A Macro-Analysis of the Printing and Business Document Industries
Total Page：16
File Type：pdf, Size：1020Kb
A Macro-analysis of the Printing and Business Document Industries
In Hong Kong and Japan
This paper examines the printing industries in Hong Kong and Japan and compares them to the US printing industry. In particular, it examines a subset of the printing industry – the Business Documents industry. The intent of the paper is to provide an assessment of the market opportunities, similarities and differences between the countries, with a focus on the Hong Kong and Japanese markets. During the research phase, it became evident that the area of The Peoples Republic of China known as the Pearl River
Delta (located in the center and the south of Guangdong Province, including Guangzhou and Shenzhen) was economically linked to Hong Kong and was at least equal in size in terms of economic opportunity.
Accordingly, this area has been included in this analysis.
Throughout this paper, all monetary figures are expressed in United States dollars, unless otherwise indicated.
Macroeconomic Analysis
Hong Kong
Hong Kong is located in Eastern Asia, bordering the South China Sea and China. Hong Kong is a
Special Administrative Region of the People’s Republic of China (since July 1, 1999), with approximately
6.5 million residents and a labor force of approximately 3.5 million. Hong Kong has a bustling free market economy highly dependent on international trade. In 1997, nominal GDP was $171.7 billion, which was up
5.3% from 1996. However, Hong Kong suffered from the Asian Crisis beginning about that time and GDP dropped 5.1% to $162.6 billion in 1998. It further declined to $160.1 billion in 1999. By late 1999, the
Hong Kong economy had begun a modest recovery, but unemployment remained high and Hong Kong’s service-dependent market lagged behind some of it’s neighbors in shaking off the regional crisis.
Hong Kong is a member of the World Trade Organization (WTO) and generally provides an environment favorable to business, including foreign businesses. There is considerable concern going forward under China rule, but for now it seems “business as usual”. For the printing industry, enforcement of copyright laws has improved since passage of a new copyright law in 1997. Copyright laws can be a
1 significant issue in the printing of many different kinds of materials. In general, copyright violations and piracy remain problems in Hong Kong.
Local law provides for the right of association and the right for workers to form unions of their own choosing. The government neither supports nor discourages unions. Due to the fragmented nature of the printing industry, most firms do not have unions.
Wholesale and retail trade, including restaurants and hotels, employs almost one-third (31.9%) of the work force. Social Services is the second largest employer (9.9%), with manufacturing third at 9.2%.
Hong Kong is home to 19 of the 1000 largest Asia companies (Asiaweek magazine). The largest is
Jardine Matheson, one of the original “Hongs”. Other Hongs make up a substantial number of these 19 largest companies (Hutchison Whampoa, Swire Pacific, New World Development, etc.)
The Pearl River Delta
The Pearl River Delta represents a completely different situation. Since the end of the Cultural
Revolution in 1978, China’s leader, Deng Xiaoping has created “Special Economic Zones” and established an open door policy for foreign businesses within these zones. Shenzhen is a direct result of this policy, growing from a tiny village of less than 20,000 to a modern city of more than 3 million in just 20 years.
With this growth has come much opportunity, a fact that has not gone unnoticed in Hong Kong! Of 66
Hong Kong firms that listed printing as one of their products, about 20% listed operations in Shenzhen. A bulletin from the Graphic Arts Association of Hong Kong proclaimed that “the Pearl River Delta’s HK$40 billion productivity, together with Hong Kong’s HK$40 billion productivity, will create a Printing Port of the East.” Already there are about 1,000 factories in the Tripartite Printing Enterprise, mostly located in the
Pearl River Delta. They are reportedly equipped with advanced printing facilities, with excellent technology and management, and produce high quality printing.
China, led by the growth of these SEZs, has 30 companies listed on the Asiaweek 1000, headed by
China Petrochemical Corp. and SinoChem. Many of these companies are located along the coast and have operations in South China.
2 Japan
Japan’s economy is the world’s second largest, after the United States. At over 4.2 trillion dollars, and with most of the Asiaweek 1000 located in Japan, this giant truly dominates the Asia Pacific economies. Spurred by a government that encouraged growth, particularly in export products, many companies flourished after WWII. Government subsidized the building of infrastructure, provided a strong authoritarian leadership that provided direction and strategy, and encouraged “keiretsus”, or informal cooperation between companies and government that allowed them access to capital, preferential regulations and official treatment, and close cooperation between the leaderships. This policy still exists today, although it appears to be under increasing pressure, particularly as a result of the political and business scandals that continue to rock Japan today.
Like most of Asia, the Japanese economy suffered greatly from the “Asian Flu” that permeated the
Region from 1997 until now. Unlike much of Asia, the Japanese “miracle” economy has remained sluggish. Plagued by political scandals and allegations of corruption, the government has been slow to respond and the economy remains in recession. However, it is still by far the largest economy in the region and an economic force. A Japanese company, Toppan Printing Company, is the largest printing company in
Hong Kong and a participant in China, as well as several other Asian countries.
The Printing Industry
Printing is one of the largest manufacturing industries in the United States, employing over 1.2 million people in almost 50,000 establishments, most employing fewer than 20 employees. In Japan, the printing industry is similarly large and highly fragmented, with almost 600,000 employees in 47,483 firms;
88.3% employing fewer than 20 people. In Hong Kong, over one thousand companies produce printed products, totaling over $5 billion in 1999. In most industrialized countries, the printing industry is one of the top five employers and represents 2-4% of GDP.
There are many similarities within the printing industries of Hong Kong, Japan and the United
States. All are large relative to their markets, highly fragmented with few truly dominant players, diverse in their capabilities and about the same technologically. However, it is useful to examine each market in terms of size, growth rates, primary channels of distribution, major participants, product specialties, and areas of
3 differentiation. An industry SWOT analysis can be used as a tool to understand each market and for points of comparison.
