Automobile
manufacturers have played a significant role in shaping the economy and the
general business environment in Japan. The story of Japan can effectively be
told from the perspective of some of the major car manufacturers which helped
transform Japan from an Agriculture based economy to the leader in technology
and manufacturing that it is today[1].
The initial market for the Japanese vehicles was local with government
implementing protectionist policies to promote the market for local products.
By 1953, Japan was exporting over 10,000 cars and double the amount by 1955[2].
These exports grew exponentially to make Japan the leading car exporter in the
world with the USA being its main market. The impact of the car manufacturing
industry has gone beyond the economic aspect and can be explored using the PESTEL
model elements explained in the latter sections of this paper.
Japan
is currently the second largest manufacturer of vehicles after China and is
followed by USA and Korea respectively. This is as shown in the data below.
Figure 1: Motor Vehicle Production Globally[3]
Since
the 1970s, the production of motor vehicles in Japan has almost tripled between
1970 and 2012. This is shown in the data presented below:
Figure
2: Motor vehicle production data Japan[4]
The
trend has however not been consistent with trends analysis showing that Japan
is yet to recover the production levels it recorded prior to the 2008 global
recession. This is shown below:
Figure 4: Data
on motor vehicle production trend[5]
This
could arguably be used to challenge the influence of the automobile industry in
Japan with further developments indicating major quality challenges in the
industry as manifested in the many recalls that the major players are forced to
make on faulty products.
The
transformation in Japan has been visible and with a high impact over the last
few centuries. It actualised in mass production and managed to unseat leading
global brands to become the leading manufacturer and exporter of motor vehicles[6].
It also spearheaded the founding of some of the world’s most popular management
concepts such as Kaizen and Just-in-Time that were the dominant driver for
Japan’s rise into global economic prominence[7].
A comprehensive discussion on the industry’s impact on Japan is done under the
PESTEL models whose elements are listed as political, economic, social,
technological, environmental and legal factors. These are discussed in the
sections below.
In
many cases, government policies are interpreted in light of their impact on key
sectors such as the automotive industry. For instance, Japan’s program for
stimulus spending and monetary easing weakened the Yen considerably and this
led to exporters such as Toyota making higher profit[8].
Even though this improved profitability has led to higher wage demands by
workers, it demonstrates how government policy impacts the currency strength
and its impact on the Japanese economy. The need to export cars also dominates the
country’s foreign policy with an emphasis being on the major sources of demand
for their products. Japan’s international relations are strongest with the USA
which is their main market for motor vehicles and other exports[9].
The growing influence of Asian countries as potential markets has also seen
Japan take measures to strengthen ties through grants and trade agreements in
order to create opportunities for free trade. The exports of motor vehicles per
region and trends projected are as below:
Figure
5: Data on export growth by destination[10]
The
contribution of the automobile industry is evident in the country’s attitude
towards international trade and the facilitation of cross-border transactions.
Having become a mass producer of motor vehicles, the need to be able to export
the products arose and the government moved to engage with other governments to
create bilateral and multilateral trade agreements to make it easy for their
motor vehicles to be purchased around the world[11].
One of the key concerns was the removal of tariff and non-tariff barriers.
These efforts have largely improved in some of the country’s key markets such
as the USA where tariffs on imports have been lowered incrementally over time.
The current negotiations on bilateral trade with the USA propose the reduction
of duty on Japanese trucks and larger vehicles to 30%, a move that is believed
to be very important for the industry[12].
This means that while the contribution of the motor industry has been positive
in contributing to GDP and international trade, it has led to the neglect of
other sectors of the economy.
Japan’s
automotive industry has contributed to the transformation of the country’s
social cultural elements. Japan is an icon of capitalism in a region that is
predominantly collectivist and this draws its roots from the early trends where
personal ownership of assets lie cars was accepted. The car made it acceptable
for individuals to own valuable assets and get accustomed to having a personal
space while travelling. This provided a platform for the acceptance of capitalist
views. Today, Japan is dominated by a strong preference of private transport.
This is shown in statistics indicating the demand for personal cars to be much
higher than for commercial vehicles.
Japan
has greatly advanced technologically with luxury car brands being on the rise
in the country. Racing cars are increasingly popular especially among the youth
who are attracted to flashy and expensive things[13].
This development is credited to developments in the automobile industry. It has
spread to other fields in the economy with technological advancement being the
characteristic that defines the Japanese society to date. Also important as an
influence of the automotive industry is the reinforcement of the value of
relationships in achieving success in business. The Japanese automobile
industry thrived on its ability to embrace operational models that emphasised
integration, trust and commitment among members of the supply chain[14].
