C・rpo蝋e Gr・w出and Organizati・na1 Cllange
一ACase Study一 Shinobu Muramatsu
Table of Contents
1． History and Development of Ryu companies………1 History prior to 1962
History after 1962
2． 1962Long Range Planlling and Ryu env三rollmenレ・・………10 3。 Organization of Ryu Departmcm S重ore in 1962………19 4． Organization of Ryu Group in 1968 …………・・一…………26
The altelnation of Financial Managers Organization of Ryu Headquarters
Organization of Ryu Department Store in 1968 Organization of Ryu Super Chain
5． Some thoughts on Ryu Group organizations ………44 ．
@ ρ
1． 1ノ∬7101〜y孟∠V1）1）五津ZEL O1）ルfEIV 7¶OF 1〜yσ
The chairman Yoshi Watai， wrote in the company organ in October 1968as fbllows：
hwould Iike to express a warm and hearty Thank you to many customers who brought up Ryu as the No． l retailing company in this area， and to other interest groups who have supportcd Ryu， on the very day of the 244th Anniversary l969 would be the ycar in the entire history of Ryu which is considered to be a spring．board fbr a de薮nite success in the midst of turmoil in the retailing business in our country．
Ihope you would strivc for the sales volume lOO okus which we have
been drcaming about for a long time and attain to this level in a few
，，
凾?＝us・ ．
The business of Ryu had bcen started in Mito， Japan， in l 724 by Jiro Watai according to the chairman Yoshi Watai s recall． However， nobody is sure whether or not the history of Ryu is so old， except the chairman．
It is very true that not only thc chairman but also other members of directors in Ryu are proud of thc history of the company anyway． It sccms to me that it would be convenient to describe the history of Ryu，
dividing it into two parts， prior to 1962 and after l962， as壬ar as this paper is concerned．
Hげ5オo冗アカ7∫07 60 1962
Befbre the end of the World War II， Ryu was nothing but a specialty store which was mainly handling womell，s clothes in Mito city， the pre￡
ectural capitol w三th the population of l80，000， about 90 miles north from Tokyo． Yoshi Watai， his younger brother Kci Wata and his young・
est brother Aki Watai had to drop out from a commercial high school and start−working at their father s store as salesmen． Above all， Yoshi was under a great pressure of running the business， because Yoshi as an
・1咋・t…w・・supP・・ed t・b・拙y re・p・n・ibl・飴・th・m・n・g・m・nt・f Ryu as it was customary in Japan・It was a hard lifb fbr the three brothers to sell enough clothes to maintain the store even・though a size of store was not large and the number of employees was no more than 6−10． The struggle ended up with the tragedy that Yoshi had lost his sight completely on account of an extreme fatigue． But he continued standing by the counter， trying to count money with the fingers and to use an abacus by touch． The only thing he噛 ≠獅п@his two brothers wcre trying to do was to keep the store open， not to discontinue Ryu an honorable， o璽d store ln town．
There was no retailing activity in the latter part of the World War II in Japan． The rationing of clothes as well as other goods made retail stores the places where the minimum amount of clothcs were distributed to the people． Yoshi just』waited thc bad time passing， doing this killd
Corporate Growth and Organizational Change 3 of job with a fbw old employees since other two brothers went to battlefields，
Afew months befbre the end of the World War II more than 90％
of houses and buildings in Mito city was burned out by the attack of B−29bombers of U． S． A． F． Ryu store was not an exception． The war ended． The demobilization which began subsequently brought two brothers back to their home， which was actually nothing but a vacant place with a pile of broken roofing tiles． However， they began to recon一 struct the buslness vigorously immediately after the三r reunion．
Their daily work except fhe blind brother used to commute to Tokyo by train． They made it a rule to get on an early morning train with a trunkful of paper money and ramble to and f士om the black market downtown Tokyo searching fbr cheap goods， Return trip in the evening was a real thrilling adventure for them， because the transportation of these things was prohibited by the interpref6ctural transportation law。 In spite of the f吾ct they invented many genious ways to escape丘om the eyes・of inspectors and policemen specialized in economical affairs， the ratio of success to failure was around 50 to 50． They built a small store on the funds they made this way． A capable young man named Fuku Kuroda was hired and bcgan to help them out as a head of sales fbrce．
The success of their business was insured by an extraordinarily strength・
ened consumers， demand in the days of Korean War（the so・called Rev五val Era of Japanese economy）．
