HIGASHI-OSAKA, Japan -- Small manufacturers in Japan have long relied on foreign workers to do factory jobs that many Japanese these days shun, but rarely do these overseas workers rise to management positions.

One Osaka factory, however, demonstrates the benefits of removing the glass ceiling for foreign employees, as Japan grapples with a serious labor shortage. The move could signal a shift in the conservative mindset of Japanese business and lead to greater diversity from the boardroom down.

Higashi-Osaka is home to many small and midsize factories, often family-run. Nakano Manufacture has been making machinery components in the city for nearly 70 years. In November the company opened its first overseas factory in Ho Chi Minh City through wholly owned subsidiary Nakano Precision.

Ho Dang Nam, president of the local unit, gave a speech at the opening ceremony. Ho, a graduate of Vietnam's Danang University of Technology, joined Nakano Manufacture in 2008. Before his appointment as president of the subsidiary, Ho worked as head of a manufacturing division at the parent company, and in other positions.

Nakano Manufacture began accepting Vietnamese trainees in 2003. At first, like many small Japanese manufacturers, it was looking for "helpers" to make up for a shortfall in Japanese workers.

But the company changed tack in 2008, hiring four Vietnamese, including Ho, as permanent employees. Nakano Manufacture realized the constraints imposed by the government-run trainee program, such as limits on how long workers could stay, hindered its ability to develop the skills it needed in future leaders.

In 2011, Nakano Manufacture held a companywide overnight training outing -- a common way of improving communication among colleagues in Japan. During the event, people talked about where they saw the company in 10 years. Vietnamese staff proposed building a factory in Vietnam.

Many Japanese companies look overseas for new sources of growth and to cut costs. But it is not easy to expand abroad, particularly for small concerns, which often do not have the people they need to oversee far-flung operations.

According to a report published in March 2017 by the Organization for Small & Medium Enterprises and Regional Innovation, a semipublic body operating under Japan's Ministry of Economy, Trade and Industry, the biggest impediment to overseas expansion cited by companies surveyed was the lack of qualified personnel.

Nakano Manufacture faced the same problem. In addition, the company was also in a challenging transition, with the then-president, Yasuhisa Nakano, a member of the founding family, passing the baton to Daisuke Nishijima, its current president.

While attending a trade fair in Vietnam in 2013, Nishijima saw that Ho and other Vietnamese employees communicated well with visitors. He realized that he had a valuable asset in the form of his Vietnamese staff.

Soon after Nishijima took over as president that same year, a project team was set up to make the expansion into Vietnam a reality. Nakano, now chairman, asked the team to keep spending on the project as low as possible. Nishijima and Ho drew up a plan that focused on products with high added-value, and making the most of external resources.

Ho Dang Nam, president of Nakano Manufacture's Vietnamese subsidiary, speaks at the opening of the unit's factory in Ho Chi Minh City in November 2017.

Moving production overseas often comes from a desire to cut costs, but Nakano Manufacture did not want to be trapped in a cycle of discounts and shrinking profit. So it decided to have the Vietnam factory make high added-value products such as chipmaking machines. The Ho Chi Minh City factory has plenty of idle space. "We don't need many machines," said Nishijima, because the company contracts out much of its work to local businesses.

Ho and other managers in Vietnam have made the most of the expertise they developed in the Osaka factory, building up a network of local contract manufacturers. The advantages they have in communicating with Vietnamese have allowed them to deal with contractors while maintaining quality and timely deliveries.

Nakano Manufacture's sales for the year through April topped 900 million yen ($8.12 million). The new unit in Vietnam is expected to rack up sales of about 150 million yen annually.

The Japanese company plans to increase its investment in the Vietnamese unit and expand into the central city of Danang, Ho's hometown, in five years. "In 10 years, half of our business could come from the Vietnam operation," said Chairman Nakano.

To overcome Japan's labor shortage, the government plans to introduce a new class of work permits starting in April next year for sectors such as construction and nursing care.

There are still kinks to work out, including making sure that foreign workers have a comfortable living environment. Recent discussions of the issue have raised concerns that the government believes it is enough to open the doors to foreign workers without addressing other problems.

The battle for talent in Asia is intensifying, not only for technology specialists and managers but also for lower skilled factory and farmworkers. If Japanese companies want to attract good people, they must see foreign employees not merely as a supplementary workforce but as part of their growth strategy over the medium to long term.

Japanese businesses are often criticized for being closed and not giving overseas employees opportunities to advance. Important management decisions are often made by headquarters or by Japanese staff at overseas branches.

Nakano Manufacture, by contrast, has accepted foreign workers for 15 years. Nishijima has expressed deep trust in Ho, calling him "a potential candidate" to succeed him. This small company has managed both to attract talented workers and to expand overseas. Many others, and the government itself, could learn from its example.