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December 04, 2008

Sumitomo Strategizes For U.S. Change

Vivien Ng ’09
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Where there is change, there is opportunity. This idea was at the heart of a recent presentation to students and faculty at Columbia Business School by Michihisa Shinagawa, president and CEO of Sumitomo Corporation of America. He spoke as part of the Center on Japanese Economy and Business’s ongoing Zandankai Series. The corporation is one of Japan’s largest trading companies.

Currently, there are three structural shifts that are transforming the Americas, which could provide opportunities for Sumitomo, said Mr. Shinagawa.

Firstly, there is a need to use natural resources more efficiently, such as by developing fuel-efficient transportation and energy-efficient buildings, and to develop alternative energy sources.

Secondly, the United States is becoming more of a consumer nation. Despite the current downturn, as income levels of immigrants rise and the region grows, the U.S. consumer market is expected to create greater business opportunities.

Lastly, Canada and Central and South America will continue to grow in importance as producer regions and supply sources, given that labor costs in China and freight charges will increase.

To take advantage of these structural changes, Sumitomo is developing strategic goals.

“The first strategy is to achieve ‘critical mass’ in markets,” Mr. Shinagawa said. “As commodity prices fluctuate and consumers become more cost-conscious, many industries, such as mineral resources, steel and aerospace, are up against stiff competition. As a result, companies are merging to become giant global players.”

He also discussed how the company would make the most of these current economic cycles.

“We try to anticipate economic cycles and recognize shifts in growth areas,” he said, citing Sumitomo’s real estate portfolio as an example.

“Until 2004, our U.S. office building portfolio had only one property, which was in New York,” he said. “Then we began recycling our assets and realized a large profit. We re-invested that profit, and today our portfolio is much more diversified and valuable.”

The final piece of Sumitomo’s strategy is an ongoing effort to be a ‘lean and mean’ organization by monitoring inventory levels, recycling investment assets and enhancing their human resources.

Photo credit: Michael Pereckas