Can Japan Compete?

I work for a Japanese company that is mentioned in this book and the book is a dead on diagnosis of how Japanese companies are managed. For anyone familiar with the current Japanese economy (which is in a huge depression) there are some major problems with how the Japanese economy operates. There is nothing inherently genius about the solution that Porter offers, which is simply a call for a true free market system in Japan; free of tariffs, trade barriers, cartels, and collusion. However, if you work for a Japanese company I strongly suggest buying this book to understand why your company is managed the way it is.

... Michael Porter become the celebrity in the field of business strategy with his two books, ¡®Competitive Advantage¡¯, ¡®Competitive Strategy¡¯. Takeuchi and Sakakibara secured their name in organizational learning school with their book, ¡®The Knowledge-Creating Company.¡¯ With this book, ¡®the word, ¡®knowledge creation¡¯ has been widely circulated within business schools. This book poses the question, ¡®Why does Japan stumble?¡¯ it¡¯s the single most popular subject in Japanese studies. Numerous books come to mind on that issue. The approach this book takes is, nonetheless, unique. While others have tackled it in the view of macroeconomics or political economy, authors of this book take the view of microeconomics, or more precisely business strategy. They argue that more-than-decade-long deflation and liquidity trap are not the fundamental problem, but just symptoms. The underlying problem must be hunted for elsewhere: the eroded competitive advantage of Japanese companies. There has been warning signs since 1980s well before bubble bursting:1. Since 1980s, no new internationally competitive industry has emerged.2. The profitability, or capital productivity has long been low. Export share has been achieved and maintained partly by sacrificing returns to capital. 3. Japan¡¯s share of world exports peaked in 1986 (10%). But it has fallen since then to below 8%. Bubble and subsequent financial meltdown certainly is serious trouble. But above reveals much deeper crisis: the loss of competitiveness. Michael Porter maintains that firms initially gain competitive advantage by altering the basis of competition. They won not just by recognizing new market, or technologies but by moving aggressively to exploit the,. A firm¡¯s local rivalry in home nation plays a critical role in shaping manager¡¯s perceptions about the opportunities that can be exploited. Firms that survive vigorous local competition are often more efficient and innovative. In the 1970s and 80s, Japan set the world standard for operational effectiveness, that is, for improving quality and lowering cost: TQM, JIT system, lean production, cycle time reduction. Japanese companies pushed the productivity frontier well beyond the capabilities of many Western companies. Japanese companies¡¯ competitive advantage was obtained through cut-throat local competition. But starting in the mid- and late 1980s, the gap between Japanese and Western companies began to narrow through so-called restructuring or reengineering. Now Japan¡¯s source of competitiveness has been eroded away. As a result, international competition has ever more vigorously intensified not in the behalf of Japan. Worse, what drove Japan to be competitive now serve as drag on it. Fierce local rivalry degrade into competitive convergence. It means that all the competitors in an industry compete on the same dimension. As rivals imitate one another¡¯s improvements in quality, cycle time, or supplier partnerships, competition becomes

For someone brought up almost all his life that Japan is the model to strive for, M. Porter et al convinced me I was wrong. Analyzing the strengths and weaknesses of any nation is a formidable task, but even more so for a country like Japan. This book takes a hard and critical view at Japan. And what we see is not a pretty site! Highly recommended. Both full of hard data, and case studies.