The Japanese automobile manufacturing industry is one of the most advanced industries around the globe. Companies in this field operate as multinational corporations because of the demand for cars around the world. In a bid to maintain their competitive advantage over companies from other countries, several approaches have been taken. Unlike the business and corporate strategies made for local companies, an international strategy for an effective multinational corporation management needs close analysis of the external environment in which it operates. The Japanese automobile manufacturing companies have thus been forced to engage in looking at the political, legal, socio-economic and cultural environment provided by the host countries in which the multinational corporations operate. The study is conducted through a market research. Some of the automobile companies that have been on the forefront in Japan include the Mitsubishi Corporation, Nissan and Toyota. Most of these companies have expanded their networks as part of foreign direct investments (FDI). One of the approaches taken is through entering into bilateral and trilateral agreements with most Japanese, European and American countries. The venturing of the Japanese automobile manufacturing came after the decline of the sales market for the Japanese products in European countries. A direct investment in these countries was thus necessary to survive. The restrictions, especially on the exports, accelerated the establishment of Japanese automobile industries in foreign countries, particularly in America and Europe. Therefore, this paper will critically look at the extent to which the Japanese automobile manufacturing companies have managed to preserve their competitive advantage as multinationals in the international market.
The Japanese automobile manufacturing industry ventured into foreign direct investment in the early 1960s, but it gained momentum during the 1980s. Before this period, only the sales of the Japanese products took place on foreign markets (Biwonder & Miyake 1992). The decision to venture into the foreign direct investment in the manufacturing industry received support due to the decline in the sales of the Japanese automobile products, especially on the American and European markets. The shift of the manufacturing activities in these countries was considered as the best idea, and the Japanese automobile manufacturing industry could indulge in boosting its competitive advantage (Cusumano 1985). In short, the industry took shape in foreign markets during the post-World War II period. Some of the Japanese companies that indulged in foreign direct investment include Honda, Nissan, Toyota, Mitsubishi and Isuzu. However, some of these plants ran as single entities, while others entered into joint ventures with other companies in the countries of investment. In the United Kingdom, for example, Nissan, Honda and Toyota made a single entry into the market, while Isuzu made a joint venture with General Motors (Cusumano 1988). In Germany, Toyota made a joint venture with Volkswagen, while Mitsubishi made a partnership with Volvo in Holland. Main focus will be made on Toyota, Nissan and Mitsubishi Corporation. In a nutshell, apart from the USA, where the Japanese automobile industry indulges in direct investment, it relies much on joint ventures or operation partnerships to gain a competitive advantage in other countries (Clarke 2013). The latter mainly refers to the European markets.
Toyota made its first appearance as a multinational company in the 1950s in the United States of America. The appearance in the market was set through the sale of Toyota Corolla. The next move was in Europe during the early 1960s with the primary aim of becoming the leading car selling company (Fujimoto, Nishiguchi & Sei 1994). Its operations moved in stages. It began with the assembly and distribution of car spares with the first solely owned production plant of Toyota in Europe, being launched in 1992 to fully exploit the market in the United Kingdom. The first sale of the Toyota vehicles in Europe was in Denmark in 1963. However, as of 2007, Toyota made over 17 million vehicles for sale in Europe and about 2 million in America as of 2004 (Dyer & Singh 1998). In Africa, the company has its plants in Kenya and South Africa. In general, Toyota has about 52 manufacturing companies around the globe, making it the fastest growing Japanese multinational automobile manufacturing company. However, the highest investment has been done in Europe.
Mitsubishi’s first move to become a multinational company was made in 1954 in the United States of America where they opened an office to give advice to their customers, and other numerous offices came to existence in Europe in the 1960s (Dyer 1996). The first Mitsubishi Corporation plant in Europe was established in 1988 in the United Kingdom, and it continues to be the main Mitsubishi plant in Europe. From then onwards, the Mitsubishi company has opened numerous branches in different countries. Currently, Mitsubishi has over 192 foreign offices and facilities around the globe.
Just like Toyota and Mitsubishi, Nissan Motor Company also made a decision to become a multinational company in the late 1950s, and its first operation got launched in 1959 in Los Angeles. The company ventured later in other countries like Australia, the United Kingdom, Spain and South Africa. As of 1970, the company opened the first assembly plant in the United States of America. At present, Nissan has become one of the most well-established car exporters around the globe, with its Datsun Nissan meeting the unconquered needs of the people around the world (Rae 1982).
