[2017 White Paper on Small Enterprises in Japan]...[2017 White Paper on Small Enterprises in Japan]...

[2017 White Paper on Small Enterprises in Japan]

FY2016 Developments among

Small Enterprises

FY2017 Small Enterprise Policy Measures

Summary

April 2017

Annual Report based on Article 12 of the Basic Act for Promoting Small Enterprises (Statutory White Paper) It is obliged to compile a report on the developments related to small enterprises based on opinions of the

Council for Small and Medium Enterprise Policy and submit it to the Diet every year. This is the third annual report after the enactment of the Basic Act for Promoting Small Enterprises.

Definitions under the Small and Medium-sized Enterprise Basic Act and the Number of Enterprises and Employees

Large enterprises:

Approx. 0.011 million 0.3％

Medium enterprises: Approx. 0.557 million

14.6%

Small enterprises: Approx. 3.252 million

85.1%

SMEs: Approx. 3.809 million

99.7%

[Remarks] “2014 Economic Census for Business Frame” (rearranged and processed)

SMEs Small enterprises

Business type Stated capital or number of employee Number of employees

Manufacturing industry and

others 300 million yen or less 300 or fewer 20 or fewer

Wholesale trade industry 100 million yen or less 100 or fewer 5 or fewer

Service industry 50 million yen or less 100 or fewer 5 or fewer

Retail trade industry 50 million yen or less 50 or fewer 5 or fewer

Number of enterprises

Number of employees

Large enterprises 0.011 million 14.33 million

SMEs 3.809 million 33.61 million

Small enterprises 3.252 million 11.27 million

Basic Act for Promoting Small Enterprises (extract) (Annual Report, etc.) Article 12 (1) The Government must submit a report on the developments related to small enterprises and related measures it has taken to the Diet every year. (2) The Government must prepare a document clarifying measures it intends to take in consideration of the developments compiled in the Annual Report, based on opinions of the Council for Small and Medium Enterprise Policy, and submit it to the Diet every year.

Outline

1

Outline of FY2016 Developments among Small Enterprises (i)

• While SME and small enterprise business conditions are slowly improving, there are ongoing structural challenges including stagnant business entries, slackening productivity, the aging of managers and growing labor shortages.

• Important under such situation is a lifecycle in which innovation takes place through business entries, existing enterprises pursue growth, and projects and business resources (including withdrawing enterprises) are smoothly taken over by the next generation. Labor shortages common to all life stages and other challenges are analyzed.

2

Business succession

Business entries Sales expansion initiatives Succession/M&A Business exit

Start-up stage Growth stage Maturity stage

Human resources (a challenge common to all life stages)

Human resources utilization unique to SMEs

Innovation sources

SME and small enterprise lifecycle (image) Fig

3

Part 1 [Analysis of the Current Status] FY2016 Developments among Small Enterprises

Chapter 1 Current Status of Small Enterprises Chapter 2 SME and Small Enterprise Lifecycle and

Productivity Chapter 3 Current Status of the SME and Small

Enterprise Employment Environment and Labor Shortage

Part 2 [Analysis by Theme] Small Enterprise Lifecycle Chapter 1 Business Entries Chapter 2 Business Succession Chapter 3 Sales Expansion Initiatives

Small Enterprise Policy Measures Taken in FY2016

Chapter 1 Promotion of Demand-based

Business Management

Chapter 2 Promotion of Corporate Metabolism

Chapter 3 Promotion of Business Operations

Contributing to Vitalization of

Regional Economies

Chapter 4 Development of United All-out

Regional Support Arrangements

Chapter 5 Other Small Enterprise Promotion

Measures

Chapter 6 Policy Measures by Business Type

and Area

Outline of FY2016 Developments among Small Enterprises (ii)

【Analysis of the Current Status 1-1】Current Status of Small Enterprises (i)

• Ordinary profits have remained at record-high levels and business confidence has been improving.

4

Fig. 1

Fig. 1: “Financial Statements Statistics of Corporations by Industry (quarterly report)” (Ministry of Finance) (Note) Large enterprises here are enterprises whose stated capital is 1 billion yen or more and SMEs are

those whose stated capital is 10 million yen or more but less than 100 million yen.

Fig, 2: “TANKAN (Short-Term Economic Survey of Enterprises in Japan)” (Bank of Japan) and “Survey of SME Business Conditions” (Small and Medium Enterprise Agency and Organization for Small & Medium Enterprises and Regional Innovation, JAPAN)

(Note) Large enterprises in TANKAN refer to those whose stated capital is 1 billion yen or more, and SMEs are those whose stated capital is 20 million yen or more but less than 100 million yen.

-60

-50

-40

-30

-20

-10

0

10

20

30

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ

07 08 09 10 11 12 13 14 15 16 17

大企業(短観) 中小企業(短観)

中小企業(景況調査) 小規模企業(景況調査) (DI, %p)

Changes in Business Conditions DI Fig. 2

5.3

10.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ Ⅰ Ⅲ

07 08 09 10 11 12 13 14 15 16

中小企業大企業

Changes in Ordinary Profits

SMEs Large enterprises

Large enterprises (TANKAN)

(Trillions yen, fourth-quarter backward moving average)

(Years and quarters)

SMEs (TANKAN)

SMEs (Survey of SME Business Conditions)

Small enterprises (Survey of SME Business Conditions)


【Analysis of the Current Status 1-2】Current Status of Small Enterprises (ii)

• Sales and productivity have been stagnant.

5

Labor Productivity Changes by Enterprise Size

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

大企業中小企業小規模企業 (10,000 yen)

Fig. 1: “Financial Statements Statistics of Corporations by Industry (annually)” (Ministry of Finance) (Note) Large enterprises here are enterprises whose stated capital is 1 billion yen or more, SMEs are

those whose stated capital is 10 million yen or more but less than 100 million yen and small enterprises are those whose stated capital is less than 10 million yen.

Fig. 2 Changes in Sales Fig. 1

Fig. 1: “Financial Statements Statistics of Corporations by Industry (quarterly report)” (Ministry of Finance) (Note) Large enterprises here are enterprises whose stated capital is 1 billion yen or more and SMEs are

those whose stated capital is 10 million yen or more but less than 100 million yen.

126.4

133.0

100

110

120

130

140

150

160

170

I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV

07 08 09 10 11 12 13 14 15 16

中小企業大企業 SMEs Large enterprises (Trillions of yen, fourth-quarter backward moving average)


Large enterprises

Large enterprises SMEs Small

enterprises

SMEs and small enterprises

(Year)

【Analysis of the Current Status 1-3】 Current Status of SMEs and Micro Enterprises (iii) - Business Practice Improvement Initiative - • Ordinary profits of large enterprises have greatly improved, increasing their profitability margin over

SMEs. • To improve such situation, an initiative is being promoted to stabilize and spread appropriate

transactions between subcontractor SMEs and their larger contractors to pave the way for SMEs to raise wages.

6

Fig. 2 Business Practice Improvement Initiative (Seko Plan)

Fig. 1: “Financial Statements Statistics of Corporations by Industry (quarterly report)” (Ministry of Finance) (Note) Large enterprises here are enterprises whose stated capital is 1 billion yen or more and SMEs are those

whose stated capital is 10 million yen or more but less than 100 million yen.

