The Journal The Authority on Global Business in Japan

INTERVIEW | ENERGY

June 2014
A Perfect Fit
GE’s commitment to Japan ensures growth and opportunities
Custom Media
Photos by Benjamin Parks

General Electric is a company of superlatives. Every day, the corporation purifies enough water to meet the needs of 39 million people, GE healthcare technology helps doctors save 3,000 lives, and its power-generation equipment creates one-quarter of the world’s electricity. And in 2012, the company filed more than 3,500 patents in the United States.

This commitment to new technology makes it a perfect fit for Japan, where it has been working with the government and private companies since it installed the first electric generator in the government’s National Printing Bureau in 1886.

“When GE started here in Japan 130 years ago, it was the opportunities and the size of the market that initially attracted us,” said Akihiko Kumagai, president and CEO of GE Japan.

“Japan was booming and it was time for us to penetrate this new market.”

After that first successful demonstration of just what the Connecticut-based company could deliver, GE was swiftly contracted to provide the engines to power Japan’s first streetcars in Kyoto, followed in 1923 by the installation of the nation’s first streetlight in Nagoya.

“The strength of the Japanese market today is still technology,” said 57-year-old Kumagai, who has been with the company for 30 years. “That is still attractive; there is a lot of great potential and great technology here.

“And we have found that we can identify new technology in Japan that we can then take to a global audience,” he told the ACCJ Journal.

GE hosts a regular trade-matching fair that attracts companies of all sizes from across Japan. Working together with GE, these firms’ products can realize their true potential on an international scale.

One company based in western Japan, for example, had devised a unique energy storage technology with applications in the healthcare sector. Now in production globally, the technology significantly reduces machines’ energy consumption and comes in a compact unit.

GE is committed to working with Japanese firms across a range of sectors to develop similar cutting-edge technologies, Kumagai added.

GE has a global workforce of around 300,000 and operates in more than 170 locations around the world. It has eight distinct business units, with 70 percent of revenue derived from its industrial operations, and the remaining 30 percent from the financial sector. Its corporate financing arm is the company’s largest single unit, followed by power and water, aviation, healthcare, and oil and gas; revenues totaled $146 billion in FY2013.

The Asia–Pacific region contributed $25.5 billion to that total, with around $4 billion of that coming from Japan.

GE employs 4,700 workers here, where it is focused primarily on the healthcare, energy, aviation, and capital sectors. As well as offices in 50 locations across the country, it has manufacturing facilities in Hino, Yokosuka, Yokohama, and Kariwa.

The energy sector has particular appeal at the moment, according to Kumagai, as Japan explores next-generation power opportunities.

“One of the biggest challenges is finding ways to be more productive and increasing efficiency in the energy cycle because of the increasing price of imported fuels,” he said. “Whether that is gas turbine, wind, or any other form of energy, we can bring a lot of experience in this area and the timing of developments is positive.”

Similar opportunities exist in the area of healthcare, particularly given that Japan has the most rapidly aging population in the world.

“Even though some say Japan is already a saturated market, there are clearly segments of that market where we can grow because need and demand exist,” he said, pointing out that changes in society indicate there will soon be more demand for homecare for the elderly, for example.

GE has tweaked its financial arm in Japan in the aftermath of the financial crisis that followed the Lehman Brothers collapse in September 2008. The shedding of part of its operations has resulted in the business becoming “so much healthier,” Kumagai said, and means that the company can “once again start to play offense and start to grow the business.”

“We tell our customers that we are not just a provider of finance, but that we are GE,” he said.

“And that allows us to take a ‘more-than-finance’ approach, offering not only financial solutions but also GE’s wide range of know-how and expertise in management, leadership development, process improvement, and many more fields,” he added, pointing to the success of Access GE. This service is provided by GE Capital and is designed to share everything that is part of GE with its customers to help them grow further.

“We have a big footprint in Japan, as well as that long history and, therefore, a strong foundation here,” said Kumagai, who is originally from Hyogo Prefecture but lived abroad in his childhood thanks to his father’s job. “That enables us to operate in Japan as a local company—95 percent of our staff here are Japanese—but we are also part of GE, meaning we are free to leverage any of our technologies from anywhere in the world.”

And while Japan provides plenty of opportunities for a company such as GE, it also throws up some unique challenges.

Traditionally, Japan’s high-cost structure has been a hurdle, although Kumagai prefers to see that as an opportunity to seek higher productivity through the application of IT solutions, be they cloud-based or via the internet.

“We are very focused on the industrial internet, and we opened a software development center three years ago near Silicon Valley in the United States,” he said. “We are seriously entering the software business, as there is already a large installed base of hardware and technology. If we can tie that to our software, then we can grow that sector of our business as well.”

To stay ahead of the competition, it is critical that the company has a strong marketing presence—to predict market trends and be prepared to meet different demands—which goes hand-in-hand with investment in future technologies.

“We often find that new technology developed specifically for the Japanese market is very well appreciated by the global market,” Kumagai said. “Demand from customers here in Japan is the highest in the world in terms of quality of service and high-tech specifications but, once a product has been developed here in Japan, we can take it anywhere.”

GE also sees new—and potentially huge—opportunities on the horizon with the decision to award the 2020 Olympic and Paralympic Games to Tokyo. And those opportunities are as much about benefitting society as creating new business.

“I think it will create an increasingly positive mood in the city—and we can already begin to see that—as well as have a big economic impact,” Kumagai said, adding that the advances Japan is making when it comes to meeting the needs of an aging population and a growing environment friendliness can be sustained after the Games are over and can make Tokyo “a role model that the rest of the world can learn from.”

“What I hope is that, as a result of these Games, people in Tokyo will once again build a new pride in being Japanese and in their city,” Kumagai added.

“We can showcase to the entire world that even though this is a big city, it is safe, clean, efficient, and that there is a long-term strategy for the city to be friendly. And that is something to be proud of.”