At a time when manufacturing is shutting down across a wide array of industries throughout Australia, Rinnai Australia built a new facility in Melbourne’s south east last year. It was a bold move that not only consolidated its presence in Australia, but added another 160 staff to the payroll.
The logic is a strong mix of business acumen, with cultural principles and the desire to innovate in the local market. It also demonstrates how subsidiaries of well-known international brands can act in their own interests whilst remaining faithful to the parent company.
The starting point, says Rinnai Australia managing director Greg Ellis, is understanding that Rinnai Australia has “extreme levels of autonomy and authority” run by local executives, yet with respect to the history and cultural practices of its parent company.
“We’re a fully owned subsidiary. We run Rinnai Australia as a profit centre and an independent subsidiary of the corporation,” he says. “We are not restricted to trade purely with the parent. We’re obliged to meet the requirements of Australian corporate law, as you’d expect, as well as the requirements of consolidation in Japan.”
The marriage of the two companies, says Greg, is more to do with business culture.
“I think when you talk about the marriage of the company, we are fully compliant. We must comply with Australian law, with Japanese law, with all manner of other international law because we trade with other organisations, both in and out of the Rinnai stable. We adopt many of the Japanese business cultures in terms of shareholder respect, returns, strategic, our longer-term positions as well as short term horizons.”
The autonomy has largely come from Rinnai Australia proving itself to the parent company over many years. With strong local knowledge, Rinnai Australia has developed new products that the market wants – and maintained a position as a market leader in an industry with many competitors.
“Several years ago it was very clear to us that the international global assault on fossil fuel was only going to increase in momentum,” Greg explains. “When Rinnai first established in Australia it was a trading company, fundamentally selling Rinnai Japan appliances certified under Australian conditions, which were all gas appliances.
“It became obvious to us some time ago, and the strategy we put to Japan, was about diversifying and being able to invest in building footprints into a raft of different energy solutions. Going from the very high gas centricity of the company before approximately 2004, we have now moved into having very strong positions in the marketplace in gas, electricity, solar, renewables and other technologies such as hybrid technologies. That has been a good thing for Rinnai Australia.”
The benefit to Rinnai globally is two-fold: it has a strong presence in the large Australian market, plus it has been able to use that market as a testing ground for global trends.
“Not surprisingly, Rinnai globally has followed Rinnai Australia’s lead, and has been starting to build solar manufacturing facilities in South America. We’ve also been building hybrid facilities in
Japan and China and the United States, all based on the Rinnai Australian models. That’s a feather in our cap.”
Despite the strong position in the market and blessing of a parent company, it could be considered a risk to invest serious dollars into a local manufacturing facility, but Greg is confident that it will work for Rinnai Australia.
“With the dollar sitting around the 75 to 78 mark we see that costs will balance out considerably with the likes of China – particularly by focusing on niche opportunities where the labour costs are not quite such a difference.
“We have a fantastic educated workforce here. We’re able to exploit the fact that we have a solid distribution channel position in Australia, New Zealand, the Pacific Rim and in Southeast Asia through a raft of different Rinnai subsidiaries.
“When I look at it, investing in Australia is not such a silly thing; particularly with those constraints. It means we have automatic markets, and it means we can get the technology right. We can inject new innovation into the technology, which our corporation can then duplicate and parallel in other parts of the world.”
Backing this position is the parent company – not only in business terms, but also in culture. The chairman of Rinnai, Susumu Naito, set a mantra for the organisation of ‘Quality is our Destiny’, providing a platform for the likes of Greg to pursue local developments.
“That’s one of the differentiations with Rinnai, because we have a global $5 billion brand, and one of the key tenets that comes out of Japan is to not expose or put at risk the brand. It’s a policy directive from our chairman in Japan; protect the brand through quality, through integrity, and pay your taxes. You won’t find too many other companies that have those policies really work through in their mission statements and adhere to them.”
This is particularly important in Australia where a lack of strength from government means there is a raft of sub-quality products on the market. In sectors like hot water and small electrical appliances it is common practice for companies to create ‘certifiable prototypes’ that are assessed and certified against Australian Standards, however not adhered to throughout full production.
With no further testing required by the government after that test model – and no recognisable brand to protect – some companies will then drop the quality of materials or manufacturing and create a product that would not reasonably pass the Standards.
While Greg is clearly frustrated by the position, he rallies that the best thing to do is to continue to invest back in the country and ensure they control their own products and manufacturing. That, he says, is also a result of a strong local team who share the same vision.
“I think we have a very knowledgeable and aware sales and marketing culture. I think we are very much market driven, and I think we have a sales and marketing infrastructure that successfully works to connect with consumer sentiment trends, horizon scanning, and is able to turn that into solid and successful outcomes in the market.”
This all lends itself to an organisation with strong cultural ethics, and a willingness to innovate and lead. In doing so, Greg is very honest about where he sees the industry moving in the future.
“I honestly think the products we make today are going to look very different to the products we’re making in five to 10 years. They’re going to look very different, they’re going to feel different.
They’re going to have different functionality. I think the concept of embedded intelligence and communication capability in appliance manufacture is state of art now.”
Of course, if Greg is right, then Rinnai Australia is in a very good position. Not only does it have the backing of a powerful parent company which encourages innovation, it will also have a local manufacturing plant which can help lead new trends and global movements.
If Japan is a country that manages to blend cultural heritage with modern innovation like no other – then Rinnai Australia must make the parent company very proud. BFM