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Japan's Coming Competitive Renaissance

A restructured Japan is likely to be an immensely powerful competitor in many sectors, in the domestic market as well as in global markets. If Japan was thought to be mighty in the 1980s, the new Japan could be mightier yet.

Three Clusters for the New Economy

Keiretsu are business groups, banded together through reciprocal stock ownership and exclusive, horizontal relationships that link banks, industrial companies, and trading companies (sogo shosha). Keiretsu such as Mitsubishi, Mitsui, and Sumitomo, with their sprawling businesses, once powered the Japanese economy. Keiretsu derived from the powerful pre–World War II zaibatsu, the huge, family-owned conglomerates that were broken up and sold to the public during the U.S. occupation. Today, the keiretsu have jumped onto the restructuring (risutora) bandwagon. Although some large keiretsu have begun to break up, the relationships built over the years by senior company executives provide an underpinning of network strength to many Japanese companies.

Kaisha are large multinational corporations with a global presence and brand names attractive to consumers in many parts of the world. Many kaisha, especially the major automakers, belong to vertical production groups linked to a vast network of exclusive distributor and supplier relationships, which tend to do business first with one another. The kaisha include multinational corporations, such as Toshiba, Nissan, and Canon, that are rapidly reinventing themselves and attempting to find new bases to compete globally. Some — including, notably, Nissan, Toyota, and Sony — have begun to radically cut
the inefficient layers of distributors and suppliers to reduce manufacturing costs.

Net-batsu are newer innovators, whose business and operating models have been built consciously on the foundation provided by the Internet. They include Rohm, Nidec, Hoya, Bandai, and Kao. Others, like NTT DoCoMo, Rakuten, and Softbank, blossomed in the high-tech wave of the 1990s. Most derive more than 50 percent of their revenues outside Japan. They tend to be run by entrepreneurial individuals, often the founders. Unlike traditional Japanese companies, which typically favored top-line and market-share growth over profits, net-batsu have focused on efficiency and profit generation, avoiding the maladies of overcapacity, low margins, and bloated work forces that have hurt many Japanese firms. Many net-batsu do not belong to a keiretsu; lacking business and government relationships, they are more exposed to market forces, which compel them to continually sharpen their performance and take greater risks.

Focus: The Japan External Trade Organization

The Japan External Trade Organization (JETRO) has become one of the most powerful enablers of Japan’s renewed global competitiveness. The organization’s role is varied. Through its Region-to-Region Initiatives program, JETRO conducts surveys, engages in economic development missions with other countries, and holds seminars for international regional development activities between Japanese regional economies and overseas regions and businesses. These efforts, coordinated through an extensive network of offices worldwide, bring regions together for investment and technical tie-ups, collaborative research and development, overseas procurement by Japanese firms, and investment in Japan by foreign firms. JETRO also conducts basic and comprehensive studies on economic and related affairs in Asian countries and in developing regions, to promote economic cooperation and the improvement of trade relations between Japan and these regions. Through investment advisors stationed at its Tokyo and Osaka headquarters, JETRO provides information to Japanese firms interested in making overseas investments.

JETRO collects a wide variety of information from its worldwide network in its two libraries — the Business Library, located in both Tokyo and Osaka, and the IDE (Institute of Developing Economies) Library. JETRO also regularly feeds companies with information collected through its global network and through publications such as Focus, a monthly newsletter about economic, trade, technology, and industrial trends in Japan. Although many of these reports are available publicly through its library and Web site, JETRO also handles “custom reports” that are available only for Japanese companies.

— C.N. and G.S.Y.

 
 
 
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Resources

  1. Angela A. Andal-Ancion, Phillip A. Cartwright, and George S. Yip, “The Digital Transformation of Traditional Businesses,” Sloan Management Review, Summer 2003
  2. Yamada Atsushi, “Japan’s Economic Crossroads,” Japan Quarterly, October-December 2001
  3. Michael E. Porter and Hirotaka Takeuchi, “Fixing What Really Ails Japan,” Foreign Affairs, May-June 1999
  4. Ben M. Bensaou and Michael Earl, “Information Technology in Japan: Are There Lessons for the West?” in Information Technology and Industrial Competitiveness: How IT Shapes Competition, by Chris F. Kemerer, ed. (Kluwer Academic Publishers, 1998)
  5. Philip Evans and Thomas S. Wurster, Blown to Bits: How the New Economics of Information Transforms Strategy (Harvard Business School Press, 2000)
  6. Larry Kahaner, Competitive Intelligence: How to Gather, Analyze, and Use Information to Move Your Business to the Top (Touchstone, 1998)
  7. Miyamoto Musashi, The Book of Five Rings (Bantam Books, 1992)
  8. Kenichi Ohmae, The Invisible Continent: Four Strategic Imperatives of the New Economy (Nicholas Brealey Publishing, 2000)
  9. Michael E. Porter, Hirotaka Takeuchi, and Mariko Sakakibara, Can Japan Compete? (Basic Books, 2000)
  10. Ezra F. Vogel, Is Japan Still Number One? (Pelanduk Publications, 2000)
  11. The Japan External Trade Organization: Click here.