CLASSICAL ADMINISTRATIVE THEORY

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Japan’s Competitiveness in the Global Economy
and Opportunities for Japan- Related Research
James R. Lincoln
Mitsubishi Chair in International Business & Finance
Walter A. Haas School of Business
University of California, Berkeley
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My Japan-related interests
--Human resource management and employment systems
--Organizational design and management practice
--Business groups (keiretsu) and corporate governance
--Strategic alliance
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Topics
• Why am I here?
– It’s not the weather
– International business focus
– Inter-university consortium
• My topic: Japan’s competitiveness
– Japan’s liabilities and strengths
– How it’s changed
• Opportunities for Japan-related business
• Opportunities for Japan-related research
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Before the earthquake Japan was
getting back on track
• 4% GDP growth in 2010, unemployment at 5%
– Following 6% drop in 09 & 1.5% drop in 08
• But Japanese financials untouched by 08 meltdown
– Strong performance in late 2010 by export industries
(mostly autos and electronics)
• Toyota quality problems a distraction
– But shake-up good for Toyota
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This follows 20 years of weak growth
• Averaged .5% GDP growth since 1990
– 18% of the global economy in 1994. Now ~9%.
• Shrinking and aging of population a factor
– Since early 90’s growth of GDP/working age
population has surpassed U. S.
– GDP p. c. growth equal to U. S. last 10 yrs
• GDP may understate Japan’s strengths
– “Market value of final goods and services
produced within a country in a given period”
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Old Japan Inc. model (~1950-1988)
• Corporate strategy: growth, quality, cust. service
• Lifetime commitment HRM model:
– High skill, stability, discipline, teamwork, flexibility
• Highest manufacturing performance
– JIT and keiretsu supply chains
• Strange but effective (?) corporate governance
– Large insider boards
– Monitoring and risk-sharing by banks & keiretsu
• Ministry “industrial policy” guidance
• Nontariff barriers to imports & foreign investment
Fell apart in the “bubble” era (88-92) & aftermath
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Performance-enhancing adjustments to
Japan’s economy since the mid-90’s
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Cost-saving corporate restructurings
Improved strategic focus by large firms
Fading of legacy networks (main bank, keiretsu)
Decline of lifetime commitment HRM model
Corporate governance & accounting reform
– But retreat from U. S. model after 2001
• Better universities
– And less rigid primary and secondary ed (good?)
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Japan mostly made the right changes
• Kept good parts of old system
– Long term employment for regular workers
• Training, discipline, flexibility
– Networking capabilities
– Strong corporate cultures
• Changes in the right places
– Greater performance focus (less seniority)
– Greater strategic focus
• Capacity reductions
• Move up value chain
– Efficiency enhancing restructurings
• Both firm and group
– Greater financial transparency
– Corporate governance reforms
Japan’s ongoing strengths
• Well-trained, disciplined workforce
– Strong work ethic and teamwork
– HRM model for blue collar that travels well
• Strong & cohesive management teams
• Long-term orientation
– Lack of investor pressure
– High R&D investment
• Strong manufacturing/supply chain mgt skills
• Better universities
Japan’s ongoing weaknesses
• Uncompetitive in many industries
– Software, pc’s, smart phones
– Chemicals and pharmaceuticals
– Services
• Complacency– people too comfortable
– Forget #1 or even #2; OK to be # 3, 4, whatever…
• Insufficient entrepreneurship
– Lack of venture capital
– Excessive risk aversion?
More liabilities
• Weak political leadership
– Which is no longer offset by strong ministries
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Weak CEO’s & slow corp decision-making
Insufficient M&A (still coddling “zombies”?)
Lack of entrepreneurship
Labor market (including ILM) rigidities
– Underutilization of women, immigrants
– Few mid-career job opportunities
– Problems integrating foreign white-collar employees
• Still wedded to “closed innovation” model
• Aging and shrinking of population
• High government debt (200% of GDP)
What will be the economic impact of
the quake/tsunami?
• $300B estimated reconstruction cost
– To be deficit-financed
– Repatriation of yen (and shedding of US debt?)
• Loss of GDP growth 1.5 - 2%
• Impact on global supply chains- significant short
term, longer term hard to say
• Impact on psychology?
– New seriousness - drive to rebuild & contribute
– Or “gaman” – fatalistic resignation, muddle through
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Should US firms be looking at
Japan– for markets, partners, etc.
• Already are, at least indirectly, for sourcing
• Probably not in terms of markets
– Affluent but tight-fisted & shrinking consumer base
– Continuing consumer resistance
• Still concerns about US quality & service
• Japanese tastes – iphone example
– Deflation erodes profitability
• Maybe
– For acquisitions (tough)
– Alliances (better). Bad reputation outdated.
Patience still required!
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Topics for research
• How do Japanese companies differ from
other countries (US, EU, Korea) and are they
better or worse?
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Employee commitment, etc.
Teamwork and rotations
Training and mentoring
Interfirm alliances and networking
Manufacturing and supply chain
Innovation: (is ‘open’ really better than closed’?)
Corporate culture and socialization
• Strategic value: knowledge kept tacit and inside
– Corporate governance (incl. family firms)
Japan-related research opportunities
• Positives
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Japanese scholars want foreign collaboration
More trained in Western styles/standards
Funding by Japanese funding agencies
Relative ease of access to Japanese firms
Vast data-gathering by government agencies
• Negatives :
– Language barrier
– Gaps in research styles/standards persist
– Lack of interest by funders, journals, audiences
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