The Tombow Pencil Co. established in the early 20th Centaury has survived many difficult times in Japanese history, including the Second World War, numerous recessions and fundamental technological changes affecting its market. However, profits have declined and remained low during the 1990’s despite efforts to modernise.
In reviewing this case it is tempting to view its current methods as inefficient, with an over-reliance on many subcontractors, with the temptation of following a Western European/USA model of centralising production and driving tighter Arms Length Contractual Relations (ACR) to drive efficiency and reduce costs.
However, the business system operating in the region is of great importance. There …show more content…
Kantoh expresses that it is engaged with three other important customers, the sharing of this information in itself indicates some degree of a culture of information sharing with Tombow, although the resultant reasoning that Kantoh requires 3 month lead time does not indicate close ties binding Tombow and Kantoh together. From an OCR system perspective (Sako) (2) this is an indication that interdependence is missing, hence the buyer relies more on the supplier than vice versa which adds business risk. Also shorter time demands can never be fulfilled without larger preproduction leading to higher stocking, and Kantoh themselves may be missing out on knowledge sharing throughout the network which may help them with their other key customers as described by Dyer and Nobeoka (1)
The Changing Business Environment
Tombow appears to comply with many of the expectations of the Japanese business system, having created the basis a Keiretsu (Lincoln) (3) a network of independently managed firms maintaining close and stable business ties. It is evident that the current “Keiretsu” has formed over many decades. As already discussed, such networks rely on OCR.
Looking at the performance of Tombow in recent years, there is a question