5.2

9.4

0

2

4

6

8

10

12

Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ Ⅳ Ⅰ Ⅱ Ⅲ

07 08 09 10 11 12 13 14 15 16

中小企業大企業

Changes in Ordinary Profits Fig. 1

(i) Clarification and strict implementation of cross-sectoral rules • Increasing the number of violation cases from 66 to 141 by including

“inappropriate cost-cutting activities” and “passing die storage costs to subcontractors”

• Adding “cooperation in improving productivity” and other practices to desirable business practices for larger contractors and their subcontractors

• Larger contractors should make payments to their subcontractors in cash as much as possible and implement other measures to take leadership in improving business practices.

(ii) Development of voluntary action plans by sector, etc. • Of sectors that have developed subcontracting guidelines, the automobile

industry and some other large enterprises were requested to develop and steadily implement voluntary action plans to improve business practices and increase added value. A follow-up to the request has been conducted. At the end of March 2017, 21 groups in eight sectors had developed such plans.

(iii) On-site inspection by business practice investigators

(Subcontracting Supervising Inspectors) • Subcontracting Supervising Inspectors have been deployed to hold more

than 2,000 interviews with subcontractor SMEs annually and use the data from the interviews to improve business practices.

SMEs Large enterprises (Trillions of yen, fourth-quarter backward moving average)


Reducing sizes 0.093

Maintaining sizes 3.0

Expanding sized 0.072

0

0.5

1

1.5

2

2.5

3

3.5

Large-sized entries 0.001

Medium-sized entries 0.111

Small-sized entries 0.546

Large-sized exits

-0.001

Medium-sized exits

-0.099 Small-sized exits

-1.027

▲ 1.6

▲ 1.2

▲ 0.8

▲ 0.4

0.0

0.4

0.8

0.61 0.59 0.55 0.53 0.54 0.51

4.23 4.10 3.78 3.66 3.67 3.34 Small

enterprises 3.25

00.5

11.5

22.5

33.5

44.5

55.5

6

1999 2001 2004 2006 2009 2012 2014

7

【Analysis of the Current Status 2-1】SME Lifecycle and Productivity (i) (Changes in the number of enterprises from business entries and business exits)

Fig. 1 Changes in the Number of Enterprises Fig. 2 Breakdown of business entries and exits (2009-2014)

Fig. 3 Changes in Sizes of Existing Enterprises (2009-2014)

(Note) Enterprises that maintained their sizes unchanged include about 110,000 enterprises that failed to be identified in 2009 and were identified in 2014 due to enterprise split-ups and the improvement of statistical precision and exclude 40,000 enterprises that were identified in 2009 and could no longer be identified in 2014 due to mergers, etc.

From medium to small: 0.092 From large to medium: 0.001

Medium enterprises

0.56

Large enterprises

0.01

From small to medium: 0.071 From medium to large: 0.001

• The total number of enterprises has followed a downward trend, decreasing by 390,000 from 2009 to 2014. Small-sized business exits represent a large portion of this decline.

• This means a decreasing trend for small enterprises and an increasing trend for medium enterprises.

Figs. 1-3: “Economic Census,” “Economic Census for Business Activity” and “Establishment and Enterprise Census” (Ministry of Internal Affairs and Communications) (rearranged and processed)

Existing enterprises: 3.16 million firms

Exits

Entries

(million enterprises)

4.2 3.8

-0.39

(Year)

(million enterprises) +0.6

-1.1

(million enterprises)

5.9

0.6

5.9

3.1

1.3

1.8

-6.2

-0.8

-4.2

-2.8

-1.8

-3.0

-15

-10

-5

0

5

10

15

大企業中規模企業小規模企業

減少大企業減少中規模企業減少小規模企業

1,248

1,289

1,200

1,220

1,240

1,260

1,280

1,300

2009 2014

+41 (+3.3%)

8

【Analysis of the Current Status 2-2】 (Changes in the number of employees from business entry and exit)

• While the overall number of employees remained basically unchanged from 2009 to 2014, employees at medium enterprises increased. Particularly, medium-sized business entries represent a significant contribution to the increase.

• The number of employees per enterprise increased particularly for medium enterprises.

Fig. 1

Fig. 2

Changes in the number of employees

Breakdown of changes in the number of employees (2009-2014)

Fig. 3 Changes in the number of employees by enterprise size

37.9

40.1

36.537.037.538.038.539.039.540.040.5

2009 2014

+2.2 (+5.8%)

3.50 3.46

3.003.103.203.303.403.503.60

2009 2014

48.0 47.9 -0.1

Figs. 1-3: “Economic Census,” “Economic Census for Business Activity” and “Establishment and Enterprise Census” (Ministry of Internal Affairs and Communications) (rearranged and processed)

(i) Large enterprises

(ii) Medium enterprises

(iii) Small enterprises

-0.04 (-0.9%)

(million employees)

(Year)

Large enterprises Medium enterprises Small enterprises (million employees)

Existing enterprises +0.95

Start-up enterprises +5.5

Closed enterprises -6.5

Total -0.1

(Number of employees)

(Year)

(Year)

(Year)



Small Enterprises

12.8

Small Enterprises

11.3

Medium enterprises

20.3

Medium Enterprises

22.3

Large enterprises

14.9

Large Enterprises

14.3

0

10

20

30

40

50

2009 2014

-3.8%

+9.9%

-12.1%

9

【Analysis of the Current Status 2-3】SME and Small Enterprise Lifecycle and Productivity (iii) (Business entry and exit rates by sector in FY2015)

Remarks: “Annual Report on Employment Insurance Services” (Ministry of Health, Labour and Welfare) (Notes) 1. The business entry rate in the Annual Report on Employment Insurance Services is computed by dividing the number of business establishments where employment relationships were established in a fiscal year by the number of business establishments adopting employment

insurance at the end of the previous year. 2. The business exit rate in the Annual Report on Employment Insurance Services is computed by dividing the number of business closings where employment relationships were closed in a fiscal year by the number of business closings adopting employment insurance at the end

of the previous year.

• The status of business entries and exists differs from sector to sector.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0%

(Business exit rate)

(Business entry rate)

Low entry rate High exit rate Average entry rate

for all sectors 5.2％

High entry rate High exit rate

Low entry rate Low exit rate

High entry rate Low exit rate

Average exit rate for all sectors

3.8％ Manufacturing industry

Lodging and food service industries

Life-related service and entertainment industries

Construction industry

Information and communications

industry

Real estate and rental industries

Retail industry

Academic research and special technical service

industry

Other services industries (mixed services, etc.)

Healthcare and welfare

Other industries (mining, electricity, finance, agriculture/forestry/fisheries,

public services, unclassifiable enterprises) Education and

learning support industry

Wholesale industry

Transportation and mail industries

【Analysis of the Current Status 2-4】SME and Small Enterprise Lifecycle and Productivity (iv) (Current status of business exits)

10

• As SME managers are aging, the number of business exits has hit a record high, despite a decline in the number of bankruptcies.

• Enterprises with managers aged 60 or more and 80 or more hit their respective record-high shares of closed enterprises.

Fig. 3

Fig. 2

37.1

34.7

27.3

33.7

6.1 14.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2007 2016

Business exits

49 years old or younger 50-59 years old 60-69 years old

70-79 years old 80 years old or older(%)

(Year)

Ages of managers of closed enterprises

Figs. 2-3: “2016 Business Exit Trend Survey” (Tokyo Shoko Research)

Changes in business exits and bankruptcies

29,583

8,446

0

5,000

10,000

15,000

20,000

25,000

30,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Number of business exits Number of bankruptcies

Fig. 1 Distribution of Ages of Managers of SMEs (by five-year interval)

0

5

10

15

20

25

30歳～ 45歳～ 60歳～ 75歳 Fig.1: “COSMOS2 (corporate information file)” (Teikoku Databank, Ltd.) (rearranged and processed)

(Note) The mode value is the value that occurs most frequently.

