UBC Theses and Dissertations

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UBC Theses and Dissertations

Adjustment to less-developed country competition in some Japanese industries Goode, James Thomas 1983

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ADJUSTMENT TO LESS-DEVELOPED COUNTRY COMPETITION JAPANESE INDUSTRIES  IN SOME  by JAMES THOMAS GOODE B.A.,  University  M.Sc,  Of B r i t i s h  University  M.A.,  Columbia,  Of B r i t i s h  Rikkyo U n i v e r s i t y  A THESIS SUBMITTED  1972  Columbia,  (Tokyo),  1976  1977  IN PARTIAL FULFILMENT OF  THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in THE FACULTY OF GRADUATE International (in  Business  The F a c u l t y We  And I n t e r d i s c i p l i n a r y S t u d i e s  of Commerce  accept to  STUDIES  and B u s i n e s s  t h i s t h e s i s as  the r e q u i r e d  Administration)  conforming  standard  THE UNIVERSITY OF BRITISH COLUMBIA April  ©  1983  James Thomas Goode,  1983  In p r e s e n t i n g  t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of  requirements f o r an advanced degree a t the  the  University  o f B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make it  f r e e l y a v a i l a b l e f o r reference  and  study.  I  further  agree t h a t p e r m i s s i o n f o r e x t e n s i v e copying of t h i s t h e s i s f o r s c h o l a r l y purposes may department or by h i s or her  be granted by  the head o f  representatives.  my  It is  understood t h a t copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l gain  s h a l l not be allowed without my  permission.  Department of The  U n i v e r s i t y of B r i t i s h Columbia  1956  Main M a l l  Vancouver, Canada V6T  DF.-6  n/fm  1Y3  written  i i  Abstract This  exploratory  less-developed industries insights  the  competition  countries  nature  derived  from  of  and  mosaic  producers  in  the  newly  informants  i n J a p a n e s e government and  research  External competitive exports  along  and  direct  the  adjustment  to  the  of  the  Adjustment  LDC  Japanese  incorporates  and  employs  interviews the  with  results  development  including earlier O.E.C.D.  than  those is  competitive  LDC  of  of  for  discussed.  This  development  the  competitive  relative  LDCs s e r v e d  LDC  Japanese  markets  e v o l u t i o n of  i n competing  product Japanese  to  increase  is  related  and  to  the  i n d u s t r i e s examined.  a l t e r n a t i v e s are  of v a l u e - a d d e d ,  four  countries  study  i n d u s t r y and  factor-intensity  of  price-improving, these  of  The  p r o b l e m of J a p a n e s e p r o d u c e r s .  rapidity  structure  pattern  investment  in  competition  industrializing  rapid  identified,  dimensions other  standardization foreign  The  severe  reports,  favouring  are  are  centre.  internationalized  examined.  strength  concept  in a production  strength  which  products  non-public  factors  and  problem  adjustment  Singapore).  public  f-ield  of  w h i c h have f a c e d  T a i w a n , Hong Kong, and  firms  Empirically-based  adjustment  existing  of  affected  to  r e s p e c t i v e l y ; c u t l e r y , footwear,  Asian  and  by  examination  tile)  i s s u e of a d j u s t m e n t  (DCs).  the  i n d u s t r i e s (producing,  umbrellas,  (Korea,  a d d r e s s e s the  (LDC)  developed  into  Japanese  from  country  in  inductively  study  under  the  discussed,  in  categories  of:  margin-improving  improvements  terms  the  cost-improving,  adjustment.  i n value-added  of  The  arising  last  of  from  a  change  of  problem  i s seen  also  product  or  of f u n c t i o n a l  t o be a f u n c t i o n  of concurrent  DC  activity.  not only  development  The a d j u s t m e n t  o f LDC d e v e l o p m e n t b u t  external  to  the  affected  industries. Variation adjustment  activities  of  "retrogress"  shifts  was h i g h l y  within  geographic  firms.  Where  an i n d u s t r y , and  competition.  implications further  of  research.  adjustment  i n the functional  itself,  activities periphery  are within  and a r e l e a s t a b l e suggestions  findings  are  is  found  transferred  e x p o s u r e t o LDC c o m p e t i t i o n  Some the  of  of the  e x i s t i n g producers a r e unable to  production  ultimate  nature  the industry,  and s o c i o - e c o n o m i c  the  i n t h e impact  related to differences  have t h e l e a s t m o b i l i t y that  participants  p r o b l e m and i n t h e number and  alternatives  adjust  among i n d u s t r y  the  DC.  onto those  to to a This who  to a c t i v e l y adjust to made  f o r government,  regarding business,  the and  i v  Table  Abstract L i s t of Tables L i s t of Figures Acknowledgements I. T H E PROBLEM 1.  2.  3. 4. II. 1.  2.  3.  4.  III. 1.  of Contents  i i ix x xi A D D R E S S E D AND T H E PURPOSES OF T H E R E S E A R C H 1 D E V E L O P E D COUNTRY A D J U S T M E N T TO L E S S - D E V E L O P E D COUNTRY I N D U S T R I A L I Z A T I O N 1 1.1 A d j u s t m e n t T o A C h a n g i n g E c o n o m i c E n v i r o n m e n t ...1 1.2 L e s s - d e v e l o p e d C o u n t r y I n d u s t r i a l i z a t i o n 2 1.3 A d j u s t m e n t A n d L e s s - d e v e l o p e d C o u n t r y Industrialization 4 A P P R O A C H E S TO T H E A D J U S T M E N T PROBLEM 8 2.1 R e s e a r c h On T h e A d j u s t m e n t P r o b l e m 8 2.2 G o v e r n m e n t P o l i c y 9 2.3 B u s i n e s s P o l i c y 11 PURPOSES.OF THE RESEARCH 14 AN OVERVI EW OF T H E STUDY 16 M E T H O D O L O G I C A L C O N S I D E R A T I O N S AND C A S E S E L E C T I O N ...18 METHODOLOGY 18 1.1 E x p l o r a t o r y R e s e a r c h 18 1.2 A M e t h o d o l o g y F o r E x p l o r a t o r y R e s e a r c h 21 T H E N A I V E C O N C E P T U A L FRAMEWORK 24 2.1 Some A s p e c t s O f R e a l - w o r l d C o m p l e x i t y 24 2.1.1 A Simple Example 24 2.1.2 Some F u r t h e r C o m p l e x i t i e s 25 2.1.3 Some I m p l i c a t i o n s 27 2.2 T h e F r a m e w o r k 29 2.2.1 Basic Concepts 29 2.2.2 S i n g l e P r o d u c t F r a m e w o r k 30 2.2.3 G e n e r a l i z e d F r a m e w o r k 33 2.2.4 Some H y p o t h e t i c a l E x a m p l e s 34 CASE SELECTION 37 3.1 J a p a n A n d T h e A s i a n N e w l y I n d u s t r i a l i z i n g Countries 37 3.2 I d e n t i f i c a t i o n O f A f f e c t e d I n d u s t r i e s 38 3.2.1 Quantitative Selection 39 3.2.2 Q u a l i t a t i v e S e l e c t i o n 40 3.3 T h e I d e n t i f i e d P r o d u c t / I n d u s t r i e s 41 M E T H O D O L O G I C A L I M P L I C A T I O N S OF T H E A F F E C T E D INDUSTRIES 43 4.1 C h a r a c t e r i s t i c s O f T h e I d e n t i f i e d I n d u s t r i e s ...43 4.2 O u t l i n e O f M e t h o d o l o g y E m p l o y e d 44 4.2.1 A B r o a d S u r v e y Of The A d j u s t m e n t P r o b l e m 44 4.2.2 A n O v e r v i e w O f A d j u s t m e n t I n Some S p e c i f i c Affected Industries 44 4.2.3 Case S t u d i e s 45 BACKGROUND TO T H E C A S E S T U D I E S ...47 J A P A N AND T H E A S I A N NEWLY I N D U S T R I A L I Z I N G COUNTRIES .47 .1.1 J a p a n 47  V  2.  3. IV. 1.  2.  3.  4.  5.  6.  1 .2 T h e A s i a n N I C s 52 1.3 C o n t e n d i n g V i e w s O f J a p a n - A s i a n N I C R e l a t i o n s ..54 1.3.1 C o m p e t i t i o n 54 1.3.2 C o l l a b o r a t i o n 60 1.3.3 D i f f e r i n g P e r s p e c t i v e s 61 THE I D E N T I F I E D INDUSTRIES IN P E R S P E C T I V E 62 2.1 T h e R o l e O f S m a l l - A n d M e d i u m - s i z e d E n t e r p r i s e s In The J a p a n e s e Economy 62 2.1.1 D e f i n i t i o n s 62 2.1.2 D e s c r i p t i o n 64 2.2 S a n c h i A n d J i b a S a n g y o 65 2.2.1 I n t r o d u c t i o n 65 GOVERNMENT P O L I C Y AND I N T E R V E N T I O N 68 A C A S E STUDY OF A D J U S T M E N T : T H E TSUBAME FLATWARE INDUSTRY 72 BACKGROUND TO THE TSUBAME FLATWARE INDUSTRY 72 1.1 N i i g a t a P r e f e c t u r e 72 1 .2 T s u b a m e 73 1.3 T h e S t r u c t u r e O f T h e T s u b a m e S t a i n l e s s S t e e l Flatware Industry 77 1.3.1 T h e S o c i a l D i v i s i o n O f L a b o u r 77 1.3.2 P r o d u c t V a r i e t y , D e s i g n , A n d D i s t r i b u t i o n ....83 1.3.3 Q u o t a s A n d T s u b a m e ' s I n d u s t r i a l S t r u c t u r e ....85 1.3.4 Summary 90 E N V I R O N M E N T A L CHANGE AND T H E ADVENT OF A S I A N N I C COMPETITION 92 2.1 E n v i r o n m e n t a l C h a n g e 92 2.2 T h e A d v e n t O f LDC C o m p e t i t i o n 95 2.3 A d j u s t m e n t T o A s i a n N I C C o m p e t i t i o n 100 R E V I V A L OF P R I C E C O M P E T I T I V E N E S S 102 3.1 S a l e s 102 3.2 P r o d u c t i o n 102 3.2.1 M e t h o d s 102 3.2.2 O r g a n i z a t i o n 106 3.2.3 O t h e r 109 S H I F T TO NEW MARKETS 110 4.1 S a l e s F u n c t i o n 111 4.1.1 L o c a t i o n 111 4.1.2 O r g a n i z a t i o n 112 4.1.3 M e t h o d 113 4.2 D e s i g n 114 S H I F T TO HIGHER-GRADE L I N E S 115 5.1 P r o d u c t 115 5.1.1 G r a d e 115 5. 2 P r o d u c t i o n 115 5.2.1 O r g a n i z a t i o n A n d L o c a t i o n 116 5.2.2 M e t h o d s 116 5. 3 D e s i g n 116 5.4 S a l e s 1 17 5.4.1 O r g a n i z a t i o n 117 5.4.2 L o c a t i o n 117 5.4.3 M e t h o d 118 MOVE TO A NEW B U S I N E S S 119 6.1 S T A I N L E S S S T E E L HOUSEWARES 121  vi  7. 8.  V. 1. 2.  3.  4.  5.  VI.  6.1.1 P r o d u c t 122 6.1.2 P r o d u c t i o n 122 6.1.3 S a l e s 123 6.1.4 D e s i g n 1 24 6.2 O t h e r New B u s i n e s s e s 126 MIXED STRATEGIES 131 ADJUSTMENT EFFECTIVENESS AND PROSPECTS 133 8.1 A p p a r e n t E f f e c t i v e n e s s Of A d j u s t m e n t S t r a t e g i e s 133 8.2 P r o s p e c t s 135 8.2.1 Tsubame R e g i o n 135 8.2.2 The F l a t w a r e I n d u s t r y 137 8.2.3 I n d u s t r y P a r t i c i p a n t s 139 EVIDENCE FROM SOME OTHER INDUSTRIES 144 OUTLINE 1 44 NON-LEATHER FOOTWEAR ~. 145 2.1 I n t r o d u c t i o n 145 2 . 2 Background 1 46 2.3 I n d u s t r y S t r u c t u r e 147 2.4 A d j u s t m e n t S t r a t e g i e s 149 2.4.1 E x p o r t M a r k e t s 149 2.4.2 D o m e s t i c M a r k e t 150 2 . 5 Summary 1 58 UMBRELLAS 160 3.1 I n t r o d u c t i o n 160 3.2 B a c k g r o u n d 161 3.3 S t r u c t u r e Of The I n d u s t r y 163 3.4 A d v e n t Of A s i a n NIC C o m p e t i t i o n 168 3.5 A d j u s t m e n t S t r a t e g i e s 170 3.5.1 L a r g e r W h o l e s a l e r / M a n u f a c t u r e r s 170 3.5.2 The I n d u s t r y As A Whole 171 CERAMIC T I L E 177 4.1 I n t r o d u c t i o n 177 4.2 B a c k g r o u n d 178 4.2.1 The T o k a i C e r a m i c s R e g i o n 178 4.2.2 The C e r a m i c T i l e I n d u s t r y 180 4.3 I n d u s t r y S t r u c t u r e 180 4.3.1 T i l e T y p e s And The R o l e Of E x p o r t s 180 4.3.2 D i f f e r e n t P r o d u c t i o n P r o c e s s e s And F i r m Characteristics 182 4.3.3 S a l e s And D i s t r i b u t i o n 184 4.4 The A d v e n t Of LDC C o m p e t i t i o n 185 4.5 A d j u s t m e n t 186 4.5.1 The Impact Of LDC C o m p e t i t i o n 186 4.5.2 A d j u s t m e n t S t r a t e g i e s 189 THE MIGRATION MODE OF ADJUSTMENT 199 5.1 The S c a r c i t y Of C o m p a r a t i v e D a t a 199 5.2 Government D a t a On A d j u s t m e n t A s s i s t a n c e 200 5.2.1 A g g r e g a t e P a t t e r n s 200 5.2.2 L i n k a g e s By B r o a d E c o n o m i c S e c t o r 201 5.2.3 D i f f e r e n c e s By I n d u s t r y Of O r i g i n 204 5.2.4 I m p l i c a t i o n s Of A d j u s t m e n t A s s i s t a n c e D a t a ..206 LESS-DEVELOPED COUNTRY COMPETITION AND FOREIGN DIRECT INVESTMENT 208  vii  1.  THE NATURE OF THE LDC COMPETITIVE CHALLENGE 208 The R o l e Of Exogenous Change 208 J a p a n e s e C o m p l i c i t y In A s i a n NIC Competitive Development 210 1.3 The C o u r s e Of LDC C o m p e t i t i v e D e v e l o p m e n t 213 1.3.1 P r o d u c t s And P r o d u c t i o n T e c h n o l o g y 213 1.3.2 O t h e r D i m e n s i o n s Of C o m p e t i t i v e D e v e l o p m e n t .215 1.3.3 S p e c i f i c i t y - G e n e r a l i t y Of I n d u s t r i a l S k i l l s .220 THE ROLE OF FOREIGN DIRECT INVESTMENT 222 2.1 I n t r o d u c t i o n 222 2.1.1 The D e a r t h Of FDI 224 2.1.2 FDI By W h o l e s a l e r / M a n u f a c t u r e r s 228 2.1.3 FDI And LDC F u n c t i o n a l Competence D e v e l o p m e n t 229 ADJUSTMENT ALTERNATIVES 231 ADJUSTMENT AND VALUE-ADDED 231 COST-IMPROVING ADJUSTMENT 2 34 2.1 Change Of P r o d u c t i o n T e c h n o l o g y 235 2.1.1 The "Deus Ex M a c h i n a " Syndrome 235 2.1.2 Failures 236 2.1.3 D e v e l o p i n g And D i f f u s i n g New Production Technology 238 2.2 D o m e s t i c T r a n s f e r s Of L o c a t i o n Of P r o d u c t i o n ..241 PRICE-IMPROVING ADJUSTMENT 242 3.1 P r o d u c t D i f f e r e n t i a t i o n ( P r o d u c t V a r i a n t s ) ....242 3.2 S h i f t Of M a r k e t s 244 3.2.1 Temporally P r o t e c t e d Markets 244 3.2.2 S t r u c t u r a l l y P r o t e c t e d Markets 245 MARGIN-IMPROVING ADJUSTMENT 246 4.1 F u n c t i o n a l Change 246 4.1.1 D i v e s t m e n t Of E x i s t i n g F u n c t i o n s 247 4.1.2 E n t r y I n t o New F u n c t i o n s 248 4.2 P r o d u c t Change 248 4.2.1 V e r t i c a l P r o d u c t Change 248 4.2.2 H o r i z o n t a l P r o d u c t Change 249 THE ADJUSTMENT PROCESS 250 INTRA-INDUSTRY VARIATION AND ADJUSTMENT 250 1.1 I n t r a - i n d u s t r y V a r i e t y 250 1.2 I n d u s t r y S u b s t r u c t u r e 252 1.2.1 D i f f e r e n c e s Among C o m p e t i t o r s 252 1.2.2 D i f f e r e n c e s Among F u n c t i o n a l G r o u p s 254 1.2.3 D i f f e r e n c e s Among F u n c t i o n a l C o a l i t i o n s 255 1.3 I n t e r a c t i o n In A d j u s t m e n t 260 1.3.1 Underlying P r i n c i p l e s 260 1.3.2 I n t e r a c t i o n With C o l l a b o r a t o r s ...260 1.3.3 I n t e r a c t i o n With Competitors 262 DIFFUSION AND DURABILITY IN THE ADJUSTMENT PROCESS 263 2.1 D i f f u s i o n Of The A d j u s t m e n t P r o b l e m 263 2.2 The D u r a b i l i t y Of A d j u s t m e n t N i c h e s 264 2.3 S u c c e s s f u l A d j u s t m e n t S t r a t e g i e s 266 2.3.1 S u c c e s s f u l Adjustment 266 2.3.2 The D i s t a n c e - D u r a b i l i t y Dilemma 266 2.3.3 D e t e r m i n a n t s Of S u c c e s s f u l A d j u s t m e n t 267 1.1 1.2  '  2.  VII. 1. 2.  3.  4.  VIII. 1.  2.  viii  2.3.4 A d a p t a b i l i t y I n A d j u s t i n g I n d u s t r i e s 268 2.4 T r a n s n a t i o n a l D e c o u p l i n g Of F u n c t i o n a l Competences 270 3. INDUSTRIAL RETROGRESSION 272 3.1 A l t e r n a t i v e P e r s p e c t i v e s On A d j u s t m e n t 272 3.1.1 The P e r s p e c t i v e Of The F i r m 272 3.1.2 The P e r s p e c t i v e Of The I n d u s t r y 273 3.2 I n d u s t r i a l R e t r o g r e s s i o n 274 3.2.1 R e t r o g r e s s i o n And D e v e l o p m e n t In The P e r i p h e r y 275 3.2.2 C h a r a c t e r i s t i c s Of Movement Towards The Periphery 276 3.3 LDC C o m p e t i t i o n And The Immobile P e r i p h e r y ....277 IX. CONCLUSIONS 280 1. GENERALITY OF THE FINDINGS 280 2. IMPLICATIONS FOR BUSINESS 283 3. IMPLICATIONS FOR GOVERNMENT 288 4. AREAS FOR FURTHER RESEARCH 290 APPENDIX A - GOVERNMENT POLICY ON SME ADJUSTMENT: INSTITUTIONS AND PROGRAMMES 292 5. THE INSTITUTIONAL FRAMEWORK 292 5.1 S t r u c t u r e Of The B u r e a u c r a c y 292 5.2 F i n a n c i a l I n s t i t u t i o n s 293 5.2.1 "The B i g T h r e e " (San K i k a n ) 293 5.2.2 O t h e r F i n a n c i a l I n s t i t u t i o n s 294 5.3 O r g a n i z a t i o n a l I n s t i t u t i o n s 295 5.3.1 C e n t r a l A s s e m b l y Of SME C o o p e r a t i v e Associations 295 5.3.2 Commerce And I n d u s t r y C o n f e r e n c e H a l l 296 5.3.3 C o n f e r e n c e On Commerce And I n d u s t r y 296 5.3.4 SME P r o m o t i o n O r g a n i z a t i o n 296 5.3.5 N a t i o n a l A s s o c i a t i o n F o r The Advancement Of Subcontracting Firms 297 5.4 D e l i b e r a t i v e C o u n c i l s 297 5.4.1 C o u n c i l On SME P o l i c y 297 5.4.2 C o u n c i l On SME M o d e r n i z a t i o n 297 5.4.3 C o u n c i l On SME S t a b i l i z a t i o n 298 5.4.4 C o u n c i l On SME B u s i n e s s F i e l d R e g u l a t i o n ....298 6. AN OUTLINE OF SME POLICY 299 6.1 P o l i c y O v e r v i e w 299 6.2 SME M o d e r n i z a t i o n P o l i c y 302 6.2.1 M o d e r n i z a t i o n 302 6.2.2 E n t r y I n t o New L i n e s Of B u s i n e s s 303 6.2.3 R e f o r m Of I n d u s t r i a l S t r u c t u r e 305 6.3 SME Change Of B u s i n e s s P o l i c y 306 6.3.1 O u t l i n e 306 6.3.2 E l i g i b i l i t y C r i t e r i a 309 6.4 D i s t r e s s e d R e g i o n a l I n d u s t r y ( " S a n c h i " ) P o l i c y 309 6.5 T r a d e P o l i c y And SMEI 310 BIBLIOGRAPHY  313  ix  List  of T a b l e s  1. C h a r a c t e r i s t i c s o f V a r i o u s T y p e s o f R e s e a r c h ....22 2. Some S u b d i v i s i o n s o f an H y p o t h e t i c a l C h a i n o f P r o d u c t i v e Activities 26 3. Some H y p o t h e t i c a l Examples o f A d j u s t m e n t t o C o m p e t i t i o n 36 4. P r o d u c t / I n d u s t r i e s F a c i n g S e v e r e A s i a n NIC C o m p e t i t i o n 42 5. Change i n J a p a n ' s I n d u s t r i a l S t r u c t u r e : 1960-1975 ...49 6. Change i n t h e C o m p o s i t i o n o f J a p a n ' s M a j o r E x p o r t s : 1950-1971 51 7. M a c h i n e r y P r o d u c t s i n Which A s i a n NIC's T e c h n o l o g i c a l Competence P r o v i d e s a P r e s e n t o r P r o s p e c t i v e C o m p e t i t i v e Strength 59 8. A C o m p a r i s o n o f t h e R o l e o f S m a l l - and M e d i u m - s i z e d F i r m s i n Some M a j o r O.E.C.D. C o u n t r i e s 66 9. C o m p a r i s o n o f M a j o r F i r m s i n t h e F l a t w a r e I n d u s t r i e s o f J a p a n , K o r e a , and T a i w a n ; c i r c a 1974-75 96 10. M i g r a t i o n s Out o f t h e F l a t w a r e I n d u s t r y i n t o New Manufacturing Businesses 128 11. D i s t r i b u t i o n o f F i r m s and W o r k e r s i n t h e U m b r e l l a I n d u s t r y , c i r c a 1977 165 12. Volume o f C e r a m i c T i l e P r o d u c t i o n by Type and M a r k e t , c i r c a 1968 181 13. A C o m p a r i s o n o f F i r m S i z e i n t h e K o r e a n and J a p a n e s e Industries 187 14. T r e n d s i n J a p a n e s e and K o r e a n M a r k e t S h a r e i n Some M a j o r Markets 188 15. L i n k a g e P a t t e r n s i n Change o f B u s i n e s s A s s i s t a n c e A p p r o v a l s up t o A p r i l , 1980 202 16. L i n k a g e P a t t e r n s by I n d u s t r y o f O r i g i n 205 17. H y p o t h e t i c a l I n t e r n a l F u n c t i o n a l V a r i e t y Among I n d u s t r y Participants 257 18. N a t u r a l C o a l i t i o n s i n an I n d u s t r y 258 19. An O v e r v i e w o f J a p a n e s e SME P o l i c y M e a s u r e s 300 20. A C o m p a r i s o n o f P o l i c y M e a s u r e s Employed i n T h r e e A d j u s t m e n t Programmes 301 21. M o d e r n i z a t i o n P o l i c y : Some R e p r e s e n t a t i v e D e s i g n a t e d Industries 304 22. Change o f B u s i n e s s P o l i c y : Some R e p r e s e n t a t i v e Designated I n d u s t r i e s 308  X  List  of F i g u r e s  1. H y p o t h e t i c a l T h r e e - d i m e n s i o n a l C o n f i g u r a t i o n f o r a Firm 35 2. Change i n t h e Commodity C o m p o s i t i o n o f A s i a n NIC Exports 55 3. Changes i n J a p a n e s e and K o r e a n 1 - d i g i t S . I . T . C . Export P r o f i l e s 56 4. Map Showing Names, P r o d u c t s , a n d L o c a t i o n s f o r Some Japanese Sanchi 69 5. P r o d u c t i o n S t a g e s f o r a S t a i n l e s s S t e e l Spoon (Tsubame, J a p a n ) 78 6. P a t t e r n s o f S u b c o n t r a c t i n g ; I n t e r n a t i o n a l l y and i n Tsubame 80 7. P a r t i c i p a n t s and P a t t e r n s o f P r o d u c t i o n i n t h e Tsubame Flatware Industry 81 8. V a r i e t y i n P a r t i c i p a n t s ' F u n c t i o n a l Scope; Tsubame ...88 9. P r o d u c t D i s t r i b u t i o n Under a Q u o t a System: Tsubame ...89 10. C h a n g i n g R e g i o n a l C o n t r i b u t i o n s t o J a p a n e s e Industrialization 93 11. A l t e r n a t i v e Forms o f C o a l i t i o n Between F l a t w a r e and Complementary P r o d u c t s 142 12. T r e n d s i n A r t i f i c i a l L e a t h e r F o o t w e a r P r o d u c t i o n , E x p o r t s , and U n i t P r i c e s 152 13. P a t t e r n o f P r o d u c t i o n and D i s t r i b u t i o n i n t h e U m b r e l l a Industry 166 14. T r e n d s i n J a p a n e s e E x p o r t s and I m p o r t s o f U m b r e l l a s ; 1962-1977 169  ;  x i  Ac k n o w l e d q e r o e n t  Financial s u p p o r t f o r t h i s r e s e a r c h was p r o v i d e d by t h e S o c i a l S c i e n c e a n d H u m a n i t i e s R e s e a r c h Council of Canada, The Japan Society f o r the Promotion of Science, The Department of Industry Trade and Commerce, C a n a d a , T h e A l u m i n u m Company o f C a n a d a , t h e F a c u l t y o f Commerce a n d B u s i n e s s A d m i n i s t r a t i o n a t t h e U n i v e r s i t y of B r i t i s h Columbia, and by my wife and relatives. The r e s e a r c h i n J a p a n was d e p e n d e n t upon the kindnesses of many individuals but I would particularly like to acknowledge here the support I r e c e i v e d from s t a f f a t the Institute of Developing Economies ( A j i a K e i z a i Kenkyusho), t h e Tokyo O f f i c e of the Niigata Prefectural Government, and from the library sta-ff of the Commercial and Industrial Cooperatives' Central Financial Corporation (Shoko K u m i a i Chuo K i n k o ) . Among t h o s e who h e l p e d me a t the University of British Columbia, I would like to thank Bill T o m l i n s o n , Sam Ho, a n d Frank Langdon for providing much h e l p f u l comment a n d e n d u r i n g many i n c h o a t e d r a f t s o f t h e d i s s e r t a t i o n m a t e r i a l a s w e l l a s J o h n Howes a n d T e r r y McGee f o r t h e i r c o n s i d e r a b l e m o r a l s u p p o r t . To no one, however, d o I owe a d e e p e r d e b t o f g r a t i t u d e than to my wife, Jenny, whose support, forbearance, and s e l f - s a c r i f i c e have been f a r beyond a l l wifely duty.  1  I. 1.  THE  PROBLEM ADDRESSED AND  THE  PURPOSES OF  DEVELOPED COUNTRY ADJUSTMENT TO  THE  RESEARCH  LESS-DEVELOPED COUNTRY  INDUSTRIAL!ZATION 1.1  Adjustment The  economic  well-being  or  economies  large  and  change  rapidly  and  change problem, a  well  upon  have  therefore,  or  to  i n ; the  1  i f those a f f e c t e d  Thus,  itself  Change c a n , however, o c c u r a t  itself,  is  who  adjust  they  are  t o major  structural  however, need  pace  more  E n v i r o n m e n t a l change  change. a  of  activity.  those  by e n v i r o n m e n t a l change of  from  o v e r c o m p e t i t o r s f o r whom  and p r o s p e r .  p a c e commensurate w i t h t h e p a c e  that  s e r v e s t o m a i n t a i n or t o  o r not a t a l l , and  Adjustment  to  conditions  and g o v e r n m e n t a l  an a d v a n t a g e  the  national  adaptation  i t can, over time, l e a d  i n an economy.  and  e n v i r o n m e n t a l change,  efficiency.  to survive  and  f o r adjustment can a r i s e  technology  and  change  industries,  dependent  comes more s l o w l y ,  adjustment  of c o n s t a n t  t o e n v i r o n m e n t a l change  effectiveness  and  Environment  firms,  Moreover,  increase  likely,  i s one  i n d u c e d by e c o n o m i c  Adjustment  adjustment  Economic  Pressure  in  demand.  part  of  ultimately  environment.  environmental  in  environment  survival  is  changing  supply  To A C h a n g i n g  n o t be a  can a d j u s t  at  strains  the  2  which  See, f o r example; United Nations, S t r u c t u r e and Change i n E u r o p e a n I n d u s t r y (U.N., New Y o r k , 1977). 2 See. Matthews, R. A., " I n d u s t r i a l V i a b i l i t y i n a Free Trade Economy" pp 23-24 i n , R e g i o n a l and A d j u s t m e n t A s p e c t s o f T r a d e L i b e r a l i z a t i o n ( U n i v e r s i t y of T o r o n t o Press, Toronto, 1973). Matthews gives some examples o f s u b s t a n t i a l s t r u c t u r a l c h a n g e s t h a t d i d not p r e s e n t s e r i o u s a d j u s t m e n t p r o b l e m s . 1  2  adaptive  capacity  of  adjustment  "problem"  reflected  rapid  which  were u n a b l e  many  rapid to  change  which  was  technological  of petroleum  adjust.  change i n some  conditions  i s widely  industrial  ability  firm  or  inter-region migration,  In  recent  technology  competition the  1.2  countries  problem  h a s now  that  long  to  productive.  As  industrial  been  change the  a  Nowhere  than  less-developed  difficult been  task  has  of t r y i n g  an e v o l u t i o n a r y  term  lot  of  has  countries. i n the  micro-  other  hand,  which  labour exceeds  (via inter-  i n supply, of  this  demand,  adjusting  manufactures  of the present  to  i n many o f  particular  demonstrated  we  result,  development,  in  type  of  research.  Industrialization  since  improve  is  example,  etc.).  problem  country  i t  for  to adjust  of changes  i s the focus  Country  socio-technological capacity  and  force  to the  less-developed  Less-developed  It  rise  products;  t o reduce  a t a pace  retraining,  an a g g r e g a t e  has given from  developed  adjustment  sectors  of the a f f e c t e d labour  years,  expected  to  triggered  related  the  an  1970's  supply,  developments on  that  the  also  industry,  represent,  which  of  It  f o r some  Recent  the  and  adjust.  automobile  automation  i t i s then  crises  o f demand  American  and  The energy  to readily  to  and  requirements  in  i n the nature  hard-pressed  affected  arises.  change  the North  electronics  those  man  by  making,  industrialization, a  received  countries  t o compress  process  t h e complex  "industrialization"  become  this  that  into  central more (LDCs)  what a  goal  explicit which  has o f t e n  directed,  has the  him or  of  more further of a l l  attention face  the  i n the past  revolutionary  3  transformation The  of t h e i r  problems  particularly countries problems  they  "Given  newly  face  the  existing to  even most  health  and l i f e  to death.  urban  problems  arise  in  early  moreover,  the  that  was  not a v i a b l e  and  was c l e a r l y  people  the  places  physical  they a l s o village  process  The  has put  i t :  pace  of  prefer  comfort to prefer  life, of  work close  traditional  and i t i s a t t h i s  enormity  period.  of  the  few o f them  level  that  development  long-range strategy inappropriate  was n e c e s s a r y f o r t h e m  problems  made  By t h e 1 9 6 0 ' s ,  industrialization  Moore, W. E., Englewood C l i f f s ,  a s s o many  of a l t e r n a t i v e s  i n most  Whether  a  and  3  i n t h e LDCs,  postwar  t h e knowledge  t o t h e uneven  doubtful,  of  f o r , as Moore  agglomeration to  synchronization  period  h a s been  independence.  to sickness,  i s more  development  3  or  production  Because  It  political  hunger,  industrialization."  the  achieved  option  i n t h e LDCs  i n the postwar  are far-reaching;  'leisure',  temporal  development  topic  elsewhere,...  suffering to  of economic  prominent  have  food  societies.  based even  f o r small-  to develop  of  dramatic  industrial progress  i t h a d become on  in  evident,  import-substitution  for  the  larger  and medium-sized  i n d u s t r i e s which  S o c i a l Change 2nd Edition N . J . , 1973) pp 92-93.  