Vitally important to the automobile industry are favorable international relations with and ideally acceptance into the WTO and UN, hence the Japan government actively strides towards improving relations with both entities. The trade agreement that resulted from improved relations between Japan and U.S. are examples of political factor effect on car industry. In 1995, Japan government signed ‘Auto-Agreement’ with American government in order substantially to increase access and sales of competitive foreign cars and after services through market opening measures.
2.2 Economic factor
Economic factors concern the nature and direction of the economy in which an industry live. Basically, it considers GNP, wage level, employment level and monetary policies.
Japanese economy condition has a significant impact on its car industry.
It is important to know that in Japan, banks are the major shareholders in car industry. And banks have significant influence over the direction of foreign and domestic investment. Additionally, Japanese banks take responsibility of channeling foreign investment to high competitive car market.(Deedle, P.124) In the meantime, Japanese had bad loan problem. The problem has a negative effect on the economy for some time and is now depressing consumption.
It is well known that the unemployment rate in Japan had been very low by international standards. The low unemployment rate traditionally contributed to the stability of Japanese society. The economic recession however, has thoroughly changed the structure of the Japanese labor market.
(Source from )
Actually, labor market conditions kept worsening these years. Most important, car manufacturers are now ready to discharge workers for restructuring. Job insecurity results in depressed consumption.
Due to Japanese lingering economic recession, exchanges pressure, and financial crisis forced many Japanese carmakers to restructure, shifting production overseas and reducing production overseas and reducing their workforce in Japan.
2.3 Socio-cultural factor
One of the most profound social changes in recent years has been the entry of large number of women into the labor market. (Pearce and Robinso, P.73) Nowadays, more and morn female workers than before are finding their positions in the workplace, especially over the last few years under the impact of the economic downturn. And in 1999, revised the Equal Employment Opportunity Law which called for more equal treatment of men and women in the workplace accelerated the movement of female workers from staying at home. With the increased number of women workers, it is impossible to ignore the fact that women are being used for convenient, low-cost labor which is the reliable resource for the car industry.
(Source from )
And demographic changes will also play a great impact on the business industry of Japan. Statistics show that Japan is expected in several years' time to see its population drastically decrease and average age of population will increase. Japan's rapidly aging society means that senior people are getting less motivated to spend because of their anxiety over pensions, while younger generations with a high spending propensity than older help expand consumption demand in cars. It provides Japanese car companies an easily identifiable target market for their cars and service.
2.4 Technological factor
Nowadays technological changes play an increasingly important role in the global car industry. Technological advances research for creative products and discoveries, for improvement in existing products, or in manufacturing and marketing techniques. New technology is seen as an opportunity for business to reduce costs, increasing the quality of their products and effective of service. (Needle, P.125)
In the area of technology, Japan automakers were one of the initiators of technological changes. When they broke into the market in the 1990's they provided products that consumers had not seen before. In Japanese latest auto leading edge technology, one might expect hardware or software to maintain or control the distance between autos. Clearly, there is going to be a lot of electronic components in future cars.
(Source from )
What’s more, so called hi-tech business will spawn sophisticated new market and significantly boost the current car industry.
On the other hand, with the development of information technology, especially the emergence of Internet has caused dramatically changes in Japan car industry. The Internet, faster communication, lower trade barriers, and rising incomes in many parts of the world have changed the face of the international automotive market. In recent years, e-business has been attracting more attention for its potential to cut costs and create new marketing format. Some Japanese manufacturers including Honda, Toyota have already set up online dealer locators on their websites which allows the user to research vehicles, check new and used inventory, build a vehicle to the specs, request a quote and apply for credit.
(Source from )
Such customized online experience model is becoming unprecedented convenient than before and tends to the mainstream of marketing model in the future.
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2.5 Ecological factor
The term ecology refers to the relationships among human beings and other living things and the air, soil, and water that support them. (Pearce and Robinson, P.76)
One of the ecological factors dictating future car development is increased environmental concerns such as air pollution and energy dependence. These concerns are mostly aimed at reducing greenhouse gas and fuel-related pollution and seeking for renewable energy. So it is evident that mass attention for environment problems may soon change the entire car industry. For instance, considering air pollution and energy preservation, Toyota manufactured hybrid cars that combine a standard gasoline engine with an electric motor, resulting in low fuel consumption and low emissions. These hybrids probably represent an even better option than current cars that run completely on gas or fuel cells and maybe a good example for other auto manufactures to follow up or becomes the mainstream of the future car.
(Source from http://www.jef.or.jp/en/jti/200203_022. html )
There increased environmental concerns will substantially change the car industry itself, resulting in a complete overhaul of the industry from gasoline-powered to alternatively-fueld vehicles. (Source from http://www.jef.or.jp/en/jti/200203_022. html )
3.0 Three key factors
The automotive industry is a concentrated global industry. Japan car sector is in the forefront of the global consolidation. Based on the PESTE analysis of Japan car industry outlined above, there are three key factors that is determinant to the development of car industry: economic factor, technological factor and ecological factor.
