NRI Papers
No. 196 June 1, 2014
  Challenges Facing the Rebirth of Japanese Manufacturing: Part 2  

The importance of manufacturing has again come to be recognized not only in Japan, but also in the United States and Germany in their pursuit of economic globalization and because of growing expectations for greater innovation, growth in domestic employment, higher incomes and other economic multiplier effects that manufacturing could have on other industries.

German companies have created a business model enabling the design and development of products that are tailored to meet local needs in emerging economies even with limited development resources available there, and have continued to gain momentum in these markets. In the United States, both the public and private sectors work toward developing the next generation of manufacturing such as creating services through the integration of IT and manufacturing. The moves of these two countries provide a valuable source of inspiration for Japan's manufacturing industry.

Among emerging economies, the presence of China has overwhelmed all others. While Japanese companies that are already operating in the Chinese market have been struggling in the face of fierce competition from local businesses, the fact remains that the Chinese market still presents immense potential. In inland China, which has huge growth potential, there is a wide range of growth areas where first-mover advantage can be attained. Companies should actively explore the possibilities without pessimism. While India also presents a very large potential market, the pace of growth is not as fast as that in China. For the time being, given the rich engineering talent that the country possesses, focus should be given to the country not just as a market but also as a design and development center aimed at emerging economies.

In order to successfully respond to the diversification of the global market that includes developed and emerging markets, a need exists for the establishment of a system whereby all business processes ranging from marketing to product planning, design, development and production are carried out in local markets. This full localization cannot be achieved by Japanese executives alone. Rather, human resources should be recruited on a global scale, and a personnel management mechanism whereby employees can be trained up to management level is required.

IV Betting on the Last Frontier of China's Market
V Strategy to Make the Best Use of India's Strengths
VI Challenges Facing the Rebirth of Japanese Manufacturing


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