Introduction
Deglobalization is a process in which countries or regions reduce their economic, social, and political connections with the rest of the world. The deglobalization of the world has had a significant impact on international trade. However, one company that has remained essential in maintaining the supply chain of Japan is Sogo Shosha. A Sogo Shosha is a type of trading company unique to Japan and is playing an increasingly important role in helping Japan diversify its energy sources. Therefore, this essay will discuss several reasons why the Japanese Sogo Shosha, a unique type of trading company, has been a major driving force behind Japan’s economic growth. Additionally, it will discourse on how Sogo has adapted its business model over time in response to the changing global economic landscape.
Sogo Shosha
Meaning of Sogo Shosha
Sogo Shosha is a Japanese term for ‘general trading company’ and is used to describe a company that engages in various international trade activities. These companies are large, powerful, and influential in the global market and are typically based in Japan. The Sogo Shosha companies were first established in the late 19th century when Japan opened its doors to the world economy (Young, 2019). At the time, Japan had limited access to foreign markets, and the Sogo Shosha companies offered an important bridge between Japan and the rest of the world. They served as intermediaries, negotiating deals, arranging shipments, and providing financing for international trade.
Besides, an individual may wonder why Sogo Shosha is often referred to as ‘is’ and not translated into ‘Trading Companies’ in English. That tells how unique globally Sogo Shosha is as a category of businesses in Japan. If a person looked back at the history of Japanese modernization, they would find that many Sogo Shosha was established as a part of Zaibatsu- group companies consisting of strong conglomerates such as Mitsui and Mitsubishi in the Meiji era (Young, 2019). At that time, Sogo Shosha was limited to helping only Zaibatsu companies trade materials and products with foreign companies. Then after world war II (WWII), Sogo Shosha came to play significantly more important roles in the reconstruction period in Japan when its economy grew at a high rate, and Japan caught up with developed countries such as UK and USA (Young, 2019). Therefore, the processing trade which Japan took to grow its economy due to the combination of a lack of natural resources and a relatively strong manufacturing platform accelerated the presence of Sogo Sosha.
Four Types of Trading Companies
First, in the colonial era, the East India Company was established by Great Britain, dominating seven seas worldwide. The East India Company was a multinational company established by the British Crown in 1600 (Young, 2019). It was the most powerful and wealthiest corporation of its time. Its main mission was to import rare commodities from its colonies, such as spices, tea, coffee, indigo, and opium. In addition, it served as a major trading partner in the East and had a regional monopoly on trade. The company also had a major impact on the politics of the region, as it was deeply involved in the governance of its colonies. It provided a powerful source of revenue for Great Britain and the company had its own private army, which it used to protect its interests. It also had a wide range of administrative powers, such as the power to make treaties with local rulers and collect taxes. Therefore, the East India Company was a major force in shaping the history of the region and it ultimately led to the establishment of the British Raj in India.
Second, a type of Sogo Shosha trading company specializes in specific products. For example, a US company Cargill was established to trade grain. Cargill is an American-based global corporation focusing on trading and processing grain and other agricultural products. It is the largest privately owned corporation in the United States and amongst the world’s biggest Sogo Shosha companies (Young, 2019). Cargill’s business model is based on purchasing grain from farmers and selling it to customers worldwide, including processors, food service companies, and retailers. Cargill’s global presence and strong market position mean that it can influence the prices of agricultural commodities, including grain.
Third, specialized Sogo Sasha trading companies also focus on importing European fashion. Sogo Sasha is a European fashion trading company that specializes in importing high-end fashion from Europe. They offer several products, including clothing, accessories, and home decor. They source their products from trusted European manufacturers and suppliers, ensuring that each item is of the highest quality (Young, 2019). They also strive to provide their customers with the latest trends, styles, and European designs. Customers can purchase items directly from their website or visit one of their physical stores to try on items before making their purchase. As a specialized trading company, Sogo Sasha is dedicated to providing customers with the best selection of European fashion.
Lastly, there is regional Sogo Sosha that specializes in a particular region. For example, some focus on Asia and others focus on Europe. Regional Sogo Sosha is a large trading company specializing in a particular region (Young, 2019). They act as middlemen for international trade, helping to enhance the sale of products and services between countries. They are knowledgeable about their region’s market conditions, enabling them to negotiate better deals between buyers and sellers. They also provide logistics support, such as financing, shipping, and insurance, as well as market research and analysis. Regional Sogo Sosha helps companies to diversify their supply chain by providing access to international markets while helping to reduce risk.
Japanese Sogo Shosha Uniqueness
Japan is unique because it must be tied with foreign countries economically in order for them to utilize relatively strong manufacturing capabilities. Therefore, that is how Japanese Sogo Shosha developed their role and strengthened their presence. Therefore, rhe Japanese Sogo Shosha, or ‘general trading companies,’ is a unique and integral part of the Japanese economy. These companies are responsible for a significant portion of the nation’s imports and exports and for providing a wide range of services to businesses across the country (Young, 2019). That combination of activities makes the Sogo Shosha quite unique and important to the success of the Japanese economy.
