Murata: when boring is brilliant

We’ve said before on Family Capital that the true power in the world economy lies not with the likes of Twitter and Amazon, big-name companies which are loved by business journalists but don’t turn a profit. Rather, the really big guns are the people who do boring-sounding things that are essential to the world’s economy.

Many of the firms that do these things are family-owned – for example Lafarge in concrete, or Mittal in steel. Or Britain’s JCB in farm machinery. Or India’s Essel Propack, which makes toothpaste tubes. Or the UK’s Gallagher Group, which makes electrical fencing for livestock farming.

This is hardly the stuff to get you on the cover of a glossy magazine, but it matters. And it is very profitable.

Any list of these firms should also include Murata Manufacturing, a second-generation Japanese firm that makes chip coils, ceramic capacitators and other obscure electrical gizmos. (They also make dancing dolls, to show off their skills.) The thing is, it does this so well that it has a market capitalisation of $24bn and annual revenues of $8bn.

Why? Because the things it makes are essential to mobile phones. As a recent profile of its boss Tsuneo Murata in the Financial Times explained, while other businesses founded around the same time – it was started in 1942 by Tsuneo’s father Akira – such as Sony have been overtaken as consumer brands by the likes of Apple and Google.

But if you make the stuff that makes stuff work, you are never at the mercy of fashion.“Whoever it is that is making the handsets, demand for our components continues to expand,” said Murata Jr, who is the youngest of three brothers who all went into the family firm. He took over as head of the business from his brother in 2007, aged 55.

So, if and when Samsung loses market share to Xaiomi or another upstart, Murata just sells to them. It’s a brilliant business model.

And it raises an interesting question – are families, with their long-termist, stewardship philosophy, drawn towards these sorts of businesses? Or do these sorts of sectors, because they are stable, breed family firms?