SHOSHA Activities - Outline of Transactions

Outline of Transactions

The transactions and activities of Shosha are often distinguished by the following major characteristics:

1.A wide range of products handled
2.Global operations and a diverse set of transactions
3.Huge sales volume and massive business scale

A Wide Range of Products

Shosha handle a vast array of products, from something as simple as mineral water to complex machines like communication satellites. They are involved in all types of transactions, from upstream to downstream in almost every kind of industry, but primarily: machinery, plants, communications equipment, metals, minerals, energy resources, chemicals, textiles, foodstuffs and food products.

Similarly, they deal in all categories of products ranging from raw materials to manufactured goods and from consumer goods to industrial tools. Lately, Shosha have made headway in the service sector in areas like food services, supermarkets, convenience stores and mobile communications. They have also become involved in promising new business fields related to ICT (information and communication technology), bio- and nano-technology and eco-technology.

Global Operations and a Diverse Set of Transactions

Shosha are committed to global scale operations and engage in four major patterns of transactions.

These are (a) purely domestic transactions in Japan, (b) export from Japan, (c) import to Japan and (d) strictly offshore transactions between countries other than Japan. Of the combined transaction volume of representative Shosha, foreign-related trade transactions account for roughly 40%.

Shosha are involved in a large portion of Japan's steel, energy and raw materials trade, as well as in large scale overseas projects like power generation and plant export. In regional terms, transactions in the U.S., Europe and Asia have largely expanded thanks in part to Shosha investment. Meanwhile, in Central and South America, the Middle East and Africa, business is often energized by Shosha cooperation in the raising of funds and other financial arrangements.

In addition to spot based trading on actual commodity movements, Shosha are engaged in dealings in the forward contract market (i.e. term settlement market). This circle of commodity dealing includes commercial bonds, metals (precious and non-ferrous), energy (crude oil, natural gas and naphtha), foodstuff (grains, sugar and coffee), and general merchandise (natural rubber). They make use of these movements mainly to minimize the risk associated with price fluctuations.

Huge Sales Volume and Massive Business Scale

This is another signature characteristic of Shosha. In FY2010, the consolidated sales volume of the top seven Shosha was JPY68 trillion. A major factor enabling these huge sales is the existence of a large number of subsidiaries and affiliates inside and outside of Japan. In fact, the aforementioned seven Shosha have some 3,500 subsidiaries and affiliates, forming enormous business groups.

These major Shosha often make inroads into new business territories by setting up new companies or buying out existing ones and are deservedly known as “enterprise creators” in many regions.

It is largely through close cooperation with these group companies that Shosha pursue the expansion of their transactions and earnings.
This huge sales volume used to be regarded, in the context of growth strategy, as one of the most important management barometers during Japan's high economic growth period. However, with the trend toward globalization starting in the 1990's, alignment with global standards drove a shift in management strategy from going after even larger sales volume to pursuing returns commensurate with the asset risk, i.e. putting more emphasis on profitability.