Choose and Focus

Choose and Focus: Japanese Business Strategies for the 21st Century

ULRIKE SCHAEDE
Copyright Date: 2008
Edition: 1
Published by: Cornell University Press
Pages: 304
https://www.jstor.org/stable/10.7591/j.ctt7zfbt
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  • Book Info
    Choose and Focus
    Book Description:

    Between 2002 and 2008, Japan's economy saw constant expansion, a record among the world's advanced economies and Japan's longest period of economic growth since World War II. This remarkable achievement came about because of a transformation of Japanese business practices. This transformation was guided by strategies that enabled Japan's leading corporations, previously diversified to an exceptionally high degree, to become leaner, more nimble, and more competitive at home and in the global economy.

    In Choose and Focus, the first in-depth account of this strategic inflection point in Japanese business, Ulrike Schaede argues that the emerging practices and attitudes have created a New Japan. Drawing on profiles of several corporations, including Panasonic, Takeda and Astellas, Softbank, kakaku.com, and SBI E*Trade, Schaede explains how the fundamental principles of Japan's economy have been overturned. "Choose and focus" strategies, whereby corporations concentrate on core areas and spin off unrelated businesses, have completely altered the strategic logic of Japan's previous industrial architecture. These surprisingly aggressive moves, Schaede finds, have created new market opportunities for start-up enterprises and foreign investors, as well as a wave of mergers, acquisitions, and hostile takeovers that have shaken Japanese companies out of complacency.

    Unlike the advances made by Japanese firms in the 1970s and 1980s, the current transformation is taking root in component and materials industries rather than in consumer products. Because of the relative obscurity of the changes and the overshadowing story of China's ascent, the Japanese corporate revolution has gone largely unnoticed among Western observers. Choose and Focus is required reading for anyone doing business in Japan or trying to understand how contemporary Japanese business works and how Japanese corporations have reinvented themselves to face the challenges-and realize the opportunities-of the 21st century.

    eISBN: 978-0-8014-6055-5
    Subjects: Management & Organizational Behavior

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. PREFACE
    (pp. vii-xii)
    Ulrike Schaede
  4. 1 INTRODUCTION
    (pp. 1-18)

    Between 1998 and 2006, Japan’s political economy underwent a dramatic change. Some observers have referred to this period as a “lost decade” of stagnation, but it is now clear that it was a turning point toward corporate renewal that has fundamentally changed the context in which Japanese corporations compete. Profound transformation of the regulatory system, the arrival of price competition, and the opening of markets to new entrants, imports, and foreign investors has made our knowledge of Japan outdated. Japan’s business organization has shifted from its old emphasis on corporate growth through diversification and long-term relationships toward a focus on...

  5. Part I: Toward Choose and Focus
    • 2 JAPAN’S STRATEGIC INFLECTION POINT, 1998–2006
      (pp. 21-46)

      Between 1998 and 2006, Japan underwent changes in laws and regulation, regulatory processes and domestic and global competition so fundamental that the period defines a strategic inflection point. In business research, such an inflection demarcates a point in time when the balance of forces shifts completely away from previous structures to new ways of doing things, and therefore fundamentally alters the ways in which companies compete. For this inflection to be strategic, it has to be irreversible (Burgelman and Grove 1996; Burgelman 2002). What made change in Japan irreversible was not so much one single event but rather the cumulative...

  6. Part II: The Old Japan
    • 3 POSTWAR CORPORATE STRATEGY
      (pp. 49-67)

      Perhaps surprisingly, there are only a few studies that look at the overall drivers of corporate strategy in postwar Japan (e.g., Yoshino 1968; Clark 1979; Abegglen 1984; Abegglen and Stalk 1985; Kagono et al. 1985). Most of the business research of the postwar period have zeroed in on one aspect of the system, such as supplier structures, research and development (R&D) organization, or corporate groups. Porter, Takeuchi, and Sakakibara (2000) consider corporate strategy in the 1990s, and dismiss postwar-period managers as having been insufficiently decisive and overly concerned with competitor imitation and market share growth through diversification. Rather than asking...

    • 4 DIVERSIFICATION VERSUS FOCUS
      (pp. 68-84)

      Our understanding of Japan’s shift toward “choose and focus” is informed by existing research in strategy, in particular as it relates to the experience of diversification and refocusing in the United States of the 1970s and 1980s. A review of the established insights of strategy research about the United States will set the stage for the discussion of Japan.

      At the most basic level, strategy is about making choices of how to compete along two dimensions: (1) What businesses should the company be in? and (2) How will the company compete? The latter refers to strategic positioning within a product...

  7. Part III: Japan’s Changing Industrial Architecture
    • 5 CORPORATE RELATIONS: KEIRETSU, CROSS-SHAREHOLDINGS, AND THE MAIN BANK
      (pp. 87-109)

      Japan’s corporate groups, cross-shareholdings, and main bank arrangements represent core elements of Japan’s postwar industrial architecture. Admired by some for their “patient capital” implications and criticized by others as market distorting, Japan’s intermarket groups and financial structure have been widely studied. From this research, we have learned three main things. In their financing, Japanese firms relied primarily on bank loans, which put one main bank in a focal position in the financial arrangements and corporate governance of a firm. The largest firms issued shares, a large portion of which were held as long-term cross-shareholdings between banks and firms, as well...