They decided to go in the field of department store business rather than rema｛ning as a women s clothes shop， when they faced the problem of reconstructing a new building s三nce the previous one was destroyed by afire in l963． Around that time Chihaya Kaita， a brother of Kei Watai s wifヒ， joined the management of Ryu Department Store （the name changed）． He had been helping his father s business making soy・bean paste in the same town after his withdrawal f†om a military training school． The years l953 to l961 were ones of almost cont五nual expansion in terms of sales volume and selling floor space士or the Ryu familγ．
4（Exhibitレl andレ2）．
In l949， Ryu changed its legal form丘om a proprietorship to an
■
奄獅モ盾窒垂盾窒≠狽?п@entity to get prepared toward a fUrther expansion．1953 sales volume， nearly￥30ks（＄8．1millions）was almost the minimum one among local department stores in Japan at that time・However・
they increased the sales volume up to l8．50kus in l96L They also increased the store space by extending the building three times． These
expansions were done in accordance with an ever・increasing consumers● demand fbr goods， so that they did not see any decline of sales even in
the midst of construction work which gave shopping people big no量ses
・
≠獅п@inconvenlences．
EXHIBITレ1 」
SALES OF RYU DEPARTMENT STORE
1955−67
y冶α7 0んπ 1ね48κ 1955＝100
1955 2．8 100
1956 3．5 126
1957 5．O l78 1958 8．0 284
1959 7．2 257
1960 11．7 420
1961 14．2 506
1962 18．5 663
1963
1964 1965
1966
1967 （74．0）＊
＊Only thc total sales of Ryu Group was 3vailable SQurco：Company records
Corporate Growth and Organizational Change 5
EXHIBIT 1−2
BREAKDOWN OF SALES OF RYU DEPARTMENT STORE AS A PER CENT
Year l955 1956 1957 1958 1959 1960 1961 Item
Clothes lOO 87．0 85．7 79．1 69．7 69．8 69．5
Access・rie・ 4．3 4．3 Household
Goods 9．6 8．5
Sundries 6．5 9．3 10．2 5．5 5．9
Dining Rooms 3．4 4．5 5．8 4．1 3．9
Outside Sales 3．0 3．2 4．5 3．7 2．1
Miscellaneous l3． O l．4 3．7 9．8 3．0 5．8 Source：Company records
1ノゼ3彦oりノψθ7 1962
In 1962 Spring， the position fbr the chairman of board of directors was newly established． The eldest brother who was tired f士om struggles 負）ralong time occupied this position． Consequently the second eldest brother， Kei became the president of Ryu Department Store． The f量rst thing which Kei Watai has done as a president was to set up long・range plans in order to identify the direction the company was going to take．
The three Watais at the head of the firm realized thatafurther expan一 sion along the line of diversification was required if the business was to continue to hold the position it had gained in the local retailing market．
1962Long・Range plans comprised three fundamental policies to mate一 rialize the idea of further growth．
First， to achieve the sales target of￥1000kus in five years；Second，
to enter the new business of supermarket and credit store；Third， to ex一 tend the building of department store twice as large as it was befbre．
Throughout the per三〇d between thc Wars（the World War II and Korean War）， the firm did nothing very origina1． Surely they grew
very・apidly， but th・y・imply・・pi・d th・ir c・mp・tit… P・li・i…F・・
th・m， th・h・μw・・t・…pass th・bu・iness・f My・D・p・・tm・nt St・・e which is Iocated just across the street， almost the same size around the tirne of l950 s． The l960 market research which was initiated by Ryu market research section revealed that Ryu s business exceeded Myo s with the apP・・xim・te rati・・f 5 t・3in t・・m・・f・al・・v・lume and・u・t・mer・
9・・dwill． Th・1962 m・・k・t re・ea・ch・1・…nH・m・d th・・e fact・t・Ryu 脚・pl・． The re・ult・・f・・eri…fm・・k・t・e・earch・・ea・ed th・t・n・i・n・f Ryu p・・pl・t…me ext・nt， but・t th・・am・tim・・th・y w・・e p・t in th・
P・・iti・n t・・ea・ch飴・n・w・切・cti…th・y were t・ying t・a・hi・v・・In
。th。。 w・・d・， th・y w・・e requi・ed t・d・t・・mi・・wh・・e th・y・h・uld g・in the future． This was a much more d三fficult task fbr them than just try一 ing t・cat・h up・・mp・tit… pace・・Th・・e ci・cum・t・nce・enf・rced Ry・
t・pm・n・g・m・nt t…t・bli・h th・上・ng・R・ng・Pl・n・in l962・Th・Pl・n・
were broken down to the individual divisional plans and they were started to exercise immediately， with the adjustments to all6cate them over the adequate time span・
Ryu G・・up（th・n・me ch・ng・d）w・・bd・g・・g・nized i・t・tw・d畳・三・i・n・・
Department Store Division and Maru Super Market Division in l962．
The building of Ryu Department Store contained Maru Super Market in the fburth floor． This type of combination seems to be rather odd now， but at that tlme， in Japan it was not so unusual to see it． The confused ideas about super markets and discount houses were introduced
圏
?窒盾香@North America without receiving a careful examination． The word，
super market was simply interpreted as a self忌ervice store and the term，
discount house， meant store selling cheap， durable consumers goods．
While they began to run a little strange business at the old building in l 962 winter， they set forward the construction of a large building near the building of Myo Department Store． So that， geographically the locations of three large buildings， Ryu Department Store， Myo Department Store and Ryu s new building（it was caUed Chu Building）
made a tr量angle holding a wide， Inain strcet between． The two main rea一