In most highly industrialized economies, printing is a diverse industry that includes many different products and printing methods. Around the edges, these classifications overlap and it is difficult to neatly classify the participants. For example, many non-printing firms offer some printing services and products.
In Hong Kong, the Chamber of Commerce lists sixty-six firms under the heading “Printed Matter” and one hundred fifty nine firms under the heading “Paper and Paperboard, articles of paper, stationery”. Some firms are listed in both sections. Upon examination of the sixty-six firms, nineteen seem to be primarily in the printing industry and to be manufacturers of “business documents”. Many of the firms listed are trading companies that specialize in various products and supply “printing” services related to the packaging and promotion of those products. This diversity of products offered by individual firms is common in the US and in Japan, but is less so in European markets.
The major product categories within the Printing Industry include the following:
a. General Commercial Printing, includes: 1. Advertising (direct mail, brochures, displays, inserts, pamphlets) 2. Business cards 3. Stationery 4. Catalogs 5. Directories b. Convenience, Or Quick Printing, includes: 1. Copying and duplicating in store-front locations c. Prepress Services, includes: 1. Graphic design 2. Imagesetting 3. Desktop publishing 4. Platemaking 5. Film stripping d. Newspaper Printing, includes: 1. Printers who print newspapers 2. Newspaper companies with presses e. Magazine Printing, includes: 1. Specialized business and professional periodicals 2. General and consumer periodicals (fashion, home, automotive, comics)
4 f. Greeting Card Printing, includes: 1. Printers who print greeting cards 2. Greeting card companies with presses g. Package Printing, includes: 1. Converting of paper boxes or cartons 2. Printed flexible packaging and bags 3. Envelopes h. Labels and Wrappers Printing, includes: 1. Printed custom or stock labels 2. Pressure-sensitive labels 3. Printed rolls and sheets for packaging purposes i. Tag, Ticket, and Tape Printing, includes: 1. Printed clothing tags 2. Coupons 3. Amusement tickets 4. Packing tape j. Business Forms Printing, includes: 1. Unit set or continuous forms 2. Cards 3. Manifold books k. Financial and Legal Printing, includes: 1. Annual reports 2. Insurance forms 3. Bank printing 4. Passbooks 5. Ledger and statement sheets 6. Checkbooks l. Thermography, includes: 1. Thermographic printing on such products as business cards and stationery m. Screen Process, includes: 1. Screen printing on all substrates except textile n. Other Specialty Printing, includes: 1. Wallcoverings 2. Playing cards 3. Post cards 4. Decals 5. Trading stamps
5 6. Game boards o. Trade Binding, includes: 1. Folding 2. Gluing 3. Stapling 4. Stitching p. Other Finishing Services, includes: 1. Die-cutting 2. Laminating 3. Varnishing q. Printing Services, includes: 1. Direct mail 2. Marketing and promotional printing 3. Packaging 4. Books 5. Magazines 6. Manuals 7. Catalogs 8. Coupons 9. Inserts 10. Labels 11. Business forms 12. Business communications 13. Annual reports 14. Quick printing r. Non-Printing Services, includes: 1. Electronic prepress 2. Traditional prepress 3. Trade binding Source: Printing Industries of America
From this extensive listing, it is evident that the printing industry is varied and extensive. The industries in Hong Kong, Japan, and most of the rest of the world are similarly categorized. Many companies overlap in products and services provided.
The Printing Industry can also be categorized by printing methods employed. These methods include letterpress, rotogravure, wet offset, dry offset, silk screen, thermographic, digital, and others.
6 Although type of printing employed is important in terms of capabilities, costs, and quality, it is less relevant than the types of products provided. The primary differences between markets with respect to printing methods employed are minor.
Printing is a traditional industry that is changing dramatically. It is an industry in transition. Some firms still rely on old, mechanical processes. In these firms, costs are high, skills are limited, and marketing is generally poor. The average printers (usually about ½ of all firms) are more advanced, use electronic processes and have a more diverse product line. The industry leaders are typically more prosperous and succeed by providing better or cheaper customer service and provide more advanced products.
The Hong Kong Printing Market
Exact information on the market for printing has been difficult to find. The Graphic Arts
Association of Hong Kong does not show such information. Their web site, English language version, shows the site as under construction, and requests for information have not yet been fulfilled. One of the articles on their site referred to a HK$40 billion number, which was reported to be the same as for the Pearl
River Delta area. Using a formula that translates printing sales as a percent of GDP, the market size is estimated at about USD 5.2 billion (Exhibit B). This is consistent with the HK$ 40 billion.
The market for business forms and documents as a percentage of the total printing market for a highly industrialized area that supports a large number of business transactions and enjoys a high degree of technology implementation should be roughly consistent with that of the US and Japan. Accordingly, I have estimated this market at 9% of all printing, or approximately $461 million.
Another test for “reasonableness” for the estimates of printing industry size is to compare the estimate to US cities. The following cities and their printing market size show that Hong Kong numbers are reasonable:
1. Chicago $8.1 billion
2. Los Angeles $4.9 billion
3. New York $4.7 billion
4. Philadelphia $4.6 billion
5. Minneapolis $4.0 billion
7 Source: Printing Industries of America, Top US Metropolitan Print Markets
Again, the estimate for Hong Kong seems reasonable.
For the Pearl River Delta, it is tougher to make such comparisons since the business climate is quite different. The number of transactions, particularly financial transactions, would probably be lower than in Hong Kong due to lower technology adoption rates, different business processes and cultural differences. It is reasonable to assume the total amount of printing may be as the article estimated (HK$40 billion), but a higher percentage of such printing is probably in packaging and materials related to the production volumes centered in that region. Accordingly. the forms and business documents usage is estimated to be substantially lower, perhaps even only half the size of Hong Kong.
