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Japan Railways Group
Is It Time To Expand?
Tyler, Dave, Sofia, and Paul present
INDEXJapan Railways
Problem
External Analysis
Internal Analysis
Financials
Recommendations
Introduction:
Timeline
1964: Japan National Railways -Government/publicly
owned1984: Japan Railways privatized
-7 Railways1987: JR Central created
-Tokaido Shinkansen -Main Route: Tokyo--
Nagoya--Shin-Osaka
Background Specifics● Train Statistics
○ 350 trains/day
○ Nozomi Time Table
○ 430,000 passengers/day
● Technological Advancements○ Conventional
○ Shinkansen
○ Maglev
● Affiliated Businesses○ Vertical Integration
Japan’s ProblemJapan’s population is in drastic decline.
○ Population Growth Rate of -0.13%
○ Expected (1/3) decline within 50 years
○ 40% of the population will be over 65 by the year 2060
● Efficiency cannot save them in the long term
● Japanese high speed railway market is saturated
External AnalysisBarriers to entry: HIGH
High Capital Requirements (Planning, Building, Maintaining)
High level of technology
Government policies
Supplier Power: MODERATEInternational suppliers are highly competitive
U.S. suppliers focus on locomotive freight
Buyer Power: LOWLots of customers, one company
Most companies have full control of their region
Germany
France
Spain
External AnalysisThreat of Substitutes: MODERATE
Plane (Moderate-to-high)
Car (Moderate-to-low)
Bus (Low)
Rivalry: HIGHModerate number of competitors (France, Spain, Germany, Italy,
China, Japan)
Highly Competitive (Expansion)
Increasing Demand→ Increasing level of competition (USA)
High barriers to exit → Long Projects (30 years)
Internal AnalysisTechnology/Research and
Development FocusMaglev Trains
ChuoCore Competency
Organizational CultureDisciplined, focus on
perfectionismCore Competency
Acquisition - MindsetValuable
Internal Analysis ContinuedReputation/Brand Image
VRIN/Core Competency
Safety and Efficiency Philosophy
Zero fatalities in over 50 years
.9 minute delays over that periodNozomi Time Table
Core Competency
Financials Operating revenue
$12.5 billion (2012) and $13.9 billion (2014)
Operating costs of revenue 76.8% of Revenue (2012) and
69.7%(2014)Focus to pay off of long term
debtPaid off $1.8 billion in long
term debt (2014)October 1, 1991 : $45.5 billion
in long term debtNow: $27.7 billion
Financial Ratios
Recommendations
Transnational StrategyPotential Markets
Europe, Asia, or United States
Factors Affecting Market Integration
Culture variations
Legal issues (different requirements to meet --environment, for example)
Infrastructure/Geographic limitations
Method of Integration
Acquisition vs. Joint Ventures vs. Wholly subsidiary
Joint Venture in Europe?
Incentives/Pros:● Established high speed rail lines● Train-oriented culture● Minimized infrastructure costs
Cons:● Railways are government owned● Cultural Discrepancies in standards
Conclusion: Due to barrier of government ownership, not a viable option
Joint Venture in United States?● Incentives/Pros
○ Unsaturated Market■ Amtrak, California Rail Projects, and Northeast Maglev■ Appeal to Green movement
● Cons○ “Freedom of Open Road”○ Extreme Competition for Rivals○ High Infrastructure Costs
■ Chuo (maglev) Shinkansen: $178 million per km ■ Shinkansen: $76 million per km
○ Cultural Clashes● Conclusion: There are many hurdles that will deter
this being an immediate viable option but there is potential due to current trends
Joint Venture in Asia?Incentives:
Asia is in drastic need of a more efficient means of transportation
May be less cultural barriers serving as deterrents
JR lines and technology more familiar in that region
Cons:China
Increased international growth in high speed railway service
Stronger bidding power
Offer total package: construction, supply of trains, operating and finance
Conclusion: China is a formidable rival in Asia. Unfortunately, China may have too big of an influence on the region.