Corporate Growth and Organizational Change ？ sons that Kei Watai made up his mind to construct Chu Building were considered as fbllows：first， to utilize a vacant spot which was belonging to the taxi company named Chu Taxi， a subsidiary of Ryu Group．（1）At that tlme the lot had the market value of about￥10ku， since it was at
闇
狽??@corner of a very busy shopp量ng area downtown Mito． Second， they could not find a suitable place to open a credit store which they antici・
pated to be fairly prof玉table unless they would erect a new building to accommodate it．
The constluction of Chu Building started in I963 Spring and ended in 1964Fall under the direct supervision of Kei Watai． The original plans were stretched a little in order to accommodate a branch office of local bank as well as Ryu Credit Store at the first and second floors， which offered his spot just next to Ryu s spot in exchange for the right to occupy an office in the new building． Chu Building contained a variety of businesses（Exhibit l−3）． The business of Ryu Credit Store turned out very successful in the first six months． One of the advantages of credit store business was that it could be run by relatively small number of people in contrast with the department store buslness． The amount of
money spent． on goods per customer fbr Credit Store was very high， 、
which was mainly due to the nature of credit store business． Therefore，
ahigh marg至n per item and the saving of labor expenses had affected the profit and loss statemcnt of Ryu Credit Store favorably．
EXHIBIT l−3
BUSINESSES IN CHU BULLDING IN l965 Top Beerhall（summer time only）
Sixth Floor Rooms fbr banquet
Fifth Floor Silver Hall fbr wedding ceremony Fourth Floor Office space fbr lease
Third Floor Ryu Bunka Gakuin， office space for lease
「」T−
i1） Since thjs tlme， Ryu Group bccame the formal name of a group of Ryu companies・
Second Floor Ryu Credit Store
First Floor Ryu Credit Store， Branch Of資ce of Bank Basement Restaurants， Coffヒe．shops， Bars， Barber Shop．
The next step which Ryu top management took was to extend the building of Ryu Department Store to increase the sales volume and strengthen its relative position in the department store business in Mito and the vicinity． The sales floor was to be doubled and the entire build三ng was to be modernized， equipped with the faster elevators and the wider escalators， etc． Inevitably， it was discussed among the top people the problem whether or not Maru Super Market Division at the fourth floor should have remained． Most of all the top management fblt that having a super market section which had a kind of rough atmosph・
ere at the heart of building might hurt a rather gorgeous mood of newly designed， nice・looking building of Ryu Department Store． So that they decided on squeezing out Maru Super Market eventually．
The construction fbr extension took about one year until its complet．
ion in l965 Fall． It was done under the direct supcrvision of Kei Watai once again， who have been very enthusiastic with the construction work Ryu toP People have estimated that the sales would be increased by 30
％ by doubling the selling floor space and modernization of various facillities within one year． In fact， their 30％ sales increase estimation was exceeded by the 35％actual increase．
On the other hand， Maru Super Market Division which was kicked out from the original shclter had to find out a place to rlln the business．
They ended up with building a Hghtly equipped store of about 450 Tsubo（15001n2）uptown． The physical separation of Maru Mart Divi・
sion（the name changed）from Ryu Department Store resulted in giving a definite fbeling of independance to Maru Mart people headed by chihaya Kaita． They learned what the idea of profit centre in a real sense was for the first time， and it led them to the reflection that it was almost out of question fbr them to gain profits enough to generate funds fbr
Corporate Growth atld Ofganizational Change 9 expans董on unless they could make use of the principle．of mass purchase，
mass selling by handling a large quantity of goods． Chihaya Kaita tricd to persuade the executive in charge of finance in Ryu Head Off量ce，
MaZUmi MOri， tO draW OUt the fUndS enOUgh tO eqUip MarU−Mart With at least fbur super market stores all over Mito city． Kaita insisted on the shift of emphasis all Ryu top management put on the future of Ryu Group f士om the department store business to the super market business．
He never failed to repeat this contention at the executive meetings of Ryu Group， givlng an example that in the world war II Japan6se Navy lost many naval battles mainly because they put too much stress on heavy war ships and looked down the roles of destroyers， aircraft一 carriers and submarines． According to his metaphor， a heavily equipped department store was a war・ship and super market stores are destroyers and submarines． His idea has been gradually moulded out壷hile he made several trips to North America． His continuous campaign was so success．