The Japanese automobile industry decided to go multinational to boost their profits, tap the unsatisfied needs of the people in other countries, exploit their skills in technology and become the world’s leading motor vehicle manufacturers. The decision to venture into foreign direct investments, especially in the 1950s and 1980s, gained momentum by the need to beat the import and export controls put by several countries, particularly in Europe, which had the impact of lowering the sales of the industry in Japan. Therefore, Toyota, Nissan and Mitsubishi decided to enter into joint ventures by establishing subsidiaries in foreign countries around the world to circumvent the import controls and tap the local market in those countries. One of the strategies that these companies used was first to test the markets by selling their products abroad and then eventually starting their car assembly plants and motor vehicle spare parts sales. One common example was the sale of engines. The companies also used different modes of entry to the market.
Most companies like Toyota and Nissan ventured to the USA market with a single operations entry, while in other markets, they preferred to enter into the automobile industry as joint ventures. Nissan, for example, has subsidiaries in South Africa and Spain. Toyota has subsidiaries in Kenya, South Africa and the United Kingdom, while Mitsubishi has subsidiaries in the UK and several other countries. Therefore, the companies preferred to enter either as joint ventures or sole operators (Wei & Chen 2008). The strategies employed have such differences because the multinational corporations come from different countries and each has an aim of boosting revenue for itself and its country. Each country would strive to devise initiatives to support their home industries because they consider the revenue that would trickle in as a result of such expansion. Japan, for example, has spared part of the money in its budget to support foreign direct investment initiatives taken by multinational automobile industries coming from Japan (Rose 2008). In the United States and Europe, for example, import and export restrictions are imposed on the foreign countries to protect multinational companies from Europe and America to the detriment of Japanese automobile industry.
To a large extent, the automobile industries venturing into foreign direct investments have complied with the theories of foreign direct investment. First, the comparative advantage theory states that a state should involve a product that it has as a sufficient resource and that it can produce at a lower price. The Japanese market is rich in car making technologies as compared to other countries like the United States of America, and it can produce such vehicles at a cheaper cost because of the availability of raw materials. Therefore, Japanese companies are better suited to venture into the automobile manufacturing industry as opposed to any other country. The rate at which Toyota, Mitsubishi and Nissan have expanded in Europe, especially in the United Kingdom, the United States of America and Africa clearly indicates that Japan has a competitive advantage in car manufacture as compared to other countries. The Japanese automobile industry also has an advantage concerning car design and research, funding, total quality management policies, strategic planning and government support. For this reason, it is said to have a competitive advantage because it can produce cars at an economical price compared to their counterparts in the same industry. The industry also complies with the theory of economic development as the venture leads to income generation in Japan which goes towards aiding in the economic development of the state.
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In the automobile industry, different multinationals use various strategies to woo the global market. The plans take into consideration time, locations, strategy and the mode of entry of a particular company. For example, some companies prefer insourcing as a strategy as opposed to purchasing the operations of a competitor in another country for their survival. For example, looking at Toyota, Mitsubishi and Nissan, it is obvious that these multinational companies entered the global market at different time, using different strategies. Some chose joint ventures, while others settled for a single entry. The companies also prefer locating their businesses where there are no serious competitors and where the cost of transportation to the market is small and the raw materials are easily available. The opening of the Nissan branch in New York, for example, is a classic example of how a multinational company can tap the market by looking at the unsatisfied needs of the people. However, what keeps the companies surviving is the need to preserve the market efficiency by sticking to their goals and ensuring that they produce quality products. For the Toyota Company, for example, customer satisfaction is their primary concern. The company also engages in the training of the customers to ensure that they are competent in handling the motor vehicles in a safe manner. Engaging in corporate social responsibility matters like environmental preservation and protection, recycling and ensuring compliance with rules and government regulations is what the companies are striving to attain (Aaker 2008). In general, these factors enhance the market efficiency that the Japanese automobile companies aim to provide. The automobile manufacturing companies in Japan also focus much on asset-based FDI through acquisition of foreign company’s assets to boost their operations and enhance their competitive advantage (Mazur et al 2015). This type of foreign direct investment is provided by entering into joint ventures as opposed to wholly owned subsidiary companies (Horaguchi & Shimokawa 2013). This strategy assists the Japanese companies in gaining more resources. A good example is the Toyota Volkswagen joint venture in Germany (Meyr 2009).
