View source for Sogo shosha

{{short description|Japanese general trading companies}}
{{italic title}}
{| class="wikitable sortable floatright"
|+ Seven major ''sōgō shōsha'' (billions of yen)<ref>{{Cite web |title=会社四季報オンライン｜株式投資・銘柄研究のバイブル |url=https://shikiho.toyokeizai.net/news/0/672076 |access-date=2024-06-02 |website=shikiho.toyokeizai.net}}</ref>
|-
! scope="col" | Name
! scope="col" | Earnings<br />(FY 2023)
! scope="col" | Market capitalisation<br />(May. 2024)
|-
|[[Mitsubishi Corporation|Mitsubishi]]
|1,181
|13,803
|-
|[[Mitsui & Co.|Mitsui]]
|1,130
|12,064
|-
|[[Itochu]]
|801
|11,744
|-
|[[Sumitomo Corporation|Sumitomo]]
| 566
|4,991
|-
|[[Marubeni]]
|543
|5,129
|-
|[[Toyota Tsusho]]
|284
|3,377
|-
|[[Sojitz]]
|111
|923
|}
{{Nihongo|'''''Sogo shosha'''''|総合商社|'''sōgō shōsha'''|or '''general trading companies'''}} are [[Japan]]ese wholesale companies that trade in a wide range of products and materials. In addition to acting as intermediaries, ''sōgō shōsha'' also engage in logistics, plant development and other services, as well as international resource exploration. Unlike trading companies in other countries, which are generally specialized in certain types of products, ''sōgō shōsha'' have extremely diversified business lines, in which respect the business model is unique to Japan.<ref>{{cite web|title=総合商社|url=http://kotobank.jp/word/%E7%B7%8F%E5%90%88%E5%95%86%E7%A4%BE|publisher=Kotobank|accessdate=21 April 2014}}</ref>

The structure of ''sōgō shōsha'' can give them advantages in international trade. First, they have extensive risk management capabilities in that they trade in many markets, keep balances in many foreign currencies and can generate captive supply and demand for their own operations. They also have large-scale in-house market information systems which give them [[economies of scale]] in pursuing new business opportunities. Their vast scale also allows them to provide capital in the form of credit, financing and export services at low cost.<ref name="dziubla">{{cite web|last=Dziubla|first=Robert|title=International Trading Companies: Building On The Japanese Model|url=http://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1123&context=njilb|publisher=Northwestern Journal of International Law & Business|accessdate=21 April 2014|year=1982}}</ref> Mitsui CEO Masami Iijima described general trading companies as similar to investment funds such as [[private equity]] funds, but distinguished by their ability to identify and implement business opportunities in various industries using the information and human resources gleaned from their trading business.<ref>{{cite news|last1=Fukase|first1=Atsuko|title=Mitsui Remains Focused on Resources|url=https://www.wsj.com/articles/mitsui-remains-focused-on-resources-1422653403|accessdate=5 June 2015|work=The Wall Street Journal|date=30 January 2015}}</ref>

Sōgō shōsha are among the highest-paying employers in Japan.<ref>{{cite news|title=総合商社絶好調！三菱商事1412万、物産、住商は －年収＆生涯賃金2012【商社・卸売】|url=http://president.jp/articles/-/8728|accessdate=21 April 2014|newspaper=President|date=15 October 2012}}</ref> Along with financial institutions, these companies have consistently been ranked among the most popular employers for the graduates of top Japanese universities for over thirty years due to their high compensation levels, employment stability and the diversity of opportunities available to prospective employees, of which has made the recruitment process highly competitive.<ref>{{cite news|title=就職人気ランキング、実は30年前と「変わらない」 安定、高給の金融、総合商社が上位占める|url=http://www.j-cast.com/2014/03/23199508.html?p=all|accessdate=21 April 2014|newspaper=J-Cast News|date=23 March 2014}}</ref><ref>{{cite web | url=https://toyokeizai.net/articles/-/408368 | title=｢入社が難しい有名企業｣ランキングTop200社 &#124; 就職四季報プラスワン | date=30 January 2021 }}</ref>