The printing industry worldwide continues to enjoy modest growth. In the US, the robust economy over the past several years has led to a growth rate in printing of 6-6 1/2% per year. In Europe, the rate of growth of printing in 1999 was approximately 4.5% For Asia, the growth rates were substantially lower and some estimates actually show a slight decline in the 1% range. This decline reflects the overall decline in
GDP growth for the region due to the 1997-1999 Asian financial crisis.
For Hong Kong, this stagnant growth in printing continued throughout 1999 and into 2000.
Although a recovery seems to be underway, it could take some time, particularly if the Japanese economy continues to stagnate. No firm growth rates were found for the Hong Kong printing industry.
The Hong Kong printing industry is heavily influenced by the large number of trading companies and the markets they serve. An examination of the 66 printers on the Chamber of Commerce directory of printers shows that about half were primarily trading companies, with printing provided to support these trading activities, primarily in packaging. Only one printer specifically listed business forms as a primary product. The remainder of the companies listed stationery and business printing, which could cover a wide range of products.
When considering the impact of the Pearl River Delta area, it appears the primary product group is packaging products, followed by business communications products (brochures, pamphlets).
8 The largest printers in Hong Kong are Japanese companies. Dai Nippon Printing appears to be the largest, followed by Toppan Printing and one of its subsidiaries, Toppan Forms. HSBC formed a printing subsidiary some years back and now claim that 50% of its revenues come from business outside the bank.
Asia One Printing states that they print over 10% of all annual reports for listed companies in Hong Kong, which would give them a substantial market share in is highly fragmented industry.
Toppan Forms Ltd. (HK)
Toppan Forms (HK) is an interesting company to profile because their literature reads as if it could have been written about one of the large American business forms companies. Their diversification into value-added products, expansion into new products, and focus on providing technology solutions is quite similar to the course taken by companies such as Moore Business Forms. This is not surprising, since their parent company, Toppan Forms Co. Ltd., in Japan formed a joint venture, Toppan-Moore, many years ago that was only recently ended.
Toppan Forms (HK) was established as a business forms printer in 1972, a joint venture with
Toppan Forms Company and Kadoorie McAulay Ltd. of Hong Kong. Toppan Forms Company, while publicly listed in Japan, is a subsidiary of Toppan Printing Company Ltd. of Japan. They were founded as a business forms supplier but quickly expanded into related products such as sealer forms, bar coded forms, pin mailers, security forms, and other high value products. In addition, they expanded into data management services, mailing systems, new media products, computer products, plastic card products, smart cards and card issuance systems. Most of these products reflect the rapidly changing technologies that affect business document usage.
Today, Toppan Forms (HK) is the leading supplier of business forms, and the second largest printer, in the Hong Kong market. To achieve and maintain this position, they have expanded by adding production facilities to a total of 75,000 square feet in Kwun Tong, Tseun Wan, and Kwai Chung. It is interesting to note that this space is small by US standards, where a 150,000 square feet facility is not uncommon. However, in Hong Kong, this actually represents three facilities.
9 In addition, Toppan Forms (HK) established a new division, Data Management Services (1989) to provide direct mail services. This followed the pattern of Moore in the US, which established a direct mail business in the late 1970s.
In 1993, Toppan established a Machinery Products division to supply a full line of forms handling systems, inserting systems, decollators, pressure seal systems, shredders, labeling systems, and, recently, media products such as CD-ROM manufacturing. In the US, these products were in the mature phase during this time, with the exception of the pressure seal and media products.
One area that speaks to the technological influence is the 1982 addition of Toppan Forms Card
Technologies Ltd. , which manufactures plastic cards (credit cards, ATM cards, etc.) and smart cards. Most
US forms companies were late getting into these products and are still not market leaders. Toppan built a high security manufacturing plant with 32,000-sq. ft. and now services the China business, with offices in
Beijing, Shanghai, Wuhan, and Guangzhou.
Toppan Forms (HK) continues to expand with a joint venture established in 1992 with the China
Guangdong Nuclear Power Holding Company to service the Guangdong area. Another expansion was made into Macau in 1993, called the Tipografia Manson Computer Forms Lda.
Toppan Forms shows aggressive management that appears quite capable of keeping abreast of technological changes within the forms industry. In Hong Kong, as well as the rest of the developed world, demand for traditional business forms continues to decline at 5-7% annually. Growth into related business documents, providing value added services, and aggressive expansion into emerging markets is a strategy that is similarly employed in the US and Western Europe.
SWOT – Hong Kong
It is useful to perform a SWOT analysis on the Hong Kong printing industry to understand the overall environment. Such an analysis is a helpful tool for generating a summary of a strategic situation.
Each must be defined in its relative sense, that us, as compared to other Regions. For Hong Kong, competition mainly comes from other areas located around the Asia Pacific Rim that have access to China and that represent economic competition for exports and foreign capital.
Strengths
10 The printing industry is a well-established industry with many participants. It enjoys reasonable profits and provides products that are widely used by virtually all businesses. The primary barriers to entry are reasonably low, leading to the high degree of fragmentation.
Hong Kong printers have good access to technology, good access to capital, and good access to a large and well-educated work force. Hong Kong has a modern educational system through the secondary school level, although access to higher education is competitive and somewhat limited. There is widespread knowledge of English as a second language and a strong local work ethic.
Historically, the Hong Kong economy has been strong and growing, and their location enables
Hong Kong to be the gateway to the Chinese market. Hong Kong is one of the world’s busiest ports, so transportation is a plus.
Many local printers have been in business for many years and have the contacts and relationships required for successful competition with other printing markets.