Additionally, one of the essential aspects of the Sogo Shosha is their ability to act as intermediaries between the buyers and sellers of goods and services. Sogo Shosha can facilitate more efficient and cost-effective transactions by providing a bridge between the two parties (Young, 2019). They provide a range of services such as market research, negotiation of contract terms, and even collection of payments. That unique role allows them to gain insight into both parties’ needs and develop strategies that bring the best results for everyone involved.
Some Examples of Traditional Business by Sogo Shosha
One of the traditional business models employed by the Sogo Shosha is the ‘keiretsu,’ which involves forming tight-knit relationships between companies. Companies can cooperate to increase efficiency and reduce costs by forming these alliances. The Sogo Shosha manages and coordinates these relationships and ensures that all parties are treated fairly (Young, 2019). This traditional business model has been incredibly beneficial for the Japanese economy, allowing companies to increase their profits while maintaining strong relationships with their partners.
Another traditional business model employed by the Sogo Shosha is long-term contracts. These contracts are often used to lock in prices and guarantee a certain level of quality. By entering these contracts, companies can be sure they will get the goods and services they need at a reasonable price. That has allowed companies to operate more efficiently and helped ensure that Sogo Shosha remains competitive in the global marketplace (Young, 2019). Finally, the Sogo Shosha also employs a traditional business model known as the ‘mae-kari’ system. This system involves the Sogo Shosha as a middleman between buyers and sellers. By acting as the middleman, Sogo Shosha can manage the entire transaction and ensure that both parties are satisfied with the outcome. This system has been incredibly beneficial for buyers and sellers and has helped ensure that Sogo Shosha remains competitive in the global marketplace.
The Change of the Business Model of Sogo Shosha
The Sogo Shosha business model was initially developed in the late 19th century in Japan, and it has since evolved to meet the changing needs of the global business environment. In recent years, the Sogo Shosha business model has experienced a significant shift that has allowed these firms to remain competitive and relevant in the global market. The traditional Sogo Shosha business model has been to act as an intermediary between buyers and sellers in the global marketplace. The approach has enabled them to build relationships with buyers and sellers and control the flow of goods and services between the two parties. By having this level of control, the Sogo Shosha firms have been able to benefit from economies of scale and maximize their profits.
However, the traditional Sogo Shosha business model has been increasingly challenged by the emergence of new technologies and e-commerce. As the internet has become a major platform for conducting business, Sogo Shosha firms have had to adjust their strategies to remain competitive. In particular, they have had to focus more on providing services rather than simply acting as intermediaries (Young, 2019). Hence, that shift has allowed them to offer services such as market analysis, product development, and supply chain management, enabling them to remain competitive in the global marketplace.
Importance of Sogo Shosha Discussion
In addition to the trading businesses that Sogo Shosha historically developed and concentrated on, Sogo Shosha recently developed its ability to invest its capital to corporations. Therefore, Sogo Shosha is crucial in maintaining Japan’s supply chain and energy security in an era of deglobalization. As global trade networks become less interconnected, Sogo Shosha offers a way for Japanese corporations to remain competitive in a more complex and uncertain environment (Young, 2019). Therefore, Sogo Shosha is a trading company focusing on global sourcing, logistics, and risk management, acting as a bridge between Japanese companies and global markets.
Furthermore, by leveraging the expertise of Sogo Shosha, Japanese corporations can diversify their energy sources and access new markets, helping them to remain competitive in an increasingly challenging global environment. Sogo Shosha has also been instrumental in helping Japanese firms to develop renewable energy, which is critical to the country’s energy security (Young, 2019). For instance, Sogo Shosha has been involved in developing large-scale solar and wind power projects in Japan, helping to reduce the country’s dependence on traditional imports of natural resources. Additionally, the role of Sogo Shosha in maintaining Japan’s supply chain and energy security in an era of deglobalization cannot be overstated. Sogo Shosha provides a vital connection between Japanese companies and global markets, helping to ensure that the country remains competitive in a rapidly changing global environment (Young, 2019). By facilitating access to new energy sources, Sogo Shosha is helping to ensure Japan’s energy security and long-term economic growth.
Conclusion
The Sogo Shosha companies are an important part of the Japanese economy and have helped shape the global economy. They are powerful, influential, and well-respected, continuing to be a major force in international trade. The Japanese Sogo Shosha is a unique and important part of the Japanese economy. Their combination of activities, their extensive network of relationships, and their commitment to quality have helped them to become a trusted and respected part of the business landscape. As such, they are an integral part of the Japanese nation’s economic success.
In addition, the Sogo Shosha have employed traditional business models for many years and profoundly influenced the Japanese economy. Utilizing the keiretsu, long-term contracts, and the mae-kari system, the Sogo Shosha has allowed companies to increase their profits while maintaining strong relationships with their partners. These traditional business models have been incredibly beneficial for the Japanese economy. Furthermore, the Sogo Shosha business model has undergone a significant shift in recent years, enabling these firms to remain competitive in the global marketplace. Therefore, by shifting their focus to services and embracing open innovation, Sogo Shosha firms have remained relevant and profitable.
Reference
Young, A. (2019). The Sogo Shosha: Japan’s Multinational Trading Companies. (1st Ed.). Routledge.