舳1that other top people agreed upon sc母ttering fbur super mafket stores downtown and uptown Mito by the time of the completion of
、
??狽?獅р奄獅〟@the building of Ryu Department Store．
Kaita fbught his good fights at every place・Since there were already two big chains of s叩er markets in M三to and the vicinity， the fights he fbught were actually to snatch off the customers from them． It was not so unusual fbr him not to shave for several days， some emplQyees．of Ryu Super Chain Divisio11（the name changed again）gave him a nick一 name Field Commander ． His struggles were being rewarded in the fact that his say was l@getting stronger in the meetings of Ryu top management．
He was ent五tled to pick up many capable young managers at the middle or lower levels of the entire Ryu Group organization to staff his line or stafF supervisors s positions unofficially． By l 968 Fall， Ryu Super Chain have become a fairly large organization which was composed of the head quarters（8 departments）and the l 2 stores． Their sales account fbr about ahalf of the total sales of Ryu Group．
2． 1962LO」MO 1〜孟VOE P五オ2Vノ＞1NO．41V1）Ryぴ8 Eノ〉四ROハゐMEAア77
As Exhibit l−l shows， Ryu Department Store increased the sales volume with the higher rate of increase． It did not need more than 7 years
■狽潤@lncrease the sales 7 times as much，（丘om￥2．80ku to￥18．50k11）．
This rapid growth is obviously due to the五nternal diversification to some extent， as Exhibit 1−2indicates． However， it would be falr to consider that the rapid growth of overall Japanese economy accoun重s fbr Ryu，s sales growth to a great deal．（Exhibit 2−1）． No need to say， the post・
war economic growth in Japan was really surprising． Besides this fUnd・
mental fact， the tendency of urbanization in post war periods pushed up the population figures of large Tokyo area in which Mito city is includ一 ed astonishingly．（Exhibit 2−2，2−3and 2−4）． Urban development in
Japan had early beginnings・There bas been a steady flow of people， 丘om rural areas where there is little work fbr the young． Relatively
high city wages have attracted peoPle f士om county areas． All Japan s increase in population has been absorbed by migration to the towns，
leaving the numl）er of farmers at lO million in l965，4million less than in l 868． Small general stores in villages have lost customers on one hand，
and department stores and other types of stores in towns obtained custo・
mers more and more．． Increased income fbr city wage earners meant that there has been a greater demand fbr the commodities the depart・
ment stores handled．
EXHIBIT 2−1
GRowTH oF NATIoNAL IN coME IN JAPAN
1955−60
Year Oku Index l 9551＝100
1955 65，548 100 1956 73，825 116 1957 82，389 125
Corporate Growth and Organizational Change 11
1958 83，759 128 1959 96，686 148 1960 118，217 181
source：Ministry of Finance， Japan
Exibit 2−2 ，
9
TOKYO
8 Exibit 2−3
7
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C ／／ YoKoHAMA Urbanization trends since 1
／窟．＿拶をコニ壊ぎ謬．．堤誕二瓢蕩 ・一ン／
1900in Japan， Ind且a and dngland． Source：P．
Dempster；Japan Advances．
・93。、94。、95。、9、。 1967・P・264
Gmwth of the blg 6 cities s三nce 1920 in Japan． source：P． Dempster；
Japan Advances．1967． P．262
Exibit 2−4
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．覧゜・ IBARAKI
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showing Tokyo
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conurbat孟on and
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source；P． Dempster；Japan Advances・1967・P・269・
With some exaggeration lt could be described that the only thing Ryu people had to do was just to extend the building to accommodate more customers and show cases． Of course， we cannot deny that they endeav・
oured to push up Ryu Department Store to the position of No． l store in Mito． The rival of Ryu， Myo Department Store began to disclose its
，
翌?≠汲垂盾奄獅狽刀@gradually during the period and finally slipped down ffom the No． l position． It was the unanimous observations among the inter一 ested that its stagnation was mainly caused by the，oor management of Myo family・
Myo family is originally f士om Ota City，30 miles north from Mito．
Theアstarte4 the departmen‡store busiηess with Mγo， Ota Store． It wa§
Corporate Growth and Organizational Change 13
f・i・ly・uccess釦l by it・el￡Th・y・・t・bli・h・d My・・Mit・St・・e in l949・ 、
S。bu My・， th・p・e・id・nt h・・been the ch・i・m・n・f Mit・Ch・mber・f Commerce for a long time． Human conflicts among Sabu Myo， his brother and his mother・in−law（both of them are large shareholders）were being disclosed while Ryu s people were eager to catch up Myo．
In l962 Kei Watai who took over the presidency from his brother，
appointed Kuro， the executive in charge of finance， as the head of Com・
mittee of Long Range Plans． Kuro immediately staffヒd the committee with the controller， the assistant of controller and a fヒw other members．