Since the time that Toyota, Mitsubishi and Nissan decided to go multinational, they have indulged in several activities that have kept them leaders of the market. Toyota, for example, has some of the best and major design studio in America, which gives it a competitive advantage over other multinational companies from other countries. The studio is located in New Port Beach, California (Morgan & Liker 2006). The company has also opened research and development centres in Michigan, New York and Costa Mesa amongst other places. This program aims to conduct market research to boost the innovation of the company by devising more people-friendly commodities. The Mitsubishi and Nissan companies are also engaged in research and development as part of the Japanese government strategy. The design studios are also a way in which these two companies get their advantage over other firms. The lean production method that was popularly referred to as the Toyota system is a total quality management system devised by the Toyota company (Holweg 2007). The system aids in removal of waste to ensure efficiency in production. This system has kept Toyota on the top of the market. The method yielded high-quality cars with fewer costs, thus making them customer-friendly (Leachman & Kyoon 2005). This system has also led to adaptation of the continuous improvement method by Nissan and Mitsubishi companies (Matsui 2007).
The continuous improvement process is an operation and management method aimed at encouraging quality and efficiency in car production. The method seeks to alleviate all the barriers to effectiveness. Therefore, the method has boosted the Japanese automotive companies. Concerning the running of subsidiaries, the management of these operations reports directly to the central office in Japan for joint ventures and other subsidiary companies that are not wholly owned. The wholly owned subsidiary companies are given the power to run their finances and their management. These kinds of operations amongst the Toyota, Mitsubishi and Nissan companies have encouraged efficient running of the operations of these firms (Nayebpuor & Saito 2007). These advantages, the case of the Japanese automotive manufacturing companies, reflect the OLI model that is based on three factors: the benefits that come with ownership, the internationalisation benefits and the national benefits. The model is a reflection of the internationalisation theory as the two are closely related. Another factor that gives the Japanese automobile industry a competitive advantage is the way in which the industry handles customer relations. The Toyota, Mitsubishi and Nissan companies, for example, are indulging in corporate social responsibility where customer satisfaction is key to the companies. Toyota, for example, offers training to its clients on how to use its cars in an efficient and reliable manner. The training of the clients aims to ensure safety of the users as part of quality management by the company. The Nissan and Mitsubishi companies also indulge in the recycling of waste materials for a better environment (Esty & Winston 2009). In short, the three companies are committed towards environmental protection and conservation. Since these firms are operating in foreign destinations, the only way in which the clients would feel associated with the corporation is through quality service delivery and care for the customer needs. The companies even go to an extent of providing employment to the locals to encourage them to be part of the company. As such, these incentives have assisted the three companies in gaining a niche in the market over other firms.
In conducting their research and innovation activities, the Japanese automotive companies receive massive funding from the Japanese government. Some of the money that they get in profits is also dedicated to running research and development programmes. The government aid is meant to ensure that the Japanese companies do not succumb to the external forces caused by other companies that may threaten to push them out of the market. Therefore, the funding assists the companies in stabilising themselves in the market. Eventually, customer satisfaction arising from the provision of quality and human-friendly products ensures that the Japanese companies get maximum profits and return high income to the Japanese government. The key supplies of raw materials are also readily available from Japan as it produces the materials at a cheap price compared to multinational companies from other countries. For this reason, the easy acquisition of raw materials from their home country at an affordable price aids the companies in thriving in the global market. This is because the other companies have to incur high costs of transportation and taxes to acquire the raw materials from Japan.
Venturing of the Japanese automotive companies into foreign direct investment induces the need to establish the corporate values, the goals and missions of various joint ventures or wholly owned subsidiaries (Ghosn 2005). These strategies include the human resources strategy, i.e., who to employ or not, whether an ethnocentric approach should be adopted in hiring workers or not. It guides the company as to whether the workers should come from the local communities or be expatriates. Another critical problem that arises is the development of the financial strategy. Other strategies include the legal strategies and product development strategy. The plans are necessary because the companies are operating in different foreign countries in which distinct regulations exist. Therefore, the strategies would aid in planning the enterprise to yield the maximum possible profits. The strategies are developed at four levels: corporate, business unit, departmental and operational (Ward et al 2012).