Weaknesses
The top three business printers in Hong Kong are subsidiaries of foreign firms. All three are
Japanese firms. In addition, many other foreign firms have a presence. This can limit early access to new technology.
Hong Kong is a small geographic area where space is expensive and there is little room for manufacturing expansion. Accordingly, there are few large manufacturing facilities and economies of scale are difficult to achieve. Many printing presses have large footprints and multiple machines are required for efficiency and flexibility.
Hong Kong imports all of its paper, which could lead to reduced competitiveness. Paper is an expensive commodity to ship and much of the paper used comes from a long distance (Indonesia,
Malaysia). In addition, there is a relatively high reliance on export of the finished products, with the US the number one destination, followed by China. Again, freight costs become a competitive issue.
With the recent transfer of power from the British to the Peoples Republic of China, a certain degree of uncertainty exists. Although China signed a 50-year agreement making Hong Kong a Special
Administrative Region, many foreign firms remain somewhat uneasy about investments.
11 In an article published by the Graphic Arts Association of Hong Kong, the author expressed concern about the “lag in education of printing industry professionals, particularly in new printing technology”. There is also evidence that Hong Kong has a low level of printing research and development.
This is consistent with the foreign dominance at the top of the market.
The Hong Kong economy is closely tied to the overall health of the Asian economies, particularly that of the PRC. When most of Asia was negatively impacted by the “Asian Flu” that swept the region in the late 1990s, the Hong Kong economy suffered a recession from which it is only now beginning to recover. One of the big fears was that the China economy would greatly suffer, but, fortunately, it weathered the crisis relatively well.
Opportunities
Hong Kong is well positioned to capitalize on China’s growth. China has made remarkable progress in the past twenty years. Its impending membership in the World Trade Organization is expected to accelerate this progress. Since Hong Kong is now a part of China, the SAR is in a position to enjoy a competitive edge in that shipments throughout the mainland could escape tariffs and many foreign taxes.
As China continues along the path of rapid industrialization, Hong Kong should be in a position to receive increased foreign attention from companies wishing to invest in China. With its large English speaking population, foreigners may favor Hong Kong as the place to locate.
Hong Kong’s location represents an opportunity as the rapidly expanding manufacturing base in
Southern China leads to increased demand for printing.
Threats
Perhaps the biggest threat to Hong Kong is the risk of political uncertainty in China. China has enjoyed over 20 years of stability but has a long history of unrest and violent change. In the past, Southern
China was shielded from some of this instability due to its geography and physical isolation from the north.
Today, it is doubtful such geographical isolation would matter. When the current regime ends, continued political stability and expansionist policies could change. That could be a significant problem
12 China’s entry into the World Trade Organization could lessen Hong Kong’s competitive advantage over other Asian Pacific areas, particularly Japan, South Korea, and Taiwan. China will undoubtedly open more for such regions and this could challenge Hong Kong’s “gateway” advantage.
There is a very real risk that Beijing will exert more influence and control over Hong Kong’s business policies and practices. As the last of the great socialist superpowers, China may hold sway over free market practices such that Hong Kong would lose some of its competitive advantage.
The printing industry is expected to undergo significant changes in product mix, competitiveness, and growth over the next decade due to rapid changes in technology. This has led to the decline in certain kinds of business forms usage. Electronic commerce technology replaces many high volume paper-based transactions, and the Internet changes the competitive landscape. Many Japanese and Western firms are ahead in implementing this technology and the new business processes that accompany it. This could lead to a reduction in the number of firms engaged in printing, as high costs to re-tool their operations could drive them out of business.
From this analysis, it is reasonable to conclude that Hong Kong printers are in position to thrive as long as China remains stable, growing and vibrant. Hong Kong’s future is clearly tied to their mainland country’s future.
Hong Kong could also benefit from an aggressive trade association that establishes a collective vision for the industry, provides leadership to implement the vision, and provides training in technology, leadership development and the Internet.
13 The Japanese Printing Market
Japan’s economy, the world’s second largest at roughly $4.2 trillion, is experiencing a prolonged recession. Most observers continue to forecast meager growth following a decline in 1998-1999 and modest, if any growth in 2000. A substantially weakened Asian demand for Japanese exports and domestic banking concerns, coupled with political scandals and uncertainty, continue to weigh heavily on the economy. Nonetheless, the “Asian Miracle” that was Japan of the post-war era remains a force to be reckoned with.
Japan has a large and well-organized printing industry and has, for many years, been the leading influence throughout most of Asia. Japanese printing firms are well established in most Asian markets and are frequently the largest firms in those markets.
The printing industry consists of the same product groups and services as the US printing industry described above. The classifications are somewhat different, and include “Printing, prepress, binding, finishing and related services”. The industry is also one of the largest in Japan, ranking 8th among all manufacturing industries and providing 4.5% of all manufacturing shipments.
Since 1980, the printing industry has recorded an average annual growth rate of more than 7%.
Since 1995, however, growth has slowed to 2.6%, with 1998 and 1999 declining. The printing industry is regarded as an urban industry for its business nature. Three areas account for almost 80% of all printing firms: Kanto, 47%; Kinki with 20% and Chiba for 11%. When analyzed by administrative areas, Tokyo metropolitan area ranks the highest with 26.6% of all firms and per capita shipments. Saitama prefecture is second.
The business forms sector of the printing industry is also quite large, as it is in the US. The classifications are very similar in both countries, as the Japan Business Forms Association has long been a member of the International Business Forms Industries, which includes the United States, and most of
Europe. Exhibit C shows the rank of the business forms sector within the printing industry in Japan.