LDCs LDCs.  could  (Prentice-Hall,  4  competitively During  e x p o r t to the l a r g e r the  unprecedented oriented a  group,  economic  come  to  or  LDCs  rapid  employment  The  their  criteria  that  move  the  level a  into  newly  and  of  however one  exporthave,  as  industrializing  from  the m a j o r i t y  s h a r e of share  of  national  applies  of  industrial world  manufactures,  change o v e r  income.  them,  time.  and  the  6  Industrialization  involves  change  in  producers  t h e p r o d u c t i o n of  industrial  manufactures  The  general  elsewhere.  most  in  the  as  produced  labour,  attained  such  countries  of per c a p i t a  undoubtedly  of  on  Such  rising  exports  development  division  were h i t h e r t o  the  Less-developed Country  economic  international countries  in  ( f o r LDCs) l e v e l s  And  5  are d i s t i n g u i s h e d  a r e not e x a c t and,  Adjustment NIC  as  and  will  largely  strategies.  economies,  production high  based  known  growth  makeup of t h e g r o u p 1.3  be  market."  1970's, a number of LDCs  growth  "NICs", and  in  industrial relatively  and  industrialization  countries, by:  1960's  world  those  and  " See, f o r example, Lary, H a l B., I m p o r t s o f M a n u f a c t u r e s f r o m L e s s D e v e l o p e d C o u n t r i e s ( N a t i o n a l B o a r d of Economic Research, New York, 1968) pp F-17; and Giersch, Herbert ( e d . ) , The I n t e r n a t i o n a l D i v i s i o n of L a b o u r : P r o b l e m s and P e r s p e c t i v e s P a r t I I I , "The d e v e l o p i n g c o u n t r i e s e x p o r t n e c e s s i t i e s . . . " (J.C.B. Mohr, T u b i n g e n , 1974). See, Donges, J . B., "A C o m p a r a t i v e S u r v e y o f I n d u s t r i a l i z a t i o n Policies in Fifteen Semi-industrialized Countries" in, Weltwirtshcaftliches Archiv V 112, 1976 pp 626-657; Herman, B., The O p t i m a l I n t e r n a t i o n a l D i v i s i o n of Labour (International L a b o u r O r g a n i z a t i o n , Geneva, 1975); and, G i e r s c h , , op. c i t . See, O r g a n i z a t i o n f o r Economic C o o p e r a t i o n and D e v e l o p m e n t , The Impact o f t h e Newly I n d u s t r i a l i z i n g C o u n t r i e s on P r o d u c t i o n and Trade i n Manufactures (O.E.C.D., Paris, 1979). This study defined the following countries as NICs: Greece, P o r t u g a l , S p a i n , Y u g o s l a v i a , B r a z i l , Mexico, South Korea, Taiwan, Hong Kong, and S i n g a p o r e . 5  6  5  familiar the  e x p l a n a t i o n of the i n t e r n a t i o n a l  theory  even  i f  of comparative one  (productive) if  each  that  other more  than  countries  the other  goods), total  comparative division  goods  of  advantage  by t h e b e l i e f ,  theories,  that  of  trade  a l l countries.  This  within  t h e G.A.T.T.  trade.  These  constrain hinder  free  trade.  feature  of t h e postwar  interdependence economic  in  of  international  underlying  changes  sought,  by  period  as a  advantage  period  h a s been i t  common  result  to  of t h i s ,  other  trade  interests primarily free  concensus,  to  unilaterally another  an i n c r e a s e  the  has been  at promoting  of states  Partly  put  aimed  in  phenomenon.  has l e d t o the c o d i f i c a t i o n , of rules  them.  t o changes i n  the  the postwar  a  i n t h e sense  each  can lead  has  relative  i s i n the national  independence  to  i t  in  major  economic  way, a d e c r e a s e i n  independence.  Developed comparative competition advantage  or,  to  i n comparative  i n goods  have  the p o l i t i c a l  which  as a b e n e f i c i a l  countries,  framework,  rules  in  types  reflects  grounded  free  product,  profitable;  change  c a n be s e e n  dominated  any and every  available  various  that  efficient  the greatest productivity  which  t h e non-communist  holds  more  products  Thus,  labour  of labour i s  theory  absolutely  c a n be m u t u a l l y  advantage.  comparative  i s  c a n b e made  change  of  the  (i.e.,  trade  This  i n producing  in  advantage  Environmental  In  two  specializes  comparative to  of  advantage.  division  country  (DC)  advantage with they  LDC may  producers  and producers  need  also  where  this  who  enjoy  to fundamentally  face brings an  adjust  changing them  into  absolute  cost  their  business  6  activities acts of  i f they are to s u r v i v e .  as a f o r c e the  process  DCs.  In  change  principle,  DC  of a d j u s t m e n t w i t h a l a r m ;  fundamental it  for structural  a  i s of t h a t  feature of t h e  of t h e i r  expressed  adoption Action aims  on  LDC  Despite principle  Conflict  increase  7  8  i n the  has o n l y  1970's.  there  partly  I t has a l s o  economic  this  is  as as  through  have  development.  The  Plan  f o r example,  world's  industrial  concrete  of  not  LDC  of  step  to  aid",  an  manufactures  8  is  amount  of  growing  to rapid  the  arising  1970's.  complementary in practice.  export  expansion  by slow r a t e s This  f r o m LDC  lower  of  conflict  been e x a c e r b a t e d  merely  DC-LDC agreement i n  inevitability  been due  difficulties  and  "trade  imports  the  meant not  t h e DCs  and C o o p e r a t i o n ,  economies d u r i n g  has o f t e n  change  level,  M o r e o v e r , as a  7  considerable  change,  NICs. t h e DC  2000.  development  the  do not view  of t h e Lima D e c l a r a t i o n  a s t o t h e wisdom and  structural  it  political  LDC  scheme t o f a v o u r DC  instituted  economies  o n g o i n g economic d e v e l o p m e n t  Development  by t h e y e a r  international  in  to  1975  Industrial  stimulate  the  governments  f o r t h e LDCs t o a c c o u n t f o r 25% of t h e  production  was  of  overall  this  LDCs.  commitment  i n March  i n the  such s t r u c t u r a l  Indeed, at the i n t e r n a t i o n a l an  At t h e a g g r e g a t e l e v e l ,  growth  has  of g r o w t h served  competition but  an  by  to  because absolute  See, U n i t e d N a t i o n s , R e s t r u c t u r i n g of W o r l d I n d u s t r y (U.N., New Y o r k , 1978) See, Ginman, P e t e r J . and M u r r a y , T., "The G e n e r a l i z e d System of Preferences: A Review and Appraisal" in, The New I n t e r n a t i o n a l Economic O r d e r S a u v a n t , K. P. and H a s e n p f l u g , H. ( e d s . ) , ( W i l t o n House, London, 1977)  7  decline  in levels  Moreover,  f o r those  LDC  competition,  it  more d i f f i c u l t  other  has  appropriate  when ever.  ,  with  This  exclusively Nevertheless, examples  1 1  f o r them, o r t h e i r  been, t h e r e f o r e , DC a d j u s t m e n t s  the  advent  trade.  9  related the  to withstand  g r o w t h have made  employees,  most  increased  to  LDC  to  move  of t h e N I C s , to a r i s i n g  The  problem  to  trade  serious  found  t h e need tide  of  into  throughout  i s greater  just than  of p r o t e c t i o n i s m i n  DCs  structurally  in relations  increasing attention during  i n making  protectionism  between and  difficulty  industrialization  t h e p r o b l e m o f DC a d j u s t m e n t  remain prominent  1 0  low r a t e s of n a t i o n a l economic  are probably  a result,  received  9  i n unemployment.  f i r m s w h i c h have n o t been a b l e  has c o n t r i b u t e d  international  As  and an i n c r e a s e  activities. There  the  of p r o d u c t i o n  and  i s not LDCs.  1 0  important  between DCs a n d LDCs. t o LDC c o m p e t i t i o n  has  t h e 1970's and i s l i k e l y t o  the 1980's.  1 1  S e e , f o r e x a m p l e : J a c k s o n , John H., "The C r u m b l i n g Institutions of t h e L i b e r a l T r a d e System" i n , J o u r n a l o f W o r l d T r a d e Law VI2 No2 , M a r c h / A p r i l 1 9 7 8 ; B a l a s s a , B e l a , "The 'New Protectionism' and t h e I n t e r n a t i o n a l Economy" i n J o u r n a l o f W o r l d T r a d e Law V12 No5 Sept/Oct 1978; Cohen, Stephen D., "Changes i n the I n t e r n a t i o n a l Economy: O l d R e a l i t i e s a n d New Myths" i n , J o u r n a l of W o r l d T r a d e Law V12 No4 J u l y / A u g u s t 1978; B l a c k h u r s t , R i c h a r d e t a l , T r a d e L i b e r a l i z a t i o n , P r o t e c t i o n i s m , and I n t e r d e p e n d e n c e (General Agreement on T a r i f f s and Trade[G.A.T.T.], Geneva, 1977) . F o r example, s e e ; S t r a n g e , Susan , "The management o f s u r p l u s c a p a c i t y o r how does t h e o r y s t a n d up t o p r o t e c t i o n i s m 1970's style?", i n , I n t e r n a t i o n a l O r g a n i z a t i o n V. 33, NO. 3 (Summer, 1979) and; T s o u k a l i s , L. and F e r r e i r a , A. da Silva, "Management of i n d u s t r i a l surplus capacity i n the European Community", in International Organization V. 34, No. 3 (Summer, 1980). S e e , B a l a s s a , B., " P r o s p e c t s f o r T r a d e i n Manufactured Goods Between Industrial and D e v e l o p i n g Countries, 1978-1990" i n , J o u r n a l o f P o l i c y M o d e l l i n g V2 No3, 1980.  8  2.  APPROACHES TO  2.1  R e s e a r c h On  The  R e s e a r c h on been  carried  THE  ADJUSTMENT PROBLEM  Adjustment  the adjustment problem has, to date,  out  by  national  c o n c e r n e d w i t h government adopted  the " a t o m i s t i c "  movement  of  individual  individual  workers)  is  commonly  because  unemployment  of  t h e DC  facilitating  on a l l e v i a t i n g The  any  Such  that  units  of  as  impact  research  e x p o r t s have  technology. had  and  impact  They  significant  have  factors  (e.g.,  the  slight  dwarfed  of c h a n g e s  and  has  on ways  industries,  aggregate,  has been  also  concern  unemployed.  been  As  f e a t u r e of  competition,  on t h e  in  immobile  policy  of t r a d e w i t h t h e LDCs has  employment  generally  volatile  out o f a f f e c t e d  shown t h a t ,  has  relatively  impact of LDC  labour m o b i l i t y  organizations  productive a c t i v i t i e s .  i s t h e most p o l i t i c a l l y this  primarily  i s a m a t t e r of t h e  productive  being  c a s e , t h e i m p a c t on employment  production  research  adjustment  t h e h a r d s h i p s imposed  more s i g n i f i c a n t  1 2  view  employment  r e s e a r c h has  employment  policy.  viewed  the adjustment problem, on  or i n t e r n a t i o n a l  between d i f f e r e n t  labour  focussed  Problem  and  1 2  the  net  and, i n  by t h e much and  in  shown, however, t h a t  LDC  a d v e r s e impact  i n demand  on DC  producers  at  See, f o r example: United Nations Conference on Trade and Development [UNCTAD], A d j u s t m e n t A s s i s t a n c e M e a s u r e s [TD/121 and supplements] (UNCTAD~ Geneva, 1972); UNCTAD, Adjustment A s s i s t a n c e Measures [TD/B/C.2/171] (UNCTAD. Geneva") 1977); Warnecke, S. J . , I n t e r n a t i o n a l T r a d e and I n d u s t r i a l P o l i c i e s (Holmes and Meier, New York, 1978); MacBean, Alasdair, A P o s i t i v e A p p r o a c h t o t h e I n t e r n a t i o n a l Economic O r d e r , P a r t I: T r a d e and S t r u c t u r a l A d j u s t m e n t (British North-American Committee, London, 1978).  9  the  narrow  problems  sectoral for  segments of  2.2  does  the  limited  displaced  workers. change  tariffs  the  the  policy  Matthews  however,  1 4  and  policy  has  delay  efforts  severe  adjustment firms,  and  1 3  has the  those  DC  has  to  individual  the  past  the  assistance  under  manufactured  firm  or,  i n the  the  goods.  aggregate,  individual so,  proliferation  LDC  mobility  programmes  at  d e c a d e or  falling  been  factor  specifically  on  the  rubric  most of  of  special  These  policies  the  industry  as  unit.  discussed  level  not  on  aimed  policy  of  especially  acted  focus  Indeed, over  quotas  at  to  industries,  government a d j u s t m e n t  to  in  take  relevant  assistance  policy  assistance"  and  implicitly  1 3  and  mean t h a t  "adjustment  regions,  force.  led  Policy"  have been  notable  specific  labour  research  not  t h i s has  some  Government The  l e v e l s and  to  the  the  firm  in  the  facilitate  adjust  by  rationale or  adjustment  industry. "  case timely  r e m o v i n g or  for  Too  1  of  tariffs  and  adjustment, reducing  the  often quotas, but  to  pressures  For reviews of research and methodology regarding the employment impact see; United N a t i o n s I n d u s t r i a l Development O r g a n i z a t i o n [UNIDO], "The Impact of Trade with Developing Countries on Employment in Developed Countries: Empirical E v i d e n c e From R e c e n t R e s e a r c h " i n , W o r k i n g P a p e r s on Structural Change , No. 3 (UNIDO, Vienna, 1978), and Organization for Economic C o o p e r a t i o n and D e v e l o p m e n t [OECD], The Impact of t h e Newly I n d u s t r i a l i z i n g C o u n t r i e s on P r o d u c t i o n and T r a d e i n M a n u f a c t u r e s (OECD, P a r i s , 1979). See, Matthews, R. A. (1973) , op. cit. .  10  for  adjustment.  Nevertheless,  1 5  effective  adjustment  industry  is  central policy.  adjustment little level  increasingly  role in 1 6  current  However, by  firms  empirical  within  the  focussed  i t  understanding  1 6  1 7  the  discussions acknowledged  firm  and  and i t has a  of  government  importance  i n d u s t r i e s , there  on c o r p o r a t e -  or  of  has been  enterprise-  1 7  i s , therefore,  assistance  necessary  to  of the n a t u r e of the adjustment  The d e v e l o p m e n t  o f a body o f e m p i r i c a l  on e n t e r p r i s e - l e v e l a d j u s t m e n t  1 5  of  by r e s e a r c h e r s  affected  e n t e r p r i s e - l e v e l adjustment  effective  level.  stressed  despite  p o t e n t i a l importance o f ,  at the l e v e l  normative  research  adjustment. If  assistance  the  schemes a r e t o be develop a c l e a r e r problem research  at  that  focussed  c a n make a c o n t r i b u t i o n t o t h e  See, f o r example: O.E.C.D., The Case f o r P o s i t i v e A d j u s t m e n t Policies (O.E.C.D., P a r i s , 1979); M u t t i , John H. a n d B a l e , M. D., "Output and Employment Changes in a 'Trade Sensitive' Sector: Adjustment i n t h e U. S. Footwear Industry" i n , W e l t w i r t s c h a f t l i c h e s A r c h i v V117, 1981; a n d , K r u e g e r , Anne 0., " R e s t r u c t u r i n g f o r Import C o m p e t i t i o n from D e v e l o p i n g C o u n t r i e s , I : L a b o u r D i s p l a c e m e n t a n d Economic R e d e p l o y m e n t " i n , J o u r n a l of P o l i c y M o d e l l i n g V2 No2 1980 pp 165-183. See, O.E.C.D., , op. c i t . , and: Wolter, Frank, " R e s t r u c t u r i n g f o r Import C o m p e t i t i o n from D e v e l o p i n g C o u n t r i e s , I I : The Case o f t h e F e d e r a l R e p u b l i c o f Germany" i n , J o u r n a l o f Policy Modelling V2 No2 1980; Adelman, Irma, "Some T h o u g h t s on the R e s t r u c t u r i n g of North-South Interaction" i n J o u r n a l of P o l i c y M o d e l l i n g V2 No2 1980; Matthews, R. A., D i s c u s s i o n Paper No 172, C a n a d i a n I n d u s t r y a n d t h e C h a l l e n g e o f Low-Cost I m p o r t s (Economic Counci1 of Canada, Ottawa, 1 980); Australian Government P u b l i s h i n g S e r v i c e (AGPS), S t u d y G r o u p on S t r u c t u r a l A d j u s t m e n t , R e p o r t M a r c h , 1979 Volume I (AGPS, C a n b e r r a , 1979) ; and, L l o y d , P. J . , "A K n i g h t i a n Model f o r the A n a l y s i s of Structural A d j u s t m e n t s by F i r m s " i n , W e l t w i r t s c h a t l i c h e s A r c h i v V1 17, 1981 pp 672-685. L l o y d , P. J . , , op. c i t . , e x p l i c i t l y adopts t h e p e r s p e c t i v e of the f i r m b u t p r e s e n t s a t h e o r e t i c a l e c o n o m e t r i c model a n d examines i t s p r o p e r t i e s , rather than directly examining the e m p i r i c a l f e a t u r e s o f adjustment from t h a t p e r s p e c t i v e .  11  development 2.3  of  Business Quite  aside  importance  field is  of  2 0  the  area  young and  no  structured  research  has  of  competiton.  therefore,  growth  universal  in their  in  been  national it  which is  a  or a  "strategic state  face the vast  time.  characterized  i s the  The  field  There  1 8  has and  or on  management t h a t  Research  1 9  in reflection  reality  relevance  ferment.  strategic  obvious  literature  of b u s i n e s s p r a c t i t i o n e r s over  an  management".  of  field.  government  has  of g r e a t e s t a p p a r e n t  particulars,  considerable  firms There  this  a c o n s e q u e n c e , and has  of  problem,  t h e o r y of  in  the concerns  that  interest  adjustment  managers  but  relatively  As  the  "business p o l i c y "  changed,  1 9  from the  of LDC  reflected  1 8  in for  management  understanding.  Policy  policymakers  prospect  this  is, has  largely  these  have  2 0  of t h e  steady  economic  most of t h e p o s t w a r p e r i o d , t h e r e  empirical  research  emphasis  on  the  See, H o f e r , C. W. e t a l , S t r a t e g i c Management: A Casebook i n B u s i n e s s P o l i c y and P l a n n i n g (West, New York, 1980) pp 2-26. H o f e r i d e n t i f i e s as many as f o u r "paradigm shifts" since the 1950's, in response to i n c r e a s e d (or i n c r e a s e d awareness o f ) c o m p l e x i t y i n the m a n a g e r i a l t a s k . See, S c h e n d e l , Dan E. and H o f e r , C. W. (eds.), Strategic Management -A New View of B u s i n e s s P o l i c y and P l a n n i n g (Little, Brown, T o r o n t o , 1979). T h i s volume i s r e s p o n s i v e to the felt need for a more widely accepted paradigm f o r t h e f i e l d of s t r a t e g i c management/business p o l i c y . I t was p r e p a r e d under t h e a u s p i c e s of t h e B u s i n e s s P o l i c y and Planning Division of the Academy of Management and can be c o n s i d e r e d t h e most t h o r o u g h and d e f i n i t i v e r e c e n t s u r v e y of t h e f i e l d . See, A n s o f f , H. I g o r , "The C h a n g i n g Shape of the Strategic Problem" in S c h e n d e l and H o f e r , op. c i t . , pp30-44. Ansoff presents a schema relating change in the overall business environment since 1900 to the changing f o c u s of m a n a g e r i a l interests.  12  strategic for  management  example,  retrenchment  ignored  at  2 1  2 2  life-cycle  calling  for a  based,  focussed  fundamentally  these  appear,  latter  level.  on  adverse  approach however,  situations  Theorists  f o r example,  which e x p l i c i t l y  different not  2 1  corporate industry  include to  have  have  proposed  on t h e c o n c e p t a  "decline"  strategic  been  of a stage  management.  t o have been much  23  empirical  i n the area.  Ansoff, , op. c i t . , makes t h i s p o i n t , w h i c h i s e c h o e d i n D i l l , Wm. R., "Commentary" i n t h e same volume, p 49. See, S t e i n e r , George A., " C o n t i n g e n c y T h e o r i e s o f S t r a t e g y and S t r a t e g i c Management" i n S c h e n d e l and H o f e r ( 1 9 7 9 ) , , op. c r t . , p 408. A c c o r d i n g t o S t e i n e r , r e s e a r c h i n t e r e s t i n t h i s area is comparatively recent. He d o e s , however, c i t e some s t u d i e s , i n c l u d i n g : S c h e n d e l , Dan E . and Patton, G. R., "Corporate Stagnation and T u r n a r o u n d " i n J o u r n a l of E c o n o m i c s and B u s i n e s s Spring/Summer 1976; A r g e n t i , John, C o r p o r a t e C o l l a p s e : The C a u s e s and Symptoms (Wiley, New York, 1976); A l t m a n , Edward, Corporate Bankruptcy i n America (Lexington Books, Lexington, Mass., 1971); Ross, Joel ET and Kami, M. J . , Corporate Management i n C r i s i s : Why t h e M i g h t y F a l l (Prentice-Hall, Englewood Cliffs, N.J., 1973); a n d , W i l c o x , J a r r o d W., "The Gambler's Ruin Approach t o B u s i n e s s Risk" i n S l o a n Management Review F a l l 1976. See, f o r example, Fox, H a r o l d , "A Framework f o r F u n c t i o n a l C o o r d i n a t i o n " i n A t l a n t a E c o n o m i c Review November/December 1973; and, H o f e r , C. W., "Towards a C o n t i n g e n c y Theory of Business S t r a t e g y " i n , Academy o f Management J o u r n a l December, 1975. F o r a survey of "stages theories", see the c h a p t e r "Stages of D e v e l o p m e n t T h e o r i e s and S t r a t e g i c Management" i n G l u e c k , Wm. F., B u s i n e s s P o l i c y and S t r a t e g i c Management Third Edition, (McGraw H i l l , New Y o r k , 1980). f  2 3  conceptual  frameworks  product  research  on  n o t t o say t h a t  the  does  or  little  diversification,  2 2  is  conceptual  There  relatively  or d e c l i n e  envi ronments. This  but  of c o r p o r a t e g r o w t h and  13  Recent  research  exceptions. to  adverse  demand". the  nature  of  if  it  research  perspective  and  object  inquiry.  a different i s not  adjustment  was  not  were  are  2 5  strategic  form  of  major  response  "declining  p e r s p e c t i v e s , however, problem posed  the  concerned  other  by  on  this  with  respect to  w i t h what might  or  divested. as  2 6  the  replace  Moreover,  opposed  assumed a d i v e r s i f i e d  hand,  range of  as an  what  pre-specified  to  an  (multi-  2 7  M o r e o v e r , he  business  strategies  of  assumed a b u s i n e s s - l e v e l ,  made t h e  clear  set  strategies  abandoned  parent e n t e r p r i s e . on  It  the  limited  p e r s p e c t i v e and  Miles,  into  in  adjustment  only a  disinvestment  enterprise-level,  of  change  strategic  b u s i n e s s and  Harrigan's  M i l e s examined  quite different  considered  and  business  business)  and  by M i l e s  change.  Harrigan investment  the  and  2  environmental They d e v e l o p  declining  Harrigan "  Both H a r r i g a n  environmental  a  by  adopted strategic  an  options, i t s e l f ,  explicitly  adjustment  might  f o r adjustment  be  the  t o LDC  enterprise-level an  c o n s i d e r s movement  strategy. range  of  competition,  relevant but  " H a r r i g a n , K. R., S t r a t e g i e s f o r D e c l i n i n g B u s i n e s s e s ( L e x i n g t o n Books, Lexington, Mass., 1980) and Harrigan, RT R., "Exit Decisions in Mature I n d u s t r i e s " i n , Academy of Management J o u r n a l V2 N04, 1982. Miles, Robert H., C o f f i n N a i l s and C o r p o r a t e S t r a t e g i e s ( P r e n t i c e - H a l l , E n g l e w o o d C l i f f s , N.J., 1982). Nevertheless, she found the strategic problem presented considerably more c o m p l e x i t y t h a n had been a t t r i b u t e d t o i t i n the e x i s t i n g l i t e r a t u r e . H a r r i g a n (1980) , op. c i t . , p 55. 5  6  7  14  they  would  which  is  implies  have less  an  to  exposed  In  one  in s p i r i t  to  an  to  movement that  enterprise-level  problem. closer  include  this  into different  competition.  perspective  on  the  respect,  a comprehensive  to Miles  than to H a r r i g a n )  examination  of  the  problem  of  This,  2 8  business in turn,  adjustment  orientation is  (i.e.,  appropriate  adjustment  to  LDC  competition. The differ Miles  c o n c r e t e c i r c u m s t a n c e s o f t h e DC  considerably and  demand  by H a r r i g a n .  is  problem.  not  The  motivated  problem  problem growing problem  would, to  THE  evolving  a  feature  however,  obtain  a  decline of  the  by  overall  DC  adjustment  from  similarly  detailed  empirical  benefit more  in  may  RESEARCH  c o m p e t i t i v e n e s s of LDC  of a d j u s t m e n t  to that  competition  i m p o r t a n c e and has a t t r a c t e d for  i n t h e c a s e s examined  particular, a  problem  of i t s d i m e n s i o n s .  PURPOSES OF The  In  necessarily  efforts  understanding  3.  from t h o s e r e l e v a n t  adjustment  DC  government  and  however, s t i m u l a t e d much e m p i r i c a l  manufactures by DC  increased  business. research.on  and  the  p r o d u c e r s i s of attention  It  has  as  a  not y e t ,  participants  in  See, S p e n d e r , J . C, "Commentary" i n S c h e n d e l and H o f e r , , op. cit. , pp 394-404. Spender argues that most strategic management c o n t i n g e n c y t h e o r y t a k e s t h e e x i s t i n g e n v i r o n m e n t as a g i v e n and o v e r l o o k s t h e o p t i o n of moving to a less hostile environment. "Hence i t o v e r l o o k s by assumption a whole dimension of the strategist's options for coping with...the firm's environment".  1 5  affected  DC  studies  of  affected  industries. the  main  a d v a n c e what by  LDC  this  adjustment  industries.  The  insights  i.  ii.  iv.  2 9  3 0  t o DC  the  of  DC  dearth  producers  the  research  adjustment  enterprises  research  of  in  the  seeks  to  is,  therefore,  to  environment  in a f f e c t e d develop  presented  industries.  To  empirically-based  into;  The  n a t u r e of  The  The  The  enterprise-level  nature  variation  iii.  problems  of  i s known about  the  i s , in p a r t i c u l a r , a  3 0  objective  competition end,  There  2 9  of  intra-industry  relevant  d y n a m i c s of  d y n a m i c s of  adjustment  to  the  the  the  (i.e.,  adjustment  adjustment  alternatives.  inter-firm)  environment  process.  DC-LDC c o m p e t i t i v e  environment.  Surveys of the P u b l i c A f f a i r s I n f o r m a t i o n S e r v i c e (PAIS) and the ABI/INFORM b i b l i o g r a p h i c d a t a b a s e s as r e c e n t l y as December, 1982 reaffirmed that, as p r e c e d i n g d i s c u s s i o n has s u g g e s t e d , most of the l i t e r a t u r e c o n s i s t s of t h e o r e t i c a l l y - b a s e d o r macroeconomic discussions of either the growth of LDC competitiveness, the aggregate DC employment impact of LDC p r o d u c t i o n , or government a d j u s t m e n t p o l i c i e s . T h e r e was v e r y l i t t l e t h a t a d d r e s s e d the q u e s t i o n a t t h e level of the enterprise at all. Lloyd (1981, , op. cit. ) and Mickwitz [Mickwitz, Gosta, "The New International Price Competition" i n , E u r o p e a n J o u r n a l of M a r k e t i n g V13, No4, 1979 ] a r e m o t i v a t e d by a c o n c e r n f o r e n t e r p r i s e - l e v e l adjustment but n e i t h e r of t h e s e a r e e m p i r i c a l studies.  1 6  The first  research  is  that  instance,  a  adjustment advent  the  a  LDC  upon  DC  problem to  of  rests  two  adjustment  of  changing  is  features  generality  a n d y e t , a t t h e same  from  of other  4.  AN  OVERVIEW  The of  OF  orientation  the  research  field  provides  naive  study.  Chapter  adjustment  in  presents  industries. data  industries The  pattern  related the  five  of  some  the exploratory  that  served  chapter  to  Chapter  case  three  of the  study  i n d u s t r y and  studies  also  also  organize  the e m p i r i c a l core  cutlery  case  It  studies.  detailed  steel  chronology  employed.  analyses.  a  the migration  of  of  Chapter  three  other  i n c l u d e s an a n a l y s i s o f  of firms  from  a  large  variety  businesses.  three  chapters  present  of the e m p i r i c a l data. development  to foreign direct  variety  have  which  change.  