In a first for the defense industries of the United States and Japan, LOCKHEED MARTIN CORP. and MITSUBISHI ELECTRIC CORP. have reached a basic agreement to collaborate on the development of military hardware for sale to the Japan Defense Agency. Work on a new generation of missiles and radar are two of the areas reported to be under consideration. The decision to move beyond the standard licensing of American defense equipment for production by Japanese manufacturers was prompted by some obvious considerations. For Lockheed Martin, the world's top defense contractor and the prime subcontractor on Japan's F-2 fighter jet (see Japan-U.S. Report No. 344, May 1998, p. 10), the arrangement could better position it to win contracts for front-line equipment from JDA at a time of declining hardware procurement budgets. For MELCO, Japan's number-three defense contractor, the deal provides a way to remain in the defense business despite its high cost structure.
ECOLAB INC., the world leader in institutional and industrial cleaning and sanitation, has changed its Japan marketing strategy. For about $690,000, the St. Paul, Minnesota company's subsidiary sold the right to market 140 of its industrial and commercial cleaning products to DAI-ICHI KOGYO SEIYAKU CO., LTD. The sale also gave the Kyoto manufacturer of surfactants access to 94 Ecolab distribution channels.
Looking for a new source of business amidst the consumer spending slowdown in Japan, the subsidiary of big golf equipment supplier TAYLOR MADE GOLF CO. introduced a pair of golf bags designed for touring pros. The Staff Bags are priced at $320 or $360.
Contract facility management is not an unknown form of outsourcing in Japan, but it is a relatively undeveloped business, even though the cost pressures on domestic firms are increasingly heavy. Not surprisingly, JOHNSON CONTROLS, INC., which generates more than $1 billion a year from the management of facilities, believes that there are opportunities to exploit in Japan. It formed wholly owned JOHNSON CONTROLS INTEGRATED FACILITY MANAGEMENT CORP. in Tokyo to bring its approach to facility management to the commercial building market. That strategy enables firms to trim costs by using a single source to integrate facility services and consolidate purchasing. Johnson Controls IFM already has its first customer, MOBIL CORP.'s subsidiary. Under their integrated facility management services contract, facility budgeting, facility management and office services support at Mobil's Tokyo headquarters are handled by on-site staff provided by the Milwaukee, Wisconsin maker's affiliate. Over the next five years, the Japanese company expects to build its operations into a $469 million business.
Through its various units, OMNICOM GROUP INC., the world's largest advertising agency, is beefing up its position in Japan. First, its BBDO WORLDWIDE affiliate doubled its stake in I&S CORP. to 40 percent. That Tokyo-headquartered company is Japan's eighth-largest ad agency (see Japan-U.S. Business Report No. 346, July 1998, p. 29). Almost simultaneously, another Omnicom Group company, TBWA WORLDWIDE, which had 1997 billings of $3.4 billion, announced that it would acquire a majority stake in NIPPO CORP. from primary owner NISSAN MOTOR CO., LTD. and various of its affiliates. Nippo ranks sixteenth among Japan's ad agencies, with billings last year of $291 million. Through the takeover, TBWA Worldwide hopes to win the Japan advertising business of American and other foreign clients that it already represents.
An exchange rate of ¥145=$1.00 was used in this report.