Sogo Shosha Unique to Japan

Distinguishing Feature 1: Economies of Scope and Scale

Each sogo shosha handles about 30,000 different products with a total volume of over $100 billion

  • The first distinguishing feature of the sogo shosha is what is called economies of scope and scale, or the range and volume of the different products they handle.
  • In their core role as traders or middlemen or wholesalers they deal in a massive array of products, everything from natural/energy resources and intermediate materials to food commodities and infrastructure projects to industrial and transportation machinery to consumer goods and services. This broad scope is often expressed as ”everything from noodles to satellites” or ”from chopsticks to power plants”. In addition, the sogo shosha have traditionally handled these products in huge volumes, or scale, meaning millions of tons of coal or hundreds of thousands of computers and so on.
  • The reason for this is that originally the sogo shosha, as a brokers or intermediaries, had no ownership rights of resources or production so could only expand profits in two ways; by applying their core trading expertise to other new products, especially those with higher value-added and/or increase the volume of the commodity or good they were trading. In other words, it was only by expanding the scope and scale of the products they handled that they could increase their profits. This is how they came to be involved in dealing in so many different products in such large volumes.

Point:

The handling of such a wide variety of items in such huge volumes is a unique characteristic of the sogo shosha and not readily found in other business organizations.

Distinguishing Feature 2: Multi-Industry, Center of a Conglomerate, Extensive Global Scope

A creator of companies operating in an array of industries on a worldwide scale through an integrated global network

  • To simplify, the sogo shosha’s business is divided into divisions by industry. Using Marubeni’s organization chart, you can see that they have chemical, food, energy, machinery, metals and minerals and other business divisions divided by industry. Now each of these divisions, 18 divisions in five groups, in the case of Marubeni, has responsibility for their own business strategies worldwide upstream, midstream and downstream depending on the particular industry. As part of their business strategy each division may buy a company, make a joint venture or create a new company. These are their business division subsidiaries and Marubeni has 430 of these business divisions worldwide and the average sogo shosha has more than 500.
  • In addition to Marubeni Corporation Japan, there are also corporate subsidiaries overseas, for example Marubeni America, Marubeni Europe, Marubeni China, and so on, with their own corporate offices. Marubeni has 120 of these corporate offices, with about 110 overseas. These 120 corporate offices combined with the 430 business division subsidiaries form the Marubeni Group and employ about 32,000 employees with more than half overseas.
  • Now with roughly 60% of these subsidiary companies also overseas, Marubeni has about 370 business units operating in 67 countries, whereas the average for all the sogo shosha is close to 400 units located in approximately 70 countries.

Point:

There are not many organizations involved in so many industries managing such a large number of companies on such a wide global basis.

Distinguishing Feature 3: Economies of Functions

Number of functions combined under one-roof rarely found in one organization

  • In the course of executing the traditional core business role of broker/intermediary/wholesaler/trader between sellers and buyers the sogo shosha have developed other skills in the areas of information, logistics, finance and risk management. These functions have become very important to their business. Moreover by combining all of these functions they have also become organizers of large-scale projects.
  • The foundation of the sogo shosha’s information function is their extensive global network. In Marubeni’s case it is the 550 units in 67 countries linked by digital hardware. The software of this system is the people they have in each of these units in all of these countries in liaison with governments, businesses and customers allowing them to gather and analyze first hand, information and create new business, supplement current trade and provide valuable information to their customers.
  • Another important function is logistics or the transport and distribution of goods and materials. As traders this is a natural process for the sogo shosha. Through expertise in warehousing, customs clearance, insurance, shipping arrangements and intelligent supply chain management systems they can efficiently move goods from the producer’s door to the buyer’s door.
  • Finance is also an essential function. In finance they are involved in advancing credit, loaning money, debt guarantees, currency hedging and dealing, futures contracts, project finance and investment, among other things. Providing credit, loans and debt guarantees to their customers, both buyers and sellers, to advance trade deals is an important part of their business, as is project finance for large-scale projects and investment (ownership) in core businesses to protect themselves as intermediaries in the supply chain.
  • Another function is risk-management, including credit risk, investment risk and country risk. With long experience in carrying out business transactions between countries and in various different industries and product areas they have been able to build sophisticated risk management systems to reinforce and complement their business.
  • Finally, by employing their global information network in combination with their trading, logistics, finance and risk management functions they are able to provide multiple services to their customers as a kind of one-stop shop supplier while at the same time enabling them to organize large scale (infrastructure) projects.

Point:

It is unusual to find such as array of functions integrated in one commercial enterprise.

Top of Page