f o r the case  presents  latter  of  with  two d i s c u s s e s  present  This  analyses  change  the  preliminary  abbreviated  new  i s that the  approximates  framework  more  into  first  are usefully distinguished  and the methodology  the stainless  following  inductive  Chapter  and  regarding  The s e c o n d  of environmental  information  four  in the  "enterprise-level")  dynamic  time,  The  STUDY  and  four  i s ,  environmental  general  conceptual  background  Chapters  the  THE  of the study  a  of  forms  process.  presents  other  a  an  o r g a n i z a t i o n of the study  the research  five  and  (or  environment.  competition  assumptions.  problem  corporate  specific  those  fundamental  Chapter  o f LDC c o m p e t i t i o n  investment.  potential  the  modes  Chapter  of adjustment  results  of  six discusses  a n d how seven suggested  this i s analyzes by t h e  17  study  and  relates  value-added. industry process the  suggested  government,  to  Chapter  variation  results  them  are and  and by  one  eight the  the  case  around  discusses  overall  summarized  future  another  dynamics  studies. and  some  research are  the  In  concept  nature of  a  the  the  of  discussed.  for  intra-  adjustment  concluding  implications  of  chapter, business,  18  II. 1.  METHODOLOGICAL CONSIDERATIONS  CASE SELECTION  METHODOLOGY  1 .1 E x p l o r a t o r y In view topic  it  Research  of the d e a r t h of p r e v i o u s e m p i r i c a l  seemed  exploratory  particularly  industries.  effective  way  combinations more  absolutely Mintzberg  appropriate  a p p r o a c h b a s e d on f i e l d -  affected  and  AND  This  of l e a r n i n g  approach  the  study.  essential has s a i d ,  It  3 1  t o adopt  is  and  the  be  in  the  context  of  overtly some  t o be an  ranges  reward  considered  t e c h n i q u e when e x p l o r i n g  the  of  considered  most f r u i t f u l l y can  an  case-studies  variables,  o f them w h i c h might  directed  or  s t u d i e s of  new  further  a l m o s t an  fields.  research  and  on  3 2  As  business  policy;  "Students generally  of  agree that  phenomenon, exploratory  3 2  3 3  there  methodology  at early is  approaches,  a  need  that  the  t o use l e s s  study  can  effective  building  complexity be  sciences of  rigorous,  c a n encompass more  by r e m a i n i n g open t o t h e r i c h theory  i n the s o c i a l  stages i n  Only  field."  3 1  research  initiated  an more  variables. of in  reality a  new  3 3  R u n k e l , P. J . and M c G r a t h , J . E . , R e s e a r c h on Human B e h a v i o u r ( H o l t , R i n e h a r t , and W i n s t o n , New York^ 1972) p 94. Helmstadter, G. C. R e s e a r c h C o n c e p t s i n Human B e h a v i o u r ( M e r e d i t h , New Y o r k , 1970) p 53. M i n t z b e r g , H e n r y , " P o l i c y a s a F i e l d o f Management Theory" i n Academy o f Management Review J a n u a r y , 1977, p 94.  19  It  is  emphasized  "exploratory" for  the  the  be  a  idea  the  by  the  does For of  not,  without the  problem,  Thus, openly  there  i s an  some  begin  at  a  eccentric.  It  is  which  seeks  the  less  than  to  model  need  on  not  but  about  tension  in  even  to  some  the  to  a  not  nature  of  task  should  perception  of  this  approach  priori  structure.  of  dimensions  the  the  the  desire  that if  i s not  be the  one  it  must  is  to  particularly  implicit,  concern  to  the  research,  a l l ) about the  to  specify  fact  commitment  at  commitment  the  itself  empirical  (or  been  begin.  paradox  the  have  of  of  between  and  a  the  choice  i f only  which  only  that  investigation  this  A l l  environment,  central  problem  the  with  total.  learn  for  context,  relationships  A  where  the  central,  research  novel  and  The  variables,  concern  is a  empirical  model  A  a  conceptualization  let  order  present  contrary,  open  decide  and  priori  a l l .  the  itself.  inherent  to  dimensions  impose  of  cannot  in  variables  the  tentative,  one  on  remain  obviate  the  relationships  relationships.  exploratory;  relevant  all  some,  and  means,  i s to  in  search,  problem,  and  however,  It  relevant  then,  variables  the  variables  .  that  investigation,  mean  of  priori  defined  those  not  presence  specified, to  does  that,  a  empirical  priori  that  the  of  is,  adequacy  problem  as  well. Nor There a  is  it likely  i s , rather,  priori  model  particular  mix  subjective  choice  an and  that  inherent  the  in part  can  trade-off  commitment  adopted on  anyone  any of  to  an  given the  resolve between  the  paradox.  commitment  to  empirical  problem.  instance  must  researcher.  In  the  an The  involve present  20  instance, to  t h e c h o i c e was made t o s t r o n g l y e m p h a s i z e  a problem area A  similar  research  such  that  3  different  implicit  any  case,  cases,  a  in  a l l policy-oriented  considerable  single,  There  such  disciplines,  tactic  model  as  from  It i s  complexity  of r e a l -  here,  can  of  economics.  makes i t h i g h l y  do  justice  i s , t h e r e f o r e , a growing  approaches  degree  model; o f t e n one d e r i v e d  a s t h e one a d d r e s s e d  perspectives,  though t h i s  implicit  discipline,  any,  reality. "  inter-disciplinary from  many  importance.  e v i d e n t , however, t h a t t h e v e r y  problems,  improbable  is  t o an a p r i o r i  academic  increasingly  empirical  in  i s given  single  world  choice  though,  commitment a  b e l i e v e d t o be o f  a commitment  to the  emphasis  on  i n w h i c h a number o f r e s e a r c h e r s  and w i t h  jointly  a variety  and  Laudable  may be, i t need n o t be t h e o n l y one  and, i n  r e s e a r c h must c u s t o m a r i l y  be  a  explicit  problem.  i t i s not f e a s i b l e  address  of  i n the present carried  out  i n s t a n c e ' , where t h e by  the  individual  researcher.  3  "  Of c o u r s e , one i s n o t n e c e s s a r i l y r e s t r i c t e d t o " o f f t h e s h e l f " m o d e l s b a s e d on a s i n g l e d i s c i p l i n e . The r e s e a r c h e r i s f r e e to s p e c i f y h i s own a p r i o r i and , i f he w i s h e s , "multidisciplinary" model which he c o n s i d e r s more a p p r o p r i a t e . However, a s R u n k e l and M c G r a t h ( o p . c i t . p p 406-407) have p u t i t ; "(in domains which have been little s t u d i e d ) . . . the r e s e a r c h e r must go i n w i t h o n l y g u e s s e s a s g u i d e s . In s u c h a c a s e , t h e i n v e s t i g a t o r must c h o o s e between (1) c o l l e c t i n g data with little theory to guide him in i t s interpretation... [or collection! (author's comment)]...or (2) p a u s i n g t o b u i l d t h e o r y w h i l e h a v i n g few facts t o g i v e him c o n f i d e n c e t h a t he i s b u i l d i n g s o m e t h i n g useful. Given such a choice, most o f us c h o o s e t h e a l t e r n a t i v e we f i n d p e r s o n a l l y t h e l e s s f r u s t r a t i n g . " In and  any c a s e , commitment  t h e b a s i c t r a d e - o f f between commitment t o an e m p i r i c a l p r o b l e m r e m a i n s .  t o a model  21  1 .2  A Methodology Table  1  characteristics  of  characterization  of  the  and  of d e g r e e ;  other  a priori  types focus  fundamental research. In a priori  3  of and  but  Research  array  those  of  data  research  various  exploratory and  methods.  The  presented  "unstructured"  there  nature  Clearly,  the  this  is a  research  T h e r e must, however, be  structure.  How  unstructured  of  and  shown.  this  might  unsettled methodological  and  approaches.  research  collection  approaches  i t i s unfocussed  be  relative  provided  p r o b l e m of  to  some is  a  exploratory  5  any  investigation  "impressions"  examined.  These  framework.  Even where  specified  will  Those  of  the  the  constitute  a pr i o r i  impressions model.  an  "unfocussed"  research design matter  Exploratory  presents  emphasizes the  3 5  For  nature an  (perhaps,  model  normally not  researcher  is only  revealed  of  the  brings  a priori  especially  where)  the  be  partially  in  the  i t some  phenomenon  ^implicit  employed,  to  being  conceptual a  tightly  researcher's revealed  model w i l l ,  in  prior that  nevertheless,  See, f o r example; A d m i n i s t r a t i v e S c i e n c e Q u a r t e r l y V 24 No 4, December, 1979. T h i s i s a s p e c i a l i s s u e on q u a l i t a t i v e r e s e a r c h methodology edited by John Van Maanen. While qualitative r e s e a r c h does n o t e q u a t e w i t h e x p l o r a t o r y r e s e a r c h the reverse is often true. T h u s , many of t h e p a p e r s r e f l e c t t h e p r o b l e m s of conducting exploratory research. The p a p e r by M. B. Miles, " Q u a l i t a t i v e D a t a a s an Attractive Nuisance: The Problem of Analysis" (pp 590-601), specifically deals w i t h t h e r o l e of rough p r e l i m i n a r y frameworks in exploratory research. See, also; Glaser, B. G. The D i s c o v e r y of Grounded T h e o r y : S t r a t e g i e s for Q u a l i t a t i v e Research (Aldine, Atherton, Chicago, 1967) and, G l a s e r , B~. G~. T h e o r e t i c a l S e n s i t i v i t y : A d v a n c e s i n t h e M e t h o d o l o g y o f G r o u n d e d T h e o r y (The Sociology Press, Mill V a l l e y , 1978).  22 Table  1 -  Characteristics  of  Various  Types  of  Research  Normative Descriptive C h a r a c t e r i s t i c s yt of the / research / process /  / /  Theory B u i l d i n g  /Types 0 f  research  Exploration  Nature of research question  Nature of research design  Data gathering methods  Data analysis methods  Nature of results  Source:  Hypothesis Generation  Hypothesis testing internal validity  Hypothesis testing external validity  Improve Test maps of the maps territory of t e r r i tory What's What are What are Are the Where do the there? the key the theories theories really and What are v a r i a b l e s ' r e l a t i o n apply? valid? the key ships issues? among variables? In-depth Few focu- Several Large-scale Large-scale unfocused sed comp- focused sample of sample of longitudiarative comparaoriginal multiple nal longitudi- • t i v e l o n g i - population population tudinal case studies nal case studies case studies Observation Observatic >n Observation Structured Structured Unstructured Structurec Structured interviews interviews interviews interviews interviews Documents Documents Documents Documents Documents Open-and Open-and Small-scale closedclosed-ended questionnair :s ended questionnaires questionnai res Lab experiments, F i e l d Lab experiexperiments ments F i e l d experiments i Insight Factor analysis Sign test X " Kendal's Tau Correlation analysis of var CategoriSemantic d i f f e r e n t i a l s zations Multidimensional s c a l i n g Pearson's Product Moment Cor lation Multiple Simultaneous Regression Regression IdentifiRefined Development Corroboration Corroboration cation and descrip- of hypotheses or r e f u t a t i o n or r e f u t a t i o n d e s c r i p t i o n t i o n of about of hypotheses of hypotheses of phenophenophenomenon for s i m i l a r for d i f f e r e n t menon menon organizations organizations Explore territory  Purpose  Concept Development  Theory t e s t i n g  Draw maps of territory  Schendel, Dan E. and Hofer, Charles W. (eds.) Strategic Management: A New View of Business P o l i c y and Planning, ( L i t t l e , Brown, Toronto, 1979) p. 387.  23  influence  the  interpretation Thus, as  to  encourage facts  of the  model make  others  and  the merits  or  them  one  provide  an  explicit  brought  to  the  i f  in  underlying  nothing  one h o p e s )  outline  the  impressions  is  merit  in  else,  this  can  viewpoint, likely  suppressed  what  t o have  or  unduly  of the f o l l o w i n g s e c t i o n of  More  framework  there  researcher  the  a priori  centrally,  t h e raw m a t e r i a l  conceptual  only  underlying  the  purpose  research.  provided  If  this  is  (subconciously, Thus,  "naive"  of these  explicit.  to ask: given  minimized?  impressions  even  of the e m p i r i c a l problem,  interpretations  overlooked  a  enterprise  findings.  whatever  a partial  trying  research  with  from  which  "impressions"  however,  which  i s to  these  was  same  constructed  to structure the  field  research. While specific the  a priori  problem  framework some  not a r b i t r a r y ,  t o be a d d r e s s e d ,  does  not  There  t o i t as a model even  specify  o f DC  a  set  of  It  hypothetically  relevant dimensions  the  place.  I t i s derived  relevant complexity  more  from  derived  no  a  to  lend  research  a priori  of  conceptual  "tool"  field  of  some  of the dimensions  adjustment. "model"  from  of the naive  the  specific  interactions.  take  to  is  inaccurate  no  is  I t i s merely  an  does  i t  the purpose  structure  analysis.  constitute  as  impressions  pragmatic.  organizational  preliminary  not  subjective  i s entirely  commitment  insofar  and  intellectual  Indeed,  i t could  adjustment  as  i t  variables  and  variable  than  propose  a  set  along  which  a priori  in the managerial  adjustment  impressions  might  o f some  environment.  of  of  24  2.  THE NAIVE CONCEPTUAL  2.1  Some A s p e c t s Of R e a l - w o r l d  2.1.1  A Simple  Begin,  industries)  activities.  which produce  market,  using  minimum,  one w o u l d e x p e c t  as will  the  one  market  being d i f f e r e n t often  display  incorporate  a  some o f t h e r e a l - w o r l d The number  a  single  technology,  however, Even  it  3 6  for  i n some  must be t r i v i a l l y o f "models" o f  far  number  substantive way.  more of  complexity distinct  f o c u s on j u s t  back t o i t s f i n a l  to  small. the  one At a  product  to perceive)  In g e n e r a l , f i r m s  than  this  products  of markets. than  3 6  firms (or  sale  p e r c e i v e s ( o r has been p e r s u a d e d  f a r g r e a t e r even  i f we  complexity of  of manufacturing product  a variety  p r o c e s s e s , and s e r v e a v a r i e t y is,  Complexity  Example  by c o n s i d e r i n g  manufacturing  which  FRAMEWORK  and  Potential  and  will  production complexity  this.  a single  raw m a t e r i a l s ,  product  we w i l l  and t r y t o  find  a whole  trace series  A Japanese manufacturer of a u d i o products (Sansui), for example, i n t r o d u c e d a "LIMITED" e d i t i o n o f an e x i s t i n g a m p l i f i e r p r o d u c t , at a h i g h e r p r i c e , i n which t h e d i f f e r e n c e c o n s i s t e d i n a selection procedure f o r t h e component p a r t s w h i c h was more r i g o r o u s t h a n t h a t employed f o r t h e s t a n d a r d version. Thus, except f o r t h e d e s i g n a t i o n "LIMITED" on the f a c e p l a t e the p r o d u c t was t o t a l l y i n d i s t i n g u i s h a b l e from t h e s t a n d a r d version even i f disassembled. Of course, i t was expected that, s t a t i s t i c a l l y , t h e s e m o d e l s would offer an average level of performance and reliability higher than that of the s t a n d a r d version. We c a n a l s o n o t e t h e i m p l i c i t l y d i f f e r e n t i n p u t mix, i.e., more skilled labour h o u r s i n t h e s e l e c t i o n and t e s t i n g process. T h u s , even t h i s example p r e s e n t s a p r o d u c t difference which i s a r g u a b l y more s u b s t a n t i v e t h a n i n t h e c a s e o f " s p e c i a l editions" which offer more obvious but merely cosmetic differences.  25  of  production  it  is  case  processes  derived.  of  a  set  In  the  of  Indeed, could  be  the  illustrates  given,  This  (intermediate)  lawn  what  subdivision  presumably  2  plastic  to  "industries". of  Table  example  correspond  and  various  activities  probably  be  because  example.  A  the  in each  subdivided  for  the  which  hypothetical  process/product  commonly  is partly  possible given  this  from  furniture.  are  i n the  products  to  perceived  of  the  much  a  these  as  very  finer  necessary  of  sets  distinct  crude  degree  s u b d i v i s i o n would  detailed  familiarity.  "industries"  degree  often  similar  themselves,  to  that  in  the  table. 2.1.2  Some F u r t h e r  Despite conceals a  the  three  final  Complexities  complexity  further types  product  as  intermediate  (prior)  the  given  not from  example true a  f o r most number  combinations, (parallel) good  suggests  but,  back raw  final  goods.  distinct to  through  not  in  rather, various  materials a  the  line  a  number which,  single  tree-shaped  intermediate  from  a  and  i t  singular Even  i t is  which  in  arises various  non-sequential  u l t i m a t e l y , the final  branching and  in  obviously  good  are,  of  table  presents  and  final  straight  products  the  processes.  true  Typically,  of  fact a  strictly  raw  First,  sequential  production  goods  Thus  implies,  complexity."  produce  intermediate  is  and  i s not  i s comprised.  this  involving  goods  used  material  of  this  of  even  line  good, as  to  the  network stages  final  to  raw table  running primary  materials. Second,  the  intermediate  goods  shown  (e.g.,  petrochemical  26 Table  2 - Some S u b d i v i s i o n s of an H y p o t h e t i c a l Productive A c t i v i t i e s  ACTIVITY  LOCATION Geographic/Organizational  Chain  of  OUTPUT  O i l exploration  various/external  Known o i l reserve  O i l extraction  various/external  Crude o i l  O i l transport  various/external  Relocated crude o i l  Petrochemical production  various/external  Petrochemical feedstock  Furniture design  Toronto/external  Design f o r set of lawn f u r n i t u r e  Mold production  Toronto/external  Injection mold f o r lawn f u r n i t u r e set  I n j e c t i o n molding  York/internal  Lawn f u r n i t u r e parts  Finishing  York/internal  Finished parts f o r lawn f u r n i t u r e sets  Assembly  various/external (customer)  Assembled lawn furniture  York/internal  Packaged set of lawn f u r n i t u r e  Toronto/external  Demand f o r lawn furniture  various/external  Relocated f u r n i t u r e , + Revenue  various/external  Maintained demand, ± Revenue  Packaging Advertising D i s t r i b u t i o n and Sales Service  Source:  Compiled by author  27  feedstock,  plastic  only  in  terms  Most,  i f not  multiple them  downstream goods  forward  Third, through  is  of  2.1.3  Some  of  important emphasis. such  have  a n y one o f  branching  plant.  network  a  final  a  c a r r i e d out  No  good  explicit  i s the r e s u l t  consumption  (depreciation  further,  implications The  span in  as those  have, sets  and  parallel,  capital  even of  at  that  set  of  case  of a  can branch  interactions  firms, A  product  downstream that  much firm  intermediate  forward  streams  single  and  final  do n o t  and and  and the backward upstream  correspond  to  employed.  with  one  final  single  the p a r a l l e l  subdivisions  individual  a  number  real-world  i n the table  corporations.  goods  i n concert  of t h i s  of r e l a t e d  the  into  is  shown  of  or i n d i r e c t l y ) r e l a t e d  areas  relevant  first  the a c t i v i t i e s  a group  can  (directly  myriad  from  of a c t i v i t i e s  Thus,  i t sinternal activities  Second, may  bear  even  activity the  four  activity  industry)  activites  into  and  involved.  delimit  those  of  that  i s also  productive  scope  to the fact  will  goods.  physical  goods.  that  necessarily  (or  the l i n e  a chain  given  misleading.  goods  tree-shaped,  of c a p i t a l  are  complexity  less  depicts  too, i s  utility  Implications  There  of  thus,  of f i n a l  production  subdivisions  This,  as having  intermediate  a  to a v a r i e t y  the  good".  and,  i s also  given  are depicted  and  uses  implicitly  /obsolescence) of  "final  the table  an  attention also  o f one  etc.,)  a l l primary  to final  running  resin,  this  single with  web  of  level a  activities, or stage  multiplicity  of  the  firm  production, of  external  28  actors  in various  external  e n v i r o n m e n t s and, i n a d d i t i o n  physical  and f i n a n c i a l t r a n s f e r s  that  involve,  there w i l l  information  between  t h e f i r m and t h e s e a c t o r s  Third,  while  environmental  relatively  the  internal  firm  normally  the f i r m with  example,  integrate  previously  external  an i n t e r n a l Thus,  sealed  also  alternative  the e x t e r n a l forward  activity  as  firms,  routine  o f f i n t o a number of units,  backward  to  or i t can choose t o  t h e f i r m has of these  It  to a l t e r can, f o r  incorporate divest  of t h i s s i m p l i f i e d  a  itself  (e.g.  linkages  alternative  f o r complexity  importance power  and o v e r  of  a  i n the r e l a t i o n s h i p , time.  i t may  activities,  such  may  with  e t c . ) and suggests  the e x t e r n a l  linkages  to i t s partners, may v a r y o v e r  have  processes,  The example a l s o  few  linkage  and  production  i n i t s linkages  I t may have many o r  itself  on few o r many o f a  activities  between  hypothetical  The f i r m  I t may c a r r y  productive  t o how  internal  potential  relative  and  among them.  where i t c a r r i e s o u t any one o f them.  relative  for  environment.  or  consideration  related  environment.  be,  has a more l i m i t e d p o t e n t i a l  one or many p r o d u c t s .  alternatives  activities  activity.  even  sequence of  "intelligence"  t o a l t e r t h e n a t u r e and s t r e n g t h  suggests considerable complexity.  produce  the  may  d i v i s i o n s or o p e r a t i n g  potential  interactions  example  of  d i v i s i o n s and o f t h e l i n k a g e s  Fourth,  of  of  or  interactions  and e n v i r o n m e n t s .  complex  convenience,  discrete  considerable internal  the  interactions  administrative  its  be f l o w s o f  each of t h e s e  t o the  and  the  and t h e i r  linkages,  over  29  2.2 T h e F r a m e w o r k  2.2.1  Basic  The  earlier  furniture, These  Concepts  example  suggests  t h e major  are; products,  (design,  injection  organizational As  the  molding,  concern  i s  products,  business  between  not  product  referring product  to  having  Many product.  number  Moreover, taken  linked  a  fundamental  of  product  and  activities  geographic  one  common  and  DC a n d LDC  central.  One c a n u s e f u l l y  make a  functional of  styles;  legal single  produce  entity,  entity  distinction former  the function  of the  differences  which  more a  may  a number  between  (e.g.,  which present firm".  than  one  "business", incorporate a  of p r o d u c t s ) .  focussed  organizational  "the  be  the  between  the actor  for  is  compete i n  not only  with  produce  "firm",  companies  management,  It  purpose.  distinguish and a  in to  course,  (i.e.,  distinct  single  i s  need  differences  should  single  between  dimension,however,  and the l a t t e r  a common  of l e g a l l y  a  etc.),  c a t e g o r i e s and product  but as a  under  functional  competition  i t i s appropriate that  as  considered  with  products.  businesses  corporation) number  in this  i s product-specific, of  framework.  o r g a n i z a t i o n s , per se, which  manufacturers, Thus  distinct  sales,  concept  t o the end-user  products  which  Change  discrete  between  of the naive  lawn  locations.  the  market.  dimensions  technically  manufacturers,  the  of an h y p o t h e t i c a l s e t of p l a s t i c  the  on  not  company  entity.  Thus  be or a  are organizationally purposes, I f we  can  be  tentatively  30  consider on  product  some o t h e r As  category  relevant  earlier  product  discussion  molding,  enormously. therefore, design,  number and  nature  empirical  fact  nature of  the  categories  but  Of  it  located  out  We display  firms  differences  with  assumption  2.2.2  that  ask,  of  number with  (method);  how  functions  geographically,  at  any  given  respect  point  to  it  change can  be  i n time  these two  More t o the  .  is  point,  would  various  points  in  time  it is  u s e f u l l y mapped  we  Product  in  our  terms  l e t Pj  Framework  indicate a specific  style  of  product,  can  configuration  (C^  )  single-product  firms  category  we  as The  not  the  l i n k e d to, other  where,  differences.  adaptive  (such  Whatever can  is,  characteristics.  Single  If  and  or  S i m i l a r l y , a s i n g l e f i r m at such  it  i s a matter  i t i s c a r r i e d out  to,  differ  location).  that  display  these  respect  (geographical  products  functional a c t i v i t i e s .  categories,  them, how  location);  characteristics.  of  of  production,  discussion  subjective choice.  functional  with  expect  general  given  concrete  some a b s t r a c t c a t e g o r i e s  abstract  focus  a  The  mold  various  of  these  (organizational  with  on  t o e a c h one  carried  impose  activities.  example,  a  can  m a n u f a c t u r e of  sales, etc.)  respect  might  to  production,  our  of  we  change.  concrete  associated  purposes  necessary  constant,  i n d i c a t e d , the  (in  etc.)  For  held  d i m e n s i o n s of  activities  injection  is  style  i n v o l v e s a v a r i e t y of  functional  and  and  (i)  with or  then respect  we to  single-product  ( j ) of speak  that  a particular of  a  product.  cross-sections  of  firm's Either multi-  3 1  product  f i r m s c o u l d be d e s c r i b e d i n t h i s way.  t h a t c o n f i g u r a t i o n a s ; C. . = Lf F i j  3  o  We can d e s i g n a t e  , where:  a  F stands f o r f u n c t i o n a l a c t i v i t y and L f o r l o c a t i o n a = c a t e g o r y of f u n c t i o n a l  3 7  activity  t = t e c h n i c a l / m e t h o d parameter o = o r g a n i z a t i o n a l parameter  (how i t i s c a r r i e d out)  (where p o s i t i o n e d or how  located with respect to other functions) and, g = g e o g r a p h i c parameter (where i t i s c a r r i e d o u t ) . In t h i s c a s e , w i t h a g i v e n P , a d a p t i v e change over time i s ij  e q u i v a l e n t t o change i n the parameters t , o, and constant  set  of  functional  In the g e n e r a l c a s e , where  style  of p r o d u c t may  category  a d a p t i v e change c o u l d  ("a"  is  a  a c t i v i t y c a t e g o r i e s a l l which a r e  always a p p l i c a b l e ) . or  g  consist  of  more  than  be produced by a g i v e n a  change  in  the  one firm,  relative  p r o p o r t i o n of a c t i v i t y accounted f o r by the v a r i o u s p r o d u c t s and functional  activities;  activities,  themselves,  description  of  a  even  firm's  where  remain  the  the  set  same.  configuration,  (C  of  p r o d u c t s and  Thus ), would  a  full require  s p e c i f i c a t i o n of a l l of the p r o d u c t s produced and a w e i g h t i n g or d e n s i t y parameter t o i n d i c a t e the r e l a t i v e l e v e l of a c t i v i t y f o r each f u n c t i o n a l a c t i v i t y f o r each p r o d u c t . We might w r i t e , f o r example L o Fa (D.j.)a . ) , where ther p a r t i c u l a r i D. |a . i s a d e c i m a l c  3 7  The n o t a t i o n , F , might have been used and has the m e r i t of giving visually s i m i l a r t r e a t m e n t t o t , o, and g; a l l of which a r e e q u a l l y parameters of F . The d e v i c e of s e p a r a t i n g out the conceptually similar "locational" (L) parameters o and g were adopted f o r mnemonic p u r p o s e s .  