MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | Takeshi Kitaoka
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | Takeshi Kitaoka
Regional Vitality in the 21st Century
April 6-10, 2001 — Tokyo, Japan
Mr. Takeshi Kitaoka
I would like to give a short presentation concerning the current status of e-Business in Japan and the outlook for the future. The newly renamed Ministry of Economy, Trade and Industry (METI) and Accenture (formerly Andersen Consulting) have continued to conduct joint surveys throughout last year, and in January this year, following the name changes of both institutions, in cooperation with the Electronic Commerce Promotion Council of Japan (ECOM) they announced their findings concerning the scale of the e-Commerce market in Japan. In the most recent survey, statistics on Japan's e-Marketplaces and mobile commerce were added. According to the survey results, the size of Japans e-Commerce market in both the BtoB and BtoC markets will exceed previous predictions, with the BtoB market expected to exceed US$1000 billion, and BtoC expected to exceed US$120 billion by 2005, given an assumed exchange rate of \110 to the dollar. Within the market scale of BtoB, the size of e-Marketplaces accounted for US$1.8 billion in 2000, or only 0.9% of all BtoB e-Commerce. However, the survey forecasts that the market will grow, propelled by the driving force of e-Commerce industries that deal with electronic information equipment and auto-related products, and is expected to reach a scale of US$ 400 billion by 2005, which would account for 39% of the BtoB market as a whole. Turning to the BtoC market, the survey estimated that its size would expand by 1600% over the next five years. One of the largest factors contributing to the rapid growth of the Japanese BtoC market is the current explosion of mobile commerce, lead by the cellular phone Internet boom. It should be pointed out that in 2003, the next-generation mobile telecommunications services are expected to have been fully enabled and this will further accelerate growth to in excess of US$ 22 billion by 2005. This slide represents an overview of e-business, including the role and actions of government. As is the case in all countries around the world, Japan is a country that is administered by a central government that decides policy on the national level, and by local government that has close contact with the general populace. This process creates a tremendous amount of information that is exchanged within central government, and between central government and local government. Japan has been developing Internet systems to deal with this vast amount of information, and this development process has now reached the implementation stage. In addition, on an intra-government level and within individual government ministries and agencies, development of electronic certification systems is progressing (GtoG). In the private sector too, in the process of business activities, it is necessary to complete many written applications to government, and to be able to respond to public works projects and other government-related activities. It is for this reason that development of an electronic application and procurement system is currently being progressed, including by the central government. This represents government-to-business interaction (GtoB). In a similar way, both the central and local governments are publicizing their public services via the medium of the Internet. Informatization enables people to access a homepage at a click and obtain the information they require, and is an example of government-to-consumer interaction (GtoC). In the area of business-to-business (BtoB), in both direct and indirect procurement, systems are being introduced that make use of the functions of the Internet. In addition, the establishment of e-Marketplaces, which enable multiple dealing and trading among unspecified buyers and sellers, is also progressing, with many e-Marketplaces already up and running. This represents the BtoB sector of e-Commerce in Japan (BtoB). On the individual level, Internet shopping and Internet auctions are increasing in popularity, with further on-line shopping expected in the future through the spread of mobile commerce. However, this increase in on-line shopping is also being accompanied the occurrence of problems such as non-delivery, or non-payment. In order to overcome such problems business models are increasingly looking to differentiate the on-line "shopping malls." (BtoC) As you can see from these five categories, the e-Commerce boom over the Internet is exploding in virtually all sectors, and at the same time measures to reduce risks are being actively considered. Good examples of such risk-reduction systems are the electronic certification system for Government Public Key Infrastructure (GPKI) in the GtoG sector, and the global credit and certification authorities such as Identrus in the BtoB sector. Next, I would like to introduce the e-Business concepts of the Mitsubishi Electric Group companies, as a representative example of the situation among all-purpose electric appliance manufacturers in Japan. Mitsubishi Electric both offers and uses solutions to e-Business. It goes without saying that Internet use is expanding at an explosive pace. This, in turn, requires companies to revise their corporate strategies to a more global perspective. The key is to create an e-Business model that will ensure a market advantage and find and formulate a complementary business process. The most important factor in facilitating this process is the creation of information systems. At Mitsubishi Electric, we consider that there are several factors that are important in any information system in order to facilitate efficient e-Business. These are: (1) the ability to forecast customer demand; Supply Chain Management (SCM), that allows for the implementation of an appropriate delivery response by attaining information about supply companies and production plans, and the reduction of storage costs; and (2) Customer Relationship Management (CRM) through the sensitive handling of previous purchasing trends of the customer to improve service levels. Such information systems can be linked to the consumer, the dealers and the suppliers via the Internet. What is more, in the future it can be expected that all of the following and more besides will be able to link up to this e-opportunity: Authorities providing certification and credit to dealers and suppliers; payment organizations; e-Marketplaces that enable business dealing among a multiplicity of companies; central and local governments in charge of application and certification processes; end-consumers; logistics companies; and convenience stores which can be expected to the site of many product transactions. At the same time, as information systems become increasingly linked to the Internet, the risk increases significantly from the threat of illegal access from external sources. Risk