Toyota’s massive recalls exemplify how Japanese companies can suffer from being too inward-looking. (AFP Photo/Yoshikazu Tsuno)
Tokyo. Toyota Motor’s mass recall crisis may seem peculiarly its own, but the top carmaker’s woes are a cautionary tale for other Japanese companies needing to expand abroad and drive earnings growth.
Critics say Toyota, hemorrhaging its reputation for reliability as it recalls millions of cars over a sometimes fatal accelerator defect, failed to balance a traditionally tight management style that ensured quality with the world’s changing demands.
Stefan Lippert, a business professor at Temple University in Japan, calls it the “ kaisha dilemma,” using the Japanese word for “company.” “The incredible success of the Japanese economy is based on the kaisha . It’s based on this specific management model,” he said, referring to Japan’s rapid economic growth before stalling in the 1990s. “However, times have changed.”
If Japanese companies cannot break the mold, they risk losing further ground to South Korean and Chinese rivals that are more proactive in grooming local talent that knows its markets best.
Korea’s Samsung Electronics has pushed aside the Japanese to become the world’s top maker of LCD televisions.
“Toyota is part and parcel of what’s bothering Japan right now,” said Darrel Whitten, managing director of consultant Investor Networks. “They have to come to terms with globalization. I don’t think it’s a situation any more where you can run everything from headquarters.”
The challenge could be especially tough for Japan’s service companies, now facing increasing pressure to look for growth beyond their deflation-plagued home markets.
Fast Retailing, whose popular Uniqlo chain of fast-fashion shops and heat-trapping underwear gets just 12 percent of revenues abroad, for example is expanding aggressively into Asian markets.
“Companies viewed as just domestic are creating an interesting buzz in Asia,” Whitten said. “The question is, can they have flexibility and an open enough management structure that can run a competitive global operation.”
In the 1980s Japan’s tech, motor-vehicle and machinery exporters were the envy of the business world. They charged into overseas markets with high quality but reasonably priced products, taking customers from US and European manufacturers.
Some are still among the top performers in their industries — from Honda in cars to Canon in cameras and copiers to Fanuc in industrial robots.
But others, like once-mighty electronics conglomerate Sony, have lost their competitive edge to more nimble overseas rivals.
Analysis
Reuters
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