1995 Mode value

The largest age cohort of managers shifted from 47 years old to 66 years old in 20 years.

2000

2005 2010

2015

60 years old or older

70.5%


82.4%

(Number of SMEs)

(Year)

(10,000 managers)

30 years old 45 years old 60 years old 75 years old

【Analysis of the Current Status 2-5】SME and Small Enterprise Lifecycle and Productivity (v) (Relationship between Lifecycle and Productivity (i))

11

Exit of high-productivity enterprises

• Influences of each lifecycle element’s trend on SME productivity are analyzed. • While start-up enterprises have boosted productivity, the latest productivity-boosting effect has declined.

Existing enterprises with high productivity have been expanding their share and thus pushing up overall productivity. On the other hand, a decline in existing enterprises’ productivity, and bankruptcies and exits of enterprises with high productivity have pushed down overall productivity.

Breakdown of productivity changes by element Fig. 1

Fig. 1: “FY2016 Analysis of Corporate Metabolism for SMEs” under contract from the Small and Medium Enterprise Agency (Research Institute of Economy, Trade and Industry, December 2016) (Notes) 1. Productivity here refers to total factor productivity, which indicates how overall value added changes when labor and capital change.

2. The business change effect refers to the overall productivity boosting or reducing effect of enterprises’ business changes. 3. Used here are financial data of customer SMEs that the CRD (Credit Risk Database) Association received from its members (credit guarantee associations and financial institutions).

Entry of high-productivity enterprises

Expansion of high-productivity enterprises’ market share

Bankruptcy of high-productivity enterprises

Decline in existing enterprises’ productivity

0.5

▲ 1.0

0.2

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2003-2007 （第１期）

2007-2009 （第２期）

2009-2013 （第３期）

業種転換効果廃業効果倒産効果参入効果

再配分効果内部効果合計 (%)

(Year)

Internal effect Redistribution effect

Bankruptcy effect

Business exit effect

New entry effect Business change effect

Total

11.2%

7.0% 8.3%

5.9%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2003-2007 2009-2013

Positive new entry effect Negative new entry effect(%)

0.3%

0.1%

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

2003-2007 2009-2013

Positive new entry effect Negative new entry effect

TFP growth

(%)

• Approx. 50% of start-up enterprises have raised SME productivity overall. • The trend of raising productivity has recently declined due to a drop in high-productivity start-up enterprises.

12

Fig. 1 Breakdown of new entry effect

Fig. 3 Business entry rate changes (2009-2013)

The gap between business entry rates for high and low productivity enterprises has narrowed.

58％

42％

Fig. 1-2: “FY2016 Analysis of Corporate Metabolism for SMEs” under contract from the Small and Medium Enterprise Agency (Research Institute of Economy, Trade and Industry, December 2016) (Notes) 1. Productivity here refers to total factor productivity, which indicates how overall value added changes when labor and capital change. 2. The business entry rate here refers to start-up enterprises’ share of the total number of enterprises.

54％

46％

Fig. 2 Distribution of new entry enterprises (2009-2013)

【Analysis of the Current Status 2-6】 SME Lifecycle and Productivity (vi) (Relationship between Lifecycle and Productivity (ii))

Shares of the total number of start-up enterprises

Shares of the total number of start-up

enterprises

-0.10

-0.05

0.00

0.05

0.10

0.15

0.200 25 50 75 100

(%, Accumulated enterprise shares)

Positive Negative

50% of positive effect

50% of positive effect

4％ 50％

54%

(%, accumulated new entry effect)

(Year)

【Analysis of the Current Status 2-7】SME and Small Enterprise Lifecycle and Productivity (vii) (Relationship between Lifecycle and Productivity (iii))

13

• Some 50% of closed enterprises have pushed down productivity. Half of closed enterprises, excluding those attributable to mergers and acquisitions and moving overseas, have substantially pushed down productivity.

• Such enterprises feature fewer employees and sales and higher profits than existing enterprises. The share of enterprises that have determined successors to owners is relatively small for closed enterprises, indicating it is important to reduce business exits resulting from successor shortages.

Fig. 2 Distribution of closed enterprises (2009-2013)

Closed enterprises (Negative (i))

50.3％

Closed enterprises (Negative (ii))

0.8％

(Reference) Existing

enterprises

Closed enterprises (pushing up)

48.9％

Number of employees 6.4 94.5 11.2 8.7

Sales 0.19 billion yen 6.59 billion yen 0.34 billion yen 0.09 billion yen

Sales growth 0.55％ 3.54％ 1.4％ -3.8％

Ordinary profit margin 3.93％ 4.95％ 1.9％ -1.1％

Fixed asset growth 1.0％ 8.0％ 3.9％ -0.5％

Share for enterprises that determined

successors to owners 42％ 41.7％ 45％ 40.8％

Breakdown of business exit effect Fig. 1

Average characteristics of closed enterprises (business performance indicators) Fig. 3

Fig. 1-3: “FY2016 Analysis of Corporate Metabolism for SMEs” under contract from the Small and Medium Enterprise Agency (Research Institute of Economy, Trade and Industry, December 2016)

(Note) Productivity here refers to total factor productivity, which indicates how overall value added changes when labor and capital change.

54.8％

Share of the total number of closed

enterprises

44.6％

0.6％

48.9％

50.3％

0.8％

Share of the total number of closed

enterprises

-0.5%

-0.6%

-0.80%

-0.70%

-0.60%

-0.50%

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

2003-2007 2009-2013

Positive business exit effect Negative business exit effect (i)Negative business exit effect (ii) TFP growth

-0.75

-0.50

-0.25

0.00

0.25

0.500 25 50 75 100

Positive Negative

50% of negative effect →Closed enterprises（Negative (i)）

50% of negative effect →Closed enterprises（Negative (ii)）

(％, Accumulated shares) 0.8％

50.3％ 51.1%

(％, Accumulated business exit effect)

【Analysis of Current Status 3-1】Current Status of the SME and Small Enterprise Employment Environment and Labor Shortages (i)

14

▲ 30

▲ 20

▲ 10

0

10

20

30

I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Manufacturing industry Construction industryWholesale industry Retail industryService industry

(DI,%p)


• SMEs have increasingly perceived labor shortages, especially concerning the high ratio of job offers to applicants. Particularly, the number of employees has been decreasing at smaller-sized SMEs. The background factors of such situation are job and wage gaps.

Fig. 2

Fig. 3 Fig. 1

Fig. 4 Changes in the number of employees by employment size

Gap between job offers and applicants by job type Changes in Employee Overcapacity and Insufficiency DI

Fig. 2: “Labor Force Survey” (Ministry of Internal Affairs and Communications)

Surp

lus

Shor

tage

Changes in wages by enterprise size

Surplus Shortage

Fig. 4: “Basic Statistical Survey of Wage Structure” (Ministry of Health, Labour and Welfare) rearranged and processed (Notes) 1. “Regular employees” covered general workers with no specified employment periods until 2004. Since 2005, they have covered

general workers described as “regular employees” by business establishments. 2. Wages represent “regularly paid cash wages” for June every year, covering basic pay, predetermined allowances and overtime money. 3. Enterprises with 299 or fewer permanent employees (99 or fewer permanent employees for wholesale, services, retail and restaurant

industries) are classified as SMEs. The others are large enterprises.

