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5.6 Conclusion

In this chapter, we discussed how Japanese companies can best create business strategies while keeping in mind competition with local companies that emerge with the rise of developing countries, from the perspectives of a “customer value” model and product architecture theory.

The customer-centric model repudiates the corporation-leaning logic of “make good products and they will sell.” It focuses on services provided by products and displays the concept of rebuilding business models from the perspective of improving customer value. A product-centric business strategy that chases product functionality and performance will lose effectiveness at a stage where product performance exceeds the level of customer demand. In developing countries such as China and India, “good-enough” product markets feature in a volume zone, and have a lower-than-average level of customer demand compared with markets in developed countries. Accordingly, competing with companies by using a strategy that emphasizes performance and functionality is difficult, and companies should instead design products and services from the perspective of maximizing customer value. The value customers seek from products is derived as they use those products. Thus, companies must focus on services derived from products and create business models that increase customer satisfaction across the product's lifecycle.

Next, companies must formulate strategies that correspond to the characteristics of product architecture. In particular, products with a modular architecture are easy for companies in developing countries to catch up with and will dramatically increase the competition faced by Japanese companies. In those situations, companies must consider strategies to improve the technology or differentiate products at the modular level. In addition, companies may take the opposite approach and become system integrators, providing valuable systems for customers by combining multiple products. As can be seen in system integration services for information equipment, customers have various needs, and providing turnkey services that optimally combine IT systems is characteristic of integral architecture. This is because of the expertise required to optimally combine these products to meet customer needs, rather than the performance of the components themselves.

In this chapter, we discussed the export of infrastructure business packages, such as railway services, as examples of system integration services. Providing railway services requires knowledge of signaling systems and railcar management, in addition to that of hardware infrastructure such as railcars, tracks, and stations. The fact that each system component is not modularized, but rather requires mutual collaboration for an integrated design, is characteristic of integral architecture. Japan's railway services have a high level of safety and accuracy. However, competition among railway operators is absent in Japan unlike Europe, and the passiveness shown by Japan Railways and other private railway companies in pursuing overseas expansion has caused Japan to fall behind in overseas expansion. Moving forward with an overseas business will first require Japan's railway operators to clarify the extent of their expertise on system integration and management. With that done, they must formulate proposals to countries and regions that make use of Japan's strengths.

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