32  fraction F  i n d i c a t i n g the  v i s - a - v i s P..  a  the  sum  of  of  g  measures  is a  single  categories  or  specified  is  equally  functions).  some.  These  In  are  firm  for a  ;;  i.l  subjective question.  answer  products  or  total  all D  i.j  Which and  and  proportion  activity  firm  is  appropriate  Moreover,  1.0.  f o r a,  it is likely  t,  naive  framework  we  o,  that  s u i t a b l e to a l l circumstances our  for  no  (e.g.,  tentatively  were:  a  = 1 Design,  2 Production,  t  = 1 Labour-intensive,  3  Sales  2 Capital-intensive  o = 1 Internal, 2 External  ( t o the  firm)  function  (F_  and; g = Thus,the C. . =  1 Domestic,  2  intensive  , indicates a sales  3  (F ) 1  This  be  potential this style  functional  labour-  c a r r i e d on  external  to  the  firm  (L  and  2  1  a p p e a r as  distinct  a rather  adaptive any  category  simple  configurations.  a multi-step  i s without or  is  (L ).  may  512  and  s i n g l e - s t e p move from one course,  ) which  3  domest i c a l l y  defines  Foreign  notation;  L-i Fi  ij  2  patterns  we  consideration or  activities.  I f we  configuration  s e r i e s of  i n the  schema b u t ,  might of  view adjustment  to another  moves),  then  observe  of  as  ( i t could,  the  number  i s 262,144.  p o s s i b l e change  distribution  in fact, i t  activity  in as  a of of  And  product between  33  2.2.3  Generalized In  the  general  necessarily  L  case,  singular  configuration, single  Framework  G,  F  at  any  for a  incorporate  a  nor  the  are  products  they  point  of  and  l i n k e d to various  C„  impinge  narrowly  one,  only  Thus, a  .  not  be  category  distinct  products  on  fixed.  i n t i m e may  single style  number  produced  specific  not  firm's  total  given  by  of p r o d u c t  styles While  are  and  LDC  a  and  may  categories  competition  product  (C  of may  -set)  in a  ij  firm,  the  factors entire  adaptive relative  two  category  of  with  respect  to the  display  quite  differences One  (number  of  L  g  Because  1  be  reintroduce proportion of  P„  overall  the of  a l l Dj_^ have t h e  ,  respect  the  the  style  same c o n f i g u r a t i o n  (i.e.,  exactly  a total  the  same  patterns the  C  )  may  because  of  firms.  c o n f i g u r a t i o n i s to consider  with  the  length  of  the  C  vector  3  -values)  d e t e r m i n e d by  the  s t y l e s and  to  categories  L F o a o n  -value  accomodate  density total  form; C  =  [L  8  hypothetical  firm  F  D  a  products.  ,  The  general  Thus, product  cases  which  f o r each  (D  l  of)  multi-product  firm a c t i v i t y  number o f a l l  f o r each d i s t i n c t  parameter,  f i r m i s 1.0.  total •.  •*  for a  to  relative  to a  c o n f i g u r a t i o n s of  -values  by  given  adjustment  o  An  but  not  firm.  a  a separate need  determined  -set  a  (distinct  we  the  exactly  given  F  F"  o  will  ) of  to v i s u a l i z e  of L  possible  ( C  product,  i n the  way  a vector  then,  single  that  di-fferent  o  sum  to  will  f i r m s which h a v e , w i t h  and  there  observed  configuration  Thus,  as  behaviour  we  gives  must the  relevant  P  .  The  vector  C  would,  )]. ij  configuration  (in  only  three  34  dimensions) could  i s depicted graphically  actually  specified;  define  appropriate  a firm's configuration  dimensional  space,  though  it  d i m e n s i o n s and would be u n l i k e l y as  the f i g u r e  in Figure  suggests.  metrics  could  the  points  aggregate  mapped  as coherent  be v i s u a l i z e d space,  considerably  but  with  shape  as a swarm  the  density the  l e t us assume t h e r e a r e a t o t a l  of  ten  Examples  way o f example, and  possible  distinct  configurations  product.  T h e s e c o n f i g u r a t i o n s c a n be l a b e l l e d  that  there  are with  1 t o 8 and we c a n l e t a " z e r o "  activity.  Then, t h e t h r e e  configurations adjustment  shown  in  A's  adjustment  (density)  of  products.  Firm  i n product  an a b s e n c e o f f i r m  number  4.  Firm  C s  might  5.  shifting  the  adjusting  5 from C3 t o C5; t h e l a t t e r  a  consists different  emphasis  i t s p r e - e x i s t i n g range of  consists in  i t h a s had some p r e v i o u s  ( i n technology?  of  among  which  requirements  the i n t e g e r s  (T2)  before  consists  adjustment  given  (T1) and a f t e r  3  with  capability  with  a  Table  respect  to  indicate  to  the  B's a d j u s t m e n t  (C3)  respect  ( n o t 512)  have  with  role  eight  C  i t s activities  to product  only  f i r m s , A, B, and  t o LDC c o m p e t i t i o n  Firm  overlaps  a  in  products  existing  multi-  displaying  possible  from  in  the firm's " c o n f i g u r a t i o n " .  2.2.4 Some H y p o t h e t i c a l  By  one  f o r the dimensions  be  to present  I t would b e s t  varying  Assuming  would n o t be c o n f i n e d t o t h r e e -  of p o i n t s w i t h i n t h e m u l t i - d i m e n s i o n a l of  1.  experience  being  vis-a-vis  in application product  its  (product  those  role  product  of i t s pre-  o f w h i c h p r e s u m a b l y have some In m a r k e t s ? ) w i t h  a  role  8)  the  important  of product  5.;  Source:  Compiled  by  author  36 Table  3 - Some H y p o t h e t i c a l E x a m p l e s Competition  c  of Adjustment  o  C  to  l  FIRM  FIRM A  B  C  A  B  C  p- 1  0  0  0  0  0  0  R 2  0  0  0  0  0  0  0 3  0  0  0  0  0  0  D 4  K.2)  5(.2)  0  K.2)  5(.2)  0  U 5  3(.6)  3(.8)  3(1.0)  3(.2)  5(.8)  0  C 6  0  0  0  0  0  0  T 7  0  0  0  0  0  0  8  3(.2)  0  0  3(.6)  0  3  9  0  0  0  0  0  0  10  0  0  0  0  0  0  Note;  .0)  The t a b l e e n t r i e s x ( y ) i n d i c a t e t h e t y p e o f c o n f i g u r a t i o n (x = i n t e g e r s f r o m 1 t o 8) and d e n s i t y o f f i r m a c t i v i t y (y = 0 t o 1.0) a c r o s s t h e range o f f e a s i b l e p r o d u c t s .  Source:  C o m p i l e d by  author  37  as  we  might  have  configuration It  is  be  quite  relevant outcome.  3.  CASE  3.1  Japan"And  following  The  developed  the  conceptual  presumably process;  but  problem is  mainstays  of  the  a  Most on  can  in  the  framework  accommodate  whatever  great  has  T1  the  i s , as  much  specific  that cause  competition  many  can,  of  on  the  and  accordingly,  the  of  detail  to  the  i n the of  the  p r o d u c t s i n which  has  the  been  focussed,  changes  Japanese some  and  spectrum  of  industries needed  as  miracle".  new  in lagging  were  rapid  the  of  development entire  so  at  LDC  Japan's  "Japanese  development  provide  industrialized  development.  change  been  postwar  Examination  NICs.  competitiveness  postwar  has  to  export  attention  across  Japanese  examination  addition  concurrent  Japan's  i n more  to  demonstrating  acquisition  some  addressed, here.  structural of  in  discussed  earlier  Countries  producers in the Asian  relevance  attention  implications  sectors.  are  recent  deal  not  Yet,  from  most  and  this  Japanese  sectors.  adjustment  briefly  Japan's  and  Industrializing  be  presently  of  industries  their  and  development  attract  NICs  can  countries are  Newly  competition  chapter  producers  and  and  examines  Asian  Japan  change  Asian  the  adjustment  and  that  adustment  facing  and  level,  co-existence  A.  general  research  industries  to  their  SELECTION  The  postwar  from  evident  t o an  or  Japan  for Firm  will  intended,  deduced  sectoral leading  industries structural industries facing  LDC  balance to  the  38  understanding From  of  the  examination  of  rapidity  Secondly,  number  adjustment policy. most  and  LDC  of  LDCs,  relations  with  practical  attracted  serious  3.2  Identification  To  examine  industry,  one  examine. per  As  of  specific  level are  a  at we  must  s e t of  Affected  t o be  able  homogenous  of  to  industries.  and  a  NIC  Japan  to  as  and  the  extensive,  an  competition  not  These  firms.  s e t of  industries  international  the  has  and,  business  relevant  can  The  products are link  government  proximate  is  were  observing  interrelations  change  both  of  domestic  the  in  examine.  industries  and  a  of  DC  issue  of  such,  has  government.  Industries  and  products.  relevant  Thus,  of  remain  to  likelihood  NICs,  i t s own  because  will  geographically  to Asian  i n the  which  i s more  importance  attention  industries  there  however,  has  that  industries  Asian  identify  compete  likelihood  structural  adjustment  industries  these Japanese  them.  i t i s products,  se, which  identify  Of  research,  protectionist  the  and  considerable  of  i s both  the  the  the  there  by  Japan  development  Japanese  development  many  that  "unmuddied"  dynamic  present  LDC-competing  that  means  Thirdly,  economic  of  fact  export-oriented  in  postwar  development.  the  i s , first,  of  the  of  adjustment  There  substantial  postwar  perspective  attractions. the  Japanese  market  then more  be  in  Japanese  industries or one  companies, must  linked  first  to a set  disaggregated  identified,  to  t h e more  the. likely  products to narrowly-defined  and  39  3.2.1  Quantitative Selection  A  quantitative  utilize and one is  existing  Asian  NIC  would due  to  Asian  exists.  to NIC  such  gain, a  (the  measure  of  data  those i t  causal while  aggregate  the  strength  select  Similarly,  market  to  statistical  competitive  like  demonstrate  approach  is link;  the  of  selection  to  examine  relative  would Japanese  for various products.  products  in which  not  in  even  where  markets)  of  this  cannot  other  problems  in  to  certainly the  i s an  strength,  loss  possible  i t almost  shares  While  Japanese  general  respective  a l l national  competitive  problem  world  attractive  be  readily  determined. There  are  quantitative the  most  numerous  selection  crucial  the  level  of  is  highly  problem  product  collection  product  of  the  not  of  existing  likely  that  disaggregated  form,  i n the  absence  behaviour,  would  still  were  due  to  Asian  NIC  were  have gains.  of no  is  are  the  by  identified  what  identified  i t  is  none.  the  even Finally,  available  that  feasible  general,  c o n t a i n a l l of  contain  data  losses  The  Moreover, they  they  in  produced  to  statistical  one  which  a  perspective,  approaches  result,  industries.  not  present  correspond,  products.  probable)  at  a  products  distinct  our  quantitative  As  will  c a t e g o r i e s are  From  categorization  disparate  quite  subcategories (though  with  aggregated.  "product/industries"  practice  procedure.  implementing  to are  a in  aggregate relevant possible even  in  i f  highly  m i c r o - l e v e l data  on  assurance  Japanese  that  buyer  40  3.2.2  Qualitative  For  reasons  quantitative advice  Selection  of  academic  such  informed  narrowly-defined  opinion  products  was  at  proceeded,  in large  introductions of  government,  measure,  we  considerable  Asian  through  a  became  business,  and  began  number  but,  fairly in  and  subsequent  there.  large  of with  Economies of  some faced  choice  but  began  evident  have  The  chain  that  a  the  producers  NICs.  a  on  t o suggest  Developing  academia  repetition  instead,  people  Japanese  of  not attempt  government,  informants  and  did  relied,  asked  contacted  business,  we  and o p p o r t u n i s t i c  Institute  and suggested  inquiry  we  the  informal  The  We  i n which  from  quite  researchers  course  above,  i n Japanese  Specifically,  competition  informants  the  selection procedure.  circles.  severe  as  In t h e  of people i n early  on,  the  nominated  identifying  narrowly-  product/industries. This defined  procedure,  aside  product/industries,  micro-level  information  identifying  products  to  Asian  had were were  NIC g a i n s .  relatively winning also  from  direct  Indeed,  That  and  closer  buyer  i s to say,  away  products  sources  losses  the  "tapping  i n "to  relevant  supplier  generally countries  the Japanese  industry.  at  fine  a  finer  very as  we level  to  are attributable  informants  as t o which  from  a l l the  to  behaviour  Japanese  information  and  academic/government associations  on  to identify  disaggregation;  comes  i n which  business  able  directly  level  proceeded  to  the  of  made  d i s t i n c t i o n s among  They of from  industry  businessmen.  informants  often  products  41  or  product  types  disaggregation however, the  was  that  available  finest  (6-digit)  level  data  i s available.  level  As a  I n some  products  from  to revert  6-digit  cases,  an e n t i r e  our informants  The g o a l ,  at the e q u i v a l e n t of  Japan  Standard  even  much  this  official  seeking  Product  goes  beyond  statistical  statistical  data,  t o the corresponding  are listed.  moreover,  the aggregate  categories  that  nominated  4-digit  by  are  undoubtedly  selection  process  the  list  of products.  be  a  We  comprehensive  This classification Bunrui-hyo (M.I.T.I.,  representative  category  identified  of  There  a l l of  relevant us o f .  would  of  i s available, 1979)  i n the  categories.  that,  relevant  that of the  ourselves,  to produce  for  product  categories  by  not  believe,  by t h e n a t u r e  even  a r e c o n f i d e n t however  to  6-digit  6-digit  Moreover,  be u n l i k e l y  as r e l e v a n t  comprehensive  product  an e f f o r t ,  listing  reason  the  is  6-digit  i s , therefore,  i s no  a l l relevant  employed,  procedure  few  informants  of comprising  d i d not advise  categories are indicated in  The l i s t i n g  sense.  sense  informants  a  4-digit  in  that  product  only  comprehensive  repeat  when  of  Product/Industries  identified  4.  There  the  In p r a c t i c e ,  3 8  level  statistics.  of products of  finest  of t h e J.S.P.C.  The  larger  the  official  result,  i s generally necessary  Table  beyond  of d i s a g g r e g a t i o n f o r which  3.3 T h e I d e n t i f i e d  by  for  (J.S.P.C.).  the  levels  far  for identification  Classification  it  went  an  identical  were  there  6-digit  example,  to  in  to  product  Shohin  42 Table  4 - Product/Industries Facing Competition  Severe Asian  PRODUCT CATEGORY  J.S.P.C. CODE  Cotton Thread Blended Cotton Thread 203111 - 119 Twisted or Braided Yarn Wide-Woven Plain.Cotton Textiles Men's C i r c u l a r - K n i t t e d Outerwear Underwear Knitted Dress Gloves P l a i n Knitted Lace Cotton or Jute Carpeting Tufted Carpeting Men's Dress-Shirts P l a i n Plywood Board Bicycle Tires A l l Rubber Boots Footwear Made of P l a s t i c s Leather Briefcases and School Backpacks P l a s t i c Briefcases and Luggage Western-Style Ceramic Diningware Mosaic T i l e Stainless Steel Cutlery Other Stainless Steel Tableware Handtoo Is Bolts and Nuts Wood Screws e t c . Household Sewing Machines Radio Receivers (more than three tubes/or transistors) Black and White T.V. (including k i t s ) Communications-Use Resistors " " Capacitors " " Transformers Sports and Recreational Bicycles Bicycle Parts e t c . Binoculars Eyeglass Frames E l e c t r i c and Electromagnetic Watches Acoustic and E l e c t r i c Guitars Metal Toys I n f l a t a b l e V i n y l Toys Miscellaneous (other) P l a t i c Toys Stuffed Animals Tennis, Ping Pong and Badminton Equipment S k i i n g , Waterskiing and Skating " Fishing equipment and Accessories Ballpens Table and Pocket Lighters Cultivated Pearls Miscellaneous Household Notions Tatami Covers and Mats Men's Western-style Umbrellas Frames (Skeletons) f o r Wester-style Umbrellas Vacuum Bottles and Jars  202111 202112 204111 - 119 205i21 205124 205512 208211 209611 209612 212111 222211 281211 282113 289211 296112 296121 304212 304611 332111 332119 332411 337111 337114 348211 354311 354312 357919 357913 357914 363113 363115 375112 376112 277114 392311 393112 393116 393119 393214 393411 393415 393417 394211 395111 395113 396911 398211 399111 399113 399511 Source:  Compiled by the author  NIC  43  categories, in  the  i t would  majority  establishment fact,  the  of  scale  i t was  (S.M.E.I.)  which  Medium-size  Enterprise  are  Trade  METHODOLOGICAL  4.1  Characteristics  facing  overall LDC  following  those  Agency  The  listed  of  identified  industries  smaller,  privately-owned  geographically, As  a  firms  attract  Moreover, affected  very  no  industries)  would  not  THE  AFFECTED  200  the  Small-  and  Ministry  of  firms  INDUSTRIES  Industries  the  industries in  more  identified detail  in  c h a r a c t e r i s t i c s , however,  characterized and  Specifically,  by  a  preponderance  were  widely  as the had the of  scattered,  Japan.  little  operating available  attention  informants  attempts be  that,  to  information and in  (who  suggested  likely  of  Industries  the  implications.  ongoing  initial  of  of  discussed-  is publicly  owner-operators, firms  were  throughout  result,  individual  OF  these  methodological  majority  approximately  concern  of  averages.  Enterprise  Identified  are  levels  (M.I.T.I.).  c h a r a c t e r i s t i c s of  competition  the  the  (S.M.E.A.)  Industry  Some  that  among  special  display  all-industry  Medium-size  IMPLICATIONS  Of  the  attention  fall  the  and  chapter.  important  the  a l l , of  industries  below  our  and  4.  The  to  industries  Small-  by  i f not  selected  distinctly  designated  International  the  brought  selected  firms  most,  table.  The  In  include  had  the the  survey  successful,  majority  popular  helped  because  gather  vast  regarding  most data  press.  identify firms  are  in  a  the run  directly  especially  of  from  period  44  of of  adversity the  and  identified  uncertainty.  i n d u s t r i e s presented  problems  to  financial  c o n s t r a i n t s of  4.2  field  O u t l i n e Of  The  research  research,  activities  in light  of  scatter  logistical the  time  and  of  the  Employed  were  that  geographic  study.  presented  industries  the  considerable  especially  the  Methodology  problems  affected  Finally,  by  the  characteristics  coped with can  be  by  means of a  broadly  sequence  divided  into  of  three  stages. 4.2.1  A B r o a d S u r v e y Of This  the  government  problem  attached  interviews  p r o b l e m , the  adjustment An  i n the  primarily  the  of  institutions.  overall  sources  narrowly-defined  Adjustment  research  adjustment  adjustment,  data  with  academics,  of  financial  with  of  dealing  interviews with  environment  specific,  literature  representatives  whereabouts  O v e r v i e w Of  and  t o government or  dealt  and  Problem  existing  and  institutional  availability  of  in general  bureaucrats,  organizations  4.2.2  Adjustment  i n v o l v e d a survey  adjustment  These  The  and  relevant  the to  industries.  In Some S p e c i f i c  Affected  Industries This also interviews industries. associations was of  on  involved  but  was  surveys  focussed  Interviews  and  on  a modicum of  affected industries.  existing  sources  literature  f i g u r e d prominently  collecting  of  relevant  obtained  in t h i s  information  literature  stage on  a  to  from and  the  wide  and  specific industry emphasis selection  45  4.2.3  Case On  Studies  the  basis  make some i n f o r m e d  of  the. p r e c e d i n g  stages  judgements a s t o w h i c h  for  plausible  a l t e r n a t i v e s r e m a i n e d and t h e l o g i s t i c a l  research  constraints  conducting  therefore, and  case  to  studies.  industries  suitable  of  case  i t was p o s s i b l e t o  alluded  studies  this  to e a r l i e r  of a l l  concentrate  t o supplement  Nevertheless,  of  a number  them.  with b r i e f e r case  It  study  studies  be  of e q u a l l y  problems  precluded  on an i n - d e p t h  would  and  the strategy was  decided,  o f one  industry  o f a few  other  industries. The  industry  chosen  stainless  steel  Niigata  prefecture.  officially, industry. much more  as  a  In  relevant  field  research  industry, This  conducting  centred  the  research survey  was c o n d u c t e d  in Niigata  municipal-level  representatives,  local  bank  managers,  foremen. integrated  and  of  in and  study, a  interviews In a d d i t i o n ,  the  prefectural  interviewed  industry  and  industry  ranged commerce  association  company  companies  producers,  case  i n Tokyo.  local  City  manufacturing  for this  City,  i s the  popularly  rural  managers, The  study  Tsubame  both  The p e o p l e  to  case  and s e r i e s  conducted  representatives,  subcontractors,  seen,  was  and  in  -Japanese  and i n Tsubame, i t s e l f .  and  in-depth  is  literature  sources  from p r e f e c t u r a l department  the  prototypical  intensive  with  capital,  cutlery  for  visited  founders, included  distribution-oriented  firms. The  other  case  studies  involved  a  similarly  intensive  46  literature  survey  and  exception  of  brief,  Shizuoka the  a r e a , however,  benefit  presented; and  a  of  field  of which,  umbrellas)  stainless  series  and  steel  none of  these  research.  two  to footwear  latter  are  oriented  and  producers  i n the A s i a n NICs.  With  (mosaic  studies studies  severe  had are  (footwear tile  them have been h i g h l y  encountered  the  f i r m s i n the  urban-based  rural-based  A l l of  case  In a l l , f o u r c a s e  are t r a d i t i o n a l l y  two  has  i n t e r v i e w s i n Tokyo.  one-day, v i s i t  cutlery).  each  of  and  export-  competition  from  47  III.  BACKGROUND TO THE CASE STUDIES  1.  JAPAN AND THE ASIAN NEWLY INDUSTRIALIZING COUNTRIES  1.1  Japan Japan's  industrial summarize It prewar for  is a  important  and  prewar  projected  prewar  accelerated  postwar  continue market As  that  we  as  will  an only  in  much  the  rapid to  and e x t e n s i v e  Japan's  postwar  capacity  period.  and d i s o r g a n i z a t i o n  of the  of i n d u s t r i a l  Thus, Second  production  to that  o f 1915, by 1955 i t h a d r e c o v e r e d  levels  and  growth  t o be h i g h e r  a  and  that  While the l e v e l  trend.  3 9  than  by  1965-66  This,  of  had  course,  r a t e and, i n f a c t ,  that  p r o d u c t (GNP) a n d h a s been of  the  surpassed implies  t h e postwar has  to  the an  growth  consistently  and i s e x p e c t e d t o  other  industrialized  4 0  result,  w o r l d GNP i n c r e a s e d  4 0  contributed  o f most c o u n t r i e s  economies.  development  story  recognize  of Japanese gross n a t i o n a l  exceeded  3 9  to  development  was r a p i d .  immediate  known  and  features here.  from t h e d e s t r u c t i o n  War  growth  well  industrialization  1946 had f a l l e n  rate  postwar  some o f i t s main is  recovery  in  state  growth  World  rapid  between  1960 and 1980 J a p a n ' s  from 4.4% t o i n e x c e s s o f 8%.  share of t o t a l In  trade  as  See M. S h i n o h a r a , The J a p a n e s e Economy a n d S o u t h e a s t A s i a , p28 I.D.E. O c c a s i o n a l Papers No. T5~, ( I n s t i t u t e of Developing E c o n o m i e s , T o k y o , 1977). Japan Economic Research Centre, reprinted i n H. Kanamori, Kanamori H i s a o no N i h o n K e i z a i K o g i pp 207-208. (Nihon Keizai S h i n b u n s h a , T o k y o , 1979).  48  well,  Japan's  share  3.7%  (1963) t o  3.4%  (1963) t o 6.3%  by  major  and  distribution  50%  (1979).  trade  and  its  This  considerable  twenty y e a r s  between  moved  being  from  important  (25%)  Since  1975,  declined  and  common  with  countries.  1950 the  i n the the  most  the  the  Moreover, the  from  weight  (secondary)  geographical  industry  1955 the  other level  sector  19%  in  primary  as as the  sector  the  least  1965.  secondary has  sector  has  increased,  in  developed of  late  to being  to  sector  in  to  prewar  as much  as  48%  the  (41%)  of  tertiary  absolute  employment,  development,  Indeed,  important  patterns  accompanied  and  however, from  ten years  from  s o c i e t y with  primary  1970.  relative  t h a t of  manufacturing  and  exports  production.  agricultural  fell,  from  of J a p a n e s e  industrial  in  increased  been  productivity  industrial  percentage  has  of w o r l d  in patterns  i t s w o r k f o r c e engaged  1930.  exports  T h i s g r o w t h has  i n the  r e m a i n e d p r i m a r i l y an  of  world  i t s share  1 , 1  change  of d o m e s t i c  Despite  total  (1979) and  structural  production,  Japan  5.9%  of  industrial  employment  peaked  in  the  1970  at  patterns  of  around  11,679,680. A  more  production some major the of  1  reveals  its trivial in  consideration  f u r t h e r change.  f e a t u r e s of J a p a n e s e  Japanese Standard  sector  *  detailed  our  size,  will  discussion.  Japan's  Table  i n d u s t r y at  Industrial we  of  5 d i s p l a y s change i n the  2-digit  Classification  (JSIC).  ignore As  G.A.T.T., I n t e r n a t i o n a l Trade 1980);Appendix T a b l e A22.  the the  weapons  and  level  of  Because munitions  t a b l e shows, a l l s e c t o r s  1979/80  (GATT,  Geneva,  Table  5 - Change Structure:  i n Japan's Industrial / 1960-1975  J.  1975  s.  I.  Industry  c.  (1960=100)  18/19  Food Processing  20  Textiles  21  Clothing and T e x t i l e Manufactures  Employment ^Zalue Added % Change 1L975 % Chailge  Value Added  1975  145  1023  10.3  74  460  8.1  -47.1  5.0  -46. S  264  1766  4.7  88.0  2.1  40.4  • 104  740  4.1  -25.5  2.5  -16.;  1.8  8.7  Employment  No.  Composition  Indices  1960-75 +3.0  L0.2  1 9 6 0 - /5 20.  22  Wood and Wood Products  23  Furniture  170  1413  2.5  19.0  24  Pulp, Paper and Paper Products  121  730  2.9  -12.1  3.1  -16.7  5.3  110.C -19.1  25  Publishing and P r i n t i n g  157  1118  4.3  10.3  26  Chemicals  107  698  4.3  -23.2  8.9  27  Coal and Petroleum Products  150  905  .4  0  1.5  17.6  28 29  30  Rubber Manufactures  115  697  1.5  -16.7  1.4  -13.9  Leather and Leather Products  186  1115  .7  40.0  .5  25.0  Non-metallic Mineral Manufactures  140  923  5.0  0  5.1  4.7  -14.5  6.1  -40.0  1.9  -9.5  2.1  -  6.6  13.0  11.2  8.5  31  Steel  119  638  32  Non-ferrous Metals  128  513  0 3.9  33  Metal Manufactures  180  1209  7.3  28.1  34  General Machinery  145  931  9.9  3.1  E l e c t r i c a l and E l e c t r o n i c Equipment  181  825  11.3  29.9  9.9  80. C 20. C) 20. C)  35  Transportation Equipment  187  969  8.7  31.8  L0.4  161  1037  2.2  15.8  1.8  38  P r e c i s i o n Equipment Weapons and Munitions  128  7  0  0  39  Other  183  1524  5.2  30.0  4.5  140  857  100  0  100  36 37  Total Note:  Manufactures  Establishments with 4 or more employees. Source:  Calculated from data i n ; Sangyo Tokei Kenkyu Hokoku: Sengo Waga Kuni Kogyo Choki Doko Bunseki - M.I.T.I. S t a t i s t i c s D i v i s i o n ( 1 9 7 9 , Tokyo, Tsusho Tokei Kyokai)  7.] 