0.2

-13.3

47.3

-1.6

-18.8

-4.3

6.5

-3.0 -5.3

18.1

-8.5 -0.2

-21.5

32.3

-12.1

-37.8

-5.3 -4.5 -5.6 -6.6

9.1

-16.9

-50-40-30-20-10

0102030405060

Managerialjobs

Special/technical

jobs

Clericaljobs

Salesjobs

Servicesjobs

Securityjobs

Productionprocess

jobs

Transportand

machineryoperation

jobs

Constructionand

miningjobs

Transport,cleaning

andpackaging

jobs

Nursingcare

jobs*

2013 average 2016 average

Fig. 1 “Survey of SME Business Conditions” (SME Support, Japan, Small and Medium Enterprise Agency)

Fig. 3: “General Public Employment Placement Conditions” (Ministry of Health, Labour and Welfare) (Notes) 1. Excluding “agriculture/forestry/fisheries jobs” and “unclassifiable jobs”

2. “Nursing care jobs” cover “welfare facility instruction specialists,” “other social welfare specialists,” “domestic helpers” and “nursing care service jobs” extracted from “special/technical jobs” and “services jobs”, based on “Classification of Jobs (2013 Revised Edition)” by the Ministry of Health, Labour and Welfare.

1,735

1,520

1,252

1,634

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1～29 30～99 100～499 500 or more

(Year)

(10,000 employees)

38.4

29.8

24.0

29.0

34.0

39.0

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Large enterprises (Regular employees)SMEs (Regular employees)

(10,000 yen)

(Year)

(10,000 persons)

53.2

48.7

26.9

17.6

19.9

33.7

0% 100%

Women(n=2,791)

Seniors(n=2,684)

Utilizing Considering utilizing Not utilizing or considering utilizing

15.6 27.2 28.5 29.9 33.4

40.4 43.0 44.1 45.9 49.3

24.8 19.0 19.1 18.3 14.9 19.2 10.9 8.3 5.9 2.4

0

20

40

60

80

100

1-4 5-19 20-49 50-299 300 or more

15-34 years old 35-54 years old 55-64 years old 65 years old or older(%)

【Analysis of the Current Status 3-2】 Current Status of the SME Employment Environment and Labor Shortages (ii) (Utilization of various human resources)

• Smaller enterprises utilize more various human resources, including women and seniors. • Many SMEs utilize or consider utilizing various human resources as core employees.

Fig. 1

Figs. 1-2: “2007 Basic Survey of Employment Structure” and “2012 Basic Survey of Employment Structure” (Ministry of Internal Affairs and Communications) Fig. 3 “Survey on Recruitment and Job Retention at SMEs and Micro Enterprises” under contract from the Small and Medium Enterprise Agency (Mizuho Information & Research Institute, November 2016)

Male and female shares of employees by company size (employees)

(2007) (2012)

Fig. 2 Age distribution of employees by company size (employees)

(2012)

Fig. 3 Utilization of various human resources as core workers (SMEs)

15

(2007)

52.5 57.0 60.7 61.4 63.2

47.5 43.0 39.3 38.6 36.8

0

20

40

60

80

100

1-4 5-19 20-49 50-299 300 or more

Males Females(%)

52.8 55.3 59.6 61.2 62.5

47.2 44.7 40.4 38.8 37.5

0

20

40

60

80

100

1-4 5-19 20-49 50-299 300 or more

Males Females(%)

20.2 30.8 32.9 34.9 38.0

38.9 39.8 40.3 41.6 45.3

25.1 20.1 20.2 19.1 14.7 15.8 9.3 6.7 4.5 2.0

0

20

40

60

80

100

1-4 5-19 20-49 50-299 300 or more

15-34 years old 35-54 years old 55-64 years old 65 years old or older(%)

【Analysis by Theme 1-1】Business Entries (i)

Percentages of people indifferent to starting up enterprises (international comparison)

Fig. 1 Percentages of people who are interested in starting up enterprises that actually succeed in starting up those enterprises (international comparison)

Fig. 3

Fig. 3: Prepared by the Small and Medium Enterprise Agency from “International Comparison of Factors Influencing Business Start-up Activities” (Research Institute of Economy, Trade and Industry, March 2016)

• In comparison with other countries, Japan features a lower business entry rate and a larger share of people who are indifferent to starting up enterprises. However, people attempting to start up enterprises in Japan are likelier to actually succeed in starting up those enterprises.

• Increasing public interest in starting up enterprises is important. A key motivator for people to start up enterprises seems to be recommendations from close friends.

16 Figs. 1-2: Prepared by the Small and Medium Enterprise Agency from a report on a FY2013 “Survey on Entrepreneurship” (Venture Enterprise Center, March 2014)

Most frequently cited Second most frequently cited Third most frequently cited

49 years old or

younger

Male (n=961)

Influence of surrounding entrepreneurs and managers

(40.7％)

Failing to do what I want to do at my place of employment

(29.2％)

Future uncertainties and worsened treatment at my

place of employment (27.5％)

Female (n=75)

Recommendations by close friends (33.3％)

Home environment changes (marriage, child delivery, etc.)

(25.3％)


(22.7％)

50-59 years old

Male (n=809)




(28.4％)

Influences of surrounding entrepreneurs and managers

(27.3％)

Female (n=107)


Home environment changes (marriage, child delivery, etc.)

(29.0％)


(23.4％)


Male (n=949)


(25.2％)




Female (n=99)


(30.3％)


Acquisition of licenses or qualifications useful for

business operations (24.2％) Fig. 4: “Survey on Business Entry Realities” under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and

Consulting, November 2016) (Notes) 1. Motivations for entrepreneurs to have interests in starting up enterprises before actually doing so are compiled. 2. Because respondents were allowed to cite multiple motivations, percentage shares may not necessarily add up to 100%.

Recommendations by close friends and the presence of entrepreneurs can become key motivations.

Fig. 2 Fig. 4 Motivations for entrepreneurs to start new enterprises

International comparison of business entry rates

5.2

9.3

14.3

7.3

12.4

0.02.04.06.08.0

10.012.014.016.018.020.0

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Japan U.S. U.K. Germany France(%)

19 20

13 15 9

05

10152025

Japan U.S. U.K. Germany France

(%)

75.8 78.2 72.3

63.9 60.7 64.7 63.5 60.7 62.3

72.3 73.1 77.3

22.9

36.0 30.6

39.2

0

10

20

30

40

50

60

70

80

90

01 02 03 04 05 06 07 08 09 10 11 12

Japan U.S. U.K. Germany France

(Year)

(%)

(Years, fiscal years)

【Analysis by Theme 1-2】Business Entries (ii)

17

• Enterprises aged five to 10 are classified into three types -- high growth, stable growth and sustainable growth. • Services and manufacturing enterprises are dominant among high-growth enterprises. Their managers are young

and indicate effects of entrepreneurial education.

Fig. 1

Fig. 2

Fig. 4

Fig. 3 Growth types after business entry

Fig. 1-4: “Survey on Business Entry Realities” under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 2016) (Note) Growth types are based on quantitative data for this document. As some enterprises fail to be classified into any type depending on their response to the questionnaire, numbers in these types may not necessarily add up to the overall number.

