Future of the Internet Companies in Japan
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1 Future of the Internet Companies in Japan Based on the study of Bit Valley Fujitsu Research Institute Kou Yukawa fri.fujitsu.com
2 Clusters and IT industry 1. Business Environment of IT Industry IT Revolution Internet Revolution Generating New Types of Businesses Urging Existing Industry s Organizational Change IT Industry=Vendor of Internet-related Technologies and Services have to adapt the speed of business more quickly than other industries 2. Advantage of Clusters The distribution of information inside the cluster speeds up. The quality and quantity of information are enhanced. The frequency of product innovation increases.
3 Clusters and Internet Companies Nature of Internet Business Talent The necessity of different types of human resources Speed The necessity of speedy response to changes in business Companies like: Flexible organization Face-to-face communication and collaboration Informal networks Clusters offer: Environment in which various specialists can easily come into contact with each other based on the proximity of companies
4 Clustering Process of Internet Companies Flexible Organizational Format Cluster Promotion of Outsourcing /Alliance Funds Internet Companies Concent -ration Networks of Personal Contacts Community Brand Urban Environment for Internet Companies Increase of the Concentration Coordinator s Development of Networks Encouragement of Startups Human Resources
5 Concentration Status of Internet Companies (1) Internet Companies in Tokyo s 23 Wards Source: FRI Nerima 11 Itabash i 6 Nakano Suginami Setagaya 56 Kita 13 Toshima 60 Bunkyo 44 Shinjuku 148 Chiyoda 190 Shibuya 295 Meguro 45 Shinagawa 67 Ota 15 Minato 311 Adachi 3 Arakaw a 8 Taito 44 Chuo 117 Sumida 15 Koto 25 Katsushika 4 Edogawa 9 There are 1,541 Internet companies in Tokyo's 23 wards. About 69% of Internet companies in Tokyo's 23 wards are located in central five wards. About 39% of Internet companies are concentrated in Minato and Shibuya wards.
6 Concentration Status of Internet Companies (2) Areas and Degree of Concentration in 5 Central Wards Shinjuku Ward Ochiai/Nakai Hatsudai/Hatagaya 26 Shibuya Ward Shinjuku 77 migaya 7 Okubo 6 Takadanobaba/ Waseda 14 Harajuku/Yoyogi 62 Shibuya 121 Azabu 32 Chiyoda Ward Kanda 96 Iidabashi/ Kudan 27 Chuo Ward Yotsuya Imperial Palace Otemachi/ 25 Bancho Marunouchi Nihombashi Aoyama 69 Ichigaya/ Kagurazaka 22 Ebisu/Hiro-o 79 Akasaka/ Roppongi 95 Kasumigaseki/ Nagatacho 3 Shimbashi/ Toranomon 43 Ginza 17 Shinkawa/ Tsukiji 40 Of the 1,061 companies located in the five wards, 503 companies are concentrated in the specific areas in Minato Ward and Shibuya ward. Shirokane/ Mita 21 Shiba/ Hamamatsucho 51 Minato Ward Source:FRI
7 Concentration Status of Internet Companies (3) Urban Environment Conceivable Urban Environment for Internet Companies Social Amenities for Yong Generations Affordable Spaces Artists Educational Institutions Existing Industries as Clients and as Source of Human Resources A View from Shibuya Station
8 Formulation of Communities Formulation of Internet Business Community History:From 1994 Background of Formulation: The number of Internet companies was limited They ware operated in Tokyo The potential of the Internet was still unknown Role of Community Exchange of Information and Acquisition of Human Resources
9 Community Evolving into BrandCommunity Evolving into Brand (1) Flexible Organizational Format Cluster Promotion of Outsourcing /Alliance Funds Internet Companies Concent -ration Networks of Personal Contacts Community Brand Urban Environment for Internet Companies Increase of the Concentration Coordinator s Development of Networks Encouragement of Startups Human Resources
10 Community Evolving into Brand (2) Background of Evolution Internet business gained greater recognition Participants reached critical mass Businesses Bit Valley Brand Generated Cafeglobe.com (Online Community for Female) FreeML.com (Mailing List Service Provider)
11 Decline of the Brand The Gap Between the Actual Status and Brand -Expansion of Community without substance The Collapse of the Internet Bubble -Plunge in stock prices Incapacity of Coordinators -Suspension of Community Activities Community Increase of the Concentration Cluster Promotion of Outsourcing /Alliance Brand Funds Encouragement of Startups Human Resources
