Mitsuomi Koizumi, 58, president of Japan Tobacco Inc., discussed how his company has evolved since its privatization in 1985 as well as its future strategy, in an interview with Yomiuri Shimbun.
In the first decade after our company was privatized, new business undertakings - including those in the farming sector - repeatedly failed. However, the experience we gained from the failures provided the foundation for the globalisation of our business thereafter.
There are three factors, I believe, behind the success of our large-scale overseas mergers and acquisitions since the 1990s: taking a humble stance toward companies targeted for acquisition; winning respect from those companies by dint of organizational ability instead of financial power; and conducting thorough preparations.
In the meantime, employees sweated blood in their efforts to streamline. Since privatization, the number of employees has been reduced from 34,000 to one-fifth of that figure. The endeavours of our employees sustain our performance today.
Today's executives who shared experiences and discussed plans for overseas business during the era when JT was a public entity called Japan Tobacco and Salt Public Corporation. They are like comrades. However, the executives of our generation will soon retire from front line management. They must be replaced by those willing to compete with each other and offer a diversity of viewpoints.
The global tobacco market is expected to level off for the time being, and Japan's market is anticipated to shrink at an annual pace of slightly more than 2 per cent. The bleak prospects may make our employees anxious. Moreover, there is fear that we will become overconfident, given our past success in M&A bids. It is necessary for employees to maintain a healthy sense of urgency.
Our target is to become the world's No. 1 tobacco maker. We can do this without spending a huge amount on M&As by growing at a faster pace than our competitors. There are still many regions, including parts of South America and Asia, where we have yet to make inroads. There are great opportunities ahead because we are still No. 3 in the world.
Competition from foreign manufacturers spelled the doom of tobacco monopolies in France and Italy once they privatized, but JT was able to transform itself into a global enterprise through its M&A strategy. JT's method of expansion stands as a lesson for other Japanese companies.
However, the approach does have a blind spot. In recent years, the tobacco industry has faced mounting concerns about the relationship between smoking and health issues. Tobacco sales will soon reach their upper limit. For tobacco manufacturers, ending their reliance on tobacco and reaping profits from other lines of business, including pharmaceuticals and food products, has become a major challenge.