Entrepreneurs’ age distribution by growth type

Details of entrepreneurial education at school by growth type

Industries’ shares by growth type

(Note) The data cover respondents who cited specific courses at elementary schools, junior high schools, senior high schools, technical colleges, vocational schools, junior colleges, universities or graduate schools.

25.4

22.1

35.6

25.2

13.8

10.0

24.5

16.5

10.8

12.4

6.1

8.7

10.0

12.1

3.6

9.4

8.1

7.9

8.1

10.2

8.0

7.6

8.1

11.8

7.5

8.3

6.6

3.1

16.2

19.8

7.4

15.0

0% 100%

All SMEs(n=3,184)

High growth type(n=127)

Stable growth type(n=740)

Sustainable growth type(n=2,216)

Services industry (excluding healthcare and welfare service industries)Healthcare and welfareManufacturing industryConstruction industryWholesale industryRetail industryInformation and communications industryOther industries

7.5

15.5

9.7

6.1

26.4

31.8

31.7

24.1

30.4

26.4

29.2

31.4

27.1

20.2

21.9

29.3

8.6

6.2

7.4

9.1

0% 100%

Overall(n=3,191)

High growth type(n=129)

Stable growth type(n=729)

Sustainable growth type(n=2,174)

39 years old or younger 40-49 years old 50-59 years old60-69 years old 70 years old or older

13.6 14.4 12.8

8.8

4.8 7.2

14.7

11.3

7.7

3.9 3.0 2.4

14.3

9.7 8.3

3.3 2.7 2.7

0

3

6

9

12

15

Learningaccounting and

financialknowledge

Reading bookson entrepreneurs

Workplaceexperiences atenterprises or

shops

Leadershipeducation

Participation in entrepreneurs’

lecture and exchange meetings

Participation inenterpriseinternship

High growth type (n=124～126) Stable growth type (n=691～713) Sustainable growth type (n=2,038～2,092)

(%)

17.9 23.2 25.4 24.2 26.4

33.5 27.6

36.8 37.6

05

10152025303540

従業員顧客・販売先技術やノウハウ

高成長型企業(n=123～126) 安定成長型企業(n=705～707) 持続成長型企業(n=2,089～2,113)

(%)

【Analysis by Theme 1-3】Business Entries (iii) • Small enterprises account for 80% of sustainable-growth enterprises and tend to take over customers,

technology and other business resources from other businesses such as closed enterprises more frequently than enterprises belonging to other growth types.

• Small enterprises’ challenges include fundraising in the start-up stage and human resources management, particularly concerning how to secure successors, in the stable growth stage.

Fig. 1

Fig. 2

Fig. 3

Fig. 4

Sustainable growth enterprises’ challenges in each growth stage

Sustainable-growth enterprises’ takeover of business resources upon start-up

Sustainable-growth enterprises take over business resources more frequently than others.

Sustainable-growth enterprises’ fundraising methods in the start-up stage

Human resources required by sustainable-growth enterprises in each growth stage

Figs 1-4: “Survey on Business Entry Realities” under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 2016)

Needs for loans are great in the start-up stage.

59.2

39.9

26.6 19.7

5.0

26.5 25.2

46.5

12.6

43.2

31.3

16.7

32.4 28.3 32.4

9.2

53.8

29.1 32.7

29.2 23.5

0

10

20

30

40

50

60

70

資金調達家族の理解･協力

質の高い人材の確保

量的な労働力の確保

企業の成長に応じた組織体制の見直し

販路開拓･マーケティング

自社の宣伝･PR

創業期(n=1,895) 成長初期(n=1,878) 安定・拡大期(n=1,809) (%)

42.7 39.1

24.1 19.6 17.6 15.8

49.3 45.8

24.2 22.1 23.5 21.0

50.3 47.3

26.9 23.5 29.8

51.9

0

10

20

30

40

50

60

経営者の右腕人材

営業･販売人材財務･会計人材内部管理人材経営企画人材後継者候補人材

創業期(n=1,421) 成長初期(n=1,636) 安定・拡大期(n=1,712) (%)

Share of enterprises taking over business resources from stakeholders involving previous job holders, closed enterprises, etc.

High-growth enterprises (n=123~126)

Employees Customers and sales destinations

Technology and knowhow

Stable-growth enterprises (n=705~707)

Sustainable-growth enterprises (n=2,089~2,113)

Challenges involving sales channel exploration

Challenges involving recruitment

Challenges involving fundraising

Start-up stage (n=1,895) Initial growth stage (n=1,878) Stabilization or expansion stage (n=1,809)

Fundraising Family members’

understanding and cooperation

Securing high-quality human

resources

Securing labor in significant

quantities

Reorganization responding to

enterprise growth

Sales channel exploration and

marketing

Enterprise advertisement

and public relations

(Note) The five most frequently cited items are listed for fundraising methods that enterprises used and those that enterprises wanted to use.

Most frequently cited

Second most frequently cited

Third most frequently cited

Fourth most frequently cited

Fifth most frequently cited

Fundraising methods

used in the start-up stage (n=1,956)

Enterprise managers’ own

funds (80.2%)

Loans from private financial

institutions (34.9%)

Loans from family members,

relatives, acquaintances,

etc. (34.0%)

Loans from government

financial institutions

(25.2%)

Using public subsidies (8.9%)

Fundraising methods that enterprises wanted to use

in the start-up stage (n=391)

Loans from private financial

institutions (48.8%)

Loans from government

financial institutions

(48.6%)

Using public subsidies (43.5%)

Investment from venture capital

firms, investment

partnerships, funds, etc. (38.6%)

Investment from individual investors (36.1%)

Close aides to managers

Start-up stage (n=1,421)

Initial growth stage (n=1,636)

Stabilization or expansion stage (n=1,712)

Marketing and sales personnel

Finance and accounting personnel

Internal managers

Business planners

Successor candidates

18

50.2 43.8

26.1 22.6 15.4

10.5 7.6

32.0

53.0

24.4

37.3

15.5 12.6 7.3 6.9

55.3

21.9

38.6

13.5 12.3 6.9

0

10

20

30

40

50

60

Familymembers,relatives,friends,

acquaintances,in-house

directors andemployees

Taxaccountants,

certified publicaccountants,

SMEmanagementconsultants,

businessconsultants

Entrepreneurs,managers,

trading partnerswith whom

frequent contactis made

Private financialinstitutions

Commerce andindustry

associations orchambers

Governmentfinancial

institutions

National/localgovernment and

other publicsupport

organizations

Start-up stage (n=1,764) Initial growth stage (n=1,711)Stabilization or expansion stage (n=1,533)

(%)

【Analysis by Theme 1-4】Business Entries (iv) • Consultants for sustainable-growth enterprises shift from relatives to financial institutions and others subject to

frequent contacts as they go to higher stages. Receiving support from business contacts and business partners leads to smooth business operations.

19

【Specific case】 Little Pianist (Ryugasaki City, Ibaraki Prefecture)

Successful business start-up using the Comprehensive Support Center Launching production and marketing of

the world’s first special piano shoes

Little Pianist in Ryugasaki, Ibaraki Prefecture, started up in April 2014 and developed special piano shoes for production and marketing.