29.. 3  0  50  except  textiles  their  have  (nominal)  Differential composition  increased their value  of employment  particular,  t h e r e has  of  employment  and  intensive,  and  natural  utilization  textiles,  These export  Table  textiles  as  top ten export  items  radical i n 1955  items accounted  export  items  i n 1955,  they accounted  place  was  required  variety  higher  and  dependent  rubber  in  for eight  of  goods.  The  of  comparison  1970,  given  While  of t h e  in  natural top  f o r none i n 1970.  technology  the  labour;  i n the c o m p o s i t i o n  of m a n u f a c t u r e s ,  levels  upon  low-wage  of t h e s e c h a n g e s .  clothing  capital-  i n p u l p , paper,  change. and  importance  such  unskilled,  reflected  the nature  a broader  and  basis).  industries;  w o o d - p r o d u c t s , and  undergone  sectoral  wage,  "basic"  i n some i n d u s t r i e s  been  the  relative  high  and  1960-1975.  (value-added  some  relatively  have  suggests  in  and  which  employment  period  i n the  resource-based  of  t r a d e w h i c h has  6.,  production  been a d r o p  wood and  changes  of J a p a n ' s  the  non-ferrous metals  p r o d u c t s as w e l l  s u c h as  and  production  as c h e m i c a l s , s t e e l ,  intensive  over  of  r a t e s of g r o w t h have, however, c h a n g e d  In  paper  added  level  In  ten their  the p r o d u c t i o n of and/or  capital-  intensity. The for  decade  change  1970's  of  1970's p r e s e n t e d a number of new  i n the Japanese  the  environment water  of the  adverse and  resources  floating  appreciation  on  industrial  impact  of  postwar  the a v a i l a b i l i t y was  economy.  of  of t h e yen  exchange  relative  rates  the  development  industrial  inescapably evident.  international  By  forces early on  the  landsites  and  The  move t o a  led  rapidly  regime to  an  t o t h e c u r r e n c i e s of many major  51 Table  6 - Change  i n the C o m p o s i t i o n of Japan's Major E x p o r t s : 1950-1971  Year 1950  1971  RarnV  1  Cotton  2  Steel  3  Non-Ferrous  4  Silk  Textiles  Steel Automobiles  Metals  (raw)  Textiles  Ships Metal  Manufactures  Radio  Receivers  5  Rayon  6  Marine  7  Ships  8  Clothing  Scientific  Opticals  9  Metal  Television  Receivers  10  Silk  Products  Synthetic  Fibres  and  Motorcycles  Manufactures Goods  (New e n t r i e s Top Ten)  Source:  Tape  Recorders  to  Hayashi, Yujiro C h a l l e n g i n g the  e d . , S e k a i n i K a k e r u N i h o n no G i j u t s u ( J a p a n e s e T e c h n o l o g y W o r l d >- J a p a n e s e - T o k y o , K o g a k u s h a , 1 9 7 2 . p . 55  Textiles  52  foreign  m a r k e t s and r e d u c e d  products;  especially  those,  g o o d s , where p r o d u c t i v i t y same and  time,  continued  the v a s t l y  trade,  led  protection  the competitiveness such  to  as l a b o u r - i n t e n s i v e consumer's  improvements  productivity  i n c r e a s e d weight increasingly  by c o m p e t i t o r s  of many J a p a n e s e  of  elusive.  At  the  increases i n other s e c t o r s , Japanese  vocal  of Japan  were  exports  complaints  in  and  world  calls for  i n the major markets  of  the  OECD c o u n t r i e s . The both  first  urgency  transition change  out  of  the  and d i r e c t i o n  and ushered  in  structure  o i l crisis,  of t h e economy.  new  than  the  rates  of  higher  1.2 The A s i a n  the  than  "  2  of  uncertain and  Japan,  necessity  i n the l a t t e r  to adjust to, rather By  1960's,  those  had  and  1980,  h a l f of  than  much  growth, risen  partly  evade,  had  been  while  again  lower  and  was  o f t h e o t h e r OECD c o u n t r i e s .  NICs  the A s i a n , or  output  a sense of  p e r i o d of reassessment  out of  realities.  A r e c e n t OECD s t u d y  Singapore,  atmosphere  a n d J a p a n ' s r a t e o f economic  considerably  in  Partly  and consensus,  economic  accomplished  this  1973, i n j e c t e d  s t r u c t u r e o f demand and i n t h e p r i c e  1970's made major e f f o r t s  these  is  into  in a d i f f i c u l t  the fundamental  commitment  in late  shows t h a t t h e most dynamic  Far-Eastern,  T a i w a n , and K o r e a . "  group 2  composed  of  o f t h e NICs Hong  These c o u n t r i e s r a t e s of  a n d demand have n o t o n l y c o n s i s t e n t l y  exceeded  Kong, growth those  Organization f o r Economic Cooperation a n d D e v e l o p m e n t , The Impact o f t h e Newly I n d u s t r i a l i z i n g C o u n t r i e s on P r o d u c t i o n a n d Trade i n Manufactures (OECD,Paris, 1979).  53  of  the advanced  generally such  as  Mexico." in  been  higher  Greece  than  Portugal,  c o u n t r i e s of the  those  of other  Spain,  OECD  to their  relatively  Yugoslavia,  outward-looking,  or  vigorous  but  have  r e p r e s e n t a t i v e NICs; Brazil,  T h i s e x c e p t i o n a l p e r f o r m a n c e by t h e A s i a n  3  large part  an  industrialized  and e a r l y  export-oriented,  NICs  and i s due  change  to  industrialization  strategy."" In  reflection  of  manufacturing  sector  than  in  i t  imports  has  others." and in  is  5  the  other  In a b s o l u t e  t e r m s as w e l l ,  f o r about  c o u n t r i e s comprise  total  A s i a n NIC e x p o r t s  This  NICs.  in This  than  orientation in  the  share has  of t h e  Asian  NICs  of t o t a l that  of  OECD the  t h e A s i a n NICs a r e dominant  60% o f t o t a l  OECD i m p o r t s  market  from  economies, of which  t h e major m a r k e t s , a c c o u n t e d of manufactures  t h e NICs the  f o r 75% o f  i n 1976, up from  around  6  strong  orientation changes  rapidly  In t u r n , t h e developed  i n 1963.*  export  NICs and t h e i r  more  OECD  50%  the  i s considerably higher  increased  accounted 1977.  this,  growth  in  the  volume o f e x p o r t s  t o OECD m a r k e t s has been a c c o m p a n i e d t h e commodity c o m p o s i t i o n i s evident  even  at  the  of e x p o r t s highly  and i n the  by  remarkable  from t h e A s i a n  aggregate  1-digit  , ibid. . pp 50-51. " See Donges, J . B., "A C o m p a r a t i v e S u r v e y o f Industrialization Policies in Fifteen Semi -Industrialized Countries" W e l t w i r t s c h a f t A r c h i v 112, 1976 pp 626-657 ( e s p e c i a l l y , pp 655656) and S u z u k i , N., "Ajia Chushinkogyokoku no Kogyoka t o Y u s h u t s u no Y a k u w a r i " i n N. S u z u k i ( e d . ) , NIRA OUTPUT NRC-78-22 ; A j i a Shokoku no Kyusokuna Kogyoka t o Waqa K u n i no T a i o (Sogo Kenkyu K a i h a t s u K i k o , T o k y o , 1980) pp 53-113. OECD, Impact , op. c i t . S u z u k i , NIRA OUTPUT , op___ c i t . . p 85. 3  5  6  54  level as  of t h e S t a n d a r d  tended  late  and  1950's and  towards  agricultural by  a  spinning 1970's  Classification  (SITC)  p r o d u c t s , raw few  and  low  categories  appears  somewhat d i f f e r e n t  1.3  conform  1.3.1  6,  range  7, and  of  If the p r o f i l e s  embodied  V i e w s Of  (especially 6.  By  had c h a n g e d  of  8.  because  NICs ,  Japan-Asian  NIC  goods textile  the  late  dramatically manufactures  profile  for Singapore  The  its  role  were redrawn  t o those of  by  finished  as on  i n e x p o r t s , the Singapore  more c l o s e l y  Contending  Asian  semi-processed  category  export p r o f i l e s  SITC  likely  SITC  by a b r o a d e r  centre.  and  technology manufactures  their  were d o m i n a t e d  the v a l u e - a d d e d  1960's a l l of t h e  materials,  weaving) w i t h i n  however,  refining  early  a commodity c o m p o s i t i o n of e x p o r t s d o m i n a t e d  within  petroleum  the b a s i s profile  of  would  the o t h e r A s i a n NICs. Relations  /  Competition At  one  Japanese public  level,  the A s i a n  industry.  This  than  it  is  Moreover,  regions,  individuals  and  competition  from  more commonly, look at changes see,  inevitable  NICs  view  among  technocracy.  and  Trade  shown i n F i g u r e 2. In t h e  and  International  Asian  in third  is  most NIC  county  as  government  and  subject  to  threat  the  the  producers; either markets.  to  shown  federal  industries, effects  the  this  Asian  i n F i g u r e 3.,  competitive c o n f l i c t  of  domestically  Those h o l d i n g  i n t h e c o m p e t i t i v e s t r e n g t h of  growing  a  s t r o n g e s t in those  i n p a t t e r n s such as those and  seen  i s more common among t h e g e n e r a l  the  it  are  between  or, view NICs  signs  Japan  of and  Figure  55 2 - Change  TAIWAN  i n t h e Commodity NIC E x p o r t s  KOREA  C o m p o s i t i o n of A s i a n  HONG KONG  % of 70| Total Exports (by volume) 50  SINGAPORE  !70  (1957)  SOL  PRIOR  —i—i—I—i—i—i—i—i—i—i ° 1 2 3 4 5 6 7 8 9  i of 70 Total Exports (by volume) 5Ol  r  [70 (1978)  50  PRESENT  i i ' — i  '—I—i  I  i—r  Q 1 2 3 4 5 6 7 8 9  "—r—l—r <  " i — i — p — i — r -  Q 1 2 3 4 5 6 7 8 9  —i—i—i—i—i—i—i—i 1—i o 1 2  3 4 5 6 7 8 9  S.I.T.C. 1 - D i q i t C a t e g o r i e s , Key: 0 1 2 3 4  -  P r o c e s s e d Foods Beverages & Tobacco M a n u f a c t u r e s S e l e c t e d P r o c e s s e d Materials Coal & Petroleum Products F a t s and Oils  5 6 7 8  9  Source:  ChemicaIs Manufactures C l a s s e d by M a t e r i a l s (includes Textiles) M a c h i n e r y s T r a n s p o r t Equipment M i s c e l l a n e o u s Manufactured A r t i c l e s Other Trade  Figure  3 - Changes i n Japanese and Korean Export P r o f i l e s  1-digit  S.I.T.C.  56  JAPAN  S.I.T.C. 1 - D i g i t C a t e g o r i e s , 0 1 2 3 4  -  Source:  Key:  P r o c e s s e d Foods Beverages & Tobacco M a n u f a c t u r e s Selected Processes ratarials Coal & Petroleum Products F a t s and Oils  5 6  -  7 8 9  -  Chemicals Manufactures C l a s s e d by M a t e r i a l s (includes Textiles) Machinery & T r a n s p o r t Equipment M i s c e l l a n e o u s Manufactured A r t i c l e s Other T r a d e  Compiled from d a t a i n U.N. Yearbook o f I n t e r n a t i o n a l Trade S t a t i s t i c s (U.N., New York, v a r i o u s y e a r s ) e x c e p t f o r 1907 Japanese d a t a which was e s t i m a t e d from d a t a i n ; Nabeta, M i t s u o S e n i Gyokai ( K y o i k u s h a , Tokyo, 1979) p 18 1  57  the  Asian  Japan, those  NICs.  As  changes  that  i n the  t h a t Japan  has  rapidly.  As  a  "catching  up"  countries  i n t o an  figure Asian  shows,  NIC's p a t t e r n s  undergone but  result, with  the  those  f o r the  are  NICs  Japan  of K o r e a  of e x p o r t s  taking  Asian  of  case  place export  and  are  increasingly competitive  and  parallel  much  more  profiles  placing  relation  to  are  those  Japanese  producers. Of  course,  evident  that  at a s l i g h t l y the  sub-categories  NICs have  the  distinctly  different.  there  a  is  competitive export  clear  in  there  was  but  than  producer's  index  of  regarding  4 7  in  the  NICs and, within the  exports  space  wake of  increase of  i n v e n t o r i e s soared The  major  in p a r t i c u l a r , the  machinery  growing c a p a b i l i t i e s  in  size  source  first  relative  oil  crisis,  volume of  Japanese  textile  imports  a result, an  the  Asian  See M. Shinohara, The J a p a n e s e Economy and p50. I.D.E. Occasional Papers No. ]5~. D e v e l o p i n g E c o n o m i e s , T o k y o , 1977).  Japanese  average  f o r these  industries the  NIC  textiles  S o u t h K o r e a and  of  Asian  home i n t h e  year,  to  often  Japanese  i n the  as  Asian  however,  the of  is  the  the  one  are  textiles  just  it  the  increasing  absolute  t h r e e - f o l d and,  (1970=100) i n 1974-1975.  Even  a d e c l i n e , not  large  In t h e  more  Asian  of  most d r a m a t i c a l l y b r o u g h t  increased  the  i n w h i c h J a p a n and  a s s o c i a t i o n . between  sudden  imports.  of a g g r e g a t i o n ,  some s e c t o r s s u c h as  1972-1973 when, i n t h e a  level  concentration  In  s t r e n g t h and  T h i s was  sector  textile  greatest  performance  sector.  finer  of.  171  imports  was  Taiwan.*  there NICs.  7  is  concern  A  recent  Southeast A s i a , (Institute of  58  survey  of  sixty-five  manufacturers the  present  industries revealed either so  with  the the  late  Japan  of  in  of  the  press this  (or,  of  It or  transfers,  (FDI),  have  the  and  domestic  industries  this  focuses  of  markets  of  See  which  on  of  The  the  Shinohara,  business that  the  not  and  Asian on  primarily  examined the  survey  Asian  local results  NICs  would  had  soon  do  fueled primarily  by  are  less  the  Japanese  cit.  pp  lacked  for  economic NICs  are  the  direct  on  in  A more  impact  industry."  with  Japanese  investment production  purely  domestic  the  recent  refinement  in 8  up  in A  which  impact  50-51.  that  with offshore  Japan  support  catching  foreign  havoc  since  journals.  via  direct on  currency  possibility  located.  and more  domestic  , op.  on  of  had  the  wreaking  regions  and, has  moreover,  focuses  those  s u c h FDI the  recent  industries,  market  producers  market  in  "boomerang-effect";  Japanese  idea  manufacturers.  not  has,  in  concern  a  is  textile  technology  for  countries  competitiveness  products  view  "oiage-ron")  will  Asian  machinery  7.).  1960's.  popular  variant  Japanese  range  point  experiences  other  Japanese  reached a c o m p e t i t i v e c a p a b i l i t y or  Table  This  in  prospective  vis-a-vis  already  (see  operations  and  a wide  representative  on  the  the  third  relevant of  domestic country  59  Table 7 - M a c h i n e r y P r o d u c t s i n Which A s i a n N I C s T e c h n o l o g i c a l Competence P r o v i d e s a P r e s e n t or P r o s p e c t i v e Competitive Strength  Country  P r o d u c t Type  Washing M a c h i n e s Refrigerators L i g h t i n g Equipment Radio Receivers Television Receivers R e s i s t o r s • Condensers Semi-conductors Batteries Automobiles Buses • T r u c k s Auto P a r t s Motorcycles Bicycles Locomotive Wheelsets Shipbuilding Cameras Valves Tanks Pumps Water P u r i f i c a t i o n E q u i p . A g r i c u l t u r a l Machinery T e x t i l e Equipment Desktop C a l c u l a t o r s Electronic Resistors E l e c t r i c Power M e t e r s Generators E l e c t r i c Motors Transformers  Key:  Singapore  Hong Kong  Taiwan  Korea  2 3 2 3 3 2 2 4 1 1 1  3 3 3 4 3 2 3  4 3 4 4 4 3 3 3 1 2 2 3 3 3 3 3 3 3 2 3 3 2 3 2 3 2 3 3  4 4 4 4 4 3 3 4 3 3 3  -  -1  1 1 .1 — —  3 2 2 2 2 3 2 1 3 1  1 2 3 1 3 2 3 1 1 3 2  -  -  1 2 2  1 4 1  1 = 10 y e a r s o r more, 2 = 5-10 y e a r s , 3 = w i t h i n 5 y e a r s , 4 = Today-  Source:  E x c e r p t e d f r o m s u r v e y d a t a on 65 J a p a n e s e companies i n A s u no R a i b a r u ( N i k k e i S h i n b u n s h a , T o k y o , 1978)  —  3 3 3 2 3 3 3 3 3 3 3 3 3 3 3 3  !  i  60  1.3.2 C o l l a b o r a t i o n  At  the other  the Asian  NICs  of  implications  f o r Japan.  recent  than  influence  To growing  i s that  t o argue  and  NICs  Thus, and  textile  of the de  is  their  the  industrial  important  positive  of  view  this  is  but i t i s of growing  federal  government  with  and  Japan  the Asian  Japan.  a growing  and  exports  textiles,  l a r g e and  NICs  makes  even  from  complementarity of  Asian  NIC Japan  intra-industry  Japanese and  to the Asian  NICs  and yarn,  within  between  textiles  thread  i t  has not been, i n  suffered  sector,  cotton  has a  Moreover,  i n the growth  the t e x t i l e s  by J a p a n e s e  fibres  to  textiles,  that  industrialization  -as evidenced  within  silk  accompanied textile  fact  i n the aggregate,  there  silk  the  very  beneficial  competition,  trade.  the  that  have,  the Asian  emergence  of the "oiage-ron"  p o s i t i v e - b a l a n c e of trade  that  that  has extremely  within  with,  aggregate,  sectors  view  9  begin  difficult the  the  The f o r m a l  especially  technocracy.*  9  i s  development  more  *  extreme  imports clothing  of and  of are  artificial industrial  products.  Others,  more  d r a m a t i c a l l y , argue  the Asian  NICs  presents  central  member  f a c t o development  that  an o p p o r t u n i t y  of a v i t a l of such  an  the for  industrialization Japan  r e g i o n a l economic integrated  to  become  community.  economic  The  community  Two r e c e n t s t u d i e s w h o s e f i n d i n g s s u p p o r t this view are the previously referenced, NIRA OUTPUT and a study by a JETRO r e s e a r c h g r o u p , T. Watanabe (ed.), A j i a K o g y o k a no S h i n j i d a i ( J E T R O , T o k y o , 1979).  61  would,  i t  is  some  the  stability  for  of  example,  European 1.3.3  two  in large from  Asian  NIC  NIC  the  Differing  hand,  and  by  Economic  These due  hoped,  that  more  5  0  difference  problems  of  See, Toshio Shinsho, (Nihon  has  other  which  members)  is  countries  sought,  within  the  industrialization  are  in perspective.  of  Asian  social in  countries i s , i n the  adjustment  i t seems  benefitted  structural an  i t  the is  been  Japan  similar  is  in specific  that  economy  important time,  and  at  a  clear  that  associated  with  and  with  Japan.  general.  aggregate,  one  Japan-Asian  industry  in  in  in  equally  disruption  the  clear  same  Japanese  On  Japanese  change  has of  the  increasingly At  NICs  sub-sectors  situation  NIC  perspective,  analysis,  i n the  OECD  Asian  i s towards  of  regional  the  for  of  complementarity.  specific  industrialization some  to a  relations  industrialization  earlier  views  direction  beneficial  Thus,  the  5 0  macro-economic  the main  considerable  efficiency  industrialized  industrialization  in  (and  Perspectives  opposing  the  f o r Japan  regional  Community.  micro-level  decline  and  European  measure  economic  mutually  provide  The  to  that impact  favourable  but  noted of  LDC  poses  sectors.  Watanabe, A j i a C h u s h i n k o k u no C h o s e n K e i z a i Shinbunsha, Tokyo, 1979).  Nikkei  62  2.  THE I D E N T I F I E D  As  IN P E R S P E C T I V E  t h e i n v e s t i g a t i o n h a s come  S.M.E.I.,  i t  perspective. role  INDUSTRIES  of  would  This  some  organization identified  well  i s done  S.M.E.  outlining  be  in  features which  s e t of  to  by,  the of  t o focus put  first,  Japanese a  them  to than  into  describing economy  particular  appears  S.M.E.I.  on a s e l e c t e d  more  i t  i s  broader  briefly  and,  type  be  a  s e tof  second,  of  by  industrial  prevalent among  the  in  the  S.M.E.I.  in  general. 2.1  The Role  Japanese  2.1.1  Of S m a l l -  and  in  definition sized  a  medium-sized  number  i s that  Enterprises  number  of  enterprise. the  sectors i.  i i .  5 1  In The  Def i n i t i o n s  defined  for  Enterprises  Economy  Small-  the  And M e d i u m - s i z e d  5 1  given  ways  (Chushokigyo  By t h a t  in  i n the Basic  employees  wholesale, as  of  enterprises  and  Japan. Law  The  fundamental  f o r Small-  a n d Medium-  Kihonho)  and i s based  on  capitalization  definition,  retail  (SME) a r e o f f i c i a l l y  and  the S.M.E.  jointly  are defined  service  ,  and  300  fewer  of  on the  variously  manufacturing  follows;  Manufacturing  sector:  capitalization  of one-hundred  Retail  Trade  and  Service  or  million sectors:  T h i s , and other l e g i s l a t i o n regarding business, the a n n u a l p u b l i c a t i o n , T s u s h o Rokuho ( M . I . T . I . ,  employees yen or 50  and  less.  or  fewer  c a n be f o u n d i n Tokyo).  63  employees and iii.  Wholesale capital  There dealing  are,  with  accordance  of  SME  with  the  and  some  for  of  statistics  The  and  these  refers a  The statistical  of  in addition, designated  legislation.  the of  any  apply  effect,  for  broadening  legal  legally  the  policy  of SME,  as  place  of more t h a n  official unit  or  government  ( J i g y o s h o ) , or  consist the  distinct  partnership  f o r p u r p o s e s of  "establishment"  and  Japanese  criteria  definitions  company,  official  the  the  have  to  e n t e r p r i s e may  role  in  52  unit  t o examine t h e  of  legislation,  between  efforts  others,  applied  t h a t have been  and  This disparity  the  two  official  establishment. and  and  legislation  are  the  while  fundamental u n i t  a given  less,  of  laws  for  of SME  or  fewer e m p l o y e e s  pieces  purposes  whether  i s , however, t h e  business,  of  or  yen  less.  other  specific  "SME".  entity  proprietorship.  of  the  " e n t e r p r i s e " i n SME  economic  or  alternative  the  The  100  industries  the  these  term  million  capitalization  interpretation  the  yen  figures  a more l i b e r a l purposes  30  sector:  many  to s p e c i f i c  a l l of  c o v e r a g e of  5 2  and  government  Practically  of  10 m i l l i o n  different  restricted  by  Trade  however,  maximum employment are  capital  often  officially  one  statistical complicates defined,  in  economy.  two  major  sources  problems are;  1.  presented The  data  by are  most  official  presented  for  A t a b l e o u t l i n i n g t h e r e l e v a n t c r i t e r i a f o r SME f o r p u r p o s e s of v a r i o u s l e g i s l a t i o n i s g i v e n on page f o u r of C h u s h o k i g y o S e i s a k u no G a i y o (SMEA, J u n e , 1 9 8 0 ) .  64  establishments and,  2.  The  and  not a g g r e g a t e d  d a t a a r e d i s a g g r e g a t e d by  capitalization  level  factors  both  confound  efforts  position  of SME  within  the J a p a n e s e  In often and  practice, rely  employ  the  not  jointly  the concerned  o n l y one  employment  2.1.2  but  i n t h e i r own  aggregations.  of  describe  these.  These  statistically  agencies  the  on d a t a  themselves  for establishments  definitional  criteria,  in selecting descriptive  approach  by  economy.  publications  criterion, This  f o r both  to  analysis  number of e m p l o y e e s or  government  o f t h e two  i s also  adopted  here.  usually  statistical  5 3  Description Manufacturing  employees  stable  total  and  has  1977,  for  1969  and  manufacturing increased  from  Productivity  and  establishments.  While  slightly  49%  SME other  Except section passim.  (from quite  slightly  1978.  sharply  69%  more  51% their  in  and  weight  and  58%  are of t h e  but in  ( f r o m 63%  their in  has  all been  establishments substantial  1978.  relatively figures  low  and,  for has  in  larger  increased  r e l a t i v e wage l e v e l s have  in  as t h e c o m p a r i s o n s  the in  of  1967).  more i m p o r t a n t  where o t h e r w i s e n o t e d , are drawn from data  fewer  99%  still  relative productivity  1967),  or  than  of such  t o 73%  levels  300  this figure  i s lower  i n 1969  wage  are r e l a t i v e l y  OECD c o u n t r i e s ,  The  employment  were r e s p e c t i v e l y  dropped  employing  e s t a b l i s h m e n t s i n Japan  between  in  establishments  account  manufacturing  5 3  for e n t e r p r i s e - l e v e l  Japan  than  between J a p a n ,  in  the  U.S.A.,  figures in the following SMEA op. c i t . pp 4-12 i n  65  West  Germany,  weight all  of  five  much by  SME  of  Japanese  SME  total  than  of  Sanchi  but  for  France.  value  account the  of  the  And  Jiba  a  the  far  relative four  are,  and  is  higher  to  larger  share  of  71.9%,  approached  SME  are  and  27.1%  more  (56.6%)  a  (the  only  even  far  enterprises  OECD c o u n t r i e s  respectively,  in  i s , at  proportion  sector  The  i s high  The  employment  Japanese  manufacturing  other  averages  for  indicate.  in Japan.  countries  added,  8  establishment  manufacturing  figure  in  of  highest  other  to  in Table  number  the  of  lower (51.3%)  corresponding  and  75.9%).  Sangyo  Introduction  Preliminary revealed  a  a  small  number  for  the  industry  the  regional  S.M.E.I.,  distinct  industry)  of  for  a  firms  the  to  be  economy.  industries rather  identified  to  geographic  whole  industrial  of  production  narrow  as  these  These  "sanchi"  examination  tendency  medium-sized  a  total  productivity  i n any  2.2.1  the  given  in  added  four-country 2.2  France  total  and  value  level  in  respect  outstanding  and  countries  than  67.6%  With  in  the  higher  the  U.K.,  a  one,  or  (production and,  product/industries  of  Japanese  region)  in are  or  fact, generally  a  quite  industrial "jiba almost  considered  for  a  set  of  many  small-  and  large  firms.  c l o s e l y to  those  organization  of  termed,  (community-based  of to  cases, in  sangyo" a l l  i n many  in  force  of  few,  S.M.E.I,  dominant  expected,  composed  of  concentrated  and,  relatively  c h a r a c t e r i s t i c s correspond category  highly  regions  As  are  than  be  set  the be  of  identified this  type;  66  Table  8 - A C o m p a r i s o n o f t h e R o l e o f S m a l l - a n d Mediums i z e d F i r m s i n Some M a j o r O.E.C.D. Countries  COUNTRY W. GERMANY  INDICATOR  FRANCE  U.K.  JAPAN  U.S.A.  Number o f I n d u s t r i a l E s t a b l i s h m e n t s ('000) Share (%)  711 (99.5)  299 (95.6)  410 (98.3)  88 (84.7)  326 (98.8)  Number o f I n d u s t r i a l Employees C 0 0 0 ) Share (%)  7802 (71.7)  7702 (42.7)  3819 (37.0)  1558 (21.9)  1403 (67.6)  (100 Million D.M.) 726 (31.7)  (Million Pounds)  79.1  79.2  a  a  )  )  V a l u e Added Share > a  (%)  Productivity ( V a l u e Added p e r Employee) ( L a r g e r Firms=100) Date Maximum No. o f Employees i n S.M.E. Note:  (100 Million Dollars) 1304 (36.8)  (100 Billion Yen) 2969 (56.6)  Industrial  / / / /  78.3  51.3  1977  299  /  /  1972  249  /  /  1970  199  5635 (18.2)  1975  /  /  199  a)  Share i s the p e r c e n t a g e o f t h e r e s p e c t i v e n a t i o n a l  b)  Sales  Source:  (100 Million Franc)  C h u s h o k i g y o S e i s a k u no G a i y o ( S m a l l and Medium-sized E n t e r p r i s e Tokyo, J u n e , 1980)  1  5  7  M b )  66.9  /  / total.  Agency,  3  (21.7)  1975  199  /  /  67  though  those  obviously those  do  based There  this  form  foreign U.K.,  in  and  the  of  The  of the  in  industries There  any  in  and  on  are  actual  of  jiba  often  a  in  the  number  basic  be  very  common some  of  features  is  to  Some  well-known  may  small  used  more in  the  separate  consideration  in size,  ill-defined  even  interchangeably.  An  these might  the  mode  of  when  emphasize  into  are  they  " s u b - i n d u s t r i e s " comprised  polar  their  that  distinct  The  fact,  reason  of  sangyo,  invariably  of  such  form  "sanchi"  usage  suggests  terms  and  disaggregated  stages  of  outline,  Sheffield,  u s e f u l background  finely  the  degree  the  this  wherein  of  the  Osaka  Japanese.  to  in  share  ( s h a k a i - t e k i bungyo)  quite  to  and  general  of  are,  case,  For  sangyo"  usage  Writers  often  in  analogous  labour"  separate  Tokyo  i s uniquely  Nevertheless,  provides  "jiba  the  almost  economies  that  S.M.E.I.  topic  distinguished  as  issue.  Japanese  examination  aspect,  them  cutlery  and,  sanchi  terms,  industry.  the  sanchi.  adjustment  on  consider  of  such  that,  organization  industries  Japan  local  believe  regional  in  writers  to  i n Germany.  