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INTERNATIONAL BUSINESS STRATEGY

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Introduction

INTERNATIONAL BUSINESS STRATEGY The Japanese Car Industry Prepared by: Redmund Bernard: 99100251 Joannah Dobbie: 99113047 John Eggleton: 00109779 David Fisher: 00128169 Kazia Fleming: 99125534 Fran Hardcastle: 00116134 Jean-Pierre Nordmann: 11111111 Tracy Syril: 00128669 Module Leader: Alex T. Mohr Word Count: 3229 (excluding tables and appendices) Submission Date: 23rd May 2003 Contents Page Chapter Page Executive Summary 3 1.0 Introduction 4 2.0 Industry Environment 5 2.1 PLEST 5 2.2 SWOT 6 3.0 Trade and Investment Theories 8 3.1 Product Life cycle Theory 8 3.2 Absolute Advantage 9 3.3 New Trade Theory 10 3.4 Porter's Diamond Theory 10 4.0 Potential Strategies for Servicing Foreign Markets 12 4.1 FDI 12 4.2 Exporting 16 4.3 Licensing 16 5.0 Producers Strategies and Structures 18 5.1 Toyota and Honda 18 5.2 Nissan 19 6.0 Key Success Factors- Honda 21 6.1 Structure 22 6.2 Product Strategy 22 7.0 Conclusions 23 8.0 Appendices 24 A PLEST 24 B SWOT 26 C Culture 29 9.0 References and Bibliography 33 Executive Summary The Japanese Car Industry is increasing to take market share in all areas of the world. The major manufacturers operate on all continents with production facilities spread across the world. They have expanded throughout the past 20 years through a combination of Greenfield Investments, Joint Ventures and Acquisitions. Although technology and design are still major factors in competitive advantage there is a much greater level of cooperation from the top Japanese manufacturers with European and US firms. Most Japanese automotive firms lean towards a multinational structure, with manufacturing, sales and admin occurring in geographic areas, but usually with Japanese top management brought in from Head Office. The Japanese have famously brought new work practices into the car industry such as quality circles and JIT, which have influenced other commercial organisations. Culture has been a key success factor for many Japanese firms, with a trend towards team working. This has proved extremely successful in manufacturing sectors. ...read more.

Middle

4.2 Exporting A strategy of exporting vehicles to other countries is another means of entering new markets. Many Japanese car producers attempted to do in order to enter the American car industry for example, however this method was somewhat unsuccessful, due to the restrictions imposed. The advantages and disadvantages are listed below: Advantages * It enables the firm to avoid the expenditure concerned with establishing the manufacturing operations within the Host country * By exporting the firm can gain experience of the market leading to experience curve benefits * The firm can also benefit from location economies * If production is centralised in one country, the firm may be able to exploit economies of scale through bulk buying of supplies etc Disadvantages * By exporting firms may miss out on location specific advantages e.g. low cost labour * The costs of transportation may well be very high for the exporting firm * Barriers to entry by means of tariff may prevent exportation to certain countries e.g. America imposed tariffs against Japanese car manufacturers to prevent them exporting to that market thus preventing competition * The agents in acting on behalf of the exporting firm within the host country may have divided loyalties and thus not market the product as desired Figure 4.4: The advantages and disadvantages of exporting. 4.3 Licensing Licensing tends to be more appropriate for intangibles, a licensor grants the licensee the permission to use the intangible for example the brand name for a set length of time in exchange for royalty payments. It may be appropriate if a firm wishes to license its technology involved in car production for example. This entry form has benefits and costs as well. Advantages * The licensee inputs the capital, so the licensor suffers few costs and risks of development. * Licensing is a way to negate investment barriers, set against a firm. Disadvantages * This method allows for low control over manufacturing, strategy and also marketing for the licensor, therefore the potential for experience curve benefits is minimised. ...read more.

Conclusion

However, business may take longer to develop in this society, particularly for an "outsider". A Low Long-Term Orientation ranking indicates the country does not reinforce the concept of long-term, traditional orientation. In this culture, change can occur more rapidly as long-term traditions and commitments do not become impediments to change. Figure II shows the dimensions for Japan compared with the World and European Average, along with individual country dimensions. As we can see form the graph Japan has a high score on Masculinity and uncertainty avoidance, meaning it has a high reliance on rules and legislation. It also has a high score on Long Term Orientation, meaning it gives credence to traditional values, but may be slow to take up new working practices. In comparison the European Average (Figure iii) shows less inclination to masculinity and rule-based structures. There are no figures for LTO for Europe as a whole but looking at the figures for U.K., Germany and The Netherlands there is a suggestion that European countries have a less traditional view. This will mean that they are more open to change and are more likely to make rapid improvements. In the USA, as in the UK, there is a high degree of individualism and less inclination towards collectivism, a stark contrast to Japan. This could cause problems in working practices if not handled properly. For Internationalisation to be effective it is important that the firm understands the culture in the host country. With host country employees and multi ethnic executives it is possible to prevent ethnocentric behaviour. Culture and Competitive Advantage The value systems and norms of a country influence the costs of doing business in that country and therefore affect competitive advantage. Attitudes towards group working and collectivism may also affect manager-workforce relationships, whilst social structures and religion can influence pay systems. Companies with high levels of co-operation tend to enjoy greater productivity and profitability, which may go some way to explaining Japanese firms' rise in the global marketplace. Figure 8.2: Hofstede's Cultural Dimensions Figure 8.3: European Average 9. ...read more.

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