As in the United States and Western Europe, the market for traditional business forms and documents is declining at about 4% per year, as new digital printing technologies continue to erode demand for continuous and unit set forms. Electronic Data Interchange (EDI) adoption in Japan is somewhat higher than in the US, which tends to erode demand at a faster rate. Most forms companies are rapidly diversifying
14 into related document products such as labels, promotional printing, direct mail, commercial printing, smart cards, etc.
Approximately 82 companies actively participate in the Japanese business forms industry. Three of these companies have more than 1,000 employees, with an additional 2 companies between 500-999.
68% of the companies have fewer than 100 employees. This distribution in size is very similar to that in the
United States, where 5 companies have 50% of the market share out the more than 400 business forms printers. Major clients are also similar between the countries, with manufacturing, financial, wholesale/retail trade, and government among the top forms consumers.
During 1999, there were some signs of economic recovery in the Japanese economy as a result of the government’s economic stimulus measures. Despite brisk investment in certain IT-related areas, private sector capital investment remained quite sluggish. In addition, a difficult employment environment and a lack of growth in incomes led to poor consumer sentiment.
The business forms industry in Japan is facing many of the same pressures and opportunities as in the United States and Europe. In Japan, the business conditions in 1999 were more difficult. The growing use of digital technologies led to structural changes in demand and intensifying competition led to increased price competition and lower average prices. A SWOT analysis is the best way to summarize the competitive landscape.
SWOT Analysis
Strengths
The Japanese business forms industry is a large part of a large manufacturing industry. As such, manufacturing processes are well established, the industry is well organized, and the rate of adoption of new printing technologies is high. The Japanese society is well educated, has a better than average work ethic, and is comfortable with technology.
Weaknesses
Japanese companies in all industries found themselves “technologically challenged”, according to
Shumpei Kumon, executive director of the Center for Global Communications at the International
University of Japan. He relates that Japan’s late adoption, but eventual acceptance, of the Internet has
“spurred renewed interest in specialization and outsourcing”.
15 The business style and the life style within Japan have been rapidly changing. These changes have had direct and drastic influences on the printing industry both in terms of business and technology. The ability of the industry leaders to thrive in the midst of this change can be problematic.
The number of printers is declining due mainly to small-scale firms being driven out of business.
Printing businesses today generally require computerization but older, small-scale printers are generally unable to make this transition successfully. Small-scale printers with fewer than 20 employees account for
88% of the business but are most vulnerable when digital printing using toner-based machines are spreading throughout society.
The growth rate for printing sales is slowing, even declining for some products. This leads to increasing pressure on margins, as companies fight to retain market share. Sales of printing are closely linked to the ups and downs of the overall economy. One report (FAGAT/2000) reported that “the price level of printing jobs has declined to one-half that of five years ago and one-third that of ten years ago”.
The report goes on to assert that “the current price level makes the printing business in Japan nothing but a money losing business”.
Opportunities
As the Japanese economy recovers, many companies will emerge leaner and more competitive.
This should enable them to offer new products and services, and to branch out into related businesses.
Increased use of computer networks and the Internet increase the need to disseminate technical information in the form of manuals and reports. In fact, the creation and management of a variety of digital assets leads to an entirely new opportunity in Digital Asset Management Systems. Printing industry companies have considerable experience and expertise in this growth area and could capitalize on the opportunity.
Management of all types of documents, including paper and electronic forms, will become a new area of opportunity. Documents serve many purposes in business, including the efficient collection, organization, reporting and archiving of critical business data. They are also the legal record of what happened. They change frequently, with obsolescence and version control important. Forms and Printing companies could lead the way in developing new electronic forms management systems.
16 New opportunities arise in a variety of technological areas, from computer-to-plate (CPT) systems to fully digital presses. Companies with the foresight and wherewithal to invest in these technologies will prosper.
As competitors falter and fall, new opportunities arise for proactive and well-managed companies to step in and gain market share.
Focusing on providing value-added services that wrap around product sales helps remove the
“commodity” status of the products themselves, and creates less pressure on product pricing.
The growth of new media formats, such as the Internet, is leading the way toward more advanced digital communications and networking, as well as dramatically impacting customers’ sense of value, expectations and taste. As a result, businesses are searching for more effective ways to anticipate the changing consumer demands and to quickly provide the products and services in demand. Companies that can keep up with these changes will have an opportunity to thrive.
Threats
Perhaps the major threat to the future of the Japanese printing industry is the continued threat of economic stagnation. Economic reform, along with political reform, is past due.
Rapid adoption of non-printed media products could threaten the growth of the industry, leading to accelerated decline in demand and the concomitant exodus of the smaller firm, as well as increased pricing pressure across the industry.
Increased competition from China and other Asian economies could weaken Japan’s export business and the leading positions of their foreign subsidiaries.
Japan, as in the US and in Europe, suffers from over capacity in many forms of printing. Failure of industry leaders to address this issue could further erode prices and increase competitive pressures.
Continued mergers and acquisitions, as well as business failures, among major customers could negatively impact market growth and increase competitive pressures. This is a particular risk for the largest printing companies.
17 Structural changes in the demand for printing, particularly in business forms, propelled by the growing use of the Internet, widespread adoption of electronic media, and expansion of network infrastructures is a significant risk.
On the whole, the Japanese printing industry remains a large and healthy industry. The opportunities appear to outweigh the threats. Technology appears to create more opportunity than it displaces. Consolidation will continue, as the weaker firms drop out or are acquired by larger firms. As with the myth of the “paperless office’, the illusion that paper is ‘old fashioned” will also be dispelled.
Paper is itself a technology. It is cheap, user friendly, portable, disposable, efficient, and versatile, thus assuring its continued popularity and use.
Dai Nippon Printing Company, Ltd.