Japanese  their  their  Solingen,  discussion  in  reason  as  areas  areas.  industrial  set  the  rural  i s no  identified  of  urban  dominate  examples  common  in  observers  European with  not  of  Japanese  based  and  be  they  most  deal  "social  distinct  specialized  Japanese usefully  within with  this of  process  is  corresponding types  in only  the  division  production  processes  of  by  production  a  the  terms  of  one  to  firms, or  a  few  exemplified  by  production.  opposite  to  this  pattern  would  be  68  the  case  carried then,  where  out  industries  of  some  Japanese  There  are,  formulated to  main  in  that small-  some  AND  the  a  associated  with  does  in  set  is  the  term  this  narrower  which  display  the  light, to  dominant) term a  "jiba highly  carried  diffused  are  referring  the  processes  not  out  by  throughout  the  products,  and  names,  of  sanchi.  a  single  interventions facing  institutions  serve  in  have  industries  to  These  provide  LDC  and  A.  coherent  aimed  at  set the  competition.  more  generally  adjustment  assistance  i n s t i t u t i o n s and  Appendix  Here,  a  policies  summary  of  are  their  presented. the  industries  medium-sized and  in  regionally  Japanese  policy-based  detail  affected and  sanchi  processes  INTERVENTION  c h a r a c t e r i s t i c s of  institutions  *  with  industries.  characteristics The  S.M.E.I.,  indicates  p o l i c i e s which  affected  outlined  4  Seen  broader  often,  production  adjustment however,  a  (and,  government  i n s t i t u t i o n s and of  as  representative  POLICY  production  establishments  Figure  GOVERNMENT  problem  5  of  the  establishment.  those  specialized,  of  taken  by  for set  5  of  be  dominated  community. "  The  single  reserved  locations  most  concentrated  differentiated  3.  a  can  geographically  various,  or  within  "sanchi"  sangyo"  a l l  are  industries  primarily  enterprises  policies Small-  identifed  and  are,  those  and  therefore,  Medium-Sized  indicates  dominated  the largely  Enterprise  by  relevant those Agency  It should be noted that these d e f i n i t i o n a l d i s t i n c t i o n s mine. T h e y w o u l d n o t be u n i v e r s a l l y a c c e p t e d ( o r rejected) Japanese scholars.  are by  69 Figure  4 - Map  S h o w i n g Names, P r o d u c t s , Some J a p a n e s e S a n c h i  and L o c a t i o n s f o r  Kawagucbi (Molded  food*)  T o k y o (Cigarette iighter. Toyi. Yokohama Binoculari) Scarves) Shimiza (Canned tangerine)  *  Shirunka ( O s m e t i c cabinet. 0 Furniture)  (>taka (Household sewing machine. Bityclet, r i a l tit s a n d a l * Umbrellas. Thermm)  I : 6.000.000  Source: Yamazaki,  Mitsuru  Japan's Community-based I n d u s t r i e s : A'Case Study o f S m a l l I n d u s t r y ( A s i a n P r o d u c t i v i t y O r g a n i z a t i o n , Tokyo, 1980).  70  (SMEA),  or  "Chushokigyo-cho",  an  agency  International  T r a d e and I n d u s t r y  In  of the importance a t t a c h e d  reflection  is  an  extensive  institutions grass-roots  running level.  financial, The  managerial,  terms  banks.  credit  services  among  SME  and t e c h n i c a l  services  operation and to  member  down t o t h e l o c a l , number  than  down  to  bodies.  financial and  ranging  insurance  consultation  into  loans  of  the  i n the aggregate, the  SME;  and  the  divided  the b i g g e s t  and  from  the  to f i n a n c i a l ,  the  provision  of  investment.  i n s t i t u t i o n s promote t h e f o r m a t i o n and cooperative  and  educational,  firms;  as  consultation grass-roots  well and  level.  industry  research, as  and p r o m o t i o n a l fora  interaction  that  In a d d i t i o n ,  there  and recommending p o l i c y w i t h  and m e d i u m - s i z e d e n t e r p r i s e  associations  providing  of d e l i b e r a t i v e / c o n s u l t a t i v e c o u n c i l s  with monitoring small-  of  provide  government-business  SME-oriented  capitalization  to  guarantees  organizational  effective  of  They p r o v i d e ,  venture c a p i t a l through equity The  bureaucracy  as i f not l a r g e r  financial  of  of  there  and c o n s u l t a t i v e / d e l i b e r a t i v e  in  commercial  provision  i n Japan,  ("San K i k a n " ) o f t h e S M E - o r i e n t e d  as l a r g e  range of  t o SME  The i n s t i t u t i o n s c a n be r o u g h l y  are,  outstanding,  t h e M i n i s t r y of  or "Tsushosangyo-sho".  network  from t h e f e d e r a l  " B i g Three"  Japanese  intricate  organizational,  institutions  full  and  (MITI),  of  dominated  that  for  extend are  a  are concerned  respect  to  industries  various (SMEI).  71  The p o l i c i e s  most  r e l e v a n t t o the adjustment  1.  The SME  Modernization  2.  The SME  Change of B u s i n e s s  3.  The D e p r e s s e d  Regional  policies  generally  The  instruments but  Policy,  Industry  considerably  requirements  and i n t h e b a s i c  firm,  and,  a  tax  in  Policy,  Policy.  employ  (loans, guarantees,  differ  individual  and Advancement  similar  provisions, terms  policy  e t c . ) t o which they  of  unit apply.  based  country  as  agreement to  well.  Some  require  programme w h i l e  s m a l l g r o u p s of f i r m s o r t o i n d i v i d u a l  formulation  the of  government),  programmes  by  programmes  specific review bodies  are  adjustment  region,  industry-wide  others are a v a i l a b l e  by;  to  feasibility  within a short  local  year)  of  the  (third-party)  -detailed  plans accomplishing  (say, f i v e  the  p l a n s by t h e a p p l i c a n t ( n o t  incorporate  of p r o p o s e d  and, i n  r e g i o n s of the  characterized  r e p r e s e n t a t i v e s , and an a p p a r e n t l y  objectives  eligibility  of p r o p o s a l s and a d m i n i s t r a t i o n which  etc.)  firms.  business the  grants,  industries  i n designated  programmes  on an a d j u s t m e n t  Overall,  the  be  policy  A l l a p p l i c a n t s must  some  also  of  (industry,  set of e l i g i b l e  must  set  their  be i n a g o v e r n m e n t - d e s i g n a t e d cases,  problem a r e ;  p e r i o d of  attention appropriate time.  72  IV.  A CASE STUDY OF ADJUSTMENT: THE TSUBAME  1 .. BACKGROUND TO THE TSUBAME 1.1  Niigata The  the  a  western  wide  Tokyo  river  slopes  coasts  city,  broken  five  in central  the c a p i t a l the  t h e Shinanogawa,  Niigata  of the  river  visitor  hours,  decades  imagine,  Japan's  agrarian and  Tokyo-Osaka  are  rhythm  s e a s o n s and t h e l o c a l  subsistence, farmers cannot which support  the  a  weather  the p r i c e  style  of  of l i f e ,  and  truth  This and  in  from  and i n  seems n o t  Despite a l l the here,  one  can  much c l o s e r t o i s , in largely  people  which by t h e  have  an  community.  the  Tokyo  romantic  all, most  interest  the  i n the  urban-industrial  life  which  fields,  creates  that  to t h i s  even  in  rice  i s determined  i s after  government  of r i c e  train  which  belt. people  h e l p b u t have a keen  central  fertile  life,  own, immediate,  inadequate. agriculture  of  industrial  A style  may be some s l i g h t  is terribly  across  t h e s e a near  The  from' the  of a c t i v i t y  f o c u s upon t h e i r  There it  living  origins.  into  tranquillity  removed  c o m f o r t s o f modern r u r a l  insular  t o empty  towns and v i l l a g e s ,  material easily  down  separates the east  prefecture.  a sense of r u r a l  but the  by s m a l l  of  pace  that  tumbles  f o r much o f i t s c o u r s e t h r o u g h t h e  clamour  the  range  and t h e p a s s i n g , panorama  occasionally  first-time  INDUSTRY  of Honshu and t h e n meanders more p l a c i d l y  parallels  floodplain  i n Japan,  of the mountain  floodplain  Niigata  INDUSTRY  Prefecture  longest  and west  FLATWARE  FLATWARE  in can  success  image, b u t  subsidized, insular the  not  of r i c e -  levels  at  be p e r s u a d e d t o of  the  central  73  authority's world  efforts  market.  Even  image of N i i g a t a countryside on  changes  that  are  more  at  in foreign  in  foreign  town  Shinanogawa largest forks,  of  and  In no  Tsubame  "ricebowl"  single  place which  and  production  Sanjo,  the  about  the  the  dependence  of  awareness  level  r a t e s may  i n t h e more  far  exceed  cosmopolitan  i s t h i s more t r u e t h a n  in  the  sits  of  the  is,  in  the  middle  incongruously,  centre  for stainless  the  world's  steel  knives,  spoons.  era  subject about  to frequent  the  f o r the flooding  three years  fundamentally lived  the  good  (it  was,  between  1625  agricultural  The  example,  and  1875)  fertility Perhaps  p r o v i n c e of E c h i g o  5 5  of  the  town of  (1392-1573)  region.  for  in  the nearby  period  surrounding  a precarious existence.  surrounding  Shinanogawa  together with  d u r i n g the Ashikaga  centre  once e v e r y  farmers  p o r t on  (1185-1333) and,  prospered  distribution  5 5  dotted  There,  exchange  living  the  Tsubame  Kamakura  when  villages.  currency  p r o d u c t i o n on  the r o m a n t i c - p a s t o r a l  industry  c o u n t r i e s and  Tsubame began as a r i v e r  the  of  of t h e m a j o r i t y of J a p a n e s e  small  domestic  odds w i t h  the pockets  a t m o s p h e r e of T o k y o .  1.2  excess  i n s m a l l towns and  developments  of  to o f f l o a d  as  area  was  inundated  and,  despite  the area  for that  a  the  reason,  (present-day Niigata)  This and o t h e r h i s t o r i c a l m a t e r i a l p r e s e n t e d h e r e i s p r i m a r i l y drawn from; S. Ikeda (ed.) N i i q a t a - k e n no K i n z o k u Kako Sangyo [limited d i t r i b u t i o n ] U.N.U. Document No. HSDRJE-51J/UNUP-356 (United Nations U n i v e r s i t y , Tokyo, 1982); K i n z o k u Y o s h o k k i no Enkaku [mimeo] (Japan Metal Flatware Industry Association, Tsubame, u n d a t e d ) ; and on personal interviews i n Tsubame in September, 1980.  74  came under was  the d i r e c t  d e v e l o p e d by  (hand-forged) for  the  dozens  with  a  nail  foundation,  The  centre  production providing  farming  singular the  of  from a n e a r b y skilled  as a  population.  of w h o l e s a l e merchants  more  production  of t h e Tokugawa s h o g u n a t e ,  the s h o g u n a t e  local  well,  control  metalworking vessels  mountain,  and  in decorative  production  hundreds  t o the  and  nails,  however,  artisans From  this  diversified  into  the  smoking  developed  of  industry.  pipes,  a  utilizing  cadre  t e c h n i q u e s f o r ornamenting  of  employment  T h i s came t o s u p p o r t , as  industry  copper  Japanese-style  supplementary  and  commitment  for  Tsubame  ore  of  artisans  these  articles.  the  dominant  remained  industry. The  Meiji  products inflow  had  a  and  and  s e v e r e and  o f - machine-made  industry into  Restoration  forced  copper  the  suffered  from  cigarette  smoking,  As  a  its  earlier  the  result,  decline broken,  and  kitchen  unremitting  (drawn)  smoking  utensils.  successive the  fountain  pipes,  brief  ironically,  1914,  Netherlands  metal  of  relative  and  from  aluminum  table  brush  t h e west o f ;  of d e c l i n e The  the  from  cycle  of  product  was  pattern  and  origin.  knives  company were s e n t t o  also  kitchenware.  prosperity.  o n l y when Tsubame r e v e r s e d  of  local  writing  r e c o v e r y t h r o u g h change t o a new  samples  trading  the  The  However, t h e s e p r o d u c t s  Tsubame e x p e r i e n c e d a l o n g p e r i o d  position  western  on Tsubame.  decimated  introduction pen,  of  to t r y to s h i f t p r o d u c t i o n  began p r o d u c t i o n of a p r o d u c t o f w e s t e r n In  inflow  impact  nails  survivors  s u c h p r o d u c t s as m e t a l  c a s e s and  the subsequent  and  Tsubame  forks by  from an  a  Osaka  75  trading of  company.  traditional  file.  This  More  methods and led  modern  techniques  methods  and  by  1921  wholesalers  and  cottage  small  industrial  Development  of  disruptions  to western  War.  extension  The  facilitated  as  an  active  peaked  i n 1925  86%  was  materials, of  and  occupation War.  of  rapidly  recovery  Around  dozen  moved  These,  out  together  s t r u c t u r e woven i n t o  local  the  i n no  the  soon  of  the  with  the  basic units economy.  s m a l l measure by  occasioned  by  the  First  world  market.  Production were  then  the  Prewar  million steadily  increasingly  of  1922  region  production  yen,  of  which  d e c l i n e d as  diverted  the  World  n a t i o n a l r a i l w a y t o Tsubame i n establishment  5 6  plating were  the  aided  units.  and  equipment  and  in  men,  support  efforts.  Production  for  200  means  saw,  w o r k e r s came t o c o m p r i s e  subsequent  equipment  of  had  s h i p m e n t s w o r t h 3.5  exported.  J a p a n ' s war  recovered  the  hammer,  rolling  factories.  s u p p l i e r to the with  metal  production of  the  stamping  i n d u s t r y was  greatly  as  some p r o d u c t i o n  into  the  such  i n that year  mechanized  and  a complex  tools  employing  households  of  p o s s i b l e t o d u p l i c a t e them by  to e x p o r t s  and  introduced  5 6  I t proved  being and, 1950,  tableware  i n the  d u r i n g W o r l d War  postwar p e r i o d with  provided  by  subsequently, the  ceased  production the  initial  to supply  troops  i n d u s t r y switched  the  Two  engaged  from b r a s s  the  but  impetus army  of  i n the  Korean  and  chrome  There are alternative accounts of t h e d e t a i l s of Tsubame's e a r l y d e v e l o p m e n t as a s u p p l i e r of f l a t w a r e ( s e e , for example, Kamikojima's account on page 27 o f , I k e d a , op. c i t . . What seems c e r t a i n , i s t h a t t h e i n i t i a l i n i t i a t i v e came from outside of Tsubame.  76  steel  to  stainless  some i n i t i a l industry quality  soon  able  primarily  in  strategic  changes  steel  there  in  appeared  o f even g r e a t e r  (which  production),  around  industry  this  market  half  expansion  market.  This  l e d to the  for stainless  some  producers  both  most  prosperity  t o make  production  that  the r a t e of  them  with  sufficient  provided  existence when  of quotas.  the  U.S.A.  Their removed  i n a golden  f o r Tsubame.  69% of t h e U.S.A.  accounted  for  more  import than  market  of s t a i n l e s s  prosperous  steel  and  and,  90% o f J a p a n e s e  80% o f t h e w o r k f o r c e was i n v o l v e d  more  steel  found  o f t h e 1960's and u s h e r e d  i n the production was  of s u i t a b l e  rapid  led  the  steel  of  market  t o be v i n d i c a t e d  1970, J a p a n h e l d  another  U.S.A.  despite  i n the l a t t e r  Tsubame  or  period  housewares)  opportunities  By  a  Despite  Japanese  (some, f o r example, moved i n t o t h e  U.S.A.  age  the  While  growth of t h e  judgement  raw m a t e r i a l .  stainless steel  f o r t h e U.S.A.  1957.  stainless  began  on  of quotas  flatware  quotas  to provide  and t h e i n d u s t r y  imposition  as t h e b a s i c  problems with q u a l i t y c o n t r o l , the  was  focussed  of  steel  i n one way  cutlery.  pervasive  than  The ever  before. All series as  this  of developments  t o whether  might  was t o c h a n g e ,  be f a t e d  this  but  so t h r e a t e n i n g  industry,  to wither  in  like  away.  a  few  years,  through  a s t o r a i s e some  the n a i l  industry  a  question  before i t ,  77  1.3  The  Structure  Of  The Tsubame  Stainless Steel  Flatware  Industry  An  understanding  industry  i s important  prosperity however,  and as  development especially 1.3.1  The  The  an  example  that that  indicates,  nearly  production  of a  The  cleaner  In favour  of  concert  responsibility variety  solely forging,  It i s also  important,  of  organization  rural  light  and  industry;  areas.  many  can  on  be  42  employed  can,  stages within  required.  t h e number  5  the  of the c a n be limits,  For example,  the f o r g i n g equipment  and t h e fewer  in  and q u a l i t y  production  can  As F i g u r e  involved  the type  of steps  expensive)  product  of p r o d u c t i o n .  steps  as  simple  used;  the the  of  subsequently  been  resolved in  operations.  such  this,  t r a d e - o f f s have  there  in,  an  f o r example;  production  elaborate  production  specialized  electroplating,  generally  a n d more  has been  f o r the various  of narrowly  engaged  Tsubame's  of Japanese  stages  s m a l l e r - s c a l e equipment with  both  an a p p a r e n t l y  Depending  number  of  flatware  Labour  of equipment  (and  finishing Tsubame,  Of  dozen  as  i s the result  required  a  two  the the t o t a l  pattern  i n predominantly  spoon.  powerful  a  of d i s t i n c t  type  problems.  i n much  of even  involved,  involved.  of  found  Division  number  In  is  centred  Social  flatware  understanding  i t s subsequent  a  more  f o r an  manufacture  involve  affect  o f t h e s t r u c t u r e o f t h e Tsubame  stages  division among  "sub-industries" mold  or p o l i s h i n g .  production, Figure  6  stages. of  firms in  which  are  die casting,  illustrates  the  78 Figure  5 - P r o d u c t i o n Stages f o r a S t a i n l e s s S t e e l Spoon (Tsubame, Japan)  2.  E3 4.  •  7  1. 2. 3. 4. 5. 6. 7. 8. 9.  SB B LJ  In.  11. 12. 13. 14. 15. 16. 17. 18. 19.  1  20. 21. 22. 23.  C u t t i n g out blanks. Grinding blanks. C u t t i n g out rough shape. R o l l i n g out bowl m a t e r i a l (rough). Acid Bath c l e a n s i n g . Electrolytic polishing. R o l l i n g out bowl m a t e r i a l ( f i n i s h ) . Heat treatment. Acid Bath c l e a n s i n g . Rough shaping of handle. Embossing of handle p a t t e r n . C u t t i n g bowl m a t e r i a l to s i z e . Grinding bowl blank. P o l i s h i n g bowl blank. P r e s s i n g out bowl of spoon. Surface b u f f i n g . Inspection. Rough p o l i s h i n g . Finish polishing: a) E l e c t r o l y t i c p o l i s h i n g . or b) Lathe p o l i s h i n g . or c) B a r r e l p o l i s h i n g . Cleansing Hand p o l i s h i n g and f i n a l i n s p e c t i o n . Packaging. C r a t i n g f o r export.  Source Ikeda (ed.)  13.  3  14 3  H  - = ±  w C  16.  19,  20.  (a)  (b)  (c)  BE  WJ 21.  22.  23.  op. c i t .  79  major  sub-industries  Figure  7  shows  internationally and  marketing  rarely  A  act  While  as  some  of and  upon  requires structure  but  channels.  degree  is a  sub-industries not  services  of  medium-grade 11. the  but  by  spoon 12.  of  involved  15,  remaining  20,  21,  S.  Ikeda  (ed.)  , op.  c i t .  on  As  with  almost  entirely  depends  skills  production  and  (see let  one  in  to  in  firms for  the  central of  stages  preceding out  sales  firms  also  example, the  and  industrial  among  but  involvement  46  type,  these  downstream  in-house  p.  of  coordinating,  an  the  internal  Tsubame's  that  being  and  both  coordinating of  firms  buyers.  success  customers  23  of  foreign  competition  reported  stages  only  trading  industry  latter  central,  subcontractors.  5 7  and  subcontractors. 5 7  the  familiarity  downstream  Kamikojima  and  The  of  degree  subset  depend  knowledge  these  for  upstream  studied  4.  only  high  a  rely  others  of  and  Japanese  Tsubame  firms  information,  intimate  a  the  those  distribution  minimal and  by  production.  especially  also  is  both  Nagoya.  is played  between  for  an  There  compete  with  only  and  central  contacts,  not  downstream  t r a d i n g companies  these  and  The  subcontracting  wholesalers  Osaka, role  interrelationships.  of  industry  subcontractors,  firms,  their  patterns  the  interface  subcontractors  central  3.  strategic  their  Tsubame.  of  in Tokyo,  the  and  local  wholesalers,  production  firm  within  beyond  based  downstream  all  and  major  capability  crucial  which  upon  the  extends  companies  i n Tsubame  a 1.  figure); various  80 Figure  6 - Patterns  of S u b c o n t r a c t i n g ; i n Tsubame  [Western Manufact- I n t e r n a t Japanese urers (e.g. i o n a l Sub WMF, West Germany))contracting!! S e m i - I n t e g r a t e d  Industry  Medium  .Other M a n u f a c t u r e r s  Selected C a p i t a l or S k i l l - i n t e n s i v - f e P r o d u c t i o n Stages  Top Grade  and  (Tsubame)  Sub-Contractors  (15%)  High Grade  Internationally  (85%) Medium. & low  grade  .Japan High  Japan, Korea, Taiwan  Grade  Grade  '/////////MM  Low Japan,. Korea  Grade  liiaoour-  -> 3 f -  \\ E x p a n d i n g . " ° 3. D e c l i n i n g . 1 0  Source:  V  1  U  m  e  '  h  i  9  h  V  "  i  a  t  y  intensive prod+ uction staSes 1  l  l  n  6  S  3  n  d  K  O  r  e  a  f  o  r  h  i  *  h  I n t e r v i e w s , Japan M e t a l FI atware I n d u s t r y A s s o c i a t i o n ;  • low v a r i e t y  September  1980  lines.  81 Figure  7  P a r t i c i p a n t s and P a t t e r n s of P r o d u c t i o n Tsubame F l a t w a r e I n d u s t r y  Stainless Suppliers  Steel  Mold & D i e Producers  Packaging  P l a s t i c Parts P roduc e r s  Scrap Metal  i n the  Materials  SMDDIiors  Dealers  Major C o n t r a c t o r s Semi-integrated Manufacturers Manufacturing Wholesalers  Intermediate Forge  Production  Operators  Power P r e s s  Operators  Electroplaters Welders  Secondary  Intermediate Processing Rough Blank  Rough P o l i s h i n g Electrolytic pnl  iihincf  Blade  Sharpening  Finish Source:  Cutting  Adapted from K i n z o k u Y o s h o k k i no Enkaku [undated, mimeo.] (Japan M e t a l F l a t w a r e A s s o c i a t i o n ,  Polishing  Tsubame)  82  Differences confined differ their  to their also  cottage  i n the scale  such  stainless  average  persons  These operated also  1955  industrial involved  In  has  has a l s o  a  was  some  times  sub-industry  (2.3  not only  predominantly  f o r the l a r g e r diffusion  supply  increment  which  factories. of  This  simple typically  equipment  of a portion  surrounding a  and of the  agricultural  of low-cost  to the  of  workers.  community,  small-scale  the  70%  than  are  farming  a  persons  four  and f a m i l y  firms  i n the  9.8  more  by t h e s a l e  significant  (1978)  than  the countryside.  way,  provided,  made  labour  financed  this  more  which  individuals  there  of  small-scale  capital  labour, stock  the industry. While  did  sometimes  farm.  in  out into  purchase  of  labour-intensive  by v e r y  polishing  family  the  1965,  operations  machinery,  of  of  they  per se, i s only  metal  by  importance;  of o p e r a t i o n s  of the surrounding  much and  the  community  the  cottage-based  by members  Between  family  in  not  and the nature  more  i s , nevertheless,  are operated  provides  the  scale  establishment);  petty  operations  are  Tsubame.  industry,  this  scale  establishments  but  the average  flatware  per  of t h e i r  In p a r t i c u l a r ,  establishment  the  sub-industries  r o l e s and s t r a t e g i c  i n and around  while steel  various  as p o l i s h i n g , a r e dominated  industry  Thus,  the  different  participants.  operations,  per  among  not  corporate  the interdependence lead  to  groups  Relationships  the  formation  spanning  between  among  the  upstream  sub-industries of permanent  various  i s great, i t  consortia or to  production  and downstream  firms  stages. within the  83  industry  are, rather,  measure  to  industry  discussed  earlier.  engaged  in l i t t l e  o r no d i r e c t p r o d u c t i o n  possible  and depend upon a complex web o f i n d e p e n d e n t  the  competitive  extremely  activities  sub-industries  1.3.2 P r o d u c t V a r i e t y ,  While types sugar in  there  of  is  knife,  greater.  c o o r d i n a t i o n sub-  These  especially  and spoon  styles  Actual  By way o f  coordinator  of  handles  items  considerable the  industry price  5 8  the  received  almost  those  b o t h make and h i g h l y  example, a  total  one  between  soup s p o o n s ,  various teaspoons  i s a f a r greater  of  were a r o u n d  and r e f l e c t s ,  until  themselves,  these.  The  f o r members t o r e g i s t e r  variety  any  q u a l i t y of s t e e l Up  5 9  at  and  variety  (e.g.,  each  13,000  in  style  one  local  distinct  i s , of  variety industry flatware designs  course,  in distributing  time.  5 9  among o t h e r  even  wholesaler/production  o f 4,000 i t e m s w i t h a s t a f f  p e o p l e and i s a c t i v e l y i n v o l v e d these  firms,  functional  o p e r a t e s a program  5 8  small  and f i r m s .  some  d e s i g n s and i n 1980 t h e r e registered.  i s due i n no  of t h e p r o d u c t i o n  spoons, e t c . ) ; t h e r e  t h e q u a l i t y and  association  This  D e s i g n , And D i s t r i b u t i o n  fork,  s p o o n s , baby  fluid.  Quality  around  variety  things,  o f 36  750 is  differences  of also in  used. latter  half  of  the  1960's,  s p e c i f i c a t i o n s of q u a l i t y , design  exclusively  from  100 o r so s m a l l  t h e Tsubame and  export  target trading  I n t e r v i e w , September, 1980. Ikeda, op. c i t . , p . 56; T h e s e t o t a l s p r o b a b l y i n c l u d e some s t a i n l e s s s t e e l hollow-wares (pots, bowls, e t c . ) i n a d d i t i o n to flatware.  84  companies  based  liason  for  i n Tokyo,  Nagoya,  foreign  buyers.  and  Osaka  The  w h o l e s a l e r / c o o r d i n a t o r s were p r i m a r i l y and  expediting  small domestic Rapid  market  through  g r o w t h and  industry  came t o t h e a t t e n t i o n  markets  who  foreign  and  insertion  of  particularly absence  lines.  easy  o f any  This industry  turned  have  local  to shorten  been  its  a corporate identity  the  industry.  t h e end range;  of  the  and  from  s c h o o l s , t o the  p r o d u c t s of the  as a s o u r c e of with  the  supply  producers.  Tsubame  a  as  i n the  lower  European into  supplier price  range  countries,  and of of the "was  manufacturers  because  of  the  labelling  requirements. for  channels  the  within  the to  to  This,  in  to a r a t i o n a l i z a t i o n  producing  utility-grades  famous w e s t e r n  major  industry  those markets.  d i d not h a p p e n .  lower  Tsubame  the  f i r m s i n the  to lead  this  the  foreign  line  f o r some of  large,  in  the  product  1960's, Tsubame was  running  l u n c h r o o m s and quality  By  In p a r t i c u l a r ,  opportunity  have been e x p e c t e d  markets  i n Germany,  distribution  establish  could  and  the  the  an  markets  foreign  s u c h as WMF,  of  "country-of-origin"  could  ties  items  overseas  turn,  to  In t h e c a s e  f o r the  1960's.  items  Japanese-made  forwarding  of w h o l e s a l e r s b a s e d  more d i r e c t  as  wholesalers.  l o o k e d t o Japan  higher-grade)  product  the  manufacturers  i n t h e U.S.A.,  (mediumtheir  increasingly  to e s t a b l i s h  Ultimately, Oneida,  during  in  in servicing  i n c r e a s e d p e n e t r a t i o n of  changes  acted  sanchi-based  involved  urban-based  some  sought  local  o r d e r s f o r t h e s e e x p o r t e r s and  induced  and  which  reaches  a  Certainly, wider  found of  of by  quality  in  factory  the  premium  manufacturers.  