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 1 My Japan-related interests --Human resource management and employment systems --Organizational design and management practice --Business groups (keiretsu) and corporate governance --Strategic alliance 2 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 3 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 4 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” 5 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 6 Performance-enhancing adjustments to Japan’s economy since the mid-90’s • • • • • 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?) 7 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 • • • • 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 12 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! 13 Topics for research • How do Japanese companies differ from other countries (US, EU, Korea) and are they better or worse? – – – – – – – 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 – – – – – 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 15