A "coordinating company" makes use of a corporate group network to secure the mutual existence and prosperity of the companies involved.

Background

With the help of a flexible blend of of the specialised technologies of a number of small and medium sized enterprises facilitated through the formation of a corporate group network, Company L (location:Tokyo, Employees: 531)  specialising in laser processing, adopted a proposal-based sales approach to a major corporation. Rather than simply accepting the current difficult business climate at face value, Company L took advantage of the changing patterns of needs that has emerged following the restructuring of the large corporations and used this in conjunction with the more general diversification of overall market requirements as the basis for a new business approach.

The Problem

The market conditions that opened the way for the new business approach,

User Side Situation (Large Corporation)

• The large corporation could only introduce new facilities on condition that the cost of installation would be low and that the new equipment would thereafter enjoy a 100 per cent utilisation rate
• The research department was cutting its personnel costs and releasing staff outside of its central core of engineering personnel (i.e. it was cutting down on the number of staff engaged in ordering and acceptance work vis-a-vis individual suppliers).
• Orders had been received from senior management to make thoroughgoing cost cuts (i.e.to cut down on the number of other companies with which the company does business, to cut unit costs and to improve delivery efficiency."

Market Situation

• Reduction of production lifecycle
• Diversification of demand

The Solution

Under the circumstances outlined in (a) above, the coordinating company organised a network of specialised companies and accepted orders for the network as a whole from the user. For its part, the user was cutting down on its R&D department at a time when the market was calling for more new products. There was, thus, a growing need for support from the smaller business sector. The growing emphasis on growing job lot production was also serving to raise the profile of the smaller company with its capacity for the more efficient, more flexible use of capital.

By putting together a network of small, specialised companies, the "Coordinating Company" was able to use these requirements as a starting point for the development of a new business opportunity and by presenting the user with machining technologies its own engineers were not able to grasp in their entirety. The "Coordinating Company" effectively established itself as a kind of "machining technology refuge" for the user. Transformation into a "Coordinating Company" might thus be seen as one way for a subcontractor to break free from the traditional mould. Requirements for assumption of the role of "Coordinating Company" include the possession by the "Coordinating Company" of its own technology. The confidence of the other parties  to the arrangement and an ability to understand the range of technologies represented by the small and medium enterprises in the arrangement.

The Outcome

The "Coordinating Company" consults with the user and, once the user's requirements have been clearly understood, puts together a research group in the form of a flexible network of companies willing to cooperate with each other to meet the specific requirements of the user. The network is also generally able to deliver the end product more quickly than the major corporation would be able.

To make a network of this sort work, not only must the "Coordinating Company" have a detailed understanding of the technologies of the members of the network, , the members themselves must also on occasion get together as necessary to work on a joint research project. For this reason, it is important for the network of companies to be formed from a group of companies located in close proximity to each other. One way of improving the efficiency of a network of cooperating companies of this sort would probably be through the establishment of an information network including each of the participating companies.