This analysis would not be complete without a brief report and profile on the largest printing company in Japan and Asia – Dai Nippon Printing Company. DNPs history dates to 1876, when it’s predecessor, Shueisha, was established in Tokyo. DNP has a long history of “firsts” in Japan printing, from the first letterpress printing system in 1881 and Japan’s first four-color gravure press in 1881, to developing the world’s first electronically published software for Hi-Vision televisions in 1992.
Initially, DNP printed books and magazines but has since expanded its printing technology and diversified its operations to include three main areas of focus:
1. Information Media, which includes books and magazines, commercial printing, and business
forms.
2. Lifestyle Products, which includes packaging and decorative materials.
3. Electronic Components and Information Media Supplies.
DNP’s head office is in Tokyo, and they maintain 56 domestic branches, 19 manufacturing facilities, and 11 research institutes in Japan. They maintain overseas operations and branches throughout the world, including Hong Kong, Singapore, Malaysia, Indonesia, Australia, and Taiwan in Asia, and New
York headquarters in the United States (DNP America). In addition, DNP has offices in Germany, London and Denmark.
18 According to DNP’s annual report, their main business is “books and magazine printing, financial instruments printing, business forms printing; production of paper and flexible packaging, decorative materials, electronic components (shadowmasks, photomasks for ICs and LSIs); planning and production of advertising materials, market research; interior and exterior building design; and multimedia-related products. With annual sales in excess of $12.1 billion, they are almost as large as the entire US business forms industry!
DNP is set to capitalize on the opportunities that exist in the industry. They have transformed themselves from a printing company to a diversified supplier of a wide range of communications products.
Their vision, in fact, identifies them with a “new” industry: the Information Communications Industry.
VISION
By combining its innovative technology and expertise, DNP creates products and services that
fulfill dreams, ensure a more enjoyable livelihood, and afford better communications.
Examples of DNP’s transformation from a printing company to a global information communications company are as follows (from the DNP Annual Report, year ending March 31, 2000):
1. With the ongoing trend towards international expansion, companies are conducting business
on an increasingly global scale, and communications are becoming more global as well.
DNP’s comprehensive multilingual editing and printing network links the world. We provide
global solutions to businesses.
2. This worldwide network allows DNP to jointly develop commercial printing products with
companies in various countries and provide printing contents in diverse languages, whether on
one-or two byte format.
3. The world of printing is not limited to printed media with text and pictures, such as books and
magazines. The technology used in the printing industry can be applied to other fields to
create a wide range of products never before imagined.
4. DNP uses its proprietary information technology for the development and operation of a
digital database of text and images, as well as audio and video.
19 5. DNP will remain at the forefront of technology as new forms of media continue to emerge.
6. As a responsible corporate citizen, DNP believes in actively participating in the community
and protecting the environment to foster a better relationship with society.
7. DNP is developing integrated circuit (IC) cards with greater security and larger capacities to
write and store information.
8. By remaining at the forefront of its field, DNP is creating new opportunities in the world of
publishing, from printed to electronic media formats
All this is very impressive – and a long way from a traditional printing company. In many ways,
DNP represents the new opportunities that can assure the health and survival of the printing
industry in the future.
Toppan Forms, Ltd.
As in Hong Kong, the largest business forms company in Japan is Toppan Forms Co. Ltd., which was founded in 1955. Overall, Toppan Forms is the largest forms manufacturer in Asia and is the largest member of the Japan Business Forms Association. Toppan Forms is a subsidiary of Toppan Printing
Company, which is the second largest printing company in Japan.
Toppan Forms’ business development activities are guided by the fundamental concept of
Integrated Information Management Services (IIMS), which encompasses their vision for the future:
Vision
We will strive to provide a total response to customer needs by integrating our business forms,
Data Print Services (DPS), and Information Management Services (IMS) operations and
leveraging our capabilities in everything from paper products to electronic media. This is the basis
for Toppan Forms’ business model in the new century. Source: Toppan Forms Ltd. Annual report
For Toppan Forms, business forms constitute the foundation for all the company’s operational developments. This is what sets them apart from most other printing companies in Japan. Their research and development activities are centered in the development of new forms and documents products and services based on usage of these products. In their annual report, they state “The keys to success in business
20 forms are developing more advanced products and increasing competitiveness by reducing costs”. This could easily be a statement taken from any major business forms company in the United States or Europe.
This illustrates the similarity within the major companies regardless of Region.
Toppan Forms is at the core of a large, integrated information services enterprise. This includes fifty-nine sales offices located throughout Japan (primarily in major cities), eight main manufacturing plants, nine service plants (four operated by subsidiaries), and two specialized plants. For distribution, the company operates seven distribution centers and twenty-three warehouses (either directly or through subsidiaries). Overseas, Toppan Forms has ten subsidiaries in Asia, where it is attempting to expand production and marketing rapidly. Four of these subsidiaries are located in Hong Kong and one in
Singapore.
Major Businesses
Sales of business forms in 1999 decreased 0.4% to $981 million. This level of sales would rank
Toppan Forms #1 in forms sales in the United States. Business forms accounted for 51.1% of net sales for the year. The division has four product categories: business forms, related printing of general-purpose items and envelopes, multimedia and IC-related products, and others, which includes cards. With the exception of business forms, all other product categories grew year over year.
The Data Print Services division includes organizing and processing of data, inputting the data into business forms, inserting the forms into envelopes, sealing the envelopes and arranging for delivery.
Sales for the DPS division increased 16.6% for the year, totaling $289 million. The DPS division is broadly divided into business mail and direct mail. Again, this structure and result mirrors that of some of the large
US forms companies.