This was consistent with the country’s tradition of being high context and
emphasis on trust and commitment in business.
The
culture of innovation in Japan is significantly influenced by developments in
the automobile industry with Japan being among the most technologically
advanced countries in the world[15].
This image has however been faced with challenges with car recalls indicating a
lapse in quality management in sustaining innovation. In 2014, Japan’s leading
automotive player Toyota was faced with massive recalls where 6.4million cars
were recalled (Stock).
The
records on recall indicate that there may be a challenge in sustaining
technological innovation in Toyota and across the automotive industry. In spite
of these challenges, the automotive industry continues to be the leader in
investment in research and development. It therefore remains a crucial driver
in technological advancements in the country. The figure below shows data on
the level of investment in research and development in different sectors in the
country.
Figure
7: Investment in R&D in Japan by sector[17]
The
demand for automated brake systems has informed some of the innovations in the
industry. Toyota is said to have developed a pre-crash brake assist systems
which automatically brakes when they detect approaching passengers. Nissan
Motor’s Skyline luxury sedan is
equipped with a radar system that detects the movement of the preceding car and
automatically brakes when the vehicle does[18].
Also
an important area for innovation is on the fuel consumption attributes.
Companies in the industry make efforts to design engines that are efficient in
fuel consumption. Japanese vehicles have been known to have this property with
the oil crises that have occurred in the past boosting demand for Japanese
cars. In one of the latest developments, Suzuki is reported to be in the
process of designing an engine which would see a vehicle cover 42km with 1
litre of gasoline[19].
These developments help in accommodating changing customer demands while also
acting as a catalyst for greater technological development within the country.
Apart
from the automobile industry, Japan also excels in computer games and
electronics which are hailed as being a reflection of innovation advancements
in the country. However, it is the innovation in the automobile industry that
was the catalyst for the technological developments in other areas. Japan’s
excellence stemmed from its innovation in engine development resulting in
cheaper and more efficient engines[20].
For instance, Suzuki is currently in the process of developing engines that
will consume only 1litre of gasoline for every 42 km covered.
The
level of innovation in today’s world determines how an organisation is
perceived and this also applies to the host country. Japan’s innovation record
continues to be impressive with the leading automobile manufacturers such as
Toyota and Nissan investing in engine technologies to improve fuel efficiency.
Their Western counterparts have also been in Research and Development with brands
such as Ford and General Motors being more ardent in boosting energy efficiency
and innovation in developing electric cars[21].
In the production of cheaper and more efficient vehicles, emerging trends are
that Indian and Chinese automobile industries are increasingly improving and
projected to outperform Japan in future[22].
Within Japan, the industry continues to lead in innovation as illustrated in
figure 7 above.
Japan
is among the leading polluters in the world and this is largely attributed to
the manufacturing and transport sectors[23].
The automobile industry plays a significant role in both sectors. In Japan,
efforts to conserve the environment have primarily been targeted at the
transport sector with proposals such as increasing fuel tax being common. The
impact of the fuel tax in reducing fuel consumption was minimal, hence
demonstrating the extent to which modes of transport as valued by the Japanese[24].
Some
of the radical developments are in the European Union where the EU imposes
their standards on all their trading partners to ensure that environmental
standards are upheld and the emission levels reduced[25].
Japan has to a great extent adopted the conservation agenda by providing
incentives for organisations that manage to substantially cut down on their
rates of greenhouse gas emissions. However, their regulations have been
criticised for failing to prescribe penalties for non-compliance[26].
This means that compliance is voluntary and business owners have the leeway to
determine when to comply depending on whether they find it convenient to do so[27].
There is speculation that Japan’s loose laws on the environment are due to the
strategic importance of the automobile industry. As a major contributor to the
economy, the country appears wary of the danger of risking the profitability of
the sector by introducing standards that would substantially increase their
costs of operation.
Leading
automobile companies such as Toyota invest in environmental conservation by
establishing strict guidelines for suppliers in the extraction industry to
conserve the environment. Nissan on the other hand emphasises on recycling to
reduce the amount of waste that is thrown as land fill hence minimising the
impact on the environment. These initiatives are in addition to the general trend
within the industry to invest in efficient engines that minimise the amount of
emissions from engines. The emphasis on environmental conservation influences
similar trends in the manufacturing sector where energy efficiency and
conservation of natural resources are highly valued.
The
automobile industry is among the main exporters and contributors to Japan’s
GDP. This gives them an influence over the economic growth rates. This is
illustrated in the figures below which show the production levels in the
industry and the GDP growth performance in the country.