The corporate strategy is formulated in the main offices in Japan, while the business unit strategies are developed in the regional or decentralised units representing the subsidiaries. These levels need finance to run, efficiency in their operations as well as the human resources. The Toyota, Mitsubishi and Nissan Motor companies prefer using the ethnocentric approach to hiring managers, according to which the managers who have served the company are given the job. The idea is to motivate its workers to ensure that they work as required for the purpose of earning enormous profits. However, the internal employees are recruited from among the local communities to boost the customer and client relations. The corporate level cannot be easily given to an expatriate because there is a need for a qualified and experienced person to ensure smooth formulation and implementation of corporate strategies. For wholly owned subsidiaries, the locals may be hired to run the business units as managers to boost the morale and confidence of the locals in the company. The establishment of business units through setting of subsidiaries aids the Japanese automotive companies in internationalising its operations and tapping the proprietary knowledge accessible in other countries (Schonberger 2007). The exploitation of the skills available in other countries through employment enables the companies to exploit the proprietary knowledge of others. This reflects the internationalisation theory of foreign direct investment. Internationalisation creates a more cohesive and resourceful corporate governance structure necessary for the efficient administration of the Japanese automobile companies. A useful interconnection between the subsidiaries assists the companies in avoiding the government interventions, market controls as well as additional costs. In short, the eclectic paradigm, the internalisation and the monopolistic advantage theories assist the companies in developing their strategies to meet their global goals (Shimokawa 1994). One of such approaches is the governance plan.
The Japanese government is also a player in ensuring inward foreign direct investment. The aim of the government is to make sure that while the Japanese automobile manufacturing companies invest in other countries, they also contribute towards domestic investment (Manabe & Kurokawa 2005). The government of Japan does this by devising rules and regulations governing foreign direct investments. It encourages bonds between multinational companies, promoting technological advancement through research and innovation and ensuring a well-trained human resources staff to tackle the upcoming challenges in the automobile industry (Martinez & Perez, 2005). The government promotes these measures by providing proper education systems, encouraging labour mobility while improving the regulations touching on the competition. As a key player, the government is tasked with the identification of failures within the market to ensure smooth running and efficient market. Japanese government, for example, enacted the Foreign Exchange and Foreign Trade Control Law of 1949 to ensure that inward foreign direct investment is improved (Liker & Wu 2006). The laws provide a platform on which an efficient market system can thrive with the aim of meeting the local development needs in Japan. The government may also use the licensing power or authority to ensure that there is growth in foreign direct investments. The concept of institutional advantage arises as a result of effective linkages between several subsidiaries to form something like an institution to reduce costs (Nemoto & Hahimoto 2010).
The concept of institutional advantages has the effect of improving economies of scale and ensuring that the Japanese automobile companies have good market controls. The institutional advantage is a concept of the internationalisation theory. The multinational corporations change to adapt to new tax structures, labour costs, government policies and exchange rates. Therefore, the internationalisation theory leads to improved costs of trade (Porter & Kramer 2006). Internationalisation assists in pulling together resources to decrease costs. Monopolistic advantage as a theory of foreign direct investment is geared towards encouraging a company to concentrate on the products with which an individual company or state has relations (Nizamuddin 2008). It assists in reducing the cost implications as the company will be able to make a cost-effective product.
In conclusion, the multinational companies in Japan can be said to be growing much faster as compared to any other country. The companies seem to have different aims although they come from the same country. The companies started courting the Western and other markets in the 1950s and 1960s through sales, but they only managed to fully become multinationals in the early 1980s. The Toyota, Mitsubishi and the Nissan companies have the entry modes to the automotive market as multinational corporations in common. The Toyota company, for example, entered the USA market as a sole entity and later in the United Kingdom and other countries as a joint venture. Similarly, the Mitsubishi and Nissan companies entered the international automotive market as joint ventures or partially owned subsidiaries. However, the companies enjoyed the economies of scale, and they were able to make enormous profits during their early years of the investment. The Japanese companies maintained a competitive advantage over companies from other countries because of the availability of cheap raw materials from their country. Again, Japan is rich in the production of car materials, which makes them easy for the companies to acquire. The governmental support of research and development has also shaped the Japanese multinational corporations to remain extremely competitive as they can develop new products that are customer-friendly and cheap. The establishment of the best design studios and commitment towards innovation give a niche to the Japanese companies. As for the theories of foreign direct investments, the Japanese multinational corporations have good strategies on how to tap the international market to make the subsidiary institutions by means of which they can evade governmental control from other countries. Indeed, the Japanese automotive market is an excellent one.