Th・y・g・eed・p・n th・p・int th・t th・L・ng R・ng・Plans sh・・ld h・v・
covered only the operations of Ryu Department Store， despite that Ryu t・pm・n・g・m・nt・1・eady b・g・n t・di・cuss th・p・ssibility・f g・ttlng in th・
business of super markets and credit stores．
The committee started tackling its task with setting up the sales fbre．
@ 丁
cast on the time・span of five years． They put a lot of energies and time on this forecasting because the top people were very concerned with what volume of sales they had to achieve in l967 in orderto keep their present position in terms of market share． The committee fbund that the
．
モ盾窒秩曹撃≠狽奄盾氏@coefficients between National Income and Total Sales of De一 partment stores in Japan， Ibaraki Prefectural Income（2）and Total sales of Department Stores in Ibaraki Prefbcture were very high（0．992，0．999 respectively）（Exhibit 2−5and 2−6）． However， it was not the case as far as the correlation between Ryu s sales and Ibaraki Prdectural Income was concerned． It deviated favorably for Ryu， namely， the correlation coefficient was O，456（Exhibit 2−7）． These observations ensured the committee people that they could stretch the trend line further in order to get the estimate of sales in l967． After taking into consideration some other things， they reached the final figures of sales estimates，￥470kus．
They judged some regional development plans as the forces to push up
（2） As I mentioned be貴）re， Mito city is the prefectural capitol of Ibaraki． Ryu，s markets covered mainly the northern parts of Ibaraki in 1950，s，
the trend line fUrther． Ibaraki Prefヒcture was going to experience fant撫
． ●
唐狽撃メ@reglonaI developments like the constructions of a new sea port（whid1 is larger than Port Yokohama）and a new cultural town（the popu五ation
of l 50，000）， etc．
EXHIBIT 2−5
CORRELATION BETWEEN NATIONAL INCOME＊AND
ToTAL sALEs oF DEPARTMENT sTOREs IN JAPAN＊＊
Yea・ ＊・（Oku） （x一藪） ＊＊y（Oku） （y一予） y／・（％）
1957 82，859 −13，801 3，100 −663 3．74 1958 85，190 −11，470 3，384 −379 3．97 1959 100，373 3，713 3，385 122 3．87 1960 118，217 21，557 4，683 920 3．96
Mean 96，660 3，763
『＿
γ一 i留鵠，−ll灘ll−ag921
Source： Management Plans for the next 5 years by Ryu I962
EXHIBIT 2−6
CORRELATION BETWEEN PREFECTURAL INCOME＊AND TOTAL SALES OF DEPARTMENT STORES IN IBARANI PREFECTURE＊＊
Y・a・ ＊・（Oku） （・一・） ＊＊Y（Ok・） （y−y） y／・（％）
1956 1，306 −298 9 −9 0．7 1957 1，541 −63 16 −2 1．0 1958 1，966 362 29 11 1．4
Mean l，604 18
一一
γ一 i潟際券一1；ll：纒一α9999
Source； Management Plans fbr the next 5 years by Ryu l962
Corporate Growth and Organizational Cbange 15
EXHIBIT 2−7
CORRELATION BETWEEN PREFECTURAL INCOME＊
AND RYU SALES＊＊
〔 『
Year ＊x（Oku） （x＿x） ＊＊y（Oku） （y−−y） y／x（％）
1956 1，306 −−302 2．7 −3．7 0．2 1957 1，492 −ll6 4．0 −2．4 0．3 1958 1，541 −67 6．4 0 0．4 1959 1，734 126 8．2 1．8 0．5 1960 1，966 358 10．7 4．3 0．5
Mean I，608 6．4
（X−X）（y−〜づ ＝＝1474＝＝0．4565γ＝（・一覇・（y一め2． 3229
Source： Manegement Plans R）r the next 5 years by Ryu l 962 Being based upon the sales estimates， various kinds of project plans were set up by the committee。 In financial plan， they set fbrth the en・
長）rcement of equity capital and some other matters・This might sound astonishing， but in l961 Ryu Department Store had only the 5．8％of total capital as an equity capitaL It is impossible to deny that this ratio is out of line， but when we recall that the・average debt ratio of Japan一 ese firms is 77％in l967， we would be unable to say that Ryu s case is inconceivable． Ryu top people were aware of this financial shortcoming．
Therefore the committee s report also put an emphasis on the plan to correct this distortion which was largely due to the rapid growth． They hoped to improve the ratio up to ll．9％ by l967 f止om 5％ through raising more equity capital丘om the members of Ryu family and some nonfamily key executives， and increasing the retained earnings．（Exhibit 2 一8），It has not come out as a topic of committee meetings the problem of going to pul）lic to raise equity capital even though entering the stock market using over・the・counter was getting popular among local
department stores・ ρ戸
EXHIBrr 2＿8
PROPOSED CHANGES ON CAPITAL STRUCTURE
（￥MILLIONS）
1961 1967
Equity 33．6 （5。8％） 177．9 （lL9％）
Borrowing 360．3 （61．6） 832．5 （55．5）
from Banks 嘱
Other Debts l86．6 （32．6） 489．6 （32．6）
Total 580。6 （100．0） 1500．0 （100．0）
Source：Company records・ ρ
The committe also recommended that the company should have gene．
rated the internal fUnds to finance the future expansion． For this pur一 pose， cutting off a portion of dividends to shareholders and the bonus to the executives were suggested． Individual pr（り ect plans ill the report of committee included the capital expenditure pr（ject， the merchandis五ng pr（樋ect， the human resources plan， the productivity plan， the motivation plan， the perfbrmance evaluation plan， and the reorganization plan。
