Multidirectional Management Strategy of JR Hokkaido Yukihiko Usui
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Features Railway Diversification Multidirectional Management Strategy of JR Hokkaido Yukihiko Usui Non-railway Businesses Sapporo and Asahikawa. They generated companies, and design, construction and in JNR Era ¥3 billion (approximately 3% of earnings) management of new station buildings. during 1986, immediately before privati- The concept of station buildings marked Ten years have passed since Japanese Na- zation. Management of the terminal sta- a turning point in changing stations from tional Railways (JNR) was privatized and tion building was left in the hands of retired just facilities for passenger transport to we became JR Hokkaido, a private railway JNR employees who relied entirely on the more multi-functional facilities. In fact, company serving Hokkaido. I recall groups station’s location. The station buildings it is the most important concept for all JR of people, including myself, who were to- only played a role for providing a place to companies engaged in non-railway busi- tally ignorant of anything other than rail- work for retirees. The knowhow to man- ness today. way operation, doing their best to age diversified businesses was never ad- At first, during the JNR days, the concept contribute through commercial activities equately accumulated. was applied only to stations in large cit- with no direct connection to railway oper- When JNR began suffering from worsen- ies with high purchasing power. The new ation. Before the privatization, JNR was ing deficits in the mid-1960s, it turned to companies established to run non-rail- prohibited by law from engaging in such investments in new businesses. But the way businesses did not make any extra commercial activities. Even if there had layout of People’s Stations was inappro- efforts because they already had custom- been any, there was only a slim chance of priate and the company began seeking a ers. Moreover, JNR corporate culture was making profits in Hokkaido where there is new style of station building. When the such that it lacked clear definition of re- not much economic activity in the first JNR legislation was revised in 1971, it sponsibilities making it difficult to create place. The main non-railway activities at allowed JNR to invest in station build- know-how for running new businesses in that time were operating stores in stations ings and to engage in a restricted man- any profitable manner. and leasing facilities in People’s Stations ner in ‘...construction and management JR Hokkaido was no exception; the busi- (see information box below) to outside en- of shops and offices within the stations ness environment was even worse than trepreneurs. These activities were all small as well as management of dining and that of the other JNR offspring in terms of scale and went no further than utilization boarding facilities within the station com- market scale and market selection, be- of idle and excess facilities in station com- plex, bus terminals, parking and other cause Hokkaido is generally a depopu- plexes. The only active engagement in facilities located adjacent to the passen- lated and cold region. commercial activities (investment in station ger stations’. building ownership and property leasing) This allowed JNR to reflect its business was limited to terminal station buildings in intent in planning incorporation of new People’s Stations were born out of strong demand in the postwar res- toration of local cities to innovate sta- tions to match the communities in which they were located. In doing so, the local community shared the cost of building the station with JNR and won the right to use part of the new station building for commercial pur- poses. A total of 66 People’s Stations were built, the first being Toyohashi Station completed in 1949. Among them were Sapporo, Obihiro, Asahika- wa, and Kushiro stations in Hokkaido. Their basement floors were designed for commerce and these stations pre- sented a model for station buildings where railway companies could en- gage in non-railway business. JR Hokkaido’s Building next to Sapporo Station lease to a Major Department Store (JR Hokkaido) 10 Japan Railway & Transport Review • January 1997 Copyright © 1997 EJRCF. All rights reserved. Need for Multidirectional will be extremely unstable because we Sapporo. There are 8 cities in Hokkaido Management cannot expect a great increase in de- with a population greater than 100,000 mand. but there are only three cities over Poor railway characteristics 200,000: Hakodate (300,000), Asahika- Unstable financial structure: In 1994, JR Transportation characteristics versus wa (360,000) and Kushiro (200,000). Hokkaido had a route distance of 2,623 urban structure: It is often said that rail- Hokkaido’s population density of 68 per- km and 38,112, in passenger-train kilo- way characteristics are maximized by (1) sons/km2 is only 20% of the population