    • 6 OWNERSHIP: INSTITUTIONAL INVESTORS, MERGERS AND ACQUISITIONS, AND CORPORATE GOVERNANCE
      (pp. 110-133)

      The decline in business group relevance, the unwinding of cross-shareholdings, and the changing role of banks have greatly affected the composition of shareholders. Moreover, the wholesale changes in legal structure included the strengthening of shareholder rights, legal recourse, and the introduction of internal management control obligations through J-SOX. The emergence of a vibrant market for mergers and acquisitions, as well as for hostile takeovers, has fundamentally altered the incentives and management goals of Japanese business executives. Together, these developments have completely changed the mechanisms and processes of corporate governance in Japan.

      Perhaps the most important development for New Japan finance...

    • 7 SUBCONTRACTING: GLOBALIZATION AND SUPPLIER RELATIONS
      (pp. 134-152)

      One prominent feature of Japanese manufacturing in the postwar period was a system of sourcing from long-term, stable, and affiliated smaller firms. Created from necessity in the early 1950s and turned into a virtue with the introduction of the Toyota Production System in 1963, Japan’s subcontracting system had mitigated problems of asymmetric information and uncertainty by turning suppliers into collaborators with a keen interest in a long-term relationship through knowledge infusion. Thus, stable subcontracting offered a solution to the problems associated with either arm’s-length sourcing or full vertical

      However, globalization and technological changes in production processes referred to as modulization...

    • 8 PRICE COMPETITION: THE BUSINESS-TO-BUSINESS AND RETAIL PRICE REVOLUTIONS
      (pp. 153-173)

      During the postwar period, in many Japanese markets prices were not set by market clearance. For many intermediate products they were often renegotiated post hoc, and in many consumer product markets they were set through retail price maintenance. This does not mean there was no competition, only that it was often not based on spot pricing. Nor was the system necessarily inefficient. It was simply different, and thus corporate strategies were directed at different goals.

      All this has begun to change with the arrival of price transparency and price competition to Japan. Accordingly, corporate strategies are being reoriented to address...

    • 9 LIFETIME EMPLOYMENT: CHANGING HUMAN RESOURCE MANAGEMENT
      (pp. 174-200)

      The implementation of strategic change depends critically on a change in human resource practices. Success in corporate renewal hinges on the alignment of new strategic tasks with formal organization, people, and corporate culture. As companies shift toward focus and differentiation, they must reorient corporate culture toward efficiency and promote people for contributing to profitability. To turn from diversified goliaths to nimble and lean competitors they must restructure. Human resource management is at the center of a successful strategic reorientation.

      Recognizing the importance of increased labor mobility for corporate reorganization, in the early 2000s the Koizumi government pushed for a revision...

  8. Part IV: New Markets and New Entry
    • 10 VENTURE CAPITAL: OPENING ACCESS TO FINANCE
      (pp. 203-225)

      Throughout the postwar period Japan’s large firms were little concerned about either the threat of new entry or of being replaced by disruptive substitutes. The government structured R&D policies, such as research consortia, with the stated goal of diffusing new technologies to several incumbents and upholding market hierarchies. Patent policies likewise were oriented toward ensuring large firms’ access to innovation. The focus of the financial system on bank loans, combined with regulated interest rates, all but precluded start-up firms from access to credit, as banks were unwilling to provide risk capital at low rates. Meanwhile, ongoing diversification of large firms...

    • 11 NEW COMPETITORS: SOFTBANK, KAKAKU.COM, ASTELLAS, AND SBI E*TRADE SECURITIES
      (pp. 226-252)

      The development of a venture capital industry, the information technology bubble at the turn of the century, the creation of new stock exchanges, as well as privatization, deregulation, and the arrival of foreign competition all have resulted in the emergence of New Japan companies. These have created new markets, and have brought new competitive pressures even to some of the most notorious Old Japan markets, such as telecommunications. At the same time, reorganization and “choose and focus” mergers have led to the rise of new firms that challenge their erstwhile stuffy and restricted industries, such as in pharmaceuticals. It is...

    • 12 CONCLUSION: THE NEW JAPAN
      (pp. 253-260)

      During the 1990s, Japan was in major trouble. To most observers, the country had simply lost it. And so attention shifted to China, which was an increasingly important, new, and exciting economy to watch. Japan fell off the radar screen, and to the extent it was mentioned in the news the association was typically negative, such as reports of a banking crisis, deep social challenges, or incompetent politics. So dominant had the negative image of Japan become that even good news was delivered with a dismissive spin. When Japan announced a new record of over 50 months of consecutive growth...

  9. REFERENCES
    (pp. 261-284)
  10. INDEX
    (pp. 285-292)