Chapter 3. Development of independent SMEs
Section 1. Efficiency of SMEs
Although indicators of factor productivity such as value-added productivity indexes indicate that there is a gap between the productivity of SMMs and large manufacturers, a comparison of the averages for the period 1993~1996 of efficiency in industries in which small and medium-sized businesses with no more than 100 employees comprise 80% or more of the total and efficiency in other industries, using management efficiency as an index of efficiency, shows that efficiency is higher in industries in which small and medium-sized businesses have a larger share (Fig. 4-61). This shows that the presence of large numbers of SMEs in an industry has the effect of raising efficiency, and is a reflection of the dynamism of SMEs. However, over 70% of firms felt that there was a limit to how much they could compete solely through their own efforts, and it can be seen that firms are having difficulty surviving the competition in running a business (Fig. 4-62).
Section 2.The importance of independent SMEs
One of the most marked differences between SMEs and financial institutions regarding their attitudes towards the financial environment faced by the small business sector is that SMEs are more concerned than financial institutions about the future due to their small size. Over 70% of financial institutions feel that differences in firm size do not necessarily have an effect upon SMEs, and it appears that their intention is to rate SMEs in accordance with their actual capabilities (Fig. 4-20). With respect to corporate governance, 72% of firms recognized under the SME Creative Activities Promotion Law (such firms generally being very enthusiastic about the idea of going public) and 44% of ordinary SMEs demonstrated a positive attitude towards the idea of improving corporate governance (Fig. 4-63). Actively promoting improvements in corporate governance for third parties such as shareholders and creditors may in its turn contribute to improving the rating of individual firms in the marketplace. As was pointed out earlier, it is important that firms create new networks of cooperation with customers and other firms so as to supplement their managerial resources to enable them to engage in creative innovation (Fig. 4-22). It is in addition important that firms engage in technological innovation with vision and foresight in order to develop markets by, for example, developing their own products (Fig. 4-28). In order to contribute to improving their rating in the market, it will become increasingly vital that SMEs demonstrate independence and originality in their business activities.
provision of low-
interest loans" (Fig. 4-64). 57% of firms said that they feel that various measures are needed in order to supplement the workings of the market and redress the disadvantages faced by SMEs (Fig. 4-65). It is important, therefore, that various steps should be taken in order to create a "level playing field" on which SMEs can compete equally with large enterprises. In addition, in response to the question of whether they thought market principles were not operating or had ceased to function properly in some of the areas of business in which they were engaged, 42% of firms said they felt that market principles were not operating (Fig. 4-66). In order to maintain a fair system of competition in the market, the system for curbing unfair practices which put SMEs at an unfair disadvantage, such as the abuse by larger firms of their superior position and unfair price-cutting, needs to be strengthened and implemented strictly and swiftly.
Chapter 4.Contribution to regional economic revitalization
Section 1.Revitalizing city centers
1.SMEs and city centers
An examination of consumers' reasons for going to retail stores shows that the main aim is "to buy specific products" (54%), followed by "to buy specific products and also to see if there is anything else worth buying" (31%) and "to see if there is anything worth buying, though nothing particular in mind" (13%) (Fig. 4-67). It can be seen from this that commercial agglomerations such as shopping centers are therefore going to have to cater to customers' "one-stop shopping" needs.
2.Shopping area business composition strategies
(1)Increase in awareness of business composition strategies
Up to now, the position of most shopping areas (58%) has been that they do not have to worry about what kinds of businesses they attract to fill vacant store premises (Fig. 4-68). Regarding future trends in strategy, however, the fact that the majority (52%) feel scarcer types of business should be attracted to fill vacant premises in order to provide a range of every type of merchandise to cater to the needs of consumers suggests that there has been a sudden growth in awareness of the need to consider the composition of businesses in shopping areas.
(2)Superiority of single business-type strategies
Awareness of the importance of the business composition of shopping areas is growing. An examination of levels of customer drawing power by type of business composition strategy shows that the drawing power of shopping areas that adopt the "strategy of attracting stores of a single type which characterize the shopping area in order to appeal to shoppers by creating a distinctive image and identity based on the types of business and merchandise on offer" is comparatively greater (Fig. 4-69). Consequently, effective means of revitalizing shopping areas in the future will include not only the strategy of offering a balanced selection of stores of all kinds, but also that of attracting businesses of a particular type in order to improve a shopping area's commercial functions from the bottom up through encouraging competition between fellow stores and appealing to consumers by creating a distinctive image and identity.