Toppan is investing heavily in the DPS Division. An example is their DOD system that makes possible direct, full color printing from DTP data. This is digital on demand printing in small lots using variable data from desktop publishing systems. Because it is small lot printing in digital presses, it facilitates rapid delivery and is used primarily for one-to-one marketing brochures and presentation materials. Although a small part of total revenues, sales were up over 94% and the product represents good growth potential. Again, this is the area in which many US and European firms are targeting for growth, as digital printing continues to grow rapidly worldwide.
21 Toppan Forms’ other business areas compliment sales from the major units. Sales of other products and services declined slightly in 1999 to $319 million. “Other” sales includes equipment
(primarily forms processing equipment), supplies (office supplies, furniture, etc.), and services (design, consulting, etc.).
The Information Management Services (IMS) group is quite new and will receive the highest priority in the future. This group will capitalize on expertise in core businesses to expand into electronic forms, multimedia products, database management systems, image management, document management, digital asset management, and related services. It is expected to lead the way into new business opportunities.
Combined with their parent company, Toppan Printing Ltd., and along with Dai Nippon Printing, these Japanese giants will lead the transformation of the printing and forms industries through Asia and even into the United states and Europe. When threatened by technological advances that changed their industries dramatically, these companies responded by redefining their businesses, applying their experience in printing to other print related products, and adopting technology as their ally in responding to customers’ ever-changing needs. Although the industry will undoubtedly continue to consolidate, and business failures within the industry will be inevitable, the industry appears healthy and vibrant when viewed through the largest companies.
22 Comments on the Printing Industries in Selected Asian Countries
China
China is a vast market for any industry.
There are 82,189 printing companies in China, with more than 3 million employees. Of these companies, 8,152 of them are publication printing companies, 20,409 are packaging printing companies, with 53,628 “other”. Ownership is mostly collectives (30,219); state owned (7,880) or joint ventures with foreign firms (2,295).
In addition, there are 400 various printing machinery manufacturers, 9,000 paper making companies, and 400 ink companies. China ranks fourth in ink output worldwide, with about 5% of total production.
Komori Corp., a Japanese manufacturer of offset printing machines, has set up a local unit in
Shanghai and a sales agent in Beijing because “China is seeing gains in orders for printing projects from the US.
The Seventh World Print Congress will be held in Beijing in May 2001 in conjunction with China
Print – 2001. The theme of this event is “The Challenges Facing The Printing Industry of the 21st Century in a Knowledge-Driven Society” This conference will unveil new trends for the global printing market and will be attended by printers from around the world. China Print is the major print show for printers throughout China.
South Korea
According to Roper Reports Worldwide, 55% of Asian consumers now have computers and
Internet usage has increased 10% since 1998. Korea has outstripped that growth, with its Internet usage growing 12%.
According to the Korean government, the Korean printing market (1997) was comprised of 16,816 printing-related corporations with about 75,000 employees in a market valued at $2.9 billion. This would place printing as a much lower percentage of GDP than is typical in other industrial nations.
23 Vietnam
Vietnam is a big buyer of Taiwan-made packaging machinery, ranking ninth among the countries purchasing Taiwan equipment.
Singapore
The printing industry in Singapore has about 500 companies. Of this, about 20 are large printers,
50 are medium-sized printers, and the rest are small. The large printers (and some of the medium-sized) use modern printing technology and compete in international markets.
Singapore has developed into an international printing center with total printing exports totaling about $600 million annually. The industry, with the help of government, is undertaking a major effort to re- train workers in the newer technologies to insure Singapore remains a leader in this industry.
Thailand
Thailand is slowly emerging from Asia’s economic crisis. Thailand’s printing business was hit very hard by this crisis. Paper costs skyrocketed and reduction in domestic trade sent many companies to the brink.
Of the 30 or so companies involved in the export market, most have yet to embrace new digital technologies and many suffer from shortages of skilled labor.
Data Products Toppan Forms Thailand is one of the largest forms companies in Thailand.
Australia
The printing and graphics industry is the third largest manufacturing industry in Australia. Small businesses tend to dominate the industry, with 85.3% of the companies employing fewer than 20 employees and 97.55 employing fewer than 100 employees. The total production for the industry was $21.1 billion in
1999.
24 Bibliography and Acknowledgements
“Formtrac 1997”, Document Management Industries Association (DMIA), Alexandria, VA
Graphic Arts Information Network. www.gain.org, Printing Industries of America
The Japan Business Forms Association JBFA), Tokyo, Japan
“The Japanese Forms Market”, Papertronics, March 2000 edition; a publication of IBFI
“Japan Graphic Arts-2001”, The Japanese Federation of Printing
Japanese Printing Technological Society, Tokyo, Japan
Kitahara, Mr. Toshiro, personal letter and report, with the author’s thanks
Morita, Yoshaiki. , Osaka Printing Ink Mfg. Co. Ltd., personal letter and report, with the author’s thanks
“Perspective 2000”, annual report of the IBFI
“Perspective Europa 2000”, annual report of IBFI Europe
“Printing & Packaging World- An Asia-Pacific Publication”, two editions-Oct. 2000 and Dec. 2000
Web Sites
www.asiaweek.com
www.asiagateway.com
www.c-direct.ne.jp
www.chamber.org.hk
www.dnp.co.jp
www.eubusiness.com
www.gaahk.org.hk
www.jugat.or.jp
www.hkbiz.comwww.printnet.com.au
www.jajat.or.jp/asia
www.state.gov.www/issues/economic/trade/reports/1999
www.toppan.co.jp
www.toppan-f.co.jp
25 26 Exhibit A Definitions and Assumptions
Definitions:
Printing Industry – Includes the following sectors: Publishing, Commercial, Security, Business forms, packaging, Specialty, and Other Printing Services. Definitions of these categories will vary between companies and even amongst different associations within the same country. However, for purposes of this paper, the differences are not deemed material.
