Executive Summary
An American research group has presented a latest review "Global Recruitment Market Report 2013 Edition" in its gigantic pool of research reviews. The staffing industry differs significantly from one nation state to another with the Japan, United Kingdom and United States displaying the highest level of disintegration (Rogers, 2013). The staffing industry is categorized into professional and general employment industries. General employment that contains low experienced, low salary blue collar workers has a greater share in comparison to professional employment that contains more experienced, more salary white collar workers. North America exhibited the single largest industry considered in terms of earnings in the year 2012 subsequently UK, Japan, Germany and France. Furthermore, the international staffing industry is increasingly challenging and extremely fragmented with various players competing for business share. The leading four organizations comprise approximately one-fifth of the entire earnings of the market.
Adecco Group is the biggest organization functioning in this market, after that Randstad and Manpower. The review outlines these four organizations together with a discussion of their specific business policies. The report has included an inclusive summary of the international staffing market accompanied by the exposure of main local industries. It consists of various European countries (Germany, France, Italy, Spain, UK, Switzerland and Sweden), North America (Canada and the United States) and Asia Pacific (Japan and Australia). This also includes the industry size, employment/unemployment ratios and segmentation. This document provides a comprehensive overview and introduction of Japan staffing industry in the form of facts and figures. Porter’s five forces model is also discussed. Then, the drivers of change in a broad environment are presented together with their impacts. Strongest and weakest positions of numerous companies are also included in the document. After that, five major success factors are described. The document also includes information about industry’s attractiveness and prospects for long-term profitability. In the end, a comprehensive summary concludes the document. In general, an overall analysis of Japan staffing industry is provided in the document.
Introduction
Carl Camden, CEO and President of Kelly Services Incorporated say that: “Worldwide employment agreements used to eliminate Japan due to the reason that the industry was experienced to be different.” This mind-set is changing with the maturation of the industry in Japan.
Camden declares that: “As the skills supply chain orientation is establishing itself inside our market, you cannot overlook an industry like Japan. The Japanese market also works as a home of outsized employment organization Tempstaff, with which Kelly has a deliberate partnership. It is too crucial to the supply chain of our clients.”
For now, examples of global employment companies currently making an investment in Japan consist of:
- Adecco SA’s attainment of Japanese employment company VSN Incorporated during January 2012,
- Randstad Holdings NV’s attainment of Fujistaff during August 2010.
The Japanese employment market has experienced difficulties during the recent years. Short-term employment peaked in 2008, but then the economic downturn struck, and the market failed.
The Japanese employment industry also experienced improved rules and regulation with an alteration to the state’s “worker dispatch law.” It was accepted by the administration in March and was in effect from the month of October (Kiyota, 2011). Recruitment market viewer’s states that the rule could have been more intense, it was initially known for barring short-term employment in manufacturing. Administrators eliminated that part of the change. Though, the regulation made other alterations, such as barring the short-term projects of less than four weeks.
Hitoshi Motohara of Recruit Co. Ltd. declares that: “With the discussions on the alteration and a more beneficial financial perspective, the Japanese employment industry may be going back to development. Even though, at a comparatively slow proportion.”
Motohara says that: “I am certain that the Japanese employment market will again make progress.”
Motohara is an SVP (Senior Vice President) at Recruit Co. Ltd., Japan’s biggest employment company. He also leads international holdings as CEO and chairman of Advantage Resourcing and as chairperson of The CSI Companies and Staffmark.
As stated by Motohara: “Work rules in Japan can motivate organizations to use staffing. A large number of organizations want to use short-term employment due to the reason that companies can adjust to financial circumstances easily and, obviously, keep in conformity.”
Staffing Industry Analysts reports the Japanese employment industry was worth roughly $60 billion in the year 2011. The biggest employment companies in the nation state consist of Tempstaff, Recruit, Adecco and Pasona Group. The industry is also extremely fragmented with not a single company, outside of the topmost ten employment organizations, holding more than 1% of the overall industry.
Though, the Japanese employment industry does vary from other industries, for example, that of the United States.
Overview of the Industry
As reported by Staffing Industry Analysts: “Numerous employment organisations in the Japanese industry are possessed by larger corporate multinationals”. Proprietors of employment companies consist of auto organizations, insurance organizations, manufacturers and various others.
Staffing Industry Analysts also stated that: “A number of Japan’s well-recognized organizations consist of recruitment companies in their organizational profile.” Panasonic possesses one of the biggest staffing organizations all across country and Mitsubishi possesses 13 diverse staffing organizations.