management is therefore also an important concern and requires the creation of an information security infrastructure. This slide introduces the Solution Business of Mitsubishi Electric Group targeting e-Business. As I have mentioned before, the explosive spread of the Internet is making the restructuring of corporate information systems an urgent task. Mitsubishi Electric Group's Solution Business offers the answer to this task with IT-based specialist services for management tasks. I will give a brief explanation of the content of the products and the technology provided with those products and services that the Mitsubishi Electric Group offers. The products and technologies we use in our solution business, focus on information security, including mobile security and electronic certification, using such systems as "MISTY" and "KASUMI" to provide encryption algorithms. In addition, we also focus our solution business on CRM that enables efficient one-to-one marketing, made possible by the use of our exclusive "DIAPRISM" which can classify and analyze large volumes of client data in an instant. As a part of our integrated services, we are also working on the creation of material procurement system and an electronic payment system for e-Commerce. We are also involved in efforts to create systems aimed at e-document exchange, as well as e-application and e-bidding systems, all part of the drive towards e-government. As for outsourcing systems, the Mitsubishi Electric Group offers such services as the Application Service Provider (ASP) and Internet Service Provider (ISP). We also offer hosting services and housing services, implemented through high-speed telecommunications, earthquake-proof facilities, and high-security measures at our Internet Data Center (IDC). It is expected that by FY2003, Mitsubishi Electric Group's market scale in the solution business will amount to 500 billion yen or US$4.5 billion. Now, allow me to move on and introduce corporate activities in e-Commerce in Japan, taking Mitsubishi Electric and its affiliated companies as a prime example. IT, including the Internet is having an enormous effect on business activities. In the future, Internet technology will enable improvements in efficiency and speed in business-to-business tie-ups. Businesses must now aim to provide customer-oriented products and quick, efficient service. At Mitsubishi Electric we have achieved a great deal of cooperation in our sales activities to our wide customer base in all our vital distribution activities, from factory production to parts and resources procurement. We also have an excellent record in vital distribution to customers, agents and retailers. This has been achieved through the introduction of Supply Chain Management (SCM). SCM connects all processes including all those from ordering, procurement, production, logistics in a smooth operation to optimize costs, sales, inventory and production costs. As one of the leading overall electrical and electronic manufacturers, Mitsubishi Electric has created a series of basic SCM patterns for each product group and implements SCM through combinations of patterns and by adding supplementary functions. One example of these SCM functions are measures to respond to differences in production style, including the existence of agencies, production based on orders received, and production forecasts. e-Commerce is being actively used as a means to achieve SCM. At Mitsubishi Electric we have created an e-Commerce system that allows access both by anyone who is connected to the Internet and an Intranet open only to Group companies and within Mitsubishi Electric. Our e-activities include:
As for concrete examples of the status of web utilization in business - including EDI -Mitsubishi Electric Group is already applying this system with in excess of 4000 companies, equivalent to 95% of all orders. I would like to bring this presentation to a close by identifying the primary characteristics and related issues facing e-commerce in the Japanese market for the future. In the United States an estimated 40% of households are now on-line. However, this figure has yet to reach 20% in Japan. While it is true that PC ownership in Japanese households now exceeds 38%, despite this growth the most significant factor by far hindering explosive growth in the Internet and BtoC sector is the high cost of telecommunications. While improvements are being made gradually to address Internet access costs, including changes to telephone charges to the point of access, Internet penetration in the US is still twice that of Japan. On the other hand, over 50% of the Japanese population now own a mobile phone, a penetration rate far above the 30% figure in the US. In the two years to February this year since its introduction in February 1999, i-Mode, the Internet service provided on NTT DoCoMo mobile phones has notched up an astonishing 20 million subscribers. This success shows that the explosive popularity for simple BtoC e-commerce making use of i-Mode-compatible mobile phones, offering services of interest to younger users, such as ticket purchases, horoscopes and music downloads. The 40,000 convenience stores on every street corner around Japan also provide an excellent opportunity for the payment and delivery and pick-up of e-commerce products. It is expected that Japanese customers will take to these convenience stores for their e-commerce needs, since the Japanese consumer in general prefers to buy in cash rather than by credit card , at the same time solving the issue of delivery costs. In Japan, efforts are underway to create a system of e-government, under the leadership of Prime Minister Yoshiro Mori at the head of the IT Strategic Headquarters. In addition, in January this year the IT Basic Law was enacted, and it is expected that the Electronic Signature Law will be enacted in April this year, with the Basic Law on the Protection of Privacy expected to be passed during the current session of the Diet, thus ensuring that a solid legal environment is in place. Moreover, in addition to Japan's stated strategy of aiming for an "e-Japan," or becoming a leading IT country within the space of five years, plans are also afoot between government and industry to support the IT revolution in the Asian region, thus creating an e-Asia. Mitsubishi is participating in the plans to create an e-Asia Marketplace. But many challenges remain. In addition to problems of high telecommunications costs that I have already mentioned, it will be necessary to further relax regulations in order to cultivate new e-commerce businesses and measures are being studied in earnest in the Industrial Structure Council to create a proposal to achieve this aim. The key future challenge is for Japanese enterprises to transform their traditional business practices in order to fully and efficiently apply e-commerce solutions to their day-to-day operations. |
![[ Regional Vitality in the 21st Century ]](../logo128.jpg){kind=logo}