The representative had been a regular employee at a game production company before leaving the company upon her marriage. While engaging in childcare after a child delivery, she found that her daughter had difficulties in pedaling a piano during her piano performance. Then, she developed special piano shoes on her own, acquired a patent on the shoes and decided to start up a business.

While the business idea was innovative, she had no knowledge or knowhow regarding business and management, including how to start up a business. Then, she took counsel from Comprehensive Support Centers in Ibaraki and Tokyo. Receiving total support from the bases for

Consultants for sustainable-growth enterprises in each growth stage Fig. 1

Fig. 1: “Survey on Business Entry Realities” under contract from the Small and Medium Enterprise Agency (Mitsubishi UFJ Research and Consulting, November 2016)

• The Act on Strengthening Industrial Competitiveness includes a scheme to promote regional business start-up.

• Municipal governments develop “start-up support plans” for national government approval and cooperate with start-up supporters in providing specific start-up support.

• As of December 2016, 1,275 of Japan’s 1,742 municipal governments had developed start-up support plans, covering 95% of Japan’s population.

Fig. 2 Start-up Support Plan Approval System under the Act on Strengthening Industrial Competitiveness

Little Pianist Representative Kurachi and special piano shoes

the preparation of a business plan, subsidy application procedures, coordination with an outsourcing destination, sales outsourcing contracts, advertisement methods and other matters, she successfully started up a business.

After the start-up, the piano shoes were covered by a television program, leading Little Pianist to successfully secure sales channels including the largest Japanese music instrument retailer and expand earnings smoothly.

41.0 40.3

28.4

20.1

29.9 27.8

35.1

28.9

0

10

20

30

40

50

Failure to findconsultants for looking

for successorcandidates

Failure to secure timefor looking for

successor candidates

Resistance to non-family succession

Failure to find out howto look for successor

candidates

Small enterprises (n=134) Self-employed business operators (n=97)(%)

Non-family business

succession 4.9

Family business

succession 95.1

(n=978)

Non-family business

succession 9.7

Family business succession

90.3

(n=1,214)

54.1

38.6

27.1

22.4

29.5

25.1

23.5

32.0

47.8

0% 100%

Employees limited to managers’ relatives (n=170)

Employees who are managers’ relatives are more numerous than

other employees (n=241)

Employees that are not managers’ relatives are more

numerous (n=435)

The same buildings are used for personal houses and factories, shops and offices

Personal houses are separated from buildings for factories, shops or offices even if they are at the same sites

Personal houses are located at different sites from buildings for factories, shops and offices

Non-family

directors [値]

Non-family

employees [値]

Outside people [値]

(n=48)

Non-family directors

23.1

Non-family employees

64.6

Outside people 12.3

(n=118)

【Analysis by Theme 2-1】Business Succession (i)

20

• Family succession is dominant among small enterprises. • Some small enterprise owners resist non-family succession apparently due to their failure to separate business

assets from personal assets.

Fig. 1

Fig. 3

Fig. 2

Successors have

been determin

ed 48.3

There are

successor

candidates

17.2

There are no

successor

candidates, or

successors have

not be …

(n=1,518)

Successor selection conditions

Successor selection conditions and present status of non-family succession (small enterprises and self-employed business operators)

(2) Self-employed business operators

(1) Small enterprises

Successors have

been determin

ed 47.8

There are

successor

candidates

22.4

There are no

successor

candidates, or

successors have

not be …

(n=1,760)

Breakdown of non-family business succession cases

Successor selection conditions

Share of family business succession

Share of family business succession

Breakdown of non-family business succession cases

Separation of managers’ or their relatives’ business real estate from their personal houses by employment mix (small enterprises)

Reasons for failure to find successor candidates (small enterprises)

Figs. 1-3: “Questionnaire Survey on Business Succession” under contract from the Small and Medium Enterprise Agency (Tokyo Shoko Research, November 2016)

29.1 25.2

15.9 13.2 11.9 11.3 11.3

41.5

15.5 13.6

2.6

23.8

6.6 5.1

05

1015202530354045

Coveringcost of

living aftertheir

business exit

Clearingdebt

includingloans

Localvitality

losses atshopping

streets

Livelihoodmaintenancefor directors

andemployees

Purpose forliving after

business exit

Adverseeffects onbusiness

operationsof tradingpartners

Failure toraise moneyrequired forbusiness exit

(includingfacility

removal)

Small enterprises (n=151) Self-employed business operators (n=530)

(％)

【Analysis by Theme 2-2】Business Succession (ii)

21

• While many small enterprises see business closures as the only option, the challenges for corporate enterprises are very different from those for self-employed business operators.

• While some small enterprises are willing to sell their business operations and assets with the closure of their business, appropriate buyers are difficult to find. Matching services that respond to these needs are necessary.

Fig. 1

Fig. 2

Fig. 3

Fig. 4 Possible business closure problems (small corporations and self-employed business operators)

4.6

4.5

21.7

11.9

53.9

58.8

19.7

24.9

0% 100%

Small enterprises(n=152)

Self-employedbusinessoperators(n=531)

Willing to sell them Willing to sell them if possible

No idea Unwilling to sell them

Sale of business operations and assets upon business closure (small enterprises)

45.0 45.1 42.1

22.2 20.3

61.2

49.6

9.4

18.0 24.1

0

10

20

30

40

50

60

70

Commerce and industryassociations or

chambers

Relatives,friends/acquaintances

Certified publicaccountants or tax

accountants serving asadvisers

Correspondent financialinstitutions

Other managers

Small enterprises (n=111～131） Self-employed business operators (n=359～466) (％)

Consultants for small enterprise operators planning business closures

M&A consideration and business closure planning (small corporations and self-employed business operators)

Self-employed business operators tend to be concerned about their livelihood, purposes for living, etc. after their business closures

Figs. 1-4: “Questionnaire Survey on Business Succession” under contract from the Small and Medium Enterprise Agency (Tokyo Shoko Research, November 2016)

(1) Share of enterprises planning business closures

2.1

7.9

26.0

0

5

10

15

20

25

30

Mediumcorporations

(n=4,170)

Smallcorporations

(n=1,920)

Self-employedbusinessoperators(n=2,057)

(%)

(2) Enterprises Considering M&A

1.2 0.6

18.1

9.8

0

5

10

15

20

25

Small corporationshaving no successor

candidates(n=508)

Self-employed businessoperators having nosuccessor candidates

(n=510)

We may accept M&A deals tocontinue business operations

We are considering or have decidedon M&A deals

(%)

【Analysis by Theme 2-3】Business Succession (iii)

【Specific case】 Matsunaga Ceramics Shop (Namie Town, Fukushima Prefecture)

Reopened Matsunaga Pottery

Overcoming business suspension on the Great East Japan Earthquake,

resuming traditional business Exploring new sales channels upon business succession

The present representative of Matsunaga Ceramics Shop was born at a pottery for Obori Soma Ware, a traditional craft product in Namie Town, Fukushima Prefecture. He is the fourth head of the pottery.

Namie, where the pottery was located, was designated as a difficult-to-return zone due to the Great East Japan Earthquake, forcing 25 Obori Soma Ware potteries to be closed with the business suspended.

As Obori Soma Ware cannot be made without glaze from Toyamaishi stones from Namie Town, it was difficult to resume the business. Recommended by the present representative and trading partners, the previous representative, though having a negative attitude about the business resumption, developed a substitute material with help from the Fukushima prefectural government and resumed the business in Saigo Village.