The capital expenditure pr（η ect showed the figure of about￥30kus over five years to purchase the spots to enable to extend the building of Ryu Department Store and additional facilities which the expansion of business would require． This figure was considered to be an underestima一 ted one by the top executives． Since the purchase prices of lands afound the downtown area were extremely high and they were cxpected to con．
timle to go up． So that the figure seemed a little unrealistic． Kuro ex・
plained on this point at a meeting of comm重ttee members and Ryu key executives． He confbssed that it might be a part of contradiction which came out as the rcsult of effbrts to mcct thc requirement of improving the debt ratio through holding the borrowing fhnds to the minimum level and the requirement of increasing the sales volume through expand一 ing the physical capacity・
The reorganization plan the committee mentioned in its report w量ll be
@ 「
1
Corporate Growth and Org孕nizational Change i7
examined in the following sections．
As soon as the committee members bcgan to break down the Long一 Range Plans which were approved by the pres三dent into the 1963 budgets in order to exercise plans， Ryu people were shocked to hear the news
rumors that Keisei Department Store， Marui Credit Store and Maruko Credit Store are going to establish their stores jn Mito subsequently．
These companies are from Tokyo and have strong financial backgrounds．
（Exhibit 2−9）． Ryu people have l）cen afraid of that this would happen，
since in Tsuchiura city， a city in the centre of the southern part of Ibaraki Prefecture and of almost the same size to Mito， Seiyu Store，
Marui Credit Store and Keisei Department Store already established their markets firmly， kicking out the small local department stores which were located there originally， and these companies warned that the next step would be the invasion to Mito markct， taking every oppo血nity．
However， Ryu people s impression was that they came to Mito market too soon．
EXHIBIT 2−9 、
RANKING oF MAJoR RETAILING coMPANIEs IN JAPAN l967
9 Yearly
Sales No． of Head一 Rank Name （Oku） Type Stores quarters
l Daimaru I，182 ．Dept． Store 4 0saka 12 Seiyu 300 Super ．32 Tokyo
22 Marui 222 Credit 28 Tokyo
50 0giya 84 Dept．＆Super l6 Chiba 54 Ryu 74 Dept．＆Super l2 Mito 59 Maruko 65 Credit 20 Tokyo
60 Keisei 64 Dept． 2 Chiba Source： Ayumi（Progress） Ryu Company Organ， Oct．1968
凸
It was in the pr・cess・f the almost continu・us discuss三・ns and meet ings among Ryu top management about what courses of action they should have taken against the invasion of the big trusts that a series of policies with regard to business diversification and expansions；the const・
ruction of Chu Building， the start of credit store business and the expan一 sion of super market stores． The construction work fbr the extension of Ryu Department Store building was accelerated in the fbrm of shorten・
ning the construction period．
In Japan， credit sales of durable consumer goods， and expensive clothes showed a very substantial．growth throughout the period of postwar． As the means to bury the discrepancy between limited incomes fbr house・
holds and endlessly increasing demands fbr better material lifb， a number 髄
of large credit store chains which are specialized in the business came to the existence and took the very influential position in the retailing busi。
ness world． As it was explained， Ryu people noticed the important things with regard to the credit store． One of them was the substantial saving of labor expenses of the employees who took care of the store． Another merit is associated with the external aspect；there were several examples which infbrmed the possibility that Ryu Group could prevent other strong credit stores from their entry into Mito market by getting ahead of them through the establ三shment of a good credit store． Ryu key exe・
cutives believed that Chu Building， the No． l magnificent six°stories es・
tablishment would give a deluxe mood which might help customers to overcome the hesitation a Japanese tended to fヒel when he entered a
credit store．
Many large department stores or credit stores in the large cities like Tokyo run across the deadlocks when they wanted to expand in the fbrm of either extending buildings or increasing the number of stores．
They were an extreme difficulty in obtaining land fbr the purpose of expansion including parking lots and a less penetration of customers into the centres of Iarge cities f士om residential areas surrounding these centres．
These difficulties ended up with the large coτnpanies tendency to spread
Corporate Growth and Organizational Change 19 their new stores in so・called bed towns or satellite．towns neighboring to the metropolitan areas． Tsuchiura city was one of their targets and Mito also was becoming another target fbr them． The population of Tsuchi・
ura was nearly doubled in the last five years． In Capitol Region there is a great shortage of housing and the separation of the main industrial and business areas and the residential areas aggravated commuter con・