Figure 8: Comparison between motor vehicle production and economic growth
trends[28]
The two tables reveal a similar
pattern between the overall growth rate of the economy and the variations on
production in the industry. This direct connection brings out a strong
correlation between the two and demonstrates the influence that the automobile
industry has over Japan’s economy.
In
addition to its contribution to the country’s GDP, the automobile industry in
Japan contributes to about 8.8% (5.48million employees) of the workforce. This
makes the sector very strategic in fuelling local consumption through
employment creation. The data is as shown below:
Figure
9: Contribution to employment[29]
The
significant contribution to employment makes the decisions made in the industry
very significant in the economy. For instance, leading industry players
implemented a 2.78% pay hike for their employees, sparking a wave of wage hikes
in other industries with the manufacturing sector averaging wage hikes of 3.33%
and the non-manufacturing sector implementing a 2.18% wage hike[30].
The motor industry therefore acts as a leader whose actions are easily
replicated across the economy.
One
of the main benefits of the Japanese automobile industry is the provision of
the much needed foreign exchange. Japan has continued to perform strongly in
international trade and this has helped it overcome internal economic crises
and stabilise its rates[31]. Another economic impact of the automobile
industry is the general improvement in productivity levels in the economy.
Japan is the leading Asian country in labour productivity and this is
attributed to excellence mastered in work organisation through embracing
popular management concepts such as the Just-in-Time models which are strongly
associated with the automobile industry in Japan[32].
Companies like Toyota have been renowned for their emphasis on collaboration
with suppliers and outsourcing whenever convenient. Mitsubishi has on the other
hand emphasised on the need to remain self-sufficient preferring to develop and
manufacture most parts of the vehicles in-house. This is however changing as
the company seeks to embrace the supply chain where it is already working with
engineers from its rivals such as IHI to develop new products[33].
Also
important in the Japanese economy is the nature of inter-firm networks that are
exploited as sources of a competitive advantage for most organisations. The use
of assembly lines in the car manufacture factories and integration that
facilitated assembly by different suppliers introduced a new concept in
management: high trust and commitment as a basis for boosting competitiveness[34].
This has been implemented in other
industries and has yielded impressive results especially in the integrated
circuits industry[35].
The automobile industry continues to be an important reference point in
benchmarking for excellence in operations and management. Complex engineering
processes are brought together into an efficient model that results in mass
production of vehicles hence making Japan one of the top car producers in the
world[36]. The automobile industry is therefore very
significant in influencing the economic environment in Japan.
In
conclusion, the automobile industry in Japan has significantly impacted the
business environment in Japan. It has changed the overall image of Japan into
an equal competitor with the rest of the developed countries. It has also
provided the benchmarks for excellence in management which have in turn led to
a significant improvement in labour productivity in Japan. This is in addition
to the industry being behind the growth of a culture of innovation which has
been applied to other technology based industries such as gaming and
electronics industries. The story of Japan or analysis of its business
environment cannot be told without significant focus on the automobile industry
and this is evidence of its influence in shaping that environment.
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[1]
Bill Conerly. “Japan's Economic Forecast, 2012-2013: A Business Perspective.”
Forbes.12 December 2011.
http://www.forbes.com/sites/billconerly/2011/12/21/japans-economic-forecast-2012-2013-a-business-perspective/.
[2]
CULCON. “The Rise of the Japanese Auto Industry and Auto Exports.” Cross Currents. 2003. http://www.crosscurrents.hawaii.edu/content.aspx?lang=eng&site=japan&theme=work&subtheme=INDUS&unit=JWORK065.
[3]
Global Automobile Data. “Production Volumes by Country.” Toyota Corporation.
2014.
http://www.toyota-global.com/company/history_of_toyota/75years/data/conditions/automobile_data/production_volumes.html.
[4]
Japan Automobile Manufacturers Association. “The Motor Industry of Japan 2013.”
JAMA. 2014. http://www.jama-english.jp/publications/MIJ2013.pdf.
[5]
Ibid.
[6] Dick
Beason, James Fallows, and Clyde V Prestowitz. “What Saved Japan?” Foreign Policy, 184 (2011): 19.
[7] Ibid.
[8]
Ma Jie and Yuki Hagiwara. “Japan Auto Industry Faces More Labor Unions Seeking
Higher Wages.” Bloomberg News. 3 March 2014.
http://www.businessweek.com/news/2014-03-03/japan-auto-industry-faces-more-labor-unions-seeking-higher-wages.
[9]
Takatoshi Ito, Kazumasa Iwata, Colin McKenzie, and Shujiro Urata. “Japan at the
Crosswords: Editors' Overview.” Asian Economic Policy Review, 8, no. 2 (2013):
169 – 192.