Scott Sato, chief executive of Pasona Inc., declares that numerous outsized Japanese organizations truly have their employment sections, while the administration is creating that recruitment model more limited.
That is not the only dissimilarity in the way the recruitment industry operates.
Sato says: “It is not lawful for one recruitment organization to outsource employees from another employment company.” Consequently, Japanese organizations are larger so they might deal with all of the customer’s requirements instead of outsourcing.
Japanese company workforces also usually have more time and projects. The average period at Pasona for a short-term worker is 17.2 weeks, though the organization has a few employees who have served for almost 25 years, dealing with diverse short-term projects. Moreover, 90 % of Pasona’s projects are for three months or extended period.
Sato declares that: “It is a different company structure as compared to the United States. There is more liability for looking after the employee and considering that the worker gets unconventional benefits and training in order to acquire new expertise”.
While Japan has been substantial on professional employment, development is being predicted for professional staffing.
Sato specifies that: “What we perceive the greatest development in the future include finance, accounting and technological IT”.
David Swan also recognizes an exceptional growth in commercial recruitment even as professional employment has decreased.
Swan declares that: “This is the best thing for Robert Walters. We are a mid-career employer and the mainstream of the staffing work that we perform is professional employment.” The experts for which requirement is increasing consist of accountants, engineers and IT.
Robert Walters provides temporary and permanent employment with 48 workplaces in 23 states, including workplaces in Osaka and Tokyo, Japan. The organization’s contract employment company in Japan focuses primarily on placing multilingual Japanese-English speaking experts.
Subcontracting
As stated by Kelly’s Camden: “Japan’s staffing industry is younger and not as much of penetrated in the technical/professional space in comparison to North America or Western Europe. However, it is capturing up.” Succeeded service providers and dealer management systems are not as frequent, and it is even more challenging to apply VMS-type solution due to how they relate with dispatch laws and regulations.
Camden states: “What I do believe the market will perceive is a lot of development in the subcontracting side of the comparison”.
Numerous other players in the industry believe the fact with Camden’s opinion. Marcel Wiggers specified that subcontracting is stimulated by Japanese rules that bounds work. This may be done by short-term staffing organizations to three years in 26 employment groupings. It includes professions with computer operation abilities.
According to Wiggers, after the three years are over, organizations might still want those individuals. But they might not be capable of recruiting them through organizations, and as a substitute, they have to recruit the individuals directly for fulltime. An outcome is a change to subcontracting where recruitment organizations take on administration liability for individuals and record flow and enable the recruiting customer to subcontract the work to the employment companies. FujiStaff, a Japanese recruitment organization, purchased by Randstad, has a robust existence in blue collar subcontracting.
Wiggers also recognize increasing requirement for professional recruitment, such as IT and engineering. Engineers are required to reconstruct after the earthquake of 2011. In the field of IT, there is a requirement for employees in the smartphone industry in order to keep up with the necessity.
As stated by Wiggers: “There is a large number of smartphones in comparison to the individuals currently. If you perceive young individuals here, they possess two or three smartphones per individual.”
One issue in Japan is that recruitment incomes are comparatively low. Thus, there are some individuals who do not respect employment very greatly. Though, incomes are gradually starting to increase. Moreover, there are some individuals who favour recruitment due to the reason that they get payments for additional operating time and do not face the extended hours that may be the rule for permanent workers. In Japan, some permanent employees can start work at 8:30 AM and not leave the workplace until after 10:30 PM.
Furthermore, the Japanese employment market has a diverse background as compared to the United States, and the industry sees stronger rules.
The Japanese recruitment market got completely under way during the 1980s through the presentation of the “worker dispatch law.” This rule went into effect with 13 forms of work accepted for short-term employment. Though, it was not till the 1990s that the industry was opened to a rational level. Whereas later, the list of jobs was modified to 26, the rule did not agree for short-term employment in manufacturing till 2004.
However, it was merely in March 2011 that an improvement to the employee dispatch law contributes limitations and prevents short-term projects of less than 30 days. Moreover, it needs companies and staffing organizations to give short-term employees the similar salary as regular employees if the short-term workers are performing the equivalent work. Though, a regulation that might ban short-term career in the manufacturing industry was not incorporated as it included in the original bill.
Temporary, day-labour sort of employment is still permitted only for particular groups, for example, elderly, students and those who currently have a main earnings.
The least possible one-month holds for everybody else. Even potential short-term employees cannot take temporary contracts while they interview for permanent projects with staffing customers. Normally in Japan, all short-term employees interview with customers before they accept projects.
Wiggers stated that: “New amendment to the employee dispatch law is better as compared to originally proposed. However, it is not as great as we would like to perceive it for Japanese market and community all together.”