gestion． Speaking about ℃apitol Region ， the growing urban sprawl across valuable farmland moved the central government to establish Cap・
itol Region ， in l956 with a radius of 60 miles from the centre of Tokyo． Tsuchiura happened to be within this circle and Mito is on the borderline．
Ryu top men finally concluded that they would be too weak to fight against the invaders in face to face basis since there was a great diffbr一 ence between Ryu and the invaders in t6rms of financial and other strengths． They thought that it would be wise and efficient to let Ryu Department Store with the doubled physical capacity play a defbnslve role and let Super Market Division play an aggressive part in the over一 all picture of Ryu Group． In other words， the mission given to Super Market Division to catch the customers in the smaller towns of Ibaraki
（below the population of lOO，000）by setting up new super market stores as many as possible． Ryu people thought that this approach would be the best policy of a local company fbr which there was little room left to maneouver under the pressures of powerful trusts．
3． 0瑠απゑζαあoπ （ゾ1セレz6」Z）ψ07 η26η 5「 or6 2π 1962・
It would be necessary to make clear to mention that this section is concerned for the most part with the organization of Ryu Group五n l 962 Summer， tllat is， the organization just before l 962 Llong−Range Plans were set up and put into practice．
Exhibit 3−lshows that by I962 the overall Ryu s Group consisted of Ryu K． K．（K． K． means上TD．）which looked after the real estate aspects of Rγu Dcpartment Store through the method Qf leasing properties
and Ryu Department Store・and a number of small subsidi註ries． The main reason of separation is connected with the tax consideration． It was believed that firms could takc advantage of low rate of corporate taxes by dividing an entlre business operation into smaller size entities．
EXHIBIT 3−1
STRUCTURE OF RYU S COMPANIES IN l962 Ryu Department Store（President−Kel Watai）
Ryu Shokudo（dining rooms）
Ryu K． K
Ryu Amusemβnt Centre fbr Children＊
Presldent；
xoshi Watai Ryu Transportation＊
Ryu R￠al Estate＊
Chu Tax量＊
＊Chihaya Kaita was in charge of the related businesses．
One of the subsidiaries， Chu Taxi company had an interesting company history． It was orlginally owned by a widow who was not so interested in running it that she wanted to sell it with a good deaL Kei Watai felt that the acquisition of this taxi company might pay off sufficiently in the near future not because of its performance but because of its location and real estates． His expectation was materialized soon l）y erect・
ing Chu Building on the spot where the company had a large garage．
GeneraUy speaking， at that time many customers who brought a lot of items at a department store used to use taxis to go back home， even though delivery cars of departlnent store could be used to carry goods in f士ee of charge． To drive their own cars was out of the questio叫 different f士om the scene in today噂s Japan． However， it was not nece一 ss3rily must for Ryu top management to acquire the taxi cbmpany fbr the purpose of giving customers conveniences of transportation．
The dining rooms called Ryu Shokudo were also one of the subsidia・
ries． One of the reasons which it was separated fyom the department δ重Qre legallアwas that it was quite diffαent from the department store
5
C・・p・・at・G・・wth・nd O・g・ni・ati・n・1 Ch・ng・ 21
in terms of the type of operations and employees． Besides that， its ope・
，ati。n、 w。，e reg・1・t・d by th・1・w・・f publi・hygi・ne and und・・th・tight
。。nt，。1。f th， p・e琵・t・・al b・・eau・f p・bli・hygi・n・・Th・・e fa・ts seem・d t。requi・ean i・d・p・nd・nt m・n・g・m・nt t・飴ce a number・f p・・bl・m・
within the area・f Ry・Sh・k・d・． Ry・Sh・kud・h・・been・v・・y・・lu・・
bl， part・f the ent量・e・・g・nizati・n，・・m・ly・it h・・e切・y・d th・high・・t P・・fit・bility・m・ng th・g・・up． It・・uld b・d・・t・・n・・f th・J・panese customs that almost all of the customers who went into the departmellt
9
唐狽盾窒?刀@dropped in a dining room in it． It won t be an cxaggeratlon to
・ay th・t th・d・p・・tm・nt・t・re i・aplace t・eat・・w・ll・・t・buy・
Ryu Amu・em・nt C・nt・e飴・Children w…nth・t・P…f・f th・
buildi。g． M・n・・rai1，」・t・…t・・，・・a・y t・a・up・・9・−ca・t・…t・pu・and miniature train are the major facilities in the centre． Since this place w・・ex・lu・i・・ly b・children， Sund・y・and S・t・・d・y・R・m・・n・are th・
busiest time． Also it was made a rule to close the centre while it was rai。i。g b・・au・e there w・・n・…ft…ver it・An・ther rea・・n t・・u・p・nd th・・P・・ati・n・f・・a・・n・iderably l・ng tim・w・・tl・e c・n・t・u・ti・n t・・xt・pd
。b・ildi・g whi・h t・・k place v・・y・ft・n・・飴・a・Ry・D・p・・tm・nt St・・e was concerned． These irregularities of its operations besides tax consider・
ations made top management think that they would be better off by re・
gistering it as a separate legal entity・
Ryu Real E・t・t・w・・m・inly re・p・n・ibl・f・・th・1・g・1・・pect・f m・i・・