85  Practically under as  a l l  of t h i s  production  was,  however,  t h e b r a n d names of w e s t e r n p r o d u c e r s and  unbranded,  utility-grade,  the t r a d i t i o n a l increasingly, alone  western  product.  industries  matching  their  distributors  Thus, w h i l e  in quantitative  quality  as  marketed  surpassing  terms  well);  or  (and,  6 0  Tsubame, l e t  i t s m a n u f a c t u r e r s , r e m a i n e d unknown t o t h e f i n a l  users  of  i t s product. Thus,  Tsubame e n t e r e d  but w i t h a s t r u c t u r e little for  changed  this  with  lack  from  to  1970's as a much l a r g e r  of p r o d u c t i o n that  of change  respect  the  the  was  and  of t h e e a r l y t h e impact  overwhelmingly  distribution 1960's. of  the  industry that  A major quotas  dominant  was  reason imposed  U.S.A.  export  market. 1.3.3  Quotas By  under The the  the a  1956,  U.S.A.  vigourously  MITI  t o o k an that  precedent  was  thrown  for protection.  U.S.A. for  steel  home market  intense  interest  imposition  other  and  Structure  t o t h e U.S.A.  stainless  of t h e i r  exports to that  6 0  dozen  industry  inundation  fear  Tsubame's I n d u s t r i a l  Tsubame's e x p o r t s  6 million  lobbied and  And  knives,  amounted t o forks,  into a state by  Japanese  spoons.  of n e a r p a n i c producers  The J a p a n e s e F o r e i g n in these p r o t e s t s  of import r e s t r a i n t s  more  and  nationally  just  by and  Office  b e c a u s e of would  crucial  set  Japanese  market.  Chusho K i g y o K i n y u Geppo , op. c i t . (1979, 1-6) claims the following 1979 p r o d u c t i o n c a p a c i t i e s , i n m i l l i o n d o z e n ; U.S.A., 12.0; West Germany, 2.5; J a p a n , 75.0; K o r e a , 37.1; and Taiwan, 13.6.  86  In export the  1957, i n an adjustment  today.  year  While MITI's production  quota  initial  quotas  distribution  for  industry of MITI  system with impulse  evolved  i t was d e c i d e d  of  establish market.  a simple  system of  i t had n o t r e c k o n e d  Tsubame's  As p r e v i o u s l y  to  the  persists  t o t h e U.S.A.  market,  an  in  a s s o c i a t i o n which  was t o e s t a b l i s h  complexity  action,  t h e . p r o v i s i o n s of  this  respect  f o r t h e U.S.A.  involved  distribution involved  the  be t e r m e d  "subcontractors".  production  indicated,  the  on and  structure  present,  those  in  firms  t h i n g s , the f i n a l  "manufacturers"; the  can  between  production packaging  consider  production  dichotomy  side to d i s t i n g u i s h  i n moving o r d e r s  and  actual  A similar  whose  be  process formed  "wholesalers",  i n t o and p r o d u c t  out  of  At  t o t h e U.S.A. the time  the  manufacturers manufacturers, locally,  to  they  as  on  the  who a r e sanchi, of the  market.  of e s t a b l i s h m e n t  subcontractors  of  a l l other  " e x p o r t e r s " , who manage t h e a c t u a l s a l e and s h i p m e n t  product  6 1  and  6 1  encompass, among o t h e r  product  firms  some  U.S.A.  and i s , complex.  activities  and  forestall  Law  the  systems.  Let,  the  into  structural  was,  Trading  Under t h e d i r e c t i o n  self-imposed  the  to  c o o p e r a t i v e was f o r m e d under  Export-Import  following  a  effort  who  were,  dealt  t h e r e were some wholesalers,  as  of t h e quota in  fact,  with. who  system  larger  Moreover, disposed  of  there than  the  among  the  their  w e l l a s o t h e r s who s h i p p e d  Yushutsunyu Torihiki-ho; Section Rokuho (MITI, Tokyo, 1980) p 127.  3,  Article  were  output their  5: s e e , Tsusho  87  output  to  exporters  in  manufacturers  apparently  direct  to  exports  buyers  distribution  side,  intermediated  between  exporters  in  export  activities  there  were  itself.  variety.  It  firms  that  spectrum  Thus, in  the  power  participants' the  meet  participants variety.  one  exporting.  firms a  the  were  full  with  pure no  a  c o n t r i b u t i o n s to Clearly, of  the  three  parallel  general  9.  complement  production,  the  As  the  diagram  product of  were  across  the  production,  direct  totally  of  in this  very  few  entire  quotas  solely  shift  in  not  previous  development  system  to  pick  was  to  existing  reflect  quota  of  reflect  that of  their  systems  were  (wholesaling), these  indicates, to  the  exporting.  shipping  needed  and  i t would  have  functioning  the  involvement  majority  event,  The  exporters,  there  any  would  for  in  of  addition,  tremendous  the  on  and  In  vested  Moreover,  demands  too,  engaged  to  that  create  market.  amount  g r a p h i c a l l y some that  the  wholesalers  direct  market  involved,  entitlements.  were  system  So  sanchi.  U.S.A.  each  in Figure  a  would  the  i n the  In  established;  indicated  export  the  also  distribution  prosperity.  relative  existing  equitably  and  and  of  limited  pure  activities  to  of  subcontractors)  notable  their  imposition  as  (or  illustrates  particularly  manufacturing  the  who  few  market.  others  t r a d i n g , and 8  in a  simply  within  firms  Figure  Some  U.S.A..  while  base  "manufacturers"  relative  of  a  integrated  from  the  cities,  from  is  engaged  manufacturers  in export  Tsubame,  even  acted  urban-based  specialized  cities.  in  some  port  port  up  shipping,  systems  however along and  is  many  the  way  export  88 Figure  8  - Variety  in Participants' Tsubame  Functional  Scope;  Foreign Importers  Exporters  Wholesalers  Direct Exporting  Manufacturers  Manufacturers  Sub-contractors  Source:  Compiled by author on b a s i s o f interviews a t Tsubame i n September 1980.  Figure  9 - Product D i s t r i b u t i o n Tsubame  Manufacturers Production Quotas  with  89  Under a Quota System:  Wholesalers with S h i p p i n g Quotas  90%  T r a d i n g Firms with Export Quotas  U.S.A. Importers  Distribu•s t o r s & ?Retailers  Manufacturers Subcontractors and  with Production and S h i p p i n g Quotas  Sub-industry Specialists  As  above plus E x p o r t Quotas  10%  U.S.A. (Quota 30% Manufacturers  60%  without  10%  Production  Quotas  Note: P e r c e n t a g e s  Domestic  Local Manufacturers  indicate relative  volume o f t o t a l  System)  (No Quota System)  Urban Wholesalers  Retailers  f o r e x p o r t and f o r d o m e s t i c  sales.  S o u r c e s : The p a t t e r n o f d i s t r i b u t i o n i s d e r i v e d from i n d u s t r y a s s o c i a t i o n m a t e r i a l . The p e r c e n t a g e f i g u r e s a r e e s t i m a t e s based on t h e v a r i o u s (and sometimes c o n f l i c t i n g ) s t u d i e s r e f e r e n c e d i n the t e x t .  90  The industry export 1959  initial was  5.9  quota  which,  level  of quotas  million  system,  except  s e t i n 1957 w i t h i n  dozen.  the  Despite  U.S.A.  1971  revised  from t i m e t o t i m e , t h e n s e t t h e s t a n d a r d  quota by  system a p p l i e d  a  40%  The existing  and  t o normal  s e t by f o r e i g n  inclusive,  c o u n t r i e s , and to  was c o o r d i n a t e d .  which  The U.S.A.  6 2  t a b l e w a r e and was  duties  the  sanctioned  on a l l i m p o r t s above t h e  (a " t a r i f f - q u o t a " ) .  Japanese  quota  structures  the system  time,  system  to low-priced  surcharge  q u o t a maximum  be  quota  quotas  to  until  Japanese  The  1966  self-imposed  import quotas i n  lasted  domestic  1975.  this  d i d impose  f o r t h e y e a r s from  the Japanese  to i n h i b i t  which  of p r o d u c t i o n  of d i r e c t  however,  system,  relevance  the  pre-  and d i s t r i b u t i o n ,  continued to  f o r the i n d u s t r y .  A t t h e same  i t served to freeze any f u n d a m e n t a l  was m o d e l l e d on  these s t r u c t u r e s  reorganization  into  place  of t h e i n d u s t r y .  1.3.4 Summary Tsubame's development  of  agricultural  workforce.  of  small-scale  rural  development  industry  trading  example  i n r e s p o n s e t o an  companies  i t s potential  In t h i s  way, Tsubame was a b l e i n which  i s a good  of  by p r o v i d i n g  i t would  enabled a link  Tsubame  with foreign  t o be s u c c e s s f u l  the  underemployed  I n t h e modern e r a , t h e J a p a n e s e  expand  i n markets  6 2  industrial  to  network vastly  markets.  i n a product  o t h e r w i s e have n e v e r been  and  involved.  F o l l o w i n g t h e U.S.A., q u o t a s were imposed by many o t h e r W e s t e r n countries including; Canada, France, Italy, t h e U.K., t h e B e n e l u x c o u n t r i e s , Norway, West Germany, Denmark, and G r e e c e . ( J a p a n M e t a l F l a t w a r e I n d u s t r y A s s o c i a t i o n , u n d a t e d mimeo.).  91  The  highly  tradition been  disaggregated  of  small-scale  supported  government's maintain  in  low-cost  Tsubame f l a t w a r e  It  to  production  petty  respect  to the  system  displayed  variations wide  number of  firms  parts  the  Thus,  in  the  in  attributable  petty  with  to  which  to  the  of  investment  high  conditions the  low-cost  labour  which  in later  years,  was  from t h a t  flatware  degree  lot  i t c e r t a i n advantages.  of and  size  industry, resiliency  flexibility of  partially  system  s y s t e m s was postwar  of  in coping This  presence  without  success  have been e x p e c t e d the the  g r o w t h and 1960's.  the the  The  of  of  on  latter  of a  the  attests.  various  the  that  quota  petty  industry. and  strengths;  Nevertheless,  to undergo c o n s i d e r a b l e  fact  large  production  considerable  opportunities  imposition effect  dependent  presented  i t d i d not systems  institutionalizing  in  to  with  l a r g e number of  disaggregated  not  the  in reacting  t o the  were o n l y  With  itself,  orders.  i n l a r g e measure t o the  was able  same g r o u p .  system and  1950's w h i c h had  served  capital  production  to  national  farmers  in coordinating  of  a  undoubtedly  has  explicitly  the  face  This  from  the  involved  might  industry  utilization  a  due  w h i c h Tsubame's system  by  small-scale  i n a g r i c u l t u r e and,  in  who  distribution  has  period  prices.  and  evolved  but  under-employed  stainless steel  was  participants  of  capital  variations  of  rice  system brought  in business  flexibility  industry  postwar  labour  the  employed  attract  system  industry.  facilitated  partially  of  population  contribute  This  cottage the  support  a  production  to the  change to  the  is largely the  late  the s t r u c t u r a l  92  status  quo.  existing  The  structures  unprecedented they to  could  face  2.  successes  i n the  the  environmental competition  changes,  together  2.1  Environmental  rural  result, have  time, a  members wage new,  size  has  level  for  municipalities  pre-  cope  with  evident  that  industry  came  NIC  and  advent  threatened  the  of  Figure  and  the  more  have  Tsubame  COMPETITION  international of  the  formidable  prosperity, i f  flatware  industry.  of  the  steadily the  industrialization  10). new  less  More  Joetsu  of  and  the  risen.  the  for  their  A l l this  areas upon  has The may the  the  high-speed  location.  labour  there  into  "bullet  as  train" As  other  the  same  workforce  of  its  tended  to  a  Tsubame,  from At  agricultural age  o'ut  such  was  but  a  regions.  industry.  dependent  recently,  industry,  average  rural  activity  Shinkansen  competition into  heartland,  industrial  rural  underemployed  flatware in  industrial  attractive  moved  decrease  industries  the  initial  increasing  steady  the  ASIAN  pre-existing industrial  even  which  the  changes  these  to  less  domestic  with  of  p r e - e x i s t i n g pockets  industries  able  I t was  of  NICs,  diffusion  highway an  Asian  Japan,  i n the  faced  large,  that  Change  steady  make T s u b a m e  suggest  ADVENT OF  number  existence,  h i n t e r l a n d (see  national  shown  the  postwar  a  THE  a  continued  been  and  environmental  1970's,  the  has  the  CHANGE AND  from  concentrated  by  1960's  1970's.  not  In  the  opportunities.  with  ENVIRONMENTAL  In  were,  growth  cope  of  has  remaining bid  up  addition  of  other,  also  made  have  traditional  the  local local  Figure  10  -  Changing R e g i o n a l C o n t r i b u t i o n s Industrialization  to  Japanese  Note The shaded a r e a s r e p r e s e n t r e g i o n s ( p r e f e c t u r e s ) w h i c h i n c r e a s e d t h e i r s h a r e of the n a t i o n a l i n d u s t r i a l w o r k f o r c e i n each p e r i o d . Source Osono, e t a l , Chiho no J i d a i to Kogyo no S a i h a i c h i (Toyo K e i z a i S h i n p o s h a , Tokyo, 1980).  94  industry  and,  thus,  diseconomies they Tsubame, and,  the  with  imposed  industry  i n the l a t t e r  government  were  change.  The  undertook  faced  undoubted  rates  steel  Community  introduced  Japan's exposure  dollar  and  revaluation  of the  pegged  a  to  fixed  J a p a n e s e Yen p e r U.S. government p l a c e d the  rate  currencies)  which  rose  of  LDC  which  the  considerably.  U.S.A.  the  i n 1972  in  already For  Economic and t h u s  6 3  from t h e LDCs. the  link  had,  between for  the  an upward  hitherto,  t h e U.S.A.  In F e b r u a r y ,  t h e Yen o n t o a f l o a t i n g  vis-a-vis  1970's,  manufactures.  increased  exchange r a t e w i t h Dollar).  the  to their  and t h e E u r o p e a n  broke  pressure  Japan,  easier access  preferences  Yen;  environmental  increased  to competition  Japanese  associated  including  resulted,  t h e U.S.A.  gold,  from  i n t e r n a t i o n a l environmental  This  administration  costs  pressures  local  countries,  such t a r i f f  in  o f t h e town.  these  than  tariff  flatware,  When t h e N i x o n U.S.A.  strong  price-competitiveness  stainless  Certainly,  1960's,  1960's t o p r o v i d e  of  external  i n c r e a s i n g labour  impact,  f o r LDC m a n u f a c t u r e s .  increased  community.  v i b r a t i o n , and t r a f f i c  important  the late  any  steadily  industrialized  in  considerable  6 3  the  towards  out of the c e n t r a l areas  less  preferential  and  upon  h a l f of t h e  a l l their  changes  markets  indulgent  t o move t h e n o i s e ,  production For  less  been  d o l l a r (360  1973, t h e J a p a n e s e  exchange dollar  rate  basis  ( a n d most  T h i s had t h e e f f e c t  of  other  further  T h e s e were s u b j e c t , however, t o r e s t r i c t i v e volume quotas so t h a t t h e p r e f e r e n t i a l t a r i f f s a p p l i e d o n l y t o 15% o r so o f t o t a l LDC e x p o r t s o f f l a t w a r e t o t h o s e m a r k e t s .  95  increasing export  the  markets  relative price The  o f Tsubame's o u t p u t  immediate  impact  of  this  i n t h e major  was  modulated  quotas  i n 1971.  somewhat by t h e U.S.A.'s r e - i m p o s i t i o n  of import  This  was a c o u n t r y - b a s e d  with a global  Japan  was awarded  ultimate  impact  product, more  of  system  the  global  amount.  of the i n c r e a s e d r e l a t i v e p r i c e  when t h e U.S.A.  dramatic  rapidly  70%  quota  as  removed q u o t a s  new  c a p t u r e d market  low-cost share  from  However,  in  the Japanese  the  of t h e J a p a n e s e  i n 1975,  producers  maximum and  was  a l l the  t h e A s i a n NICs industry.  2.2 The Advent Of LDC C o m p e t i t i o n  Japan's stainless to  steel  42%. " 6  attributable industries presents flatware  majority i n share  Taiwan  industries  and,  of  of  this  especially, for  Japan,  the  Korea,  i s that  market  for  1970 and 1976, from 69% loss  by t h e s t a i n l e s s  data  t h e most dynamic  exports  but r a p i d l y  1978.  6 5  to gains  between  import  of  share  steel  was  flatware  South  Korea.  Table 9  major  firms  i n the  and  of S o u t h  Taiwan. Korea,  Of t h e s e the  low-  producer.  million  6  vast  some c o m p a r a t i v e  Korean 1970  (by v a l u e ) o f t h e U.S.A. flatware f e l l ,  The  of  industries, cost  share  6 5  in  o f f l a t w a r e amounted t o o n l y $430,000.  rose i n value  1976,  The K o r e a n  $116 share  to  million  $40 in  million  in  1975,  in $75  1977, and $127 m i l l i o n i n  i n i t s major market,  t h e U.S.A., showed  * C h i h o J i s e i Geppo ( M i n i s t r y o f F i n a n c e , Kanto Office; Tokyo, August 1978) p 11. Kankoku n i O k e r u K i n z o k u Y o s h o k k i Sangyo [ l i m i t e d d i s t r i b u t i o n ] (JETRO, Tokyo, 1979) p 4.  Table 9 - C o m p a r i s o n of M a j o r F i r m s i n t h e F l a t w a r e I n d u s t r i e s o f J a p a n , K o r e a , and Taiwan; c i r c a 1974-75  97  similarly  rapid  The  Korean  exclusively flatware  on  sold  competing  No.  18-8  has  of  the  The  1978  the  there 116  important  firms a  firms  part  of  6 8  the  average  engage  of  50  No.  was  18  and  It  was  from J a p a n in  the  but  latter  procurement  suppliers in  from  firm.  f i r m s and This  6 8  industry  seven K o r e a n  in l i t t l e  entirely  e n a b l e s them t o p u r c h a s e  6 7  somewhat  that  and West  of  even  or no  in-house.  firm  firms are  we  stainless steel  times the  f i r m s which  form  As  the  even  subcontracting size  ten  an  ignore  preceding larger  than  firm.  The  employees per  The  by  size.  t h e y employed  if  there.  1,000  i n Japan  i s more t h a n  cottage-based metal-polishing  an  it  flatware.  foreign  i n Tsubame;  and  almost  (e.g.,  a much l a r g e r a v e r a g e  total  this  production  6 6  and  top  firms  grade  is distinguished  i n d i c a t e d , the  Korean  however,  in domestic  lower-cost,  table  have  steel)  13 Chrome  stainless steel  increase  employees per  of  No.  s e t s of  dependence  an  industry  of  of  almost  67  were  size  number  s u c h an  U.K.  boxed  concentrated  time,  for higher and  this  (e.g.,  a short  imports  to other,  the  average  large  upon  number of  a v e r a g e of  Within  1970's w i t h  Korean  smaller  low-grade  flatware  6 6  initially  market  reduced  shift  Germany and  In  i n the  dependent  a partial  a  producing  steel)  apparently  half  industry  in bulk.  also  highly  growth.  of  supplies  and the  carry firms  directly  out also from  The n u m e r i c a l d e s i g n a t i o n s i n d i c a t e t h e p e r c e n t a g e s of chromium and nickel in the steel. Thus, No. 18-8 s t e e l c o n t a i n s 18% chromium and 8% n i c k e l . The t o p - g r a d e of f l a t w a r e u s e s No. 188 o r No. 18-10 steel. ibid. . pp 6-7. JETRO, Kankoku p 6.  98  the  manufacturers  foreign  buyers.  Despite to  utilize  Tsubame single  their  vastly  about  the  firm.  may  The  some  analysis Korean  in  the Korean Whatever  Korea's  indicated one  in  identical cheaper  6 9 7 0 7 1  7 2 7 3  have  i s only  even  (and  than the Japanese  after  of a r o u n d  Korean  article  p r o d u c t and  in labour  t h e low-wage  t h e a v e r a g e wage in Tsubame. sources  a major  preceding  15% b u t , by way has  of  suggested that, may  more  considerable  including  producers exhibit  representative the  Much  advantage  The  and  t o e x p o r t markets  figures),  markets.  of a  materials,  o n e - q u a r t e r of t h a t  the Korean  advantage  product,  that,  as i n  centralized  firms.  a distinct  appear  the c o n f i n e s  importance of the v a r i o u s  international  By t h e l a t e  with  technology  within  Korean  inflation  the r e l a t i v e  industry  to  firms  organization,  i n the Japanese  industry  German p r o d u c t .  and  of d i s t r i b u t i o n  indicates  firms  a cost  Japanese  they  wage  lower c o s t s ,  advantage  production  advantages  costs.  metal-polishing  directly  the Korean  equipment  channels  however,  post-1973  deal  l a r g e - v o l u m e , b u y i n g of raw  certainly, One  same  size,  "assembly-line"  shorter  afford  typically  greater  so v i a l i n e  management, d i r e c t , relatively  they  7 0  but do  71  and  6 9  72  of  price table  example, f o r the  be as much as  85% c h e a p e r t h a n t h e  40% West  7 3  1970's,  further  wage i n f l a t i o n ,  and p r o b l e m s i n  C h u s h o k i g y o K i n y u Koko Geppo 1979, 1-6, p 39. JETRO , 0__ c i t . pp 24-48. "Kankoku no O i a g e t o Tsubame S a n c h i no Taio" i n , Chushokigyo K i n y u Koko Geppo 1979, 1-6 ( C h u s h o k i g y o K i n y u Koko, Tokyo) p 39. ibid, p 37. K a i g a i S h i j o 1980 No. 9, (JETRO, Tokyo) p 56.  99  meeting  delivery  industry's reverted Tsubame  competitiveness to  Tsubame  industry  had p e a k e d the  difficulties  the  Korean  any  has  were  seem  their  existing  exchange  rate  level.  r e c o u p e d much  case, other  Korean  improved. The  had i n the  industry  v i a b i l i t y of In f a c t ,  7 5  Korean  such  producers'  s c h e d u l e s were a r e f l e c t i o n o f production  capacities  overcome.  for flatware pegged  Subsequent  LDC  the  f o r the continued  was  potential  i t s customers  that  easily  of t h e i r  eroded the Korean  Some p a r t i c i p a n t s  warranted.  is relatively  high  of  thereby  i n K o r e a was a p r o b l e m  artificially Won  as a s i g n  i n meeting d e l i v e r y  of problem  inflation  some  the prospects  not  orders overtaking sort  and  apparently  7  industry  does  had  as a s u p p l i e r . "  took t h i s  and t h a t  Tsubame  optimism  schedules,  at  wage  producers  because  what came  t o be an  of  advantage.  competitors  this  Similarly,  devaluation  price  and  the  Korean  There a r e , i n  for  the  Japanese  industry. In and  reality,  outside  participants eliminated adjustment  7  "  7 5  the m a j o r i t y  of  the  i n the by  industry,  Tsubame  external  within  of Japanese  Tsubame,  felt  flatware  events  and  observers, that  the  industry could  only  both  inside  problems  would  not  of be  be r e s o l v e d by  itself.  C h u s h o k i g y o K i n y u Koko Geppo 1979, 1-6, p 45. I n t e r v i e w s i n Tsubame, September, 1980. See a l s o ,  ibid.  p 45.  1 00  2.3 A d j u s t m e n t To A s i a n  NIC C o m p e t i t i o n  The l o n g - e s t a b l i s h e d  compete w i t h flatware  industry U.S.A.  l i n e s which c o n s t i t u t e  capacity,  industry a  have come  to  own  produced  by  1974.  be  production inability  i n t h e l o w e r - a n d mediumthe  bulk  of  the  was a l r e a d y ,  in  to  the  order  and o n e - h a l f  i n terms of  times the s i z e of  on  largely  a  few,  the  domestic or r e g i o n a l  o f - medium-priced  lines  i n E a s t A s i a ; and i n t h e d e s i g n ,  highly competitive.  U.K.  smaller  volumes  and  of  these s t r o n g h o l d s of c o m p e t i t i v e  companies s a l e , under  of  flatware  production,  higher  priced,  In these  West German i n d u s t r i e s  Thus, t h e c o l l a p s e  by a r a p i d l y i n c r e a s i n g  the  countries  well-known,  l i n e s of s t a i n l e s s s t e e l f l a t w a r e .  lines,  total  7 6  centered  brand-names,  prestigious,  lost  in  e i g h t e e n t i m e s t h e s i z e o f t h e West German  i n t e r n a t i o n a l s a l e of  priced  decline  consequence, the i n d u s t r i e s i n the western  specializing  and  the Japanese i n d u s t r y  a n d more t h a n t h r e e  As  their  postwar  In f a c t , the Japanese i n d u s t r y  production  higher  remained  of the i n d u s t r i e s around  strength  export-orientation  has  been  accompanied  a s t h e p r o d u c e r s have  t h e i r mass m a r k e t s , e v e n d o m e s t i c a l l y ,  t h e i r dominance i n e x p o r t markets f o r h i g h e r  7 7  have  Much o f t h i s d e c l i n e was a t t r i b u t a b l e t o an  market.  7 6  t h e U.S.A.  capacity.  of  and  such  a  period  Germany,  in  undergone  long  West  industries  as  price  U.K.,  flatware  countries  to  the  metal  b u t have m a i n t a i n e d priced  flatware.  7 7  C h u s h o K i g y o K i n y u Koko Geppo 1979, 1-6, p 37. F o r West Germany see, i b i d . ; f o r t h e U.K. see,"Eikoku Sheffield no K a n a m o n o / K i n z o k u Y o s h o k k i S a n c h i " i n , K a i g a i S h i j o Sept. 1980, p 36.  101  In  this  sense,  adjustment, of  albeit  and  be  at greatly  advent,  Taiwan as  greater  said  reduced  i n the l a t e  t h e new  threat,  t h e major  industry  t o have made a volume, t o  therefore,  then  underlay  attained  their  Asian  industry, the  While respect  to  strategies  on  any  successful  the  challenge  any  Japanese of  world  solely  by  means  cost  was  advantages industry  the  in  Japanese  f a c e d t h e need t o a d j u s t t o Not  surprisingly,  been t h e dominant  specific  adjustment  topic  in  the the  of p r i c e  p r o p o s a l s have been made w i t h  problem,  Revival  2.  Shift  3.  Move t o h i g h e r - g r a d e  4.  M i g r a t i o n t o new  analytic  those  1970's t o t h e p r e s e n t .  1.  Following  it  a  share  growth of the  environment.  seem t o u n d e r l y most  of  almost  to  the  single  Korea  posed  than  did  those  Thus,  o t h e r , which  number of  the  i n Japan  largest  and  1970's, of  flatware  only  precisely  c o m p e t i t i o n has the e a r l y  of  position  development  competitive  from  that  competitors.  more t h a n  o f LDC  industry  their  NIC  changed  problem  the  Not  f o r the  p r i c e - c o m p e t i t i o n based  that  early  to producers  nations.  account  i t had  1960's and  low-cost producers  consumer  by  production, of  could  low-cost Asian p r o d u c t i o n . The  in  they  four  of them.  major  adjustment  These a r e ;  competitiveness  markets  discussion  businesses  of  framework o u t l i n e d  effectiveness  and  lines  each  of  earlier,  these  strategies,  consideration  interrelationships.  is  using  the  given  to  1 02  3.  REVIVAL  This  OF  is  competitive of  focussed  end  on  revival-oriented  of  the  change  no  Japanese dominance  flatware  trade  and  change  i n the  strategy  of  market  that  Tsubame's  in product  "Production"  in  aimed the  price-  accounts  f o r the  production.  category  or  functional  at  style  The and i s  area.  Sales  importer  however,  been  some  effort  to  c u t t i n g out middlemen  importers f o r goods  companies .export  has  by  overseas  or and  .quota  reduce  and  a  full  that  s e t of  the  dealing  manufacturers. countries  which possess  price  more  This  production,  the  directly  i s only  a r e n o t on  to  with  possible,  a quota,  or f o r  shipping,  and  entitlements.  Production  -area  of major This  this  is  change the  strategy.  Methods 3.2.1  a  maintaining  involves  There  3.2  and  international  strategy  3.1  COMPETITIVENESS  inherently  restablishing  bulk  PRICE  and  functional  Attention  is  area  o f most  focussed  on  importance f o r the  facets  of  Organization.  Methods  i.  Appropriate  Quality  There  was  a  competitors  were  often  taking  that  not  only  of  lower  other  way,  were  quality.  