The Tech Industry in Japan

Here’s an excellent take on how sociological and economic factors have combined to undermine the strength of the Japanese tech industry. If you aren’t specifically interested in that topic, you may still be interested to read about how culture/habit/local business environment have interacted with macroeconomic developments in a globally visible industry, to produce significant change.

I’m sharing a few key excerpts:

" . . . Japanese firms have confronted two critical challenges: the decomposition of production and the services transformation. The decomposition of production refers to the process whereby integral production centered in one country has given way to modular production and global supply chains."

“Japanese firms have confronted two critical challenges: the decomposition of production and the services transformation. The decomposition of production refers to the process whereby integral production centered in one country has given way to modular production and global supply chains. . . .

The decomposition of production has undermined the competitive advantage of Japanese business models that rely on long-term relationships with suppliers, banks, and workers to foster incremental advances in production processes. Japanese manufacturers have maintained a stronger competitive position in products that continue to be characterized by integral production (such as automobiles and digital cameras) than in those that have shifted further to modular production (such as personal computers and cellular telephones). . . .

The services transformation has tested Japanese manufacturers because it relies on capabilities in areas of their weakness – such as services, software, entertainment, and system integration – or on ties with firms that possess those capabilities.”

"Observers have characterized Japan as having a "dual economy", comprised of an internationally competitive sector focused in manufacturing and a domestic protected sector centered in services. And this dual economy has been characterized by a particularly wide gap in productivity between the two sectors. Hence a shift in the locus of growth in the global economy from manufacturing to services and toward greater integration of manufacturing and services implies a shift away from Japan’s comparative advantage."

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