Essay on Events That Occured When Hokuetsu Paper had to defend itself from a Hostile Takeover Bid by Oji Paper

Essay on Events That Occured When Hokuetsu Paper had to defend itself from a Hostile Takeover Bid by Oji Paper

What were some of the strengths Hokuetsu Paper demonstrated in this effort? Why did they work?
A key strength demonstrated by Hokuetsu Paper, in defending itself from a hostile takeover bid by Oji Paper, was its ability to formulate and implement a strategic communication plan in a timely manner that included all of its shareholders and stakeholders. Hokuetsu Paper was able to gain the support of the local and business communities by demonstrating the value of keeping Hokuetsu Paper independent. The communication plan was successful because it was concise, culturally conscious and integrated with the legal and financial aspects of the defense. The Niigata community as well as Japanese culture value harmony, relationships, and collectivism. By hiring the communication advisory firm, Media Gain, Hokuetsu Paper was able to ensure their messages were effectively distributed and interpreted; which proved to be invaluable in their efforts.

What were some of the drawbacks deployed by both companies? What could have been done differently?

Oji Paper and Hokuetsu Paper both experienced drawbacks that could have altered the outcome if handled differently. Collectively, Oji Paper and Hokuetsu Paper experienced setbacks in understanding the business styles enacted by the other. Oji Paper is a global entity and transactions are more westernized, whereas Hokuetsu Paper, a local venture, prefers traditional Japanese business tactics. These differences in styles lead to misunderstandings, which shaped the outcome of the takeover bid. Key drawbacks deployed by Oji Paper were bad communication strategies, and failure in conducting a western business with a company that maintains the country´s tradition of doing business based on consensus and negotiation. Hokuetsu Paper failed to understand the severity of Oji Paper’s intention, to become the fifth largest paper mill in the world with the acquisition of Hokuetsu Paper, and was forced to be reactive once hostile measures were implemented. The misinterpretation of what constitutes formal versus informal business transactions was also an issue faced by both companies, since Oji Paper took the conversations with Hokuetsu Paper as formal, and Hokuetsu Paper claimed that there were just informal discussions.

Detrimental to Oji Paper’s tender offer, was its lack of a strategic communications plan that was culturally sensitive. The goal of Oji Paper was to acquire Hokuetsu Paper to fortify its competitiveness in the international market through a merger and acquisition activity. However, Oji Paper failed to consider the desires of Hokuetsu Paper to remain independent, and the affect this has on the business environment in Niigata. Had this been a consideration, Oji Paper might have preconceived the reaction of the community, and implemented this in their plan. Ultimately, Oji Paper would have benefited by hiring a Public Relations firm, and approaching strategically the community, Hokuetsu´s employees and shareholders directly to absolve any fears or doubt, as well as understand their aspirations. Also, acquisition and merger always attract Media´s attention, even more when it is made between two big companies. Hence the importance of hiring a PR agency when this type of business starts. For instance, when Oji Paper president, Shinoda refused to receive the letter by Hokuetsu´s executives, in Niigata, and it was aired by local TV camera and repeatedly on national news programs, the Oji Paper´s image was affected. Therefore, a Public Relations agency would be very important here. Firstly, because if the PR agency had been hired before all this process happened, this situation could have been avoided. Secondly, because if the situation had already happened, the PR agency would have helped fix it properly.

Overall, Oji Paper could have done many things differently, starting with a well developed plan for its aim, since it was a modern step in a country where hostile takeover is not usual. They should have included in its plan many different steps, such as doing a research on the target company, understanding their principles and the parts evolved, and speculate Hokuetsu´s intention with Mitsubishi. Also be advised by a financial and lawyers advisors, so they could be more prepared to move on with its M&A action, which was not the preference way to deal with other companies in Japan. These few steps would have avoided many problems, such as the way of approach, which actually helped Hokuetsu Paper to be prepared and establish a well-developed takeover defense measure, culminating to the Oji Paper´s failure in the acquisition of Hokuetsu Paper.