Business Forms and Documents – this category includes continuous, cut sheet, unit sets, business stationery, mailers, and related business documents. It includes information system labels (labels used in general business applications). It excludes pressure sensitive and other labels that are more commonly included in packaging. Definitions will vary somewhat between sources.
Assumptions:
Business document usage is generally considered to be a function of business activity and technology deployment. The level of industrialization, relative sophistication of the business environment, and mix of businesses impact consumption of business documents. For example, paper-intensive businesses such as financial and insurance tend to use more paper, while basic manufacturing and mining businesses use less.
It seems reasonable to conclude that printing, and business documents, are a function of the overall Gross Domestic Product of a country. This correlation would be stronger for industrialized countries but less strong for developing countries with high agriculture percentages. This assumption was used as the basis for the rough estimates of printing and business documents industry sizes for the Asia Pacific countries in Exhibit B.
27 Exhibit B
Estimates of Printing and Business Documents Industries in Asia Pacific Countries
1999 GDP Growth % Est. Size Est Size USD Millions Rate Agri. Printing Ind Document Ind Asian Tigers Hong Kong $160,100.0 0.5% NA $5,123.20 $461.09 Singapore $88,246.4 5.0% 0.2% $2,823.88 $254.15 South Korea $408,800.0 7.0% 4.6% $3,100.00 $279.00 Taiwan $292,900.0 5.3% 2.7% $9,372.80 $843.55
Newly Industralized Countries Indonesia $67.0 -4.0% 22.4% $2.14 $0.19 Malaysia $78,928.0 4.3% 6.0% $2,525.70 $227.31 Philippines $75.6 3.0% 17.6% $2.42 $0.22 Thailand $121,979.0 3.5% 9.4% $3,903.33 $351.30
Third World China $1,016,800.0 6.9% 17.3% $32,537.60 $2,928.38 Vietnam NA NA NA NA NA
Other Countries United States $9,559,700.0 6.5% 2.0% $155,700.00 $13,844.00 Japan $4,205,000.0 0.5% NA $85,904.30 $7,690.20 India $1,805,000.0 5.9% 25.0% $57,760.00 $2,888.00 Australia $390,700.0 3.0% 2.7% $21,114.00 $1,900.26
Sources:
GDP, GDP Growth, and Agriculture percents – “1999 Country Reports on Economic Policy and Trade Practices” US Department of State, March 2000
Japan Printing and Document Markets – “Japanese Printing Technological Society”, provided by Mr. Yoshiaki Morita, The Osaka Printing Ink Mfg. Co., Ltd.
Hong Kong Printing Industry – Graphics Arts Association of Hong Kong
United States Printing and Documents Markets – DMIA Printrac report
All Other Estimates are author’s projections
28 Exhibit C The Japanese Printing And Business Documents Industry
Market Size and Growth Rates Converted to Billions of Current US Dollars
Printing Industries Projected Percent Grow th Projected Percent 2000 of Total per Year 2005 of Total
Publishing $15.719 18.3% -1.5% $14.490 6.2% Commercial $29.289 34.1% 1.0% $30.769 34.5% Security $4.729 5.5% 6.0% $6.350 7.1% Forms & Documents $7.690 9.0% -3.0% $6.569 7.4% Packaging $16.286 19.0% -2.0% $14.721 16.5% Special materials $9.638 11.2% 6.0% $12.979 14.5% Other Printing Services $2.554 3.0% 6.0% $3.401 3.8%
Total $85.904 100.0% $89.279 100.0%
Source: The Japanese Printing Technological Society
Additional Facts: Japan Federation of Printing Industries
Shipments of the total industry equal 13.932 billion yen (This is higher than the 9.952 billion yen used above. The difference is newspaper, book and magazine publishing).
The industry ranks eighth among a total of 22 manufacturing industries, with 4.5% of all manufacturing shipments.
The number of printing establishments is 47,483, which is ranked sixth of all manufacturing industries.
Number of employees is 585,850, which ranks seventh of all manufacturing industries.
The printing industry is a large and highly fragmented industry: -43% of the firms has 3 or fewer employees. -88% of the firms has 19 or fewer employees. -99% of the firms has 99 or fewer employees.
The industry was experiencing an average annual growth of more than 7% since 1981, but the recent economic crisis has caused a negative growth rate for three consecutive years.
29 Exhibit D Hong Kong Printers with Business Printing As A Significant Specialty
Selected Examples
Dai Nippon Printing Co. (HK) HQ in Japan Parent Co. ranked 96th in Asiaweek 1000 Toppan Printing Co. (HK) HQ in Japan Parent Co. ranked 101 in Asiaweek 1000 Toppan Forms (HK) HQ in Japan Parent Co. ranked 845 on Asiaweek 1000 Asia One Printing 100% located in Hong Kong Prints over 10% of all annual reports for listed companies HSBC Precision Printing (HK) Subsidiary of HSBC 50% of work outside HSBC Leefung-Asco Printers Founded 1960 Located production to Shenzhen Local Printing Press Founded 1927 Cheong Hing Printing Co. Ching Luen Printing Co Elegance Finance Printing Founded 1980 Electronic printing-operates 7 Services Xerox Service Centers Essential Industries Two plants in China (Dongguan) The Green Pagoda Press Provides total printing solution Hing Lin Int’l Printing Ijen Enterprises Max Fortune Industrial New Island Printing Co Rainbow Printings High tech full service company Taunus Printing (HK) World Print
30 Exhibit E Largest Japanese Printing Firms
With Business Forms Specialty Noted
Dai Nippon Printing Company Tokyo Bunshodo Printing Corporation Tokyo Jyoni Business Forms Co Tokyo Toppan Printing Co. Tokyo Kyodo Printing Co Tokyo Niimura Printing Co Tokyo Semi Securities Printing Co Tokyo
31