hospitals. The sogo-shosha's strength is the ability to enable such a project with its broad network, through development of infrastructure and logistics, construction of residential areas and production facilities and procurement of resources and equipment.

The "manufacturing and management of steel sheets," which are used for automobile parts, is "midstream" in the automobile value chain. Flat steel sheets delivered by the steel manufacturer are processed according to the orders from the automotive manufacturer. The sogo-shosha provides stable and detailed service with partner companies, delivering required types of steel sheets in the required amounts, when they are needed. This is an example of "added value" that is created in a value chain.

Added value created by the sogo-shosha provides strength in "downstream" automobile sales. For example, a robust sales network can be established using the value chain, which incorporates the local partner companies and enables the supply of automobiles in countries and regions where the automotive manufacturer does not have a base.

When a public transportation network, such as a subway, is built overseas, we have to build up, from scratch, facilities and systems, which will become "arteries" for people's lives. This is done in cooperation with the government and private companies in the country. In order to implement such a large-scale project, the knowledge and experience cultivated through value chains of the sogo-shosha are essential. Its knowledge and experience cover all the processes from upstream to downstream.

As introduced here, the sogo-shosha creates added value by mediating between companies, understanding the needs and issue of both parties and finding a solution to bridge the gap. The basic concept of a value chain is to link added value created by the sogo-shosha to maximize the business value and profit. However, it is a "chain," so it will break if only one party benefits from the business. Value chains can only be maintained when both parties can stay happy, and the sogo-shosha's role is to maintain this happy relationship.

*Job titles and organization names as of March 2012

©2011-2012 Nikkei Business Publications, Inc. Nikkei Business Online Special, Translated by Mitsui & Co., Ltd.

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