The Japanese Car Industry

The Japanese Car Industry is increasing to take market share in all areas of the world. The major manufacturers operate on all continents with production facilities spread across the world. They have expanded throughout the past 20 years through a combination of Greenfield Investments, Joint Ventures, and Acquisitions. Although technology and design are still major factors in competitive advantage there is a much greater level of cooperation from the top Japanese manufacturers with European and US firms.

Most Japanese automotive firms lean towards a multinational structure, with manufacturing, sales, and admin occurring in geographic areas, but usually with Japanese top management brought in from Head Office. The Japanese have famously brought new work practices into the car industry such as quality circles and JIT, which have influenced other commercial organisations. Culture has been a key success factor for many Japanese firms, with a trend towards team working. This has proved extremely successful in the manufacturing sector.

Not all Japanese firms have been successful, Nissan has been ‘taken over by Renault structurally. How this will affect the strategy and impact on production and design remains to be seen. As two different organizations, the resulting hybrid will surely have a distinct character. A major player in the industry, Honda has a large and almost indistinct structure but has been proactive in improving quality, cutting costs and building a team orientated culture. It is committed to improving the motivation of the workforce to improve the standard of the product, a truly Japanese work ethic.

In truth the Japanese car industry is slowly becoming a global industry of organizations that were once Japanese with headquarters in Japan, but with other functions being carries out around the world.

Introduction

The purpose of this report is to examine the Japanese automobile industry, and the manufacturer’s success at entering the global marketplace. An environmental study, including the use of a PLEST and SWOT analysis will be undertaken to analyze the situation that is faced by the manufacturers as they attempt to gain a greater proportion of the world market.

Trade theories including Vernon’s Product Lifecycle and New Trade Theory will be studied to explain why the Japanese firms have been so successful. This will be coupled with a discussion of the entry strategies firms can employ when entering foreign markets such as Licensing and Foreign Direct Investment, along with an assessment of each one’s value to the producers. A more specific stance will then be taken to assess the actual strategies and structures of the producers, with examples given of relevant firms.

A study of Honda in particular will look at key success factors. A conclusion as to the main determinants of the Japanese automobile manufacturers’ success will finally be formulated. In support of this document, it was also considered in the ever more global world to consider the impact of culture upon the manufacturers and the countries into which it enters.

An analysis using Hofstede (1984) will be undertaken to help support the rationale for the producers’ success.

Industry Environment

The automotive industry is big business throughout the world, and the environment in which it takes place is ever-changing, below is a short synopsis of both a full PLEST and SWOT analysis. The PLEST has been conducted in relation to the industry environment as a whole and also with regard to the Japanese environment, whereas the SWOT is specific to Japanese Automobile manufacturers (complete examples of both analyses can be found in appendices A and B respectively).

PLEST Analysis

The automotive industry has seen various forms of barriers restricting both entries from new competitors into the industry and also trade between countries, such as tariffs and duties, which have in times past hindered Japanese firms. The industry is susceptible to many of the economic dilemmas that other industries experience such as recession and high inflation, but also has to more specific problems such as the oil crisis.

With Europe and the United States being large markets, cultural concerns become evident; consumer tastes and management styles vary throughout the world and must consequently be considered by the Japanese Manufacturers when they enter markets. Another important factor is technology; which is hugely important in the automobile industry, many of the competitors are highly technologically innovative.