The present representative decided to succeed to the business in a strong attempt to uphold the local tradition and lead more consumers to understand the excellence of Obori Soma Ware.

【Specific case】 Maruyama Shoten (Daisen Town, Saihaku County, Tottori Prefecture)

A scene at a signing ceremony for the business transfer agreement

A small enterprise owner took over goods, brands and customers from

a self-employed business operator lacking a successor.

Maruyama Shoten was an individual business operator producing and selling asa-zuke young pickles. Its representative failed to find a successor among relatives and employees while feeling that he would have difficulties in maintaining business operations.

The Maruyama Shoten representative proposed a business transfer to the Fukushima Shoten president, a pickle producer. They had remained acquainted with each other for a decade. They reached broad agreement on the transfer and made consultations with the Tottori Prefecture business succession support center through a regional financial institution.

Although it was difficult to set a transfer price in the absence of specific pricing methods for this kind of individual business operator, the business succession support center mediated the transfer, resulting in smooth coordination.

As a result, the business transfer to Fukushima Shoten was concluded, leading Fukushima Shoten to maintain the employment of Maruyama Shoten’s owner and its seven employees and take over asa-zuke knowhow, product brands and customers from Maruyama.

The previous Maruyama Shoten representative says: “It was difficult for me alone to make a decision on the transfer. I was able to relax thanks to the support.”

22

While the present representative’s father, who is his predecessor, has been in charge of production, the present representative has started up a sales enterprise, focusing on the joint development of new products with designers and the exploration of new sales channels including overseas channels.

Fukushima Shoten says it successfully acquired Maruyama Shoten’s brands and sales channels outside the prefecture amid a decline in demand within the prefecture and wants to take advantage of the acquisition for future business development.

30.6

37.4

32.5

37.4

44.2

13.1

44.2

40.1

43.9

41.0

32.6

46.5

25.1

22.5

23.6

21.5

23.3

40.4

0% 20% 40% 60% 80% 100%

Initiatives to enhancerelations with business

territories and customers(n=2,633)

New market explorationinitiatives (n=1,577)

New product developmentinitiatives (n=1,418)

Diversification initiatives(n=1,411)

Business switchinginitiatives (n=43)

No particular initiatives(n=245)

Increasing Unchanged Decreasing

41.5

30.2 31.7 24.9

20.3

7.3

16.1

39.8

29.9

20.9 23.2 23.6

6.0

18.7

0

10

20

30

40

50

Required costsare high

There is littletime for PRactivities or

improvement ofpublicity

Lackingpersonnel whohas necessarytechnology or

knowhow

There is no timefor assessing,verifying orimproving

implementedinitiatives

Regionalmagazines,media or

informationtechnology havefailed to be used

effectively

There is noappropriateconsultant

Nothingparticular

Corporations (n=1,926)Self-employed business operators (n=2,275)

(%)

61.0 52.9 50.7 50.5

41.1 47.3 48.4 48.4 44.0

29.7 38.4 33.3

27.1

38.4 29.4

0

20

40

60

80

Obtainment of newcustomers

Increased repeatcustomers

Increasedenterprise publicity

Increased sales Increased profits

Implementing PR activities and efforts to find needs and strengths (n=2,326)Implementing PR activities alone (n=91)No implementation (n=177)

(%) 44.6

51.4

21.4 20.5 17.4

41.6 29.0

24.4 20.1 21.5

0102030405060

Exploration of newbusiness territories,customers and sales

channels

Recruitment Strengthening ofrelationships withexisting business

territories,customers and sales

channels

Development ofnew products or

services

Public relationsactivities forproducts orservices and

improvement ofenterprise publicity

Corporations (n=1,926)Self-employed business operators (n=2,275)

(%)

【Analysis by Theme 3-1】Sales Expansion Initiatives (i) • Small enterprises’ earnings are stagnant, facing new sales channel exploration and recruitment challenges. • Enterprises that strive to find needs and their own strengths in coordination with public relations activities when

implementing sales expansion initiatives (including new market exploration, new product development, diversification and business switching) feel strong effects of their efforts but face a labor shortage challenge.

23

Fig. 1

Fig. 2

Fig. 3

Fig. 4

Business challenges recently growing important

Figs. 1-4: “Survey on Small Enterprises’ Earnings Improvement Initiatives” under contract from the Small and Medium Enterprise Agency (Nomura Research Institute, December 2016)

Relationship between “sales expansion initiatives” and actual sales

Effects of “sales expansion initiatives” by marketing operation conditions

PR activity challenges Costs and labor shortages are challenges for public relations activities.

It is advantageous for small enterprises to find market needs and their own strengths in line with public relations activities in implementing “sales expansion initiatives.”

【Analysis by Theme 3-2】Sales Expansion Initiatives (ii)

【Specific case】 Saga Cardboard Firm (Arita Town, Saga Prefecture)

A firm selling traditional crafts in a high-price market through 'only-one' product development

The firm produces and markets cardboard boxes and packaging

materials for packing Arita ware products. It also produces and markets Arita ware products. While the market for traditional Arita ware has shrunk year by year, the firm has tried to develop new Arita ware products under two self-imposed missions -- (1) demonstrating the beauty of Arita ware to the world and (2) reviving the Arita region economy.

President Ishikawa, when being sick in bed, was attracted by the beauty of kaleidoscopes and conceived the idea of making kaleidoscopes with Arita ware. However, it was technically difficult to combine precision-requiring kaleidoscopes with Arita ware. In 2003, the firm launched a research panel on Arita Porcelain Scope (brand name of kaleidoscopes) to solve the problem. Experts concentrated their wisdom to successfully develop Arita Porcelain Scope.

In the same year, the firm exhibited Arita Porcelain Scope at an annual kaleidoscope society convention in the United States and got high ratings on the graceful industrial art of Arita Porcelain Scope, receiving inquiries from overseas department stores. As Japanese department stores heard the overseas reputation of the product, sales destinations in Japan increased. In one year from the launch of the product, the firm achieved 130 million yen in sales.

【Specific case】 Tajima Technica Co. (Yoshinogawa City, Tokushima Prefecture)

A small enterprise that has established a new brand by adding B to C business to its traditional B to B business for business diversification

Tajima Technica is a foam slicing and laminating enterprise. Focusing

attention on ethylene-vinyl acetate materials used for shock absorbers and sandal soles, the firm has produced and sold tablet cases, accessory cases and other sundry goods taking advantage of EVA materials’ softness and durability.

The firm had focused on processing EVA materials at the request of a footwear maker. As the footwear maker launched overseas production, Tajima Technica felt that new business development would be required.

After concentrating on business customers, the firm was then considering making general consumers new customers. In a bid to develop new products using EVA materials that the firm had handled traditionally, it began to produce and sell tablet cases and accessory cases taking advantage of EVA materials’ shock-absorbing characteristics.

Tajima Technica has energetically collaborated with designers introduced by a support organization, utilized subsidies and exhibited products at trade fairs, successfully boosting its publicity and getting new customers. Particularly, the firm has been adopted for a Tokushima Prefecture support program, improving its brand power substantially.

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After the exhibition, the firm developed Arita ware products one after another. Finding that Japanese arts are accepted by wealthy people around the world, the president has collaborated with domestic and foreign brands for fountain pens, watches and other high-priced products to develop ‘only-one’ products with high value added.

Tajima Technica hopes to expand B to C business sales to some 50% of total sales.

