Purva Gaur, Director, Fine Equipments India Pvt Ltd

The “SOGO SHOSHA” approach – Will it survive?

In Japan, the manufacturing firms usually let their sales in other countries be handled by trading houses. A single trading house in Japan deals in a wide range of products in several countries. These firms are called “ Sogo Shosha” (general trading companies). Mitsui, Marubeni, Mitsubishi, etc are a few of them. While the manufacturing firm did what it was best at – produce quality products, the top line was taken care of by the trading house. Trading companies, big and small exist in every economy and have played a major role in making products available across all markets. These have helped in the wonderful phenomenon of globalization.

Tech know-how for manufacturing is no longer a privilege of few economies or companies. The ever increasing competition has led to a major price war and a decreased profit margin. Not to forget the immense pressure on margins due to increase in raw material costs, logistic costs, man power costs etc. To make things worse, the incremental prices cannot be passed on to the customers in most of the cases. It has become a lose-lose situation for both the manufacturing firm as well as the trading houses. The fading communication barriers and entry barriers and information availability has actually made traders obsolete in many cases. What is the way out? Will the manufacturing firms now start dealing directly with customers? Will this lead to the withering of the trading houses ? Or will they all survive ? 

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