Japanese multination corporations (MNCs) have achieved international economic power through rapid growth, facilitating the introduction of new technology and continuous cost improvement, which promotes further growth. They recognize, though, that other countries can pursue similar strategies and that Japan is competitively vulnerable, given the appreciation of the yen and a maturing economy where many consumer needs have been satisfied. MNCs have therefore chased growth abroad, investing to access new technologies, exploit new markets, and keep costs low. An aging population and the impact of the bubble contribute to this process. Japan's population over 65 is increasing faster than in any other country. By the first decade of the next century, it will have accomplished in one generation what has taken France and Sweden over 50 years. But this population is presently saving for retirement, not consuming, both slowing economic growth and providing resources for overseas investment. Further, when their consumption does rise, it will not be for the investment goods and consumer durables produced by the MNCs but for health care and leisure.
Similarly, helping MNCs abroad, yen appreciation, and a high savings rate increased Japan's money supply very quickly in the 1980s. This combined with financial liberalization to bid asset prices, especially stock and real estate, to astronomical levels, the so-called bubble. During this period, companies could raise capital very cheaply. While the subsequent collapse hurt financial institutions holding overvalued stock and real estate, on balance MNCs benefited from the bubble through cheap capital, access to world financial markets, and less government control.
Management's focus
Japanese management is aware that competitive development is based on growth and is concerned that new competitors will impact Japan as they did the United States. Most MNCs have developed by importing technology and selling in the high-growth Japanese market. After product and manufacturing were improved, export growth followed--first to lesser developed countries (LDCs) and then to advanced countries.
This evolution depended on aggressive pricing and investment to build volume and market share because product differentiation was difficult with several large producers using similar imported technologies. Price pressures became particularly intense once growth slowed, as each firm tried to operate at capacity. This pattern has been repeated serially in technically more sophisticated, higher value-added industries, starting with cotton textiles, then steel, ships, construction equipment, cars, and currently computers and ICs.
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