Morimatsu International: A Successful Soldier Secures Victory First, Then Engages in Battle - Business Development Requires Long-term Vision

Abstract

In recent years, terms and reports such as "domestic macro-circulation," "anti-globalization trade barriers," and "unilateralism" have become increasingly common. Without delving into these issues, it might seem that globalization is in decline.

In recent years, terms and reports such as "domestic macro-circulation," "anti-globalization trade barriers," and "unilateralism" have become increasingly common. Without delving into these issues, it might seem that globalization is in decline. However, the reality is quite different. Since the introduction of reform and opening up policy, China has shifted its focus from primarily opening up in manufacturing to expanding trade in services. Moreover, China has progressed from being a member of the WTO to actively pursuing membership in agreements such as the CPTPP and DEPA. This transformation illustrates China's shift from merely participating in economic globalization to becoming a significant advocate for it.

In 2023, public data revealed that China's foreign trade entities engaged in import and export exceeded 600,000 for the first time. Meanwhile, the number of Chinese merchants abroad increased by approximately 56% year-over-year, those operating across multiple platforms grew by about 29%, and brands expanding overseas surged by about 145%. In 2024, the State Council's government work report once again prioritized "building more brands with international influence" after a hiatus of seven years. It emphasized strengthening standards leadership, quality support, and aiming to establish more "Made in China" brands as global leaders, marking a renewed commitment to international expansion.

However, achieving success in global markets requires more than just slogans. International expansion demands sustained vigilance and patience to navigate potential pitfalls, lest enterprises find themselves adrift in the global marketplace. As of 2024, the international landscape remains uncertain, with escalating global competition presenting unprecedented challenges for Chinese enterprises venturing abroad. Issues such as information security, cultural differences, international supply chains, political uncertainties, and intricate international regulations are formidable obstacles that must be carefully navigated in the process of internationalization.

【So, how to navigate successfully and reach the destination?】

Warren Buffett's advice on identifying sustained winners rather than just past winners is crucial Over the years, China has deeply engaged in the international market through two critical sectors: manufacturing and consumption. These sectors have garnered widespread recognition globally and offer multifaceted competitive advantages. In particular, the manufacturing industry has leveraged its modular supply chain effects and robust industrial systems. This has enabled many enterprises to transcend traditional boundaries, moving beyond mere cost advantages associated with "products going global" to emphasize "production capacity going global" supported by technological strengths. This shift marks a new phase of internationalization for these enterprises. Amidst these endeavors, Morimatsu International stands out as a promising contender in the post-pandemic era, embodying the spirit of "from Japan, rooted in China, serving the world." The company has demonstrated impressive performance, showcasing potential leadership in the international arena.

Morimatsu International (stock code: 2155.HK), an early entrant into China's global competition arena, is a leading international provider of core equipment and integrated high-performance engineering solutions. Owing to its distinctive product forms, application fields, and operational approaches, Morimatsu garnered significant attention early in its establishment. Today, Morimatsu has surged ahead of many competitors in its industry, leading the charge in building its international brand.

"Engage in competition to transcend competition," remarked Mr. Nishimatsu Koei, CEO and Executive Director of Morimatsu International, encapsulating their strategic approach. Since 'going global' is an inevitable choice for ambitious enterprises, entering the market as early as possible is a superior competitive strategy. Facts have also shown that Morimatsu's initiative has enabled it to make great achievements over the past decades.

Founded in 1990 as the first foreign-funded enterprise in Shanghai Pudong post China's reform and opening up, Morimatsu has embodied a unique blend of "mixed genes.”

Perhaps it is this inherent characteristic that enabled Morimatsu, as an early entrant, to be more aware and receptive to multi-industry and diverse industrial layouts during its early development stages. From the outset, the company inherited manufacturing technology from its Japanese controlling shareholders, introduced international technology and quality standards, and competitively priced its products to quickly gain market share in China. Over the past 30 years, Morimatsu has grown into one of China's largest non-state-owned manufacturers of core equipment and complete sets of equipment for the process industry. It provides high-standard, high-quality core process equipment, complete equipment sets, and comprehensive industrial solutions featuring advanced proprietary technologies across more than 10 industries, including pharmaceuticals (including biopharmaceuticals), chemicals, raw materials for power batteries, electronic chemicals, and oil and gas refining.

Operating within a single market, it is inevitable to encounter growth limitations in terms of supply, demand, and developmental potential. In contrast, the global arena presents virtually limitless business opportunities. After establishing a strong presence in the domestic market, Morimatsu swiftly pivoted towards international expansion. Among the pioneers exporting high-end industrial products to developed countries, Morimatsu began its global market exploration in the early 21st century. International expansion has thus played a pivotal role in Morimatsu's development over its more than 30-year history.

In 2003, Morimatsu achieved a significant milestone by exporting advanced chemical equipment to Bayer in Germany. This marked Bayer's first purchase of chemical pressure vessels manufactured in China for its plant construction in Germany, signaling a breakthrough in the advanced materials industry and showcasing the full integration of foreign-funded enterprises in China into multinational corporations' global supply chains.