Financial Confusion
Japan positions as the 3rd biggest financial system on the globe after only China and United States. Though, it did not evade the economic downturn.
Japan published a few of the biggest financial development ratios on the globe during the duration of 1960s to 1980s; however it slowed down considerably during the 1990s. The financial system published development through the 2000s until the economic downturn took place in the year 2008.
According to US regime information, GDP (Gross Domestic Product) increased truly in 2010 but shortened in 2011. Japan was hit by a 9.0 scale earthquake and Tsunami on March 2011, which smashed the north-east shore of the Honshu Island. Leakage of radiations at the Fukushima Daiichi atomic power plant resulted in huge evacuations (Fujii et al., 2011).
In spite of these contemporary difficulties, the Organization for Economic Co-operation and Development predicted GDP development of 2.0 % in 2011 and 1.6 % in the year 2013. The company had reported a decrease in GDP of 0.3 % during 2011.
In the meantime, worldwide staffing organizations seem to be favourable on the Japanese employment industry. And they are casting their votes with their pocket-books.
Achievements and Mergers
Some of the distinguished business deals consist of Adecco SA’s attainment of Japan-based employment company VSN Incorporated in 2012 and Randstad Holdings NV’s attainment of FujiStaff, the 38th biggest international employment organization.
Adecco Chief Executive Officer (CEO) Patrick De Maeseneire stated when Adecco declared the VSN purchase:
“This is an exceptional option for us to flourish our Japanese professional employment company in the world’s 2nd biggest employment industry, and it is an outstanding fit with our internationally planned significances. The acquisition will promptly double the participation of professional employment to Adecco’s earnings in Japan and supports our strong placement in an appealing structural development industry.”
It is not only about outside financial commitments in the country. Japan-based organizations have also attained various other local firms.
For example, Recruit Co. Ltd. has been busy purchasing employment resources outside the state and just attained Staffmark in the United States in addition to European and Advantage Resourcing’s US operations. Recruit Co. Ltd. acquires the European and US companies of Advantage Resourcing in approximately $410 million transaction along with operations in Hong Kong, Singapore, Dubai and Australia. The business lines published income of nearly $1.4 billion dollars in their financial year ended July 2011.
Recruit Co. Ltd. struck a business agreement in October 2011 to purchase Staffmark, the 14th biggest US employment company. The agreement offered Staffmark an initiative price of $295 million.
The agreements seem to indicate an increasing attention all across Japan, both outside and inside. Moreover, it reveals that the confidence rests in the industry.
With discussions on the “worker dispatch law”, more incorporation with worldwide employment agreements and the actual probability of progress ahead, Japan might no more be the giant of the worldwide employment market.
Achievements and Mergers in Japan
Following are some of the larger achievements of Japanese employment companies by global companies recently.
- Adecco SA purchases VSN Inc. of Japan in the year 2012. Tokyo-based VSN concentrates on the technological innovation section with outlets in eight most important places. VSN published income of nearly $203.0 million in the year 2010.
- Administration of Prompt Holdings, Japan’s 7th largest employment company struck an agreement to purchase the organization from a financial commitment group that contains a private, New York-based equity company Cerberus Capital. Last year, Prompt Holdings sold majority of its Western and US operations. The business agreement declared in March 2012.
- Pasona Group obtained an 85.51% share in the Caplan Corporation in January 2012, which is a Tokyo-based employment provider. Moreover, Japan airlines Corporation Limited Caplan published net transactions of ¥15.19 billion ($183.3 million US dollars) in its financial year ended March 2011. The business deal declared in January 2012.
- Randstad Holding NV declared in August 2010 that it would spend ¥13.7 billion ($160.0 million US dollars) to obtain stocks in FujiStaff that it did not previously possess.
Centre on the Farm
Pasona placed a plantation, a rice paddy, in the underground room of a Tokyo workplace building, a place that previously served as a financial institution vault. The major objective was to make awareness in agriculture among town residents. The organization has meanwhile shifted within Tokyo, but Pasona’s present head office currently has more than 200 plants and vegetables inside the office building. The organization even had a rice paddy in its entrance hall, but later, the entrance hall was transformed into a stage encircled by water where musical groups perform every day. The change in the entrance hall originated as part of an attempt to preserve power after earthquake of 2011. Vegetables from the town farm are utilized to provide healthier foods for organizational workers.
Decreasing Population
The overall population of Japan that is approximately 127.4 million resides in a country that is a bit more compact in area in comparison to California. Though, the population is decreasing, and several reports claim that it might have 30% fewer individuals by the year 2060. The foremost language used all over Japan is Japanese. There seems to be a careful mind-set toward employment in a few quarters, and Japan is one of the few nations improving control of the staffing market.
