“Side-Business”Development in Japanese Major Private Passenger Railways: ― What can we learn from their experiences? ―

Abstract Railway privatization continues to progress in Japan and overseas, but progress was not always smooth and there have been cases of management failure following privatization. Therefore, it is important to establish appropriate business management policies and strategies. Major railway companies in Japan have been operating railway businesses together with a collection of side-businesses in a unique way. The term side-business in the context of Japan’s railway industry covers a wide range of businesses, including transportation, real estate, merchandise sales, tourism and leisure. These side-businesses are no longer on the side as they currently account for about 70 to 90% of Japan’s major private railway companies’ revenues, making them important sources of revenue. The process, factors and characteristics of diversification strategies used by Japanese major railways can offer useful background information and insights for the investigation of future railway privatization methods. This study examines the details and time periods of such side- businesses and provides a model for classifying them by era and according to their characteristics. The model developed highlights the variety of ways that companies diversified their business activities and historically maps the establishment of such side-business. Moreover, in recent years, six types of structures for operating revenue have emerged, which demonstrates that side- businesses are not incidental to the railway business in Japan, but are also a driving force that creates innovation and synergistic effects.