Business Breakdowns
Episode 156 Mitsubishi Corporation: A Japanese Trading Company
Business Breakdowns

Episode 156: Mitsubishi Corporation: A Japanese Trading Company

Business Breakdowns

Episode 156

Mitsubishi Corporation: A Japanese Trading Company

Krishna Mohanraj is a Portfolio Manager at Diamond Hill Capital Management. We cover how the rich history of trading houses is ingrained in Japanese culture, why their capital allocation priorities are shifting, and the success of some of Mitsubishi's component operating firms.

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(00:00:00) - Welcome to Business Breakdowns

(00:03:12) - First Question - Understanding Mitsubishi's Global Impact and Business Model

(00:07:12) - The Evolution of Mitsubishi and Japanese Trading Houses

(00:12:12) - Mitsubishi's Investment Case and Market Position

(00:15:02) - Comparing Mitsubishi with Other Japanese Trading Houses

(00:18:22) - The Secret to Mitsubishi's Success and Global Network

(00:21:16) - The Relevance of Berkshire’s Investment in the Japanese Trading Houses

(00:26:45) - A Cultural Shift in the Orientation of Japanese Businesses Towards Their Shareholders 

(00:28:35) - Valuing Mitsubishi

(00:31:05) - Reinvesting in The Business And Reallocating Capital

(00:33:02) - Mitsubishi’s Unique Management Dynamic

(00:38:54) - Advantages of the Mitsubishi Group

(00:42:44) - Lessons Learned from Mitsubishi

 

Mitsubishi Corporation: A Japanese Trading Company

Introduction

Zack
I'm Zack Fuss, and today, we are breaking down the Mitsubishi Corporation. I'm joined by Krishna Mohanraj, a portfolio manager at Diamond Hill Capital Management. When I first connected with Krishna, I cautioned him that tackling a Japanese conglomerate with operations that span energy, retail, manufacturing, mining, automotive and food, amongst others, would present a tall task.

In Japan, the business model of a trading company is prominent. The big five trading companies caught the attention of global investors in 2020 when Berkshire Hathaway disclosed a major stake in all of them: Mitsubishi, Mitsui, ITOCHU, Marubeni and Sumitomo. Today's Berkshire stake is nearly 10%.

In this episode, we discuss how the rich history of trading houses is steeped in Japanese culture and how each differs from one another. We discuss the evolution of stakeholder priorities and how capital allocation policies have changed in the Japanese capital markets, and we spent some time exploring some of the operating companies specific to Mitsubishi. We hope that this episode serves as a strong introduction to the business model of Mitsubishi Corporation.

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