Porter’s Five Forces
The Porter’s five forces model originated from Michael E. Porter's book published in 1980 with the title of "Competitive Strategy: Techniques for Analysing Industries and Competitors." Since that time, it has turn out to be a commonly used tool for evaluating an organization’s market framework and its business policy (Porter, 2008).
This philosophy has been based on the notion that there are five forces that decide the competitive strength and attractiveness of an industry. Porter’s five forces model help to recognize where power is found in a business situation. It is beneficial for both in knowing the strength of the company’s present competitive situation and the strength of a situation that a company may look to change.
Strategic experts normally employ Porter’s five forces in order to recognise whether latest products or solutions are possibly successful. By knowing where power is found, the idea can also be utilized to recognize areas of strength in order to reinforce weak points and to stay away from mistakes.
Porter recognized five competitive forces that form every individual market and industry. These forces support the researchers to evaluate everything from the perspective of competition to the attractiveness and productivity of the market.
1. Threat of New Entrants
The simpler it is for new organizations to get into the market, the more challenging opposition there will be. Elements that can restrict the threat of new entrants are normally called as barriers to entry.
Money-making industries entice new competitors, which erodes productivity. While officials have resilient and powerful barriers to entry, the productivity will decrease to a competitive proportion (Narayanan and Fahey, 2005).
Perhaps, taxes, regulation and business rules make government a 6th force for numerous business sectors.
2. Power of Suppliers
Supplier power is about how much stress suppliers can put on the organization. If a single supplier has a great enough effect to influence an organization’s volumes and margins, then it keeps significant power. Following are some factors that suppliers may have power:
- High fixed prices
- Existing commitment to significant brands
- Motivations for using a specific client (for example, regular consumer programs)
- Shortage of resources
- High expenses of changing organizations
- Government limitations or regulations
An evaluation of how simple it is for suppliers to generate up expenses. It is motivated by the: number of dealers of each necessary contribution; originality of their product or solution; comparative strength and size of the dealer; and cost of moving from one dealer to another.
3. Power of Buyers
Buyer power is about how much stress clients can put on the organization. If a single client has a great enough effect to influence an organization’s volumes and margins, then it keeps significant power. Following are some factors that clients may have power:
- There are no alternatives
- There are very few dealers of a specific product
- The supplying market has a greater productivity as compared to the purchasing market
- Moving to some other (competitive) item is very expensive
- The item is very essential to customers
An evaluation of how simple it is for buyers to generate expenses down. It is motivated by the: number of consumers in the industry; significance of each personal consumer to the company; and cost to the consumer of moving from one dealer to another. If an organization has a few effective consumers, they are normally able to determine conditions.
4. Availability of Alternatives
What is the possibility that somebody will move to a competitive item or solution? In case the cost of switching is tremendously low, then this presents a severe threat. Following are some factors that can influence the threat of alternatives:
- Purchases huge volumes
- Insignificant number of consumers
- Switching to some other (competitive) item is easy
- The item is not very essential to consumers; they can organize without the item for some duration of time
- Clients are cost sensitive
Where close alternative products are available in the industry, it improves the chance of clients moving to substitutes in reaction to increases in the costs of particular items. It decreases both the attractiveness of the industry and the power of dealers.
5. Competitive Rivalry
Competition explains the perspective of competition among current companies in the market. Extremely competitive sectors usually generate low profits due to the reason that the cost of competition is high. An extremely competitive industry may originate from:
- The major problem is the correspondence of alternatives. For instance, if the cost of coffee increases considerably, a coffee consumer may switch over to some beverage, such as, tea.
- If alternatives are comparable, it may be considered in the same prospect as a new entrant.
The primary driver is the capability and number of business competitors in the industry. Numerous competitors providing indistinguishable products and solutions will decrease industry attraction.
Benefits of Porter’s Five Forces Model
Porter’s five forces model allows businesses to realize the factors impacting productivity in a particular market. The model may support to notify decisions pertaining to:
- Whether to get into a particular market;
- Whether to improve potential in a particular market; and
- Devising competitive policies.
Dos/Actions to Take
- Use Porter’s model where there is a minimum of three opponents in the industry
- Contemplate the effect that administration has or might have on the market
- Contemplate the market lifecycle level. Earlier levels might be more strong
- Contemplate the changing/dynamic features of the market
Don'ts/Actions to Avoid
- Avoid using the Porter’s model for a singular organization; it is developed for utilization on an industry basis