The history of Japanese car industry has mirrored its developments in the global economy in general. Economic factor is crucially important for the development of car industry. It establishes the overall external business environment that carmaker operate on which basically make a tune for industry. Such factor including unemployment rate, exchange rate, and foreign investment policy clearly influence consumption or production of car market.
And it is important to emphasize that the driving force behind what happened here is technology. That’ the reason Japanese car industry gained its top position for more than 30 years thanks to new technologies and the delivery speed they made possible. Increased information flow, such as e-business for car industry, provides new challenges and opportunities for global car marketing. E-commerce in the automotive sector is not just a technology change, but a tool for Japanese companies to enhance their business. And new information technology and production practices have encouraged increased global competitiveness, leading to more efficient manufacturing and product development.
(Source from http://www.jef.or.jp/en/jti/200203_052.html)
So Japanese car manufacturers must remain at the cutting edge to survive in the intensive competitive environment
Ecological issues must be addressed for the key factor, aiming at the goal of simultaneous achievement of the economic growth, energy security and environmental protectionism. What’s more, Japan is a country extremely short of energy and resource, that’s why Japan combines the leading edge technology for the substitute for the current fossil fuel and promoting international cooperation to expedite the use of new energy which exerts minimal burden on the environment and to develop and disseminate its technology. Ecological and environmental standards have influenced automobile production most directly, but technological progress and manufacturers' efforts in research and development have also caused car industry changes.
4.0 Scenario planning
4.1 An optimistic future
In this scenario, Japanese economy begins to boom again. Appreciation in the yen's value resulted in lowering imported car prices. A host of low interest auto loans and other promotional campaigns as well as an increase in the sales network starting with domestic dealers who handle imported cars. Large companies are facing increasingly challenges. Employment rate keeps stable and more non-permanent workers get job involved the car manufacture and components. Fewer trade barrier lead to a competitive and technology exchange environment. It creates a high level of energy demand, and efficient new technology and substitute energy are required to fuel this growth. Favorable e-business model stimulates the car market and dominates the customized retail market. Car sailing and production both remains robust.
4.2 A pessimistic future
In this scenario, Japanese economy suffers the worst recession. Consumers are less motivated to spend money than saving in banks. Low exchange rate is unfavorable for large quantities car export. Car retail prices are depressed because of instability and high costs. Car manufacturers start to cut down on hiring employees in order to cut costs, high employment rate cause economic social instability. Fewer consumers and organizations concern for environment problem. Nonrenewable fossil fuel energy continually makes air condition worse. Technology accomplishes no significant achievements for lack of funds and economic dropdown. E-commerce for car marketing seems to be aggregated.
4.3 A middle of the road future
In this scenario, Japanese economy still remains stagnant. Bad loan of bank problem still exists and impede the further investment of car industry. Employment rate is quite stable and even a little decreasing for the application of automated machines. Increasing awareness of environment protection and balance, green energy such as fuel cells is common and gradually becomes popular one to meet the high standard of emission. Rapid technology innovation is seeking for cost cutting and new marketing developing. The price of car is quite stable. But e-commerce for car industry sustain sluggish.
5.0 Conclusions
Based on the PESTE analysis of Japan car industry outlined above, Economic, technological, and ecological factors are three key factors for Japanese car industry. Economic factor establish the overall external business environment that carmaker operate on which basically make a tune for industry. And considerable importance has to attach to technological factor so as to overcome the potential problems and benefit the industry in all aspects. Ecological factors draw more and more attention or even are dictated by national laws and regulations to maintain the balance in the long run. And three scenarios planning in the future still based on these three key factors. These three future scenarios describe the key trends and interactions that may characterize the development of a particular future environment.
6.0 Reference
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Pearce, J. A. and Robinson, R. B., 2000.Strategic management: formulation, implementation, and control. 7th ed. Boston: McGraw-Hill
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David, N., 2000. Business in context: an introduction to business and its environment. 3rd ed. London : International Thomson Business Press
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Brooks, I. and Weatherston, J., 2000. The business environment: challenges and changes. Harlow : Financial Times
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Gerry, J. and Kevan, S., 1997. Exploring corporate strategy. 4th ed. London: Prentice-Hall
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James, W., 1890. Japanese car industry strategic[online]
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Ezaki, T., 2000. Policy Goals and Measures for the Revival of Japanese Industry. Journal of Japanese Trade. [online]
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Yoshikawa, H., 2002. The Japanese Economy in the Next Decade. Journal of Japanese Trade. [online]
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Thompson, H., 2000. Automotive Industry. [online]
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Environmental Review, 1995. Environmental Review. Japan: Energy Information Administration [online]
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- Bibliography
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Pearce, J. A. and Robinson, R. B., 2000.Strategic management: formulation, implementation, and control. 7th ed. Boston: McGraw-Hill
-
David, N., 2000. Business in context: an introduction to business and its environment. 3rd ed. London : International Thomson Business Press
-
Brooks, I. and Weatherston, J., 2000. The business environment: challenges and changes. Harlow : Financial Times
-
Gerry, J. and Kevan, S., 1997. Exploring corporate strategy. 4th ed. London: Prentice-Hall
