Transferring the pharmaceuticals business to the Sumitomo Pharmaceuticals joint venture (1984)

Where to place a business that selling power alone cannot hold

At the centre of this decision is a line drawn between businesses that can be won on distribution strength and businesses that cannot. Inabata’s pharmaceuticals arm fielded more than two hundred medical representatives nationwide — a sales organisation large enough that the industry spoke of the company as a “maker.” Yet it was president Inabata Katsuo himself who said, in a 1982 lecture, that the gap was about to open decisively between makers with the power to develop new drugs and those without. The difficulty of a trading house with no development function continuing to handle only sales in a market decided by development was seen earliest by the person running it.

The manner of letting go was not a simple sale either. Setting up a company jointly with Sumitomo Chemical and moving the business into it was a way of withdrawing from direct operation without severing a relationship the two firms had run as one body for decades. Inabata left even the equity-method stake in 2005, and pharmaceuticals became wholly external. Forty years on, synthetic resins and electronics account for nearly 80% of consolidated revenue, and the space vacated in 1984 has been filled by other goods. Even a business with a strong sales network is let go once the structure of the supply side changes — a pattern of judgment that specialist chemicals traders face again and again.