Winning in Asia, Japanese Style

Winning in Asia, Japanese Style

Market and N onmarket Strategies for Success

Edited by Vinod K. Aggarwal and Shujiro Urata

* WINNING IN ASIA, JAPANESE STYLE ©Vi nod K. Aggarwal and Shujiro Urata, 2002

Softcover reprint of the hardcover 1st edition 2002 978-0-312-23910-7

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Library of Congress Cataloging-in-Publication Data

Winning in Asia, Japanese style: market and nonmarket strategies for success/co-edited by Vi nod K. Aggarwal and Shujiro Urata.

p.cm. Includes bibliographical references and index. ISBN 978-0-312-23911-4 1. Japan-Foreign economic relations-Asia. 2. Asia-Foreign economic

relations-Japan. 3. Marketing-Japan. 4. Marketing-Japan-Case studies. 5. Marketing-Asia-Case studies. 6. Investments, Japanese--Asia. 7. Investments, Foreign-Asia. I. Aggarwal, Vi nod K. 11. Urata Shujiro, 1950-

HF 1602.15.A74W56 2002 658.8'0095-dc21 2002068417

A catalogue record for this book is available from the British Library.

Design by Newgen Imaging Systems (P) Ltd., Chennai, India.

First edition: October, 2002 10 9 8 7 6 5 4 3 2 1

ISBN 978-1-349-63235-0 ISBN 978-1-137-10926-2 (eBook)DOI 10.1007/978-1-137-10926-2

Priface

Contributors

CONTENTS

List of Abbreviations

Part One Theoretical Framework

Chapter One Analyzing Japanese Firms' Market and Nonmarket Strategies in Asia Vi nod K. Aggarwal

Chapter Two Japan's Foreign Direct Investment and Trade in Asia Shujiro Urata

Part Two Case Studies

Chapter Three Banking on East Asia: Expansion and

Vll

lX

Xl

1

3

27

59

Retrenchment ofJapanese Firms 61 Masahiro Kawai, Yuzuru Ozeki, and Hiroshi Tokumaru

Chapter Four Cartels, Competition, and Consolidation in the Japanese Chemical Industry 98 Tametsugu Taketomi

Chapter Five On the Road to Asia: Japanese Automakers inASEAN 123 Gregory W Noble

Vt Contents

Chapter Six Ringing off the Hook! Japanese Telecommunications Responds to the Call of Asian Markets 15 7 Yumiko Okamoto

Chapter Seven Cracking the Code: Japanese Software Strategies in Asia 184 Trevor H. Nakagawa

Chapter Eight Short Circuiting Keiretsu: Japanese Electronic Firms in Asia 220 Hidetaka Yoshimatsu

Part Three Conclusion 241

Chapter Nine Lessons from Japanese Firms' Strategies in Asia 243 Vi nod K. Aggarwal

Index 273

PREFACE

The unbounded enthusiasm of European, American, and Japanese firms for Asian markets was tarred by the Asian crises of 1997-1998. As cur­rencies plunged and fear grew that the crises would continue to spread, many firms began to reassess their commitment to Asian markets. Yet the rapid descent of these economies was followed almost uniformly by rapid recovery. Faced with opportunities to secure assets at bargain base­ment prices and anticipating greater liberalization of Asian markets, many firms once again rushed into the breach.

This book analyzes how Japanese firms have attempted to succeed in Asian markets, both before and after the Asian crises. A central focus of this volume is the formulation and implementation of market, nonmar­ket, and organizational strategies. Market strategies have been the topic of many works. Yet as the case studies in the book demonstrate, the most successful firms have succeeded in Asia by integrating market strategies with nonmarket and organizational strategies that help firms respond to and benefit from shifts in the political, economic, and social environment. Firms that have been able to leverage their capabilities to secure assistance from their home governments, and that have pursued and developed strategic relationships with Asian governments and firms, have repeatedly emerged as winners. By examining integrated market, nonmarket, and organizational strategies, both from an analytical and empirical perspec­tive, we hope that this book will enhance or understanding of firm strate­gies in Asia that will be of benefit to both analysts and practitioners.

This project has been generously supported by the Center for Global Partnership of the Japan Foundation. Over a three-year period, their financial assistance has allowed us to examine Japanese, American, and European firm strategies in a changing Asian market. In particular, we would like to thank Takashi Ishida, the current director, and

viii Priface

Junichi Chano, the previous director,Junichi Chano, as well as staff mem­bers Susan Hubbard, Mary McCarthy, Sandhya Rao, and Lisa Weiss. The earlier work on Europe was supported by a grant from the Institute of European Studies of the University ofCalifornia.We are greatly indebted to the Institute's director, Gerald Feldman, and its associate director, Beverly Crawford, for their help.

Two workshops were convened to discuss the papers in this volume, one at Berkeley and another in Tokyo at Waseda University. A wrap-up conference brought together participants from the European, American, and Japanese subprojects, and allowed participants to share ideas, com­pare notes, and better understand different sectors from a comparative perspective. The contributions of other readers are acknowledged by the authors of each of the chapters.

We are especially indebted to the staff of the Berkeley APEC Study Center (BAS C). At BASC, Ed Fogarty, Ralph Espach, Elaine K wei, Trevor Nakagawa, Kun-Chin Lin, Min Gyo Koo, Zachary Zwald, and Chris Tucker have provided valuable research assistance, comments, and help in organizing the Berkeley workshops. A number of undergraduates also assisted in preparing the manuscript and in editing papers. For their help, we are particularly grateful to Joel Burgos, Justin Kolbeck, Matt Odette, Mytoan Nguyen,Jennifer Rho, and Dan Xu, all of whom have worked or currently work at BASC as part of the Berkeley Undergraduate Research Apprenticeship program.