==Historical background==
After the [[opening of Japan]] in the mid-1800s, trade between Japan and the outside world was initially dominated by foreign merchants and traders from Western countries. As Japan modernized, a number of existing family-run conglomerates known as ''[[zaibatsu]]'' (most notably [[Mitsubishi]] and [[Mitsui]]) developed captive trading companies to coordinate production, transportation and financing between the various enterprises within the group. A number of smaller and more specialized Japanese firms, particularly in the cotton supply industry, also took on a larger role in acting as intermediaries for foreign trade, initially in importing raw cotton and later in exporting finished products.<ref name="dziubla" /> These companies were characterized by handling a variety of products, targeting various regions for their trading, establishing modern institutionalized risk management methods for their trading, and making substantial investments in domestic industrial operations.<ref name="tanaka">{{cite web|last=Tanaka|first=Takayuki|title=Research on SOGO SHOSHA: Origins, Establishment, and Development|url=http://www.jftc.or.jp/publications/assets/pdf/2012_03_en.pdf|publisher=Japan Foreign Trade Council|accessdate=18 April 2014}}</ref>

After [[World War II]], foreign trade was briefly suspended and the ''zaibatsu'' were dismantled. The powerful trading arms of Mitsui and Mitsubishi were each dissolved into over a hundred smaller businesses.<ref name="dziubla" /> When trade resumed in 1950, the first diversified trading companies emerged as [[Kansai region]]-based textile traders (most notably [[Itochu]], [[Marubeni]], [[Toyota Tsusho|Toyo Cotton]] and [[Nissho Iwai|Nichimen]]) and steel traders (most notably Iwai and Nissho, which later merged to form [[Nissho Iwai]]) diversified into new business lines. The remnants of the Mitsubishi and Mitsui ''zaibatsu'' also coalesced in the 1950s to form new large-scale trading concerns.<ref name="nippon">{{cite news|last=田中|first=隆之|date=14 September 2012|title=業績好調、日本の総合商社 どこから来たか、何者か、どこへ行くか|newspaper=Nippon.com|url=http://www.nippon.com/ja/currents/d00041/|accessdate=21 April 2014}}</ref> The term ''sōgō shōsha'' came into use around 1955 to refer to this broad set of firms, which by 1960 had coalesced into ten large and highly diversified companies:<ref name="tanaka" />

*[[Ataka & Co.]] (collapsed in 1977; iron and steel arm merged with C. Itoh)
*C. Itoh & Co. (now [[Itochu]])
*[[Kanematsu Corporation]] (recharacterized as a specialized trading company in 1999)<ref name="unctad">{{cite web|title=NEW ROLE FOR JAPAN´S SOGO SHOSHA AS THEY SHIFT FROM MANUFACTURING TO SERVICES|url=http://unctad.org/en/pages/PressReleaseArchive.aspx?ReferenceDocId=5720|publisher=United Nations Conference on Trade and Development|accessdate=18 April 2014}}</ref> 
*[[Marubeni]]
*[[Mitsubishi Corporation]]
*[[Mitsui & Co.]]
*Nichimen (now [[Sojitz]])
*Nissho Iwai (now [[Sojitz]])
*[[Sumitomo Corporation]]
*[[Toyota Tsusho Corporation]]

''Sōgō shōsha'' became a core component of the postwar "''[[keiretsu]]''" business model, in which large commercial banks played a central role in each major ''keiretsu'' with a ''sōgō shōsha'' playing a secondary central role that diminished over time.<ref>{{cite web|last=Lincoln|first=James R.|title=Whither the Keiretsu, Japan's Business Networks? How Were They Structured? What Did They Do? Why Are They Gone?|url=http://www.irle.berkeley.edu/workingpapers/188-09.pdf|publisher=Institute for Research on Labor and Employment Working Paper Series|accessdate=21 April 2014}}</ref>

Until the 1980s, ''sōgō shōsha'' operations were largely concentrated on supporting Japanese manufacturers' international transactions, particularly in the textile and chemical industries. Since then, Japanese manufacturers have taken a more direct role in international procurement, sales and marketing, and the ''sōgō shōsha'' have shifted their business focus to services such as finance, insurance, transportation, project management and real estate development, with much of this business conducted outside Japan through local subsidiaries and affiliates.<ref name="unctad" />

The collapse of the [[Japanese asset price bubble]] in the early 1990s led to a wave of mergers and reorganizations among ''sōgō shōsha'', reducing their total number to seven.<ref name="nippon" />

