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Innovation in top gear

Toshiaki Okubo, President & CEO of Okubo Gear Co., Ltd.

Toshiaki Okubo

President & CEO of Okubo Gear Co., Ltd.

Hitachi Construction Machinery, Isuzu Motors and Mitsubishi Heavy Industries are well-known industrial titans of Japan that all share one thing common: they all depend on the high-quality and high-performing automotive components developed by Gear. We speak to Toshiaki Okubo about his company’s plans to expand internationally and diversify into to new market segments.

The general manufacturing sector in Japan has been threatened by increasing competition coming from other Asian countries such as China and Korea, who are able to replicate the Japanese products at a lower cost. Your communication insists on the Japanese "art of making things", what we call "monozukuri", to highlight the expertise of OKUBO GEAR for making gears. Could you tell us about the essence of monozukuri?

This is a complicated question. Our mission is to manufacture quality products and supply them to the customers in order to satisfy their needs. Customer’s satisfaction is the only way to maintain long-term business relationships with them. The reason why the customers should spend an extra dollar to buy a Japanese product is the quality inherent in it that allows it to last longer. For example, one of our major American customers often praise our products for not needing any "2nd claim" and remaining safe of field failures. Of course, the price needs to be appropriate but our main objective is to manufacture a quality product.

You were mentioning one of your prestigious American customers but you also serve the needs of major Japanese companies such as Hitachi Construction Machinery, Isuzu Motors or Mitsubishi, making your company a perfect example of a successful chukenkigyo (strong medium-sized firms). How do you explain the success and the importance of the chukenkigyo in the Japanese economy?

Now, this model is almost collapsing in Japan, but we do have a competitive advantage by supplying our products to major customers for so long. In other words, they have been purchasing our quality. Inside this model, the only way to be successful is to ensure long-term relationships with our customers by satisfying their needs in terms of QCD (Quality Cost Delivery). The duration of these relationships makes the true value of a chukenkigyo.

The world gear market is increasing at a rapid 6% per year, driven by a growing demand in various sectors including automobile, trucks, agriculture and construction. However, with a strong competition coming from China, could you give us a general overview of the gear market in the world and its opportunities for the coming years?

Intensifying domestic competition is the very reason why we are now willing to internationalize our activity. The opportunities on the gear market overseas are much greater than the ones in Japan where the market is shrinking. If our company only made gears, it would be difficult to survive. Hence, we have decided to work on our R&D and design to imbed our gears into some components in order to grow our business. Since the 1960s, our company has expanded the business from unit gears to assembled products. At that time, the company hired an external person from a major Japanese company and trained our workers from his knowledge and experience. Today, our sales value is represented by 80% components and 20% gear units.

Your company was first established in 1938 by Toshiie Okubo and has a strong history of adaptation, starting from being a kimono maker before switching to gear manufacturing. Could you please highlight the key milestones of your company?

The first major turn for our company was when we shifted our business from manufacturing unit gears to designing and assembling products. Another major milestone for our company was our decision to move our location from Setagaya to this current address in Atsugi in 1967, from 9000 square meters’ area to 51,000 square meters. This move reflects the ambition that we had to keep growing.

Your company now offers about 20 different products. Could you please give us an overview of your activity?

Our mission is to be a professional provider of transmission driving forces. We started our business in serving trucks before expanding to heavy industries and machinery. We have accumulated a long experience in the automotive industry where the latest technologies have been adopted. Mastering these technologies has enabled us to move smoothly to other businesses such as heavy industry whereas the opposite move would have been much more difficult to make. The biggest difference between these two industries is the importance of weight. In automotive, weight is the key factor.

All the players in this industry want to make lighter parts. In heavy industry, weight is absolutely not a constraint nor an objective. Because we could make compact and light parts, we could also go the other way and serve the needs of both industries without any issue. Today, our objective is to add more value to our products by working on their size or added functions. This way, we will be able to differentiate ourselves in a market that is, locally in Japan, not as promising as it used to be. Our second strategy is to diversify the application range of our products not only to land but also to sea and air. We need to find a way to face the local sluggish market by internationalizing our activity.

OKUBO GEAR has a history strongly connected to the international market, exporting its firsts gears to North America back in 1971. Your company serves now prestigious customers all around the world (Caterpillar Inc. USA, Buhler Versatile CANADA and XCMG in China). The Japanese market is shrinking but globally, the market is rapidly growing. How could your company find a growth lever internationally?

In our opinion, China is the most promising market. We have an affiliated company in this country and we currently first export our parts to our local warehouse and then assemble our products on-site. However, we feel that this model is not efficient enough so we are now considering localizing the whole chain directly in the country, from manufacturing to sales.

Our sales department is also working on various opportunities in the USA, in Germany and in other European countries but our main focus remains China. The European market is more difficult to understand and to penetrate than some other Asian markets for example. In Asia, there is almost no local company that has the right know-how and technology to manufacture quality products. This is the reason why we will be focusing our efforts on this region.

What would be the key strengths of your company that you would like to highlight to potential customers?

The quality of the product is, of course, indispensable and we are working hard every day to make the best possible products. However, in our opinion, the most important objective is to differentiate our products from the competitors by targeting niche markets for example. Focusing on mass volumes only gives customers more flexibility in lowering prices. However, when working on special machineries or niche markets, the company has more ability to find a fair selling price. The only way to aim for these niche markets is to focus our efforts on our Research & Development section in order to make lighter and smaller gears with additional functions.

If we had to take this interview again in 5 to 10 years, what are the dreams you wish you have accomplished by then?

We are currently designing our strategy for the next five years, from 2020. The objective will be to build a safe, strong and secure company for our future, while maintaining a high level of quality.


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