Strategy and Performance of Foreign Companies in Japan

Strategy and Performance of Foreign Companies in Japan

Strategy and Performance of Foreign Companies in Japan

Strategy and Performance of Foreign Companies in Japan

Synopsis

Despite the competitive nature of the Japanese market, a large number of foreign companies are successful in terms of profits, innovation and reverse technology. In fact, some are so successful that their profit levels in Japan exceed those elsewhere. It is an unfounded myth that the Japanese market is unprofitable for foreign companies. Foreign companies succeed in part by utilizing Japanese CEOs, a high degree of autonomy, and individual creative resources; they fail because of a lack of understanding of the intensity of competition and demanding customers in the Japanese market. A comprehensive, empirical study of a large number of foreign companies doing business in Japan show that the majority of these firms classify themselves as successful. Only six percent were failures. The companies that are successful display an ability to use their own resources to create new technologies and new products and then transfer them back to the parent company. Findings from the study suggest that there area number of inadequacies in the existing theories of MNEs and FDIs. Practical conclusions are offered to foreign companies who plan to invest in Japan, as well as to foreign and Japanese policymakers who seek to boost FDI in Japan.

Excerpt

The idea for writing this book surfaced during Dr. Khan's one-year stay from 1987 to 1988 at Nihon University in Tokyo, where he was preparing his book Success and Failure of Japanese Companies' Export Ventures in High-Tech Industries. At that time, we had the opportunity to discuss the strategies, management, and performance of foreign companies in Japan, particularly in terms of the Japanese market being the most competitive in the world, at a time when the yen was rapidly appreciating, the Japanese trade surplus and outward fdi was soaring, and Japan was increasingly being accused of being a market closed to foreign investment. Simultaneously, we observed that there were weaknesses in the fdi and traditional international trade theories, which did not take into account the reverse flow of technology and know-how from a foreign subsidiary to its parent company, a phenomenon that was in fact taking place at the subsidiaries of foreign companies in Japan. Considering this area as vital and in need of further investigation, we formulated the research project that led to this book.

We were also baffled by the fact that most of the research on foreign companies in Japan was confined either to desk studies or journalistic accounts with limited empirical data. Furthermore, the bookstore shelves were filled with stereotypical advice on how to succeed in Japan, from such trivial examples as possessing a proper Japanese name card to having adequate connections with influential personalities.

Professor Yoshihara invited Dr. Khan to jointly carry out the book. Subsequently, Dr. Khan was able to obtain a three-year leave of absence from Stockholm University from 1991 to 1994, and we were able to commence the challenging work on this book at the Research Institute for Economics and Business Administration, Kobe University. a study group on foreign companies in Japan consisting of five members was formed in June 1991. the other three . . .

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