Risk Management and Business Strategy of Mitsubishi Corporation

Abstract

A GTC or Sogo Shosha in Japanese is a unique business that only exists in Korea and Japan. Japanese GTCs used to be trading companies whose profits mainly come from trading commission. However, from 1990s, they transformed into investing companies. Among those GTCs, Mitsubishi Corporation used to be a top Japanese General Trading Companies (below GTCs) until 2015. However, suddenly net profit of Mitsubishi Corporation plummeted in March, 2016, and recorded first and worst deficit ever. From these facts, two interesting questions comes up. First, what made Mitsubishi Corporation so prosperous until 2015? Second, what made that prosperous company to suddenly plummet in 2016? The answer for the first question can be found in the business strategy of Mitsubishi Corporation. Mitsubishi Corporation has four main strategies that has been developing since its establishment

the diversification of business division or items, the diversification of functions, aggressive overseas expansion and the completion of value chains. Each strategy is adopted during respective periods, or in 3 different stages in this research. The important point is that all these strategies were made in the course of adaptation to the external environment. To look deeply into the backgrounds of this strategy development, this research deals with the whole business history of Mitsubishi Corporation from the very beginning. Despite these overwhelming strategies, Mitsubishi Corporation had constantly showed its weakness in risk management. This research has found out 3 different loopholes in the companys risk management system. Firstly, Mitsubishi Corporation showed that it lacks holistic view in risk management especially during the dissolution period in 1945. Second, it lacked the capability to deal with non-financial risks. Thirdly and lastly, the company needs long term perspective in risk management. These loopholes must be partial, which means there is a high possibility that Mitsubishi Corporation need to complement its risk management system more firmly and thoroughly.