What’s Behind the 4 Copper Companies Joining Forces?
A restructuring of Japan’s domestic copper industry is underway. News reports indicate that four major companies are joining forces and moving toward jointly operating their businesses. The goal is to boost production efficiency in response to growing demand from electric vehicles and renewable energy.
Looking at this news through the lens of “reversible management” reveals an interesting structure. Collaborations and joint ventures between competitors are often seen as difficult to reverse once started. However, this case contains several design elements that leave room for a “way back.”
The Trap of Collaboration Lies in Its “Irreversibility”
Many executives compare collaborations and partnerships to “marriage.” This is because there’s an unspoken assumption that once you start, you can’t easily back out. Indeed, collaborations involving capital investment, staffing, and contractual relationships often proceed without a clear exit strategy.
I myself have experience establishing and running a corporation in Malaysia. When entering the market, I made it a rule to “also decide on the conditions for withdrawal at the same time,” which many executives found strange. I was told, “Talking about withdrawal before you even start?”
However, this “reversible design” later proved to be hugely significant. It allowed for a relatively smooth decision to withdraw in response to changing market conditions. The same thinking can be applied to the copper industry restructuring.
Three Conditions for a “Reversible Collaboration”
Condition 1: Set an Evaluation Period from the Start
Establish an evaluation period in advance to judge the success or failure of the collaboration. Setting a deadline, such as “review after three years” or “decide whether to continue or dissolve after five years,” prevents forced continuation.
The copper market is subject to volatile demand. Prerequisites like EV adoption rates, renewable energy deployment, and infrastructure demand in emerging economies can change dramatically. Starting a collaboration without setting an evaluation period can lead to a cycle of “let’s wait and see a little longer,” eventually trapping you in an irreversible state.
Condition 2: Decide on Asset Division Rules in Advance
The most difficult aspect of reversing a collaboration is dealing with assets. If a factory is built jointly, the costs of dissolution—demolition, personnel reassignment, and managing supplier relationships—can be substantial.
The key here is to establish “asset division rules for dissolution” at the start of the collaboration. Who takes what? How are liabilities shared? What happens to employees? Reaching an agreement on these points beforehand allows for withdrawal decisions without psychological resistance.
Condition 3: Expand the Scope of Collaboration Gradually
Instead of aiming for full integration all at once, start with a limited scope, such as specific processes or regions. For example, test the collaboration in a restricted area, like joint procurement of raw materials or production outsourcing for specific products.
In the copper industry restructuring, rather than integrating all processes from the start, starting with just the smelting process or factories in a specific region can increase reversibility. This allows the collaboration to function as an “experiment”: expand if successful, return to the original state if not.
Turning the Shift from Competition to Collaboration into an Opportunity
Many SME owners worry about collaborations, fearing “losing control” or “having their technology stolen.” These are valid concerns. However, starting a collaboration with a “reversible design” can significantly mitigate these risks.
On the contrary, collaboration is an effective option for large-scale investments that are difficult to handle alone or for improving responsiveness to demand fluctuations. The copper industry restructuring is a strategic decision to enhance the competitiveness of the entire sector, but SMEs can apply the same concept on a smaller scale.
The Courage to Set Exit Terms First
Collaboration contracts usually include a “termination clause.” However, in many cases, it’s vague, like “in the event of unavoidable circumstances.” This means that when it’s time to actually decide on withdrawal, no one wants to admit the circumstances are “unavoidable,” leading to delayed decisions.
In “reversible management,” exit terms are specified concretely. For example, set objective numerical criteria like “if sales fall below 80% of the plan,” “if the market shrinks by 10% year-on-year,” or “if three or more key customers exit the business.”
This enables rational decision-making, free from emotion or pride. One can only hope that such specific exit terms are being set in the copper industry restructuring as well.
Summary
The business restructuring of Japan’s four major copper companies marks a major turning point from competition to collaboration. Rather than viewing this simply as industry reorganization, we can learn from it as a design for “reversible collaboration.”
When considering a collaboration or partnership, check the following three points:
- Is an evaluation period set?
- Are asset division rules decided?
- Can it proceed in stages?
If these conditions are met, collaboration becomes a “reversible management decision” that even SMEs can actively use as a strategy. Think about the exit before you start. That is the key to long-term business stability.
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