t・i・i・gth・buildi・g・f Ry・D・p・・tm・nt St・・e and・・m・・th・・c・t・bli・h一 ments． Real estate taxes， the casualty insurance， and the collection of ・ rents from the employees who lived in the company owned houses or dormitories were among its dutics・
Ryu Transportation was responsible for transporting goods from Tokyo to Mito for the department store every day． Originally Ryu Depart・
ment Store had been relying on other truck companies． But the dcpart・
Inent store people fbund great inconveniences in cases of strike of these
・ ●
モ盾高垂≠獅奄?刀C so that they decided on establishmg a transportatlon company which owned only two trucks exclusively f6r their own use，
We should not forget to pay attention to the two points in addition to the reasons above why Ryu Group had a number of subsidiaries．
The fbllowing observations would be valid fbr all the subsidiaries． One of them is that lt was fairly obvious that Ryu top management tried to weaken the power of Ryu Trade Union by dividing it into many bran・
ches deliberately． As a matter of fact， it was understood that top man・
agement could assess the working condit三〇ns such as wage rates and over time work of the employees of these subsidiaries more f｝eely than they could fbr the employees of Ryu Department store． since Japanese trade unions are fbrmed on the basis of the丑rm which they belong to rather than the vocation， it becomes very difficult to obtain an eff6ctive mutual understandlng between individual trade unions even though they are under the same group fundamentally， once they were set up and registered as diffヒrent trade unions．
Another important observation is concerned with the regulations of Department Store Council in Tokyo． Department Store Council was set up， being supposed to do part of duties based on Anti・Monopoly Laws．
One of the main fUnctions of the council is to determine the maximum Hoor space fbr selling activities which is allowed fbr a department store，
taking into considerat五〇n the number of small retail stores and the popu・
lafion of an area over where the department store might have an infiu・
ence． The council does this type of control for the purpose of prevenレ ing the small retail stores丘om receiving an undue pressure ffom the 1arge department store，s aggressive sales activities． Since the assessment of the council does have nothing to do with the growth rate of a par・
ticular department store s business， Ryu people have been running across agreat difficulty about this problem． In other words， Ryu could not be given the permission to expand the floor space to m6et the demand of Ryu s customers． Therefbre， they invented a device to increase the floor space to some extent beyond the space the council permitted． They noticed the fact that there was no regulation with regard to the floor space fbr the recreation area and the dining area． Bγmaklng these busj一
Corporate Growth and Organizational Change 23
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ion of these companies， operation space fbr the purpose of sales．
Chihaya Kaita was the head of the related businesses division which comprised these subsidiaries．
Moving to the organization of Ryu Department Storc， undoubtedly the core organization of the who豆e Ryu Group， Exh三bit 3−2shows that Aki Watai as a general manager was directly responsible to Kei Watai fbr the whole selling side of the business and some other minor and related activities． The actual selling was carried out by Sales（1）De・
partment Manager and Sales（II）Department Manager． In additlon to these sales department managers， there were two other line managers whose job was also sales but somewhat diffヒrent kinds of sales． One of them was Kuro was in charge of Maru Super Market Division and ano・
ther was Aki Asakawa who was responsible fbr the selling activities out・
side the bu三lding of department store．
Kuro joined the group of Ryu management in I 950 immediately after he was fired from the position of fbreman at Mito plant of Hitachi Manufacturing Company under the influence of so−called General Mac一 Arthur s Red Purge（3） when lle was 29 years old． The rumor was pre・
vailing when he entered Ryu organization that Watai brought his talent which was associated with the communists tactics in trade unions activ・
itics． He took care of not only labor managenlcnt relations but also the financial aspect， planning aspect and even the very line fUnction， sales function of Maru Super Market Division．
From the latter part of l950 s， many department stores began to be
（3）Hitachi Manufacturing Company is one of the biggest compa一 nies in Japan． General MacArtbur encQuraged the communlsts
・ activlties in immediate postwar periods， aiming to destroy the Zaibatsu monopolies and burcaucracy． It did not take a long time until his policies changed into the ones which banned their activities on account of the cxtremism and a large scale of red purge took place throughout the country in 1949． Then Japan got involved in Koreal1㍉Var．
