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1.3 Perspective of Global Business Strategies

1.3.1 Directions of Global Strategies

How should Japanese companies shape their global business strategies, considering the growing importance of developing nations in the global economy? The economic growth of developing countries such as China and India signifies attractive new markets for Japanese corporations. It is critical to the growth of Japanese companies that they expand into these markets. However, the economic growth of developing countries is the result of their efforts to catch up with developed ones economically. During that process, companies in developing countries will eventually acquire technological capabilities and become major threats to Japanese corporations. These local companies can set competitive prices by providing products and services at low cost by taking advantage of factors such as low local wages. In response to such actions, Japanese corporations must provide greater value to customers to compensate for the price difference in the products and services offered. Competition with these local companies is on a local as well as international level, including Japanese markets. For example, Suntech and JA Power are two Chinese companies with top market share in the production of solar panel. Chinese companies began producing solar panels by implementing full turnkey systems that integrated the solar panel production process from raw materials to the finished product, enabling the production of general-purpose crystalline solar cells with a certain amount of efficiency in electricity generation. The competitive advantage held by manufacturers in developed countries, such as Sharp (Japan) and Q Cells (Germany), was quickly lost because manufacturing technology originally held by panel manufacturers was incorporated into manufacturing equipment. Technologically, Chinese electronics companies and other high-tech industries have quickly caught up and are threatening developed countries' companies, including Japan, that have traditionally differentiated themselves on the basis of their technological prowess. Therefore, while the growth of developing countries presents an “opportunity” for Japanese companies through growing markets, it concurrently poses “threats” through the emergence of competitive local companies.

However, the “threats” by companies electing to forgo global markets and focus exclusively on the domestic market cannot be avoided. Therefore, as Japanese companies aggressively incorporate new “opportunities” into their business models, it is critical that they consider strategies to minimize the damages caused by these “threats.” Three important directions of global strategies are as follows: (1) respond to “good-enough” product markets, (2) strengthen cost competitiveness, and (3) create strong business models in which it is difficult to catch up (Fig. 1.3).

Fig. 1.3 Global business strategy for developing nations

 
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