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  • 1. Japan Japan once prospered by exporting to rich countries. Now geared towards emerging markets. Firms who lost money in 2009 revived by selling to new global middle class. Sony reversed its recent loses as its revenue from emerging markets grew by 40% - sales in Brazil nearly doubled. Countries outside North America and Europe will account for 80% of global growth between 2000 and 2050. Western consumers have become more frugal. Japan stagnant for 20 years and population shrinking. Corporate Japan is looking to new places. Traditional exports ill suited for emerging markets. Costly, complex and easily undercut by simpler gadgets from South Korea, Taiwan and China. Japan has long used poor countries merely as production bases and then shipped products to rich ones. This no longer works.
  • 2. Japan
    • Over past decade share of Japan’s exports going to USA halved; to Europe fell by 1/3.
    • Now tailoring produces for BRIC and MINTS (Malaysia, Indonesia, Nigeria, Turkey and Saudi Arabia) and Vietnam and the Balkans.
    • Exports to China trebled.
    • Japan companies must adapt –
    • Panasonic overhauling both its products and its organisation. Instead of maintaining strict management divisions by territory, company now thinks about product lines by temperate and tropical climate zones. Executives from South America visit peers in Malaysia each quarter to swap ideas.
    • It increasingly relies on local engineers to redesign products for local tastes.
    • Now only 10-20% of the products it sells to emerging markets are developed by Japanese teams.
    • Result? Indonesia – make fridges with big compartments to store lots of two litre bottles – less space for veg as they are bought and eaten on the same day. India – power unreliable – developing air conditioners which operate with little energy and designed to be quiet as Indians run air con all the time. In China air con is a status symbol so machines are designed to be big, colourful.
    • Toyota – designed the Etios for India ($10K)
    • Nissan – compact March in India and Thailand – 87% parts found locally.
    • Strong Yen will hurt exports. But makes M&A cheaper.
    • Challenge is managing a global workforce not as docile as Japanese workers.
    • Need to also shake up their corporate structure, devolving more power to local staff and promote more non Japanese to top management. Need to speed up decision making – less consensus and endless memos to head office.
  • 3. Japan Economy
    • Feb 2011
    • Standard & Poor’s rating agency, downgraded Japan’s sovereign bonds partly because the Government lacked a coherent strategy to improve the fiscal situation.
    • Government working on a FT pact including America Trans Pacific Partnership – 9 countries in negotiations – America, Australia, Brunei, Chile, Malaysia, NZ, Peru, Singapore, Vietnam. Japan has to decide whether to join. Will not demand special treatment e.g. protecting its 800% tariff protection for its rice farmers. May seek slow phase in of farm cuts.
    • Plans to raise sales tax (currently 5% lowest in the rich world) to help pay for an overhaul of the social security system – to cope with onslaught of retirees.
    • Plan for farm reform – export oriented agriculture – rather than precious yet unproductive paddy fields.
    • Neighbours ahead on FT status – South Korea has negotiated FT deals with EU and US. Japan’s value of trade with its free – trade partners represents 16% of its total. South Korea’s is over 33%. FTA seems to be the way to go!
  • 4. Impact of Japan’s disasters
    • Apr 2011
    • Quadruple disaster – earthquake, tsunami, nuclear alert and power shortages has put the global manufacturing supply chain under great stress.
    • Like banking system shock of 2008 – uncovering unexpected and wide reaching connections within global supply chains.
    • Banking Crisis – financial regulators’ discovered how poorly they understood the ‘shadow banking’ system.
    • Manufacturers are finding how little they know about their suppliers’ suppliers and those even further down the chain. Struggle to find out how much they will be affected.
    • Factories are finding that parts that had always turned up reliably have suddenly stopped coming.
    • In Japan – have times that are ‘too big to fail’. The compact battery in Apple’s iPods relies on a polymer made by Kureha, which holds 70% of the market – their factory was damaged.
    • Round the world scramble for the scarcest components – pushing up prices. Carmakers in US and Japan have had to scale back production. Not yet clear how worse things will get when run out OR how long it will take Japan to get back to speed (aftershocks etc).
    • This insight into global supply chain interdependency will have a lasting impact on how manufacturers manage their operations. Scenario the extreme and have buffers.
    • Just in time – keeping inventories down – spread through the global manufacturing chain. Need now a ‘just in case’ system to limit damage from disruptions like this.
    • Monopolies of crucial parts and materials will be pressed to diversify geographically, might give some business to smaller suppliers to spread the risk.
    • Lean manufacturing has made companies more vulnerable to supply shocks. May need now to sacrifice some element of efficiency to become more robust.
  • 5.