[10]
Japan Automobile Manufacturers Association. “The Motor Industry of Japan 2013.”
JAMA. 2014. http://www.jama-english.jp/publications/MIJ2013.pdf.
[11] Marie
Anchordoguy, 303.
[12] Frances
Mccall Rosenbluth. “Japan in 2011.” Asian
Survey, 52, no. 1 (2012): 17.
[13] R.F.
Ganiev, A.N. Romanov, V.A. Petrishov, and G.V. Moskvitin. “Automobile and
global warming. Automobile transport warms the planet more intensively than
industry.” Journal of Machinery
Manufacture and Reliability, 40, no. 4 (2011): 304.
[14] Ibid.
[15] Sang
Min Lee. “A Comparative Study of the Automobile Industry in Japan and Korea.” Asian Survey, 51, no. 5 (2011): 877.
[16]
Kylie Stock. “Toyota's Reputation Takes 6.4 Million Fresh Dents With Its Latest
Sweeping Recall.” Bloomberg L.P. 9 April 2014.
http://www.businessweek.com/articles/2014-04-09/toyota-recall-toyotas-reputation-takes-another-6-dot-4-million-dents-with-latest-sweeping-recall.
[17]
Japan Automobile Manufacturers Association. “The Motor Industry of Japan 2013.”
JAMA. 2014. http://www.jama-english.jp/publications/MIJ2013.pdf.
[18]
Nikkei Inc. “Carmakers rush to meet demand for automatic brake systems.” ”
Nikkei Asian Review. 16 April 2014.
http://asia.nikkei.com/Business/Trends/Carmakers-rush-to-meet-demand-for-automatic-brake-systems.
[19]
Nikkei Inc. “Suzuki aims for car that gets 40km per liter.” ” Nikkei Asian
Review. 16 April 2014.
http://asia.nikkei.com/Business/Companies/Suzuki-aims-for-car-that-gets-40km-per-liter.
[20] Ibid.
[21]
Takahiro Fujimoto and Young Won Park. “Complexity and control: benchmarking of
automobiles and electronic products.” Benchmarking:
An International Journal, 19, no. 4/5 (2012): 505.
[22] Ibid.
[23] Frank
Ackerman, Masanobu Ishikawa and Mikio Suga. “The carbon content of Japan–US
trade.” Energy Policy, 35, no. 9
(2007): 4459.
[24]
Koji Shimada. “Policies for a Low-Carbon Society in Japan.” Environmental Policy and Governance, 21,
no. 5 (2012): 367.
[25] Koji
Shimada. “Policies for a Low-Carbon Society in Japan.” Environmental Policy and Governance, 21, no. 5 (2012): 366.
[26] Ibid.
[27] R.F.
Ganiev, A.N. Romanov, V.A. Petrishov, and G.V. Moskvitin, 305.
[28]
Japan Automobile Manufacturers Association. “The Motor Industry of Japan 2013.”
JAMA. 2014. http://www.jama-english.jp/publications/MIJ2013.pdf;
Bill Conerly. “Japan's Economic Forecast, 2012-2013: A Business Perspective.” Forbes.12 December 2011. http://www.forbes.com/sites/billconerly/2011/12/21/japans-economic-forecast-2012-2013-a-business-perspective/.
[29]
Japan Automobile Manufacturers Association. “The Motor Industry of Japan 2013.”
JAMA. 2014. http://www.jama-english.jp/publications/MIJ2013.pdf.
[30]
Nikkei Inc. “Japanese companies hand out biggest raises in 16 years.” Nikkei
Asian Review. 17 April 2014.
http://asia.nikkei.com/Business/Trends/Japanese-companies-hand-out-biggest-raises-in-16-years.
[31]
Takatoshi Ito, Kazumasa Iwata, Colin McKenzie, Shujiro Urata. “Japan at the
Crossroads: Editors' Overview.” Asian Economic
Policy Review, 8(2): 171.
[32]
Takahiro Fujimoto and Young Won Park, 504.
[33]
Keita Seikguthi. “Mitsubishi Heavy seeks to grow by lightening up.” Nikkei
Asian Review. 17 April 2014.
http://asia.nikkei.com/Markets/Tokyo-Market/Mitsubishi-Heavy-seeks-to-grow-by-lightening-up
[34] Ibid.
[35]
Yongdo Kim. “Interfirm cooperation in Japan's integrated circuit industry,
1960s - 1970s.” Business history review,
86, no. 4 (2012): 777.
[36]
Takahiro Fujimoto and Young Won Park, 506.
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