{{Gallery
|title=Headquarters of major ''sōgō shōsha''
|width=160 | height=170 |align=center
|File:2024 Mitsubishi Corporation Building (2).jpg| Mitsubishi<br />(Marunouchi, Tokyo)
|File:Mitsui & Co. Headquarters Building.jpg| Mitsui<br />(Otemachi, Tokyo)
|File:Ito-Chu-Tokyo-Head-Office-02.jpg| Itochu<br />(Aoyama, Tokyo)
|File:Otemachi Place W.jpg| Sumitomo<br />(Harumi, Tokyo)
}}

==Parallels in other countries==
''Sōgō shōsha'' developed in Japan as a result of several factors unique to Japan.<ref name="JT pro-sogo">{{cite news |last1=Ryan |first1=Patrick |title=Reflecting the nation's history, 'sōgō shōsha' are unique to Japan |url=https://www.japantimes.co.jp/news/2018/10/16/business/reflecting-nations-history-sogo-shosha-unique-japan/#.XMVmDWllA0N |accessdate=28 April 2019 |work=[[The Japan Times Online]] |issue=BUSINESS{{!}} INSIDER REPORT [2 of 12 on ''sōgō shōsha''] |publisher=The Japan Times, Ltd. |date=16 October 2018 |location=[[Chiyoda City]], [[Tokyo]], Japan |language=en |quote=The sōgō shōsha‘s organization and business model is unique to Japan. This is, for the most part, because they are a reflection of Japan’s own unique economic development, first during the Meiji Restoration’s period of rapid industrialization and commercialization aimed at building a strong military in the latter half of the 19th century and then in the intensive rebuilding of Japan’s infrastructure and industry in the aftermath of World War II eventually leading to Japan’s transformation as an economic superpower. Impossible to imitate The sōgō shōsha emerged in the post-WWII period as very large entities both in size and scope. They are extremely diversified, not only in terms of their range of products and services but industry-wise and geographically. Needless to say, they are very difficult to imitate. The first sōgō shōsha initially appeared more than 140 years ago and developed sophisticated multi-faceted functions and expertise over the ensuing years. These functions are rooted in Japan’s raw-material import — value-added export trading model as well as in the sōgō shōsha’s multi-industry upstream-downstream supply chains. In truth, it is virtually impossible to build these types of large-scale trading intermediary organizations from scratch. To this day, the closest thing the rest of the world has to the sōgō shōsha are the trading firms of such Korean chaebol, or conglomerates, as Samsung, Hyundai and others. However, they are much smaller and specialized in scope than the Japanese sōgō shōsha. Little known outside Japan In 1996, all nine sōgō shōsha could be found in the top 40 of the Global Fortune 500 with five of the first six spots on the list being held by sōgō shōsha.... — Patrick Ryan is a[[industry analyst|senior analyst engaged in global industry research]] in the Marubeni Research Institute, the research arm of [[Marubeni Corp.]] He has previously worked in International[[human resources|HR [Human Resources]]] and International Corporate Strategies for Marubeni.}}</ref> Japan's geographical remoteness and unique language and culture all served to increase the costs of information and negotiation. Its [[sakoku|closure from the outside world for over 200 years]] meant that trade had to be developed in a very short period of time relative to Europe, where networks could naturally develop over a longer period of time. Japan also lacked effective capital markets to fund companies, and its industrial base was largely composed of [[cottage industry]] enterprises that could not market on their own, in contrast to the larger firms prevalent in the West.<ref name="dziubla" />

The [[chaebol]] of [[South Korea]] followed a similar path of developing trading companies in the mid-1970s.<ref name="tanaka" />
Similar conglomerate type organizations exist in India such as the [[Reliance Group]] and [[Tata Group]].

The [[United States]] also attempted to emulate the business model to promote exports in the early 1980s by enacting the Export Trading Company Act of 1982.

At the time the law was debated, Mitsui & Co. was the sixth-largest exporter from the United States, and sogo shosha accounted for about half of Japan's inbound and outbound trade.<ref name="dziubla" />

==See also==
* [[Oguri Kozukenosuke]]
* [[CoBank]]
* {{section link|Export credit agency#List of export credit agencies}}

==References==
{{reflist}}

==External links==
{{Wiktionary}}
*[https://www.jftc.or.jp/english/research/handbook Explanation of Shosha by Japan Foreign Trade Council, Inc.]
{{Economy of Japan}}
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[[Category:Economy of Japan]]
[[Category:Trading companies established in the 19th century]]
[[Category:Trading companies of Japan|*]]