Global Cases

Learning in Japan and expanding into the world -  Construction equipment rental business developed in the United States

U.S.A.

Expertise Accumulated in the Rental Business in Japan

A variety of types and sizes of construction equipment are used on construction sites depending on their scale and process. Conventionally, construction equipment systems have generally been owned by general construction contractors and therefore, the construction equipment business of Sumitomo Corporation began with a trade business that sold construction equipment manufactured in Japan to overseas users. Sumitomo Corporation later expanded the business into machinery and equipment wholesale, targeting sales agents in foreign countries. With the aim of also entering the retail business, the company subsequently acquired local distributorships and became involved in their management.

In Japan in 1990 when it had become popular to rent machinery on an as-needed basis, Sumitomo Corporation entered into the construction equipment rental business in cooperation with Taiyo Kenki Rental Co., Ltd. (hereinafter referred to as "Taiyo Kenki Rental"), which is firmly based in the Tokai and Kyushu regions (the company was formed by the merger of former Tomei Kenki Rental and former Kyushu Kenki Rental in 1996). Since then, Sumitomo Corporation has been involved in the management of the joint business and has accumulated much expertise in the construction equipment rental business.

Taiyo Kenki Rental owns 320,000 units of rental construction equipment in total.

Entering the High Potential U. S. Market

The construction industry grows in response to the development and population dynamics of each country as well as other market demands. Around the world, highly promising markets exist not only in Japan but in other countries as well. Recognizing this fact, Sumitomo Corporation undertook plans to expand its business throughout the world, employing its expertise gained through business dealings with Taiyo Kenki Rental. As the first step in this effort, it acquired Sunstate Equipment Co. (hereinafter referred to as "Sunstate Equipment"), one of the largest construction equipment rental companies in the United States. This acquisition allowed Sumitomo Corporation to enter the U.S. market on a full-scale basis. The construction equipment rental market in the United States is the largest in the world on the scale of about 3 trillion yen.

Rental penetration (rental-to-sales ratio of construction equipment) in the United States is about 40%, which is significantly lower than the ratio in Japan. This means that there is a huge potential market in the United States. Another major reason Sumitomo Corporation decided to make a full-scale advance into the U.S. market was that the entire construction equipment industry was struggling due to the impact of the economic downturn initiated by the Lehman Brothers bankruptcy.

Headquarters of Sunstate Equipment in Phoenix, Arizona

To Become a True Partner

The assets of a construction equipment rental company consist of a wide range of construction equipment units. The strength of a company is determined by its ability to manage this significant variety of assets.

Sunstate Equipment has a well-organized management system for its construction equipment units. Another one of the company's most attractive features is the trusting relationship it has built with its customers over many years through efforts taken to meet their needs. The owner of Sunstate Equipment is known for being considerate to his employees, and under his leadership has formed a corporate culture that places emphasis on teamwork, a principle that Sumitomo Corporation strongly agrees with.

We believe that by integrating and developing the high management skills of the top management of Sunstate Equipment and the expertise that Sumitomo Corporation has achieved in the domestic construction equipment rental business, we can expect long-term growth. From this standpoint, we concluded that Sunstate Equipment was the most appropriate company to enter into partnership with. Since the investment in 2009, Sumitomo Corporation has been strengthening its strategic partnership with Sunstate Equipment.

Sunstate Equipment's property with construction equipment units lined up in an orderly manner

Expanding business globally from the United States

The United States has seen increasing demand for construction equipment rentals, driven in part by demand for improvements to the country's aging public infrastructure, and Sunstate Equipment is planning to expand its business into states other than the nine states in the South and West (including Texas and California) where it is presently active in order to pursue sustained growth. Through its partnership and teamwork with Sumitomo Corporation, Sunstate Equipment will seek to reach the pinnacle of service quality and become an absolutely essential presence in the U.S. construction equipment rental business.

Future advances will be made into other markets expected to see further economic development. Utilizing the operational know-how cultivated in Japan at business companies acquired in the U.S. to expand business operations globally, this dynamic project will take advantage of the integrated corporate strength that is unique to Sumitomo Corporation.

Precise responses to customer needs resulting in a highly trusted company

February 2017

Keyword

  • Transportation & Construction Systems Business
  • The Americas
  • Machinery

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