12 Current Community 1 The Most Effective Recruitment Methods Minato and Shibuya wards Others 7.0% Other wards Others 6.8% Direct contact from job seekers 4.0% Recruitment through newspaper advertiseme nts and the Internet 44.5% Referral by acquaintanc es and people in the same trade 44.5% Direct contact from job seekers 5.6% Recruitment through newspaper advertiseme nts and the Internet 50.9% Referral by acquaintanc es and people in the same trade 36.6% Source:FRI
13 Current Community 2 Selecting Contractors for Outsourcing Minato and Shibuya wards Sales contact from contractors 5.6% Look up their business contents in newspapers, on the Internet, etc. 7.3% Others 2.8% Referral by acquaintanc es and people in the same trade 84.4% Sales contact from contractors 7.2% Look up their business contents in newspapers, on the Internet, etc. 12.3% Other wards Others 4.3% Referral by acquaintanc es and people in the same trade 76.1% Source:FRI
14 Current Bit Valley BVA s New Activities Seminars, Study Meetings CEO Gathering 2000/12 Parties exclusively for CEOs Large companies advancing into the vicinity of Shibuya NTT Electronics NTT Communications HIS (Travel agency) MasterCard, etc. Challenge Restructuring of Community with Substance by making large companies involved
15 Current Situation of Internet Companies About 10% of Companies are Shutdown Other statistics on shutdown rate Information Service Industry 8.6% M&A 2.7% Ministry of Economy, Trade and Industry annual rate, Software related IT industry 13.2% Ministry of Land, Infrastructure and Transport 2002, Tokyo Area All Establishments 5.9% Ministry of Public Management, Home Affairs, Post and Telecommunications annual rate Shutdown 10.4% IPO 3.1%
16 Policy Options Governments: Supporting Coordinators, Supporting Branding Companies: Development of the organizational form and corporate culture that enables collaboration with others as an insider of the community Flexible Organizational Format Internet Companies Concent -ration Urban Environment for Internet Companies Networks of Personal Contacts Community Increase of the Concentration Cluster Promotion of Outsourcing /Alliance Coordinator s Development of Networks Brand Funds Encouragement of Startups Human Resources
17 Current Study
18 Research Questions 1. How is the business condition of Internet Companies in Japan after the collapse of Internet Bubble? In terms of sales, profits and employment situation 2. How is the current condition of the cluster of Internet Companies in Japan? In terms of concentration and community 3. Is there any relationship between the business condition and the cluster (community)? - Fact-finding Survey + Economic Analysis -
19 Definition of Internet Company Infrastructure Network-related Technology ISP Server Rental / Hosting / Registry / Domain Acquisition Internet Data Center Intermediary Intermediary on the Internet (Online brokerages, Online travel Agencies, etc. Content providers, aggregators Internet Advertising / Marketing / Research Community site management Market Palace / Online Mall Consulting (Official Statistics) (HP Design, Planning) Development Online Shopping in general Software, Database and * Mostly, EC of Information goods Contents (Software, Music etc.) ASP Application Internet-related related Services Electronic Commerce Applied correspondingly the framework of Measuring the Internet Economy (Cisco Systems, University of Texas)
20 Target Company of this Research 1. Internet Company 2. Own their own Homepage 3. Established after Situated Head Quarters in 23 ward area of Tokyo - Firm level Analysis ( not establishment level )
21 Data Collection: Business Content Current Status of the Company (IPO, M&A, etc.) Year of Establishment, History Number of Employees VC Investment, etc. Survey Method Construction of Original Database: Data Entry from Company Info of Each company s Homepage NTT Telephone Directory 12,407 Existing DB, Internet Directory about 2,300 Literature Review Books,Magazines, Mail-magazines, etc. Existing FRI s Internet Company DB 1,541 Company Search Verification of Business Content by HP Extraction of Company Construction of Original Database
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