By 2008, Morimatsu expanded its global presence further by exporting core equipment (HPAL pressurized kettle) to major hydrometallurgical projects in Papua New Guinea and Madagascar, each weighing over 800 tons. Concurrently, Morimatsu established subsidiaries in Houston, Texas, and New Jersey, USA, serving as key technical and commercial hubs for the energy, chemical, and pharmaceutical industries across North and South America. These subsidiaries provide essential services including technology support, after-sales service, and project support.

At this stage, Morimatsu's internationalization strategy is taking shape, emphasizing not just increased product output but also the development of comprehensive capabilities and synchronized global expansion. In its pursuit of deeper globalization, Morimatsu continuously evolves. Through expanding into global markets and effectively utilizing global resources, the company has achieved significant strides in industry expertise, technological innovation, and brand development. "Innovation-driven, technology-led" isn't merely a slogan for Morimatsu; it embodies a genuine positive cycle.

Against the backdrop of industry cycles and escalating trade tensions, the imperative to avoid over-reliance on any single market or industry has become increasingly evident. Embracing a diversified global business approach has thus become essential for enterprise survival.

Morimatsu currently maintains industrial operations in over 10 countries and regions, employing approximately 4,500 people globally and holding a number of patents for inventions, utility models, and designs. According to its 2023 annual report, Morimatsu's overseas revenue accounted for about 47.2%. The company expects this figure to increase to approximately 70% by 2024. Morimatsu's ability to establish long-term, deep relationships with industry leaders internationally is rooted in its extensive expertise in material innovation and technology application over many years. Enterprise development is not about relying on a single strategy but continuously strengthening foundational technologies to enhance core capabilities. Simultaneously, Morimatsu emphasizes continuous iteration and innovation, aiming for win-win cooperation and shifting from "price service" to "value service" to continuously enhance enterprise value.

To enhance its international presence, Morimatsu strategically acquired Pharmadule, a global leader in pharmaceutical engineering, in 2011. This acquisition firmly established Morimatsu as a leading competitor and market influencer in advanced engineering solutions for the international pharmaceutical and biopharmaceutical industries. Currently, Morimatsu has subsidiaries in Sweden, Italy, Japan, the United States, India, and Singapore. By leveraging the acquired companies' market and technology resources, Morimatsu is solidifying its market presence in Western and Northern Europe. Concurrently, it aims to enhance synergies, expand its product portfolio, and advance technology capabilities. Morimatsu is steadily emerging as a global leader in the pharmaceutical industry, particularly in delivering modular plants for biopharmaceuticals.

In 2021, Morimatsu International was listed on the main board of the Hong Kong Stock Exchange and formed a joint venture with Malaysia's Dialog Group to begin constructing its first overseas factory. This move successfully expanded its manufacturing capacity from China to overseas, leveraging Malaysia's geographic advantage and market reach to effectively serve Southeast Asia, the Middle East, and both North and South American markets. This marks Morimatsu's first overseas factory, a critical milestone in establishing a global infrastructure following its listing.

As the saying goes, "As the saying goes, "A successful soldier secures victory first, then engages in battle," underscoring the importance of strategic planning in achieving success. By integrating global resources and operating as a multinational enterprise with a broad market reach, Morimatsu demonstrates the effectiveness of its long-term internationalization strategy. By integrating global resources and operating as a multinational enterprise with a broad market reach, Morimatsu demonstrates the effectiveness of its long-term internationalization strategy. The evolution is evident—from initially establishing hardware production to meet international standards, advancing to exporting software production capacity, and now establishing technical hubs and service teams worldwide. This journey signifies a shift from meeting to setting standards, and from customization to standardized products. Morimatsu's focus has shifted from addressing price demands to meeting value-driven needs, marking a significant progression in its internationalization efforts.

It's inaccurate to solely attribute Morimatsu's internationalization success to "going global.” "Going global" is a tool and process within Morimatsu's internationalization strategy—it marks the beginning, not the end. For modern manufacturing enterprises like Morimatsu to truly globalize, they must first achieve localization and operate locally with a global perspective. Expanding abroad isn't just about business; it involves broader economic, social, and cultural considerations. "Going global" is an economic and social phenomenon influenced not only by individual enterprise decisions but also by domestic and international economic and social environments.

While it holds special significance today, viewing it solely as a way to export products and expand business oversimplifies its complexities. Business owners must recognize "going global" as a long-term strategic initiative rather than a one-time action. Failing to do so risks undermining business sustainability and growth. At the same time, an enterprise's brand influence is also tied to its country's position in the global industrial chain, reflecting the competitiveness of the country on the world stage. For Chinese enterprises to maintain high-quality and sustainable development, their international business stature must encompass more than just physical output. They must also export brand influence and values. While these truths may seem straightforward, putting them into practice poses significant challenges. We look forward to more pioneers like Morimatsu who persist in exploring broader avenues for growth with a long-term international vision. We hope more Chinese companies will emerge into their own "age of exploration.”