Toby Wahl ofPalgrave has ably taken over from Karen Wolny who orig­inally signed the "Winning in Asia Series." Gabriella Pearce, who works with Toby, has been of immense help in managing the publication process.

Vinod K. Aggarwal Berkeley, California

and Shujiro Urata

Tokyo, japan

CONTRIBUTORS

VINOD K. AGGARWAL is Professor in the Department of Political Science, Affiliated Professor in the Haas School of Business, and Director of the Berkeley APEC Study Center (BASC) at the University of California, Berkeley

MASAHIRO KAWAI is Professor of Economics in the Institute of Social Science, University of Tokyo and Deputy Vice Minister of Finance for International Affairs at the Ministry of Finance, Japan

TREVOR H. NAKAGAWA is a Ph.D. candidate in the Department of Political Science at the University of California, Berkeley

GREGORYW NOBLE is Associate Professor ofPolitical Science at the Institute of Social Science, University ofTokyo

YUMIKO OKAMOTO is Associate Professor of Economics at the Graduate School of International Development, Nagoya University

YUZURU OZEKI is Professor in the Asian Public Policy Program, Graduate School of International Corporate Strategy, Hitotsubashi University

TAMETSUGU TAKETOMI is Director of Monday (formerly PwC Consulting), Japan

HIROSHI TOKUMARU is Manager, Bank Supervision Department, Bank of Japan

X Contributors

SHUJIRO URATA is Professor of Economics at Waseda University

HIDETAKA YOSHIMATSU is Associate Professor of Economics, Graduate School of East Asian Studies, Yamaguchi University

LIST OF ABBREVIATIONS

AAF ADB AEM-MITI

AFTA AIC AICO ANIEs APEC ASEAN

ASEAN4

ASP ATM B2B B2C BBC BCC BIS BOI BTO CAGR CAT CCITT

ASEAN Automotive Federation Asian Development Bank ASEAN Economic Ministers and the Minister of International Trade and Industry (Japan) ASEAN Free Trade Area ASEAN Industrial Complementation ASEAN Industrial Cooperation Asian Newly Industrialized Economies Asia-Pacific Economic Cooperation Association of Southeast Asian Nations: Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam Four members of ASEAN: Thailand, Malaysia, Indonesia, and the Philippines Average Selling Prices asynchronous transfer mode business-to-business business-to-consumer brand-to-brand complementation business cooperation contracts Bank for International Settlements Board of Investors (Philippines) build-transfer-operate compound annual growth rate Communication Authority ofThailand Co mite Consultatif International Telephonique et Telegraphique

xii

CEPT CER CLM-WG

CMS CNC DRAMs DSPs EDI EIAJ EMS FDI FNC FSC FY GATT GDP GUI IC ICI IDC IFis IJPC IMF INDRA IPO IPR ISV IT IT As ITU JAMA JAPIA JEMA JETRO ]PO JSR JV LCD M&A MEPCO

List of Abbreviations

Common Effective Preferential Tariff Closer Economic Relations Working Group on Economic Cooperation in Cambodia, Laos, and Myanmar cash management services China Net Communications Dynamic Random Access Memories Digital Signal Processors Electronic Data Interchange Electric Industries Association of Japan Electronics Manufacturing Services Foreign Direct Investment Fujitsu Network Communications Fujitsu Software Corporation Fiscal Year General Agreement on Tariffs and Trade Gross Domestic Product graphical user interfaces Integrated Circuit Imperial Chemical Industries International Data Corporation international financial institutions Iran-Japan Petrochemical Company International Monetary Fund Indonesian Debt Restructuring Agency International Procurement Offices intellectual property rights Independent Software Vendors Information Technology Information Technology Agreement International Telecommunications Union Japan Automobile Manufactures Association the Japan Auto Parts Industries Association Japan Electrical Manufacturers' Association Japan External Trade Organization Japan Polyolefins Japan Synthetic Rubber Joint Venture Liquid Crystal Display Mergers and Acquisitions Matsushita Electric Philippines

MHFG MIS MITIIMETI

MJC MMC MNCs MPT MPUs NAFTA NCCs NICs NIE3

NIE4

NPLs NRCCs OECD

OEM OS PC PVC R&D ROA ROEs ROI SIS IT SMBC SME SMEs SWOT TOT TRIMs TT&T UFJ WTO

LIST OF ABBREVIATIONS

Mizuho Financial Group Management Information Systems

xiii

Ministry of International Trade and Industry /Ministry of Economy, Trade, and Industry (Japan) Montell-JPO Company Mitsubishi Motor Company Multinational Corporations Ministry of Posts and Transportation Microprocessor Units North American Free Trade Agreement new common carriers Newly Industrializing Countries Newly Industrialized Economies: Singapore, South Korea, and Taiwan Newly Industrialized Economies: Hong Kong, Singapore, South Korea, and Taiwan non-performing loans nonresident controlled companies Organization for Economic Cooperation and Development Original Equipment Manufacturing operating systems Personal Computer Polyvinyl Chloride Research and Development Return on Assets Return on Equity Return on Investment Specific Industry Structure Improvement Treatment Sumitomo Mitsui Banking Corporation small and medium enterprise Small and Medium-scale Enterprises Strengths, Weaknesses, Opportunities, and Threats Telephone Organization ofThailand Trade Related Investment Measures Thai Telephone and Telecommunication company United Financial of Japan World Trade Organization