meters; 128 million passengers travelled transportation in metropolitan areas and density of 316 persons/km2 in Kyushu, 4,810 million passenger-km. This result- (2) medium-distance transportation be- with which Hokkaido is often compared. ed in a railway operating revenue of tween cities. Sapporo, with a popula- The population density of Sapporo is 22 ¥90.5 billion, and costs of ¥132.8 billion, tion of 1.72 million people, is the fifth times higher than other cities in Hok- producing a loss of ¥42.3 billion com- largest city in Japan after Tokyo, Yokoha- kaido, whereas that of Fukuoka in Kyushu pensated for by interest from the Man- ma, Osaka and Nagoya. The Greater is only 11 times that of other cities in agement Stability Fund (see JRTR 8, Sapporo area within a radius of 40 km Kyushu, also suggesting the heavy popu- p. 5). from central Sapporo has a population lation concentration in Sapporo. Running the company is tough under to- of 2.31 million, accounting for 40% of As a result of this unique urban structure, day’s low interest rates. If the company the population of Hokkaido. This shows JR Hokkaido enjoys good business from must rely solely on railway operation, it the heavy population concentration in transportation in the Greater Sapporo Figure 1 Major Inter-city Routes in Hokkaido 300 km (×1000 population as of 31 March 1995); [route distance from Sapporo] Electrified sections Wakkanai (50) [396 km] 200 km Rumoi (30) Nayoro 100 km (30) Abashiri Fukagawa (40) (30) Ishikari Bay Takikawa 40 km (50) Asahikawa Kitami Otaru (30) [137 km] (110) [322 km] (160) Iwamizawa Furano (Chihoku Kogen Railway) Sapporo (80) (30) Nemuro (1720) Yubari (40) [484 km] (20) (Greater Sapporo) Obihiro (170) [220 km] Kushiro Tomakomai (200) [349 km] (170) Muroran (110) Hakodate (300) [319 km] Copyright © 1997 EJRCF. All rights reserved. Japan Railway & Transport Review • January 1997 11 Railway Diversification area but inter-city transportation remains even smaller cities such as Memanbet- gy because it allows us to take advan- extremely low. Since Hokkaido does not su, Nakashibetsu and Wakkanai are con- tage of our existing resources to a large have shinkansen operation, it takes 3 to nected to Tokyo. This reduces the need extent while starting something new with 5 hours to travel from Sapporo to Hako- for feeder transport by train to and from relatively low risk. It is also true that it date (319 km) and from Sapporo to Shin Chitose and other airports. may be hard, if not impossible, to expand Kushiro (349 km). This type of medium- these new businesses to a scale that can distance inter-city transportation makes Positioning of non-railway greatly improve the company’s financial it hard to take advantage of railway char- businesses balance if we stick to railway operation. acteristics. The conditions suggest only slim chanc- es for further development of railway JR Hokkaido’s resources: Stations and the Automobile-oriented society: The roads operation, and JR Hokkaido must grow rail network are our primary resources as in Hokkaido cover 84,150 km, or 14.8 less dependent on such operation very we explore new business. Traffic con- km per person, substantially higher than quickly. However, looking back over the gestion and air pollution by automobiles the national average of 9 km. The ratio past 10 years, it seems as if everyone was are presenting serious environmental of passenger car ownership is 0.35 cars busy trying to make money with no gen- concerns. As a result, trains are receiv- per person, slightly higher than the na- eral strategy for developing non-railway ing new attention as a clean and efficient tional average of 0.33. The roads are businesses in any efficient manner. Start- means of transportation in large cities. A never congested and driving is pleasant ing a new business is hard in an area station is often considered the centre in in Hokkaido. This makes cars the pre- where railway operation is hard to ex- an urban development project. As long ferred means of transport all year, despite pand in the first place. Nevertheless, our as the station continues to play a central the fact that the roads are covered with company is now determined to become role, a large number of people will ride snow in winter. a total service industry by developing trains everyday. This, in turn, creates new business. This involves changing the many opportunities in the station. A sta- Undeveloped railway facilities: JNR was company’s structure completely and con- tion is no longer a mere node along the reluctant to make new investments in structing an entirely new operation. It railway; people will begin to see oppor- Hokkaido. In terms of the route kilome- involves rebuilding and revitalizing cor- tunities for many new functions and the ters per geographical area, JR Hokkaido porate strength by integrating railway and space in a station can create new value rates only 30 km/km2, far below the com- bus operations with new non-railway as an amenity centre.