26.8 24.5 22.9

18.5

10.7 6.5 8.5 7.0

4.2 7.7

2.8 1.4 0

10

20

30

Promotion ofovertime workreduction andleave systems

Considerationsgiven to theworkplace

environment andhuman relations

Reduction of workvolume and

burdens on humanresources underworking hours

constraints

Collection of employees’

opinions through in-house study

meetings, proposal presentation contests, etc.

Development ofresting rooms and

other hardware

Securingconsulting

arrangements forrequest-based

personnel location

Utilizing women and seniors (n=384)Not utilizing women or seniors, not considering doing so (n=142)(%)

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• Small enterprises growingly feel labor shortages. Workplace environment improvement, the utilization of various human resources including women and seniors and outsourcing are effective for responding to labor shortages.

【Analysis by Theme 3-3】Sales Expansion Initiatives (iii)

Fig. 1

Fig. 2

Fig. 3

Fig. 4

58.2 51.2 54.2 36.0 41.3 40.4

22.9 18.8 15.8

25.9 18.4 17.1

0

10

20

30

40

50

60

70

80

90

Increasing(n=153)

Unchanged(n=293)

Decreasing(n=253)

Increasing(n=139)

Unchanged(n=283)

Decreasing(n=245)

Women Seniors

Utilizing Considering utilizing(％)

Utilization of women and seniors by latest sales trend

Fig. 1-2: “Survey on Recruitment and Job Retention at SMEs and Micro Enterprises” under contract from the Small and Medium Enterprise Agency (Mizuho Information & Research Institute, November 2016)

Workplace environment improvement initiatives at enterprises utilizing women and seniors and at those not doing so

25.0

15.0

9.4

26.7

16.3

17.2

48.3

68.8

73.4

0% 100%

Sales increasing despite laborshortages (n=60)

Sales remaining unchanged due tolabor shortages (n=80)

Sales decreasing due to laborshortages (n=64)

Utilizing outsourcingNot utilizing outsourcing but considering doing so in the futureNot utilizing outsourcing or considering doing so in the future

Labor-short enterprises’ outsourcing conditions by latest sales trend

17.8 16.8 15.9 15.0

4.7 2.8

49.5

40.7

14.3

31.4

16.4 9.3

12.9 15.0

0

10

20

30

40

50

60

Cost-effectiveness ofoutsourcing is

unknown

As areas foroutsourcing arelimited, effectswill be small

Appropriateoutsourcingdestinationscannot be

found

Concern overleaks of

technology,knowhow,classified

information,etc.

Time would beconsumed for

revisingbusiness

processes andin-house rules

Areas foroutsourcing are

unknown

No particularchallenge

Using outsourcing (n=107) Considering using outsourcing (n=140)(%)

Outsourcing-related challenges for outsourcing users and others

26

【Analysis by Theme 3-4】Sales Expansion Initiatives (iv)

【Specific case】 Sugioka Textile Co. (Takashima City, Shiga Prefecture)

An enterprise promoting capital investment and information technology to improve productivity and the workplace environment

Sugioka Textile Co. is a 62-year-old enterprise producing and marketing cotton fabric under the regional brand of “Takashima Chijimi.” In 2014, President Sadahiro Sugioka took over the business from his father who was the president. With a sense of crisis that the firm’s business could face difficulties if continuing to do the same operations as in the past, he has implemented new initiatives while collecting information on customer needs and subsidies since before the takeover.

For example, the current president installed equipment according to specific purposes in order to produce goods reflecting customer needs for quick delivery. In 2016, he took advantage of the Small and Medium Enterprise Agency’s new manufacturing, commerce and service development support subsidy program to install a high-performance design system. The system has allowed the firm to improve value added to goods and ease the work burden on employees, substantially reducing overtime work that used to continue late into the night.

The firm has improved sales and paperwork operations as well as manufacturing. In 2012, it launched sales to end users via the Internet, paving the way for employees to directly receive consumers’ opinions and improve their motivations. While handwritten vouchers and pay

【Specific case】 YPP (Chuo Ward, Tokyo)

An enterprise that takes advantage of leisure time to support labor-short enterprises

YPP Co. is an enterprise providing outsourcing services for accounting, taking and making orders, wage computation and other operations. It matches SMEs and self-employed business operators unable to hire clerical workers with registered members who face workplace, working hour and other constraints due to childcare, nursing care and other reasons but are willing to take advantage of leisure time to work for short periods.

The firm has organized teams of registered members that respond to members’ sudden absences attributable to family-related reasons, allowing members to work primarily at home. It gives priority to work sharing, enabling members to work flexibly without being solely responsible for deadlines. To secure smooth job performance, the firm makes manuals for outsourced operations and provides coordination and follow-up services for customers and registered members.

The firm’s outsourcing services allow customer enterprises to enable employees to focus on core operations. Customers can cover labor shortages resulting from clerical employees’ sudden resignation and continue business operations until replacement workers are found. Customers thus enjoy various advantages.

President Noriko Gomibuchi President

Sadahiro Sugioka

statements were still dominant in the traditional local industry, Sugioka Textile took the initiative in 2006 to computerize paperwork, easing the work burden on clerical employees. Furthermore, the firm introduced cloud accounting in 2015 to positively promote the improvement of clerical efficiency.

These initiatives have improved the workplace environment and productivity and led to new capital investment and overseas expansion, resulting in a virtuous cycle.

Among the registered members are women trying to become pregnant, adjustment disorder sufferers and other persons who have difficulties in performing full-time services. They can gain income while improving their work skills and avoid isolation from society, says President Gomibuchi. Some registered members have gradually increased working hours and earned more than 200,000 yen per month despite working from home. Others were recruited as full-time employees before leaving YPP Co.

[Awareness] 3.81 million SMEs nationwide: in particular 3.25 million micro businesses, which account for approx. 85% thereof, are engaging in business activities while taking advantage of characteristics of respective regions and providing employment opportunities in response to local needs, and are playing an extremely significant role through their contribution to the stabilization of regional economies, improvement of daily living of local residents, and promotion of exchanges among them. In June 2014, the Basic Act for Promoting Small Enterprises and the Act for Partial Amendment of the Act on Supporting Small Business by Commerce and Industry Association and Chamber of Commerce and Industry were enacted. The former positions "sustainable development of business" as one of the basic principles, in addition to "growth" as prescribed in the Small and Medium-sized Enterprise Basic Act, and aims to directly support micro businesses maintaining employment and striving in local communities. [Key points] In order to effectively implement measures targeting micro businesses, efforts will focus on the following four goals, which were set in the Basic Plan for the Promotion of Small Enterprises formulated and approved by the Cabinet in October 2014 based on the Basic Act for Promoting Small Enterprises.

(1) Promotion of Management with an Eye on Demand (2) Promotion of Regeneration of Institutions (3) Promotion of Business Activities that Contribute to the Revitalization of Regional Economies (4) Enhancement of Support Systems through Region-wide Collective Efforts

[Structure]

Chapter 1: Promotion of Management with an Eye on Demand Chapter 2: Promotion of Regeneration of Institutions Chapter 3: Promotion of Business Activities that Contribute to the Revitalization of Regional Economies Chapter 4: Enhancement of Support Systems through Region-wide Collective Efforts Chapter 5: Other Measures for the Promotion of Small Enterprises Chapter 6: Measures by Business Type and Sector

Outline of the Measures Targeting Small Enterprises Taken in FY2017

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