Hokuetsu Paper did not understand that Oji Paper was really willing to do the acquisition even if it was not in a harmony manner. The fact that Hokuetsu´s President &CEO, Miwa had long been acquainted with Oji Paper´s Chairman, Suzuki let the executives make a little confusion that they could have informal discussions without taking the objectives of each one very seriously. Therefore, Hokuetsu Paper started to take attitudes against the hostile takeover a bit late and it could be done differently. Since Hokuetsu Paper values the communication with shareholders for survival, the company should have alerted them much earlier about Oji´s intentions and that everything would stay the same, i.e. the company would keep being independent, and tell them about the agreement with Mitsubishi, since it was a certain step.

Even though Hokuetsu Paper was successful defending itself from the hostile takeover, it was a defense. It means that the company could avoid all this noise around this business process, if have taken advance attitudes to prevent the entire situation that divided the industry and brought challenges to Hokuetsu Paper . The company managed all things well, but they could have failed. The majority of shareholders could have accepted Oji Paper´s proposal, or Mitsubishi could have stepped back on the agreement. Thus, Hokuetsu Paper could have worked in a well prepared action in advance.

What other challenge (s) should Hokuetsu Paper have been expecting? Were those issues addressed in a culturally sensitive manner? If so, how and why?

Japanese traditions and their collectivist culture are important considerations when evaluating the outcome of this merger attempt and the possible challenges Hokuetsu Paper could have faced. For one, had Oji Paper acted in a more "westernized" manner, as Shinoda expressed, the allocation of stock to Mitsubishi could have been blocked, essentially halting a key component of Hokuetsu’s defense, and ultimate success. However, in an attempt to “keep the harmony”” Oji Paper gave Hokuetsu Paper three weeks prior notice before they made an official proposal for the merger. Assuming the company had not provided Hokuetsu Paper that courtesy, they most likely would not have had the time to privately allocate those shares to Mitsubishi. As previously stated, Oji paper’s lack of a sound communication plan, was a weakness that Hokuetsu was able to capitalize on; however had Oji been able to gain support of their mission, there was no mention of Hokuetsu’s reactive strategy.

An article in Financial Times by Mariko Sanchanta reported that the merging of Oji Paper and Hokuetsu Paper would be in violation of Japan's anti-monopoly law. This, along with Hokuetsu’s superb reputation for their community involvement, proved beneficial in the defense against the hostile takeover.

Considering that most for profit companies live in an era of greater continuing scrutiny with a heightened probability of litigation, how should Hokuetsu Paper proceed in the future in its message strategy?

The analytical approach taken by Media Gain, was proven to be a success. Hokuetsu Paper should continue to maintain this message strategy while establishing a more robust communications approach. Media Gain’s experience in dealing with (insert their experience here) helped Hokuetsu Paper thrive within the ever-changing business environment, while identifying the most important factors by establishing the key measures.

It was important that this message strategy would be acceptable to the Niigata community and that it made sense to the other players in the industry.
The message strategy increased understanding of media necessary to achieve the business goals. This solution enabled Hokuetsu to build positive relationships with media, reassure clients and stakeholders about Hokuetsu Paper strengths and future directions. This also assisted in maximizing business opportunities through improved corporate images.
The photo opportunity played a vital role in the development of this occurrence, as a communication strategy it was a great move because the message to the media was so robust, that when the opportunity arose, the media showed an alliance with Hokuetsu Paper .

Kazuo Nishimaya, author of the book Doing Business with Japan, points out the social changes that occurred under the slogan, Civilization and Enlightenment (bunmeikaika). The Japanese began to imitate Western customs and social behavior. However, to retain national pride and a sense of inferiority in the midst of massive foreign borrowing, the Japanese used another slogan, Japanese Spirit, Western Technology (wakon yōsai). It reminded the Japanese that retaining a Japanese spirit at heart was necessary for any successful adoption of Western technology.

References:
Silveira. A.D.M (2006). Revista Capital Aberto. September, 2006, from http://www.capitalaberto.com.br/ler_artigo.php?pag=2&i=570&sec=13
Fabricantes de Papel do Japão Estudam Megafusões (2006). Retrieved August 3, 2006, from http://www.ipcdigital.com/br/Noticias/Japao/Fabricantes-de-papel-do-Japa...
Research Institute of Economy, Trade & Industry, IAA (RIETI). (2006, November 26). Analysing the Role of M&As for Japanese Companies. Retrieved November 26, 2006, from
http://www.rieti.go.jp/en/rieti_report/076.html