Japan Gold Medalists of Profitability 2022: Winners of Japanese Market’s JPY 96 Trillion ‘Profits war’ –REPORT

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The disruptions across the global economy have exposed flawed strategies running on empty, given that the profitability calculus was missing, confused with flawed valuations or market share. In truth, profitable growth is crucial, but not growth for the sake of growth. If history is any guide, the recent bankruptcies of General Motors and Japan Airlines, with their leading market shares, are classic examples of the consequences of seeking growth at all costs — even at the expense of profitability.

In other words, Japanese firms need to learn from Apple, the most valuable Tech firm. The firm understands that strategy is the game of sustained profitability. For this reason, Apple prioritizes its profit margin and profit share instead of market share. Simply put, profitability is the litmus test of a winning strategy.

Our experience suggests that winning the strategy game means winning the game of the 3Ps of profitability: the profitability of sales (operating profit margin and profit share), the profitability of assets (return on assets), and the profitability of capital through the return on equity, to name a few.

With over ¥96 trillion in ordinary profits, the Japanese market was up for grabs in the fiscal year 2021, ending March 31, 2022. CEOs asked, what is the average profit margin in Industry X and Sector Y? What are the profit margin trends across Industry X and Sector—or the entire country?

These are valid questions that business leaders wanting to improve or win the strategy game need to know. Writing the most authoritative report on this subject matter for the Japanese market is necessary to answer most of these questions.

We know and have helped many of the most profitable firms—Japan’s Gold Medalists of Profitability—but we do not intend to name them; instead, we provide the industries with the highest concentration of medalists. Moreover, many CEOs have privately told us that they need more rigorous benchmarks regarding performance within their industries and sectors, including Japan as a whole. For one, most companies are not publicly listed. Unlike listed firms in Japan, most privately held firms need an authoritative performance assessment benchmark regarding their strategic performance.

This report provides information for public and private companies for strategic assessment against their peers within an industry, a sector, and all industries within the Japanese market for the past five years, focusing on the 2021 fiscal year ending March 31. 2022. This article is derived from the introduction. As such, we scratch the surface of the full 125-page report.

In Japan’s finance and insurance industry, the banking industry has the highest share of the total profits pool. However, the banking industry needs to rethink its strategy in this age of FinTech to beef up its profitability resilience. For one, the status quo is no longer an option in times of gender diversity imperative for Japanese corporations. Our recent research revealed that the largest Japanese companies lagged at the bottom compared to the other 3,812 most prominent firms by market capitalization across the OECD.

The Age of Purpose calls for fairness and dignity in Japanese workplaces. On top of these emerging trends, disruptors actively seek to eat the industry’s lunch. For this reason, to win the game now and in the decades ahead, our latest and most popular strategy white paper provides business leaders with the market-tested winning strategy formula to move from laggards to leaders. Moreover, given the challenges and complexities associated with the Japanese market regarding market entry, in our Japan Special Collection, we highly recommend foreign CEOs to read our popular report: Foreign CEOs in Japan, What Does it Take to Win in the Land of the Rising Sun? and Japan market entry lessons from Apple: what does it take to win in Japan?

Thus, doubling down on digital transformation while building formidable payments and banking ecosystems through interoperability can protect the industry’s profit pool share. Similarly, the life insurance industry has been one of the most resilient across the financial industry—second to only the banking industry.
The insights provided in this report hold many lessons for Japanese and foreign business leaders. Because the economic environment has dramatically changed in recent months. Thus, granular insights from Japan’s competitive landscape based on the most authoritative report to date are a blessing that can catapult organizations to the top.

Please, download the full 125-page report for more insights.