3.Necessity of town management
(1)The need to shift from a consumer orientation to a resident orientation
An examination of the types of shopping areas at which shoppers like to shop shows that the largest proportion said that they like to shop at shopping areas with a "variety of shops where shopping can all be done in one go" (52%), followed by shopping areas with "provision for parking bikes and cars" (34%), "places which have arcades and colored pavements and are pleasant to walk around" (23%) and "places which provide home delivery" (16%) (Fig. 4-70). When asked what types of facilities they would like shopping areas to provide, the largest proportion (29%) said banks, followed by 26% who said post offices, 21% who wanted branches of city or ward offices, 18% who wanted parks, 16% restaurants and coffee shops, etc., and 15% hospitals and homes for the aged (Fig. 4-71).
It is clear from this that shoppers are, from a business point of view, no more than one aspect of the residents who live, learn, work and play in an area. Providing a variety of facilities and services which cater not simply to the needs of consumers but also to the wider needs of residents is therefore an important way of revitalizing city center shopping areas which have until now been simply places to shop.
(2)Independent partnerships between municipalities, businesses and residents
1)Urban development programs of municipalities
An examination of the state of urban development in municipalities in which shopping areas are located by shopping areas' levels of prosperity shows that municipalities in which prosperous shopping areas have formed are actively engaged in urban development. On the other hand, the greater the feeling of decline in a shopping area, the greater the probability that the municipality in which it is located is not engaged in urban redevelopment (Fig. 4-72).
It can be seen from this that there is a strong relationship between the revitalization of city centers and the revitalization of shopping areas, and that the urban development programs of municipalities have an exceedingly large impact on the revitalization of city centers and shopping areas.
2)The need for joint action by local government and businesses
An examination of attitudes concerning town management in shopping areas shows that while the vast majority (80%) considered "cooperation with government (principally local municipalities) necessary", only 6% considered it "necessary to take action by first utilizing the vitality of the private sector", 4% thought that "shopping areas can act unaided", and 4% thought that the "state should play the central role and take uniform action nationwide" (Fig. 4-73).
It can be concluded from this that shopping areas themselves are seeking to engage in town management and improve the local commercial environment in cooperation with local governments.
Section 2.Revitalizing industrial agglomerations
1.The potential of industrial agglomerations
(1)The driving force behind business conversion
Market needs are not constant but change with the times, and undertaking business conversion in order to respond flexibly to this changing environment is an important task for manufacturers.
According to the "Survey of Conditions in Productive Areas" (a survey of trends in the 541 main production areas in Japan), the difference between firms in the business conditions they face has grown over the past three years in almost 60% of production districts (Fig. 4-74). The main reason given for the growing difference in business conditions is "expansion into new areas and development of new products" (66%), which shows the importance of maintaining a positive attitude towards business conversion (Fig. 4-75).
The proportion of firms in industrial agglomerations which had altered their main product lineup was also higher than in other areas (Fig. 4-76). An examination of the perceived benefits of being located in a particular area when changing main products and manufacturing processes shows that around 30% of SMMs in all types of industrial agglomeration felt that there were no particular advantages, and around 70% felt that being located in an industrial agglomeration was advantageous. The most commonly cited specific benefits of being in an industrial agglomeration were "ease of procuring parts and raw materials", "ease of finding firms to handle related processes", "availability of market data" and "ease of developing markets" (Fig. 4-77). It can be concluded from this that many SMMs make use of the functions of industrial agglomerations when undertaking business conversions.
(2)Driving force for raising value added
In addition to business conversion, in industrial agglomerations where labor costs and land prices are relatively high, there is a strong need to raise the level of value added. The commonest way in which firms of all types increase value added is by increasing quality and precision (Fig. 4-78). This corresponds with the greatest advantage of visiting other firms on an every day basis identified in Part 2 Chap. 2 Sec. 2. The next most frequently cited ways-"development of own technology and products", "shift to diversified small-lot production" and "business with customers based on making new proposals"-also all appear to be closely related to the advantages of being located in an industrial agglomeration, such as having access to networks of specialization and being able to make regular visits to other firms.
The gross income-sales ratio in industrial agglomerations is higher than in other areas (Fig. 4-79). This is most likely due to firms in such areas traditionally engaging in high value-added production, but it can also be seen that many firms raise the value added even further by making effective use of the various functions of industrial agglomerations (Example).
2.Expectations of industrial agglomerations
As demonstrated above, industrial agglomerations have the potential to help firms undertake business conversions and raise value added. This potential is based on the advantages of industrial agglomerations arising from the geographical proximity of firms, such as ease of face-to-face exchange and availability of networks of specialization comprising firms with a variety of technologies at their disposal.
There are both advantages and disadvantages to being located in an industrial agglomeration. Although the value of shipments and number of businesses in industrial agglomerations has fallen (see Part 2 Chap. 2 Sec. 2), it is to be hoped that firms in industrial agglomerations can make more effective use of the benefits of being in an industrial agglomeration to counter the disadvantages.