Put  the  general  perception market cost this  that  share  Tsubame's  with  but a l s o  of  suggested  goods lower that  1 03  Tsubame's were  producers  of  excessively  markets. quality  were  As and  there  costs  high is  of  more  methods but  so  did  to  not  quality  a  fairly  might  attention  as  o f f e r i n g goods  to  produce  exceed-  particular link  improved  whose  between  by  of  quality  demands  that  appeared  fine-tuning  lots  the  it  be  a  for  direct  production,  price-competitiveness devoting  often  of  that simply  production just  the  met  -  relevant  ma r k e t s . i i .  Lower  Quality/Cost The  success  suggested  up  the  abandoned,  producing  much  The  NIC  at  their  the  lowest,  may  of  practices (and  (and have  to  introduction  quality  also  levels  appropriate  production  lower  producers  quality  levels  required  cost)  some new,  or  aimed  at  flatware.  included:  s u b s t i t u t i o n of  lower-cost  chrome-plated  steel  for  wherein  the  steel.  introduction  flatware of  beyond  previously  The  Asian  even  This  stainless •  costs),  practices  the  Tsubame's  markets.  These •  of  that  concomitant crept  Production  of  is polished  abrasive  powder  "tumble-polishing"  only  by  being  tumbled  (much  as  amateur  in  a  barrel  "rockhounds"  polish  gemstones). i i i .  Capital It grade  Intensification remains  flatware  an can  open be  question  as  competitively  to  whether  produced  lowerby  means  1 04  of  highly  The  capital-intensive  Korean  industry  example a s , within  while  they  large-scale  techniques are  does  not  firms,  labour-intensive  than,  those  industry  however,  a  actual  and  some  stages  production  perhaps  i n Tsubame.  made  relevant  production  their  to,  techniques.  provide  integrate  similar  has,  production  even The  more  Japanese  moves  in  this  direction. •  Introduction  of  Polishing production. polishing developed partly  a  was  the  the  c a u s e of  that  using  of  this  f o r the  volumes,  firms  i n the  in  in  Automated P r o d u c t i o n greater  mechanization  (see  was  is  mainly  was  number  of  An  piece  initial  imported  within  from  improved By  sub-industry  West  800  of  sanchi.  As  and  been a d o p t e d by  of  version  1978,  the  expensive  requires the  and  larger by  the  manufacturers. Systems  s i g n i f i c a n c e than  would  This  partly a  industry. use  the  was  below) and  a model, an  metal-polishing  semi-integrated  capacity  decline  capacity  i t has  high  of  mechanized  industry.  local  were  this  highly  decline.  as  stage  i n t o the  p o l i s h i n g equipment  high  Of  1970's,  increasingly  to  Equipment  labour-intensive  introduced  machines  larger  of  Polishing  metal-polishers  and,  equipment  •  During  response  developed  these  most  and  contributing  Germany  i s the  equipment  cottage-based  automatic  Sophisticated  be  the  the  above,  development  of  piecemeal, automated  1  production  systems  all)  of the r e q u i r e d  cost  levels.  of  tines  for forks.  by  costs  government  contribution  efforts  carried  would  for this  agencies  appear  with  by t h e i n d u s t r y ,  on p r o d u c t i v i t y  apparently further such  n o t y e t i n common  development  equipment  however, making  there  to  prove  may be few f i r m s  of  the  firms  in  contributions  r e s e a r c h and d e v e l o p m e n t  to  are covered ( s a y , 5%)  or  of e q u i p m e n t , late  underway.  effective  the  W h i l e no d i r e c t  In t h e  work was s t i l l  f o r t h e r e m a r k a b l y low  financial  iv.  use.  7 8  of  diffusion  sort  the necessary investment.  capabilities account  of t h i s  most  a nominal  of  of  edges and f o r m i n g  o f equipment  itself.  The  development  that  only  sort  t h e 1970's.  the  knife  e v i d e n c e was f o u n d a s t o t h e r a t e impact  in  on  sort  out a s e r i e s (or  to develop this  out  of s e r r a t i n g It  carry  processes at competitive  were f o c u s s e d  methods  development  production  were  efforts  automated  could  Some p a r t i a l  innovation  greatest  which  05  and  the i t  is  1970's, Even  were  economical  financially  capable of  The l i m i t e d  financial  the  level  these  industry of  may  the  also  industry  potentially  crucial  efforts,  Lower-cost Labour T h e r e was  some  suggestion  that  the  vanishing  W h i l e no d e t a i l e d i n f o r m a t i o n f o r t h i s r e c e n t d e v e l o p m e n t work was obtained, industry a s s o c i a t i o n data f o r the f i r s t h a l f of t h e 1970's shows p r o d u c t i o n t e c h n o l o g y d e v e l o p m e n t expenses of nearly o n e - h a l f m i l l i o n d o l l a r s o f w h i c h l e s s t h a n 5% was b o r n e by the industry (mimeo., Japan Metal Flatware Industry Association, [undated]).  1 06  supply  of  low-cost  opportunities Such  within  an e f f o r t  practices just  so  as  as  the  be a u g m e n t e d  the industry  might  require  to  (now  cottage-based, respect  labour  facilitate  polishing  evidence  of t h i s  up  citizens. production  participation;  pattern  labour  was  of  their  operations  to the a g r i c u l t u r a l  concrete  for senior  a revision  declining)  by o p e n i n g  of  had  diffuse, done  force.  with  However,  no  encountered.  Organi zat ion  Shift  more p r o d u c t i o n Wage  levels  among  much  lower  generally Thus,  these  latter  transferring activities pattern  to  sub-contractors. the than  firms  some  could  structure.  the  The suggested  pattern  what  i s t o be t r a n s f e r r e d .  almost  that  stages  opportunity Change  the  adjustment  this  the  tactic  must  finishing,  o f f e r e d a great  f o r cost  is  have  a  as  general  industry's i s not i n  some  already  of  deal  of the  relegated  inspection, i t was  by  production  therefore,  to subcontractors,  of Industry  There  of  However,  i n the industry  a l l but  this  costs  of t r a n s f e r , per se, but i n the nature  firms  packaging  their  Of c o u r s e ,  basis  are  manufacturers.  in-house  change,  the  the  lower  uneconomic  been  subcontractors  among  to subcontractors.  has long  central  small  not  and  evident  of a d d i t i o n a l  reduction.  Structure view be  in  that the  the very  most  important  structure  of the  1 07  industry (such but  itself.  as  i ) , above)  maintain,  the  structure. for  this  This  There view.  is  in  which  basic seem  One  contrast  seek  to extend  features  t o be is  to  two  of  the  to  of the e x i s t i n g  system  the  organizational  requirements  modify, existing  motivations  the  disadvantages presumed  or  distinct  related  measures  perceived  and t h e o t h e r of  to new  technology. •  Disadvantages The system tap  of E x i s t i n g  advantages  i n Tsubame  into  a  supply  Structure  of the t r a d i t i o n a l  lay primarily of low-cost  underemployed  agricultural  supply  labour  has  increased,  system not  of t h i s  industry a  appears  distinctly  production together led  to  a  rising  division industry  of  of the  pattern  labour  r e a p p r a i s a l . of  labour  of that  in  cost  production i t  in part,  has  on  integrated  firms.  the  This,  Tsubame,  merits  production have  As t h e  of the Korean  of  costs  to  by a n  i t s  time,  at least  large-scale  stages  and  the success  t o be b a s e d ,  within  with  force.  A t t h e same  that  ability  provided  labour  advantage  different  disaggregated  and  of  has the  social  c h a r a c t e r i z e d the  there.  Thus, in  this  unnoticed  labour  has decreased  has d i m i n i s h e d .  passed  in i t s  production  Tsubame  the t r a d i t i o n a l i s now  seen  s t r u c t u r e of  to involve  some  production considerable  108  disadvantages, -Low  (and d i f f i c u l t  to raise)  -High  levels  -High  intra-industry  -Excessive  of wastage  quality  production  productivity  within  levels  and between  transportation  managerial  monitoring  including;  costs  production  stages  costs  due  and c o o r d i n a t i n g  to  the  difficulties  production  across  of  diffuse  locations  •  Organizational Even partial  at  existing the  larger  volumes  some  (firms  considerably  larger  introduction  of  will  imperative.  capacity  is  pooling  primary  t o be  functionally integrated closely  from that  of resources of  production integrated  firms  by  moving  into  of  as  i ti s  even  more  the  financial  much  of  the  without  a  new  industry  consortia  groups  of  the  participants.  of  capable  and of the formation clusters  of the  towards  within  encouragement  distinct  into  firms)  c a n be m o d e r n i z e d  structure the  of  equipment,  unlikely  means  organizational appears  even  This  production  consolidation  of the industry  considerable The  i t  employed  Moreover,  advanced  Indeed,  perspective,  of  consortia  this  and  be e c o n o m i c a l .  size.  more make  equipment  to  or  Technology  of mechanization  newer  consolidation  organizations  developed,  o f Newer  levels  automation  requires demands  Requirements  of  of  more  subcontractors  109  around  the e x i s t i n g  Moreover, suburban  while  the  industrial  t h e g r o u n d s of the  central  town  relocation  parks  centre,  it  geographic  facilities  would  cooperative  groups.  seem  fierce  to  was  was  widely  To  have  date,  3.2.3  justified  on  disruption  in  easy  hoped t h a t and  formation  transition  of  of  such  this  commonly o c c u r r e d . c o m p e t i t i o n and  the  shared  however,  i n d e p e n d e n c e among t h e owners an  the  proximity the  firms.  firms into  largely  encourage  intra-industry  inhibit  of  reducing environmental  resulting  not  manufacturing  does  D e c a d e s of  a  deep-seated  firms  seems  to  to c o o p e r a t i o n .  Other There  i n t o any i.  are  of  two  important  tactics  t h e c a t e g o r i e s i n our  Reduction  i n the Cost  Stainless 50%  of  flatware were prices  to  producers, industry  the  Steel  in i t s e l f ,  accounts  flatware  their  customers,  of  producers  that  such  the and as  costs.  steel  but  it  was  steel not  had  until made a  West German s t a i n l e s s granted a p r i c e  producers  Korean  suppliers  for  reduction.  The  flatware  a  1978,  cooperative steel,  lower  market.  November  that  to The  charging  i n t h e more c o m p e t i t i v e e x p o r t  flatware producers  import  for close  production  markets  negotiated with  reduction  f i t easily  framework.  industry firms f e l t  segmenting  not  of S t a i n l e s s  steel,  Tsubame's  w h i c h do  The price after  direct domestic  r e d u c t i o n of  1 10  10%  in s t e e l  p r i c e s was  approximately ii.  Reduction  was  adjustment operating  out  yet  had  their  their  income.  paid  to  cases  reduced  effect price  i n the of  d r o v e many of  the  a 23%  those  unskilled,  or  employment and  on  f o r some or a l l of 30%  t o 50%  in  rates,  uncommon and  i n some  of  average  the  term,  local  this  undoubtedly  manufacturing i n the  costs  medium  and  term,  i s the  employed and decrease  i n the  into  i n the  number of  retirement.  p r i m e example  between  low  1970  number of  where  and  1977  f i r m s and  a  employees.  MARKETS  strategy  is  premised  markets  a competitive of  from  of  cottage-based  industry  participants  was  new  burden  o n e r o u s w o r k i n g c o n d i t i o n s , and  was  NEW  it  reducing  tactic  SHIFT TO  in  short  this  decrease  the  were not  p o l i s h i n g sub-industry  31%  on  of  The  there  o l d , too  competitiveness;  hours,  costs,  -especially  These  incomes t o o n e - h a l f  the  pay  too  Reductions  While,  the  obtain alternative  subcontractors  long  of  homes.  investment  less.  the  shift  own  an  Costs  come t o depend  capital  production  subcontractors  to e a s i l y  improving  basis  of  isolated  had  the  the  too  or  develop,  onto  to t r a n s l a t e i n t o  in total  major  were o f t e n  their  potential  a  subcontractors  and  This  reduction  in Subcontracting  There  4.  5%  estimated  on  the  idea  that  i n which Japanese producers advantage over  superior  information  lower  cost  regarding  both  there h a v e , or  producers the  are can on  needs of  111  those  markets  essence, style 4.1  and f o c u s e s  relevant  involves  on c h a n g e  distribution  no c h a n g e  i n the sales  channels.  i n product  In  category  or  function.  Function  -area  of major  change  Location  The newly  the  the strategy  Sales  4.1.1  and  strategy  emerging  i s aimed  foreign  a t two g e o g r a p h i c a l l y  markets  and  the  distinct  domestic,  areas;  Japanese,  market. i.  Newly  Emerging The  which  prime  this  Mid-East are  the  for i i .  and  as  low-cost,  distinction  where  the emphasis  the  where  importance.  In e i t h e r  is  much  than  of  comparable  believed size  of  activity.  market  on p r i c e style  case,  population.  flatware  is likely  t o be  felt,  there  be  and q u a l i t y  the size  is  market  however,  and  are also  of the market  not  country generally  increase  through that  a  market,  i n a Western It  is  and u t i l i t y ,  to significantly  the i n s t i t u t i o n a l is  metal  the  markets  the i n s t i t u t i o n a l  i t would  t o be p o s s i b l e  It  i n these  countries,  i s purely  of  smaller  are in  Market  between  household market,  markets f o r  flatware.  i n the western  major  relevance  vis-a-vis  of the p o t e n t i a l  Japanese  emerging  The c u s t o m e r s  discriminating  low-grade,  Here,  of newly  h a s h a d some  Africa.  bulk  The D o m e s t i c  Markets  examples  strategy  not very  and  Foreign  the  promotional there  is  a  11 2  potentially 4.1.2  much  larger  household  market.  Organization  i.  Emerging  Foreign  The date,  only  are  suggests,  serious  those  examples  markets  The a p p r o a c h  not  involved  into  the areas  It  has,  in  the  and  government  organizations  markets  for  organizations  and  of  has thus f a r capacity  distribution.  the  a  greater  intelligence-  capabilities  JETRO  and  of d e a l i n g  of  with  of  information  Japanese  trade  novel  edge  over  i s to  , p e r s e , b u t by a  i n t h e network  such  these  the competitive  government  this  developing  involved  i n market  in  and  to  be  hoped  promotion  of p r i v a t e  Japanese  companies.  The Domestic As  as  n o t by t h e i n d u s t r y  superiority  trading  sales  Thus,  competitors  As  of the i n d u s t r y ' s  past  capable  the  markets  promotion  for flatware.  lower-cost provided  trade  companies  in  apparently  gathering  trading  are  of downstream  than  markets,  and A f r i c a .  t o these  the extension  however,  utilization  of r e l e v a n t  i n the Mid-East  the l i k e l y  countries.  i i .  Markets  Japanese  we  have  institutional significant  Market  already  market  growth  does  indicated, not o f f e r  and i n d u s t r y  the  household  this  has l e d t o the i n c o r p o r a t i o n  association  market  hopes  (and  some  for flatware.  individual  the much  domestic  prospect  are centered  of on  Organizationally  into  the  firms)  industry of  retail  11 3  sales  promotion  and  extended  domestic  distribution  capabilities. 4.1.3  Method  i.  Emerging  Foreign  No  fundamental  involved.  The  however,  new  appropriate  i n the method  geographic  industry  i n trade  promotion  prepare  change  novel  that  participation trade  Markets  and  shows  focus  and government  initiated  involve  literature  and  display  novel  mean,  corporate  c a n now  the  does  occasional  activities  to  of s a l e s i s  cultural  t h e need  to  materials  and  linguistic  environments. i i .  Domestic  Japanese  The market  major  problem  for flatware  affluent cuisine  favour  to expensive,  the  most been  a  Japanese  diet  during  of  Western some  cultures.  prospect  through  a  of  people  from  as  an  disposable  chopsticks  of developing effort  period  material  to  as  There  has,  of  the  and a  high  aspects  therefore,that  a larger  such  suitable  westernization  the  eating  countries  postwar  are  and the n a t i v e  occasions.  the to  household  low-grade  high-grade,  I t appears,  concerted  custom  from  dramatic  receptivity  the  chopsticks  imported  elegant  however,  degree  of  Japanese  while  both  range  (now m a i n l y  the  that,  the use  These  chopsticks Taiwan)  is  of  and cosmopolitan,  utensil.  for  Market  there  household  popularize  of is  market metal  11 4  flatware the  a s an a d d i t i o n  traditional These  the  women's  in  housewares.  usually  much  shipments  than  design  within  more does  the  to  the  to  these  domestic  in per-unit operating the  in  the export  outlining  and the e t i q u e t t e  switch  because  of  has i n v o l v e d the  In a d d i t i o n  increase  delay  displays  recordings  a  or  domestic  receipt  of  market cash f o r  market,  where  payment  foreign  markets  and the  shipment.  t o both design  traditional  industry  designs  example, flatware  responsibility  export  for  markets,  specifications.  f e a t u r e s has been  Japanese  the emerging  the i n d u s t r y and companies.  the design  developing  the  upon  market,  o f many  provide  for  an  requirements  respect  domestic  the  and  activity  flatware.  in  sponsorship  exhibits  activities,  means  involves  made  metal  by  advertisements  through  latter  out l a r g e l y  Design  With  case  through  videotape  with  also  capital  4.2  of  promotion  market  is  urban  carried  o r g a n i z a t i o n of t a b l e s e t t i n g s  dining  sales  been  and  This  preparation  of  have  magazines  replacement f o r ,  utensils.  association  participation  proper  eating  efforts  industry  t o , and not a  which  by c o p y i n g design.  limited, might have  Thus  greater  foreign  is  buyers  f a r , the importance is  some  a competitive local  or transforming  product  In c o n t r a s t , i n the the  but there  gain  the  hope  that  advantage  aesthetic  traditional  of  by  appeal,  motifs  into  1 15  5.  SHIFT  TO HIGHER-GRADE  This  strategy  shifting which  aims  production  those  to adjust  into  competitors  significant  LINES  tactical  to  low-cost  the higher-grade  do n o t p o s e  lines  as g r e a t  implications  for  competitors  by  of flatware i n  a threat.  a l l three  It  has  functional  areas. 5.1  Product  5.1.1  Grade -area The  of major  higher  distinguished ways.  from  i s often  embossed  quality,  Asian  NIC  priced  stainless  greater  higher  i n Europe  of change  more  price, the  quality  (e.g.,  intricate  and massive  higher  reduces  America.  while  the  the q u a l i t y from  i s of  usually  as i s the f i n i s h .  Importantly,  flatware  flatware  in a variety  to competition  and North  steel  flatware  steel),  relief.  i s exposed  Product ion -area  lower  stainless  are of the highest  competition,  the product  producers 5.2  the  of  (but not always)  in  higher  more  range  o r . 18-10 - q u a l i t y  design is  price  The m a t e r i a l s  18-8  change  The and  a move t o  exposure  to  and p r i c e ,  the  the  traditional  11 6  5.2.1  Organization  The  production  apparently  production  facilities  is  flatware cases,  information This  regarding  those  proximity  of  within  control, novel  favours  groups  steel  flatware  integration  quality  probably  and, perhaps,  probably  required market  these  possible,  however,  might  t o say that  f o r success  are already  under  automated,  fair  already  flatware  exist being  subcontract  be  that  of  the  as well  designs  the existing firms  industrial  as and  larger  with  shared  parks.  nevertheless,  within  such  the  range  of  i n many  manufacturers.  discussed  in  of  price  improved,  the  methods  of  It is  this  of  under  t o be o f m a j o r  the  production  introduction  in  techniques  Indeed,  the  competitiveness  Changes  not l i k e l y  in  foreign  as that  strategy.  Tsubame.  applied to  by  the production  i n the high-priced  Japanese  improved  equipment  competitiveness" are,  facilitates  and geographic  skills  range  stainless  Methods  It and  of  quality  organizational  This  practices.  manufacturers  5.2.2  the  stages.  control  Location  of higher  favours  production the  And  "price-  production  importance  for this  strategy. 5.3  Design  Design the  i s an  industry  capabilities  and firms in this  consideration designers.  important  of  feel  regard.  utilizing  I t i s not c l e a r ,  aspect a need  of t h i s  strategy  to strengthen  In a d d i t i o n , there  and  their has  whether  the  in-house  been  the s e r v i c e s of well-known however,  clearly  main  some  foreign purpose  11 7  of  this  would  prestige  of  be  their  to  names.  more  appropriately  case,  i t is notoriously  prevent  the  appropriate of  this  5.4  If  be  it is  of  of  major  Orqanizat  Because  as  a  by  the  sales  a  flatware  services  itself  tactic  designs.  In  any  matter  to  Thus,  for  the  would  method.  practical  prerequisite  or  while  the  success  decisive.  more  of  direct  functions 5.4.2  change  ion  differentiation  the and  importance  the  control  is  seen  as  creation of  the  the  to of  this  a  high-quality  downstream  crucial  strategy  step  in  sales its  and  of  product  brand  image,  distribution  implementation.  Locat ion  The  major  Europe  target  of  markets  and any  for  in North  high-quality America  matter,  individual  firms  however,  the  within  i t ,  in  markets  which  brands,  the  absence  of  where  this  prime  producers  to  examples are  A u s t r a l i a and  sophistication  industry  succeeds  in  of  the  flatware  these of  seems  to  as  demand  ever, ultimate As  whole,  greatest more  local,  have  and  initial  open  the  the  mean  quality  a  to  new  competitors.  helped  consumer for  the  a  Nevertheless,  Japanese  increasing  be  as  strategy.  relatively  established,  Japan.  this  their  are  are,  must  industry  see  opportunities due  and  e f f e c t i v e implementation  practical  and  latter,  as  important  i t i s not  design  Sales  5.4.1  The  the  difficult  i s an  strategy,  their  categorized  copying  design  -area  in  utilize  Japanese affluence  that,  if  flatware  the in  1 18  the  domestic  almost 5.4.3  market,  certainly  be  some  captured  major  importance  promotional  efforts  style  exclusivity  and  differentiation potential  by  benefits  their  an  stylized  of  of  the  competitors  generally  guild-like  standards  (which  In  i s hoped,  f l a t w a r e on  has  and  increase i n the  will  West.  system  Hallmark  industry  association  overall  demand  and, they  Japanese  market. urban  areas  when do  become  the  not the  smaller  the  from of  foreign  of  a  are  embossed  on  The  and  competitive of  cooperative  however,  figure  m a t e r i a l aimed  be  sold  Tsubame for  a  marketing  participation the  inter-firm  prominently at  in  atmosphere  pooling  of in  stimulating  flatware, especially  Japan,  a  buyers  identification  development a  of  basis.  highly  such  the  character  i s to  i t .  to  by  form  Japanese  flatware  permit  to a l l  use  i n the  firms producing  the  does,  the  symbol  brand  cooperative  sanchi's  Aside  this  product  quality  symbol  as  attempting  govern  the  which  respect  is  for  of  in  f e a t u r e s such  With  however,  having  promotional  f o r the  to  meaning  practice,  to  sale  create  association  inhibited  commitment  The  in  a  names.  trademark,  moment, h o w e v e r ,  firms  fortunes.  of  of  to  reputation  i s the  order  consortium  the  solidarity  displays  or  brandname,  as  high-quality  among  a  they  may,  For  brand  u n e n t h u s i a s t i c about  foreign  hallmark  attempt  industry  "tsubame").  flatware a  the  to  method  non-utilitarian  and  "hallmark",  swallow  pronounced  the  international  administration proprietary  is  emphasize  linked  markets,  establish  under  the  Method  Of  the  of  within  exhibits  industry  the and  association  11 9  advertises  occasionally  i n t h e more  elegant,  up-market,  Japanese  magazines. The efforts their  larger  i n d i v i d u a l firms  aimed  at establishing a q u a l i t y  own,  proprietary,  established  sales  some  in  success  engage  trademarks.  promotion  developing  in  similar  image,  Some  of  b u t do the  offices  i n Tokyo  brand  identity  a  promotional so  under  firms  have  a n d two h a v e h a d and  market  in  Australia. 6.  MOVE TO A NEW  This to  move  is  the  and  into  of a higher  relevant,  strategy all  a Migration-oriented  out of the product  producers prospect  into  i s , however, firms  differs  First, is  most  has  changed  points  the  this  easily  requires  a  slightly  analytic  framework.  any  attempt  change  of  that  What,  linkage  that with  different slant  variety  generalize.  The n a t u r e  The  new  three  to the  o f what  of concrete  these  in this  strategies. three,  has not changed,  prior  i n the  of  businesses  preceding  i s to say, i s the  of  the discussion  f o r the preceding  i n terms  to  i n any of t h e f a c e t s  reason,  in contrast  relative  competitors.  as the s p e c i f i c  For that  lower-cost  a f f o r d i n g the  strength  as various  the sheer to  businesses  set  the aim i s  from  categories.  discussed  maximum  or  different,  strategy,  of  competition  of competitive  involve  i n which  functional  the l e a s t .  Second,  facing  degree  move.  from  strategy  business  usually  of  which  section  a  can, of course,  three  changes  BUSINESS  the  point  business?  application  examples  or or  This of  the  complicates  1 20  Third, not  one,  but  complicates cases,  the  industry  that  that  have  of a  firm  briefly,  relevant  leaves  this  t o much  steel  other  information  has f i g u r e d  attracted  of  of f i n d i n g  reasons,  stainless more  the adjustment  variety  when  an e x c e p t i o n  process; given,  a  interest  these  business"  that  the task  ceases  For first,  the fact  involves businesses,  prominently  housewares.  migrants  some from  In  most  f o r the flatware  i s addressed  of the p r e c e d i n g  to  enormously  information. sources  to  the industry.  strategy  most  movement  by d i s c u s s i n g  and the s i n g l e in  the  Consideration  of the v a r i o u s the flatware  adjustment  will  other  "new  then  be  businesses  industry.  121  6.1  STAINLESS  STEEL  HOUSEWARES  Background The wide  stainless steel  range  bar  products  equipment,  serving  and  including;  coffee  dishes.  extremely  As  varied  but  pots, this  cookware,  wine  list  centre  industry  on  produces  kitchen  goblets,  suggests,  articles  the  a  tools,  trays,  and  products  are  relating  to  food  the  early  drink. In  Tsubame,  postwar the  period  flatware  the of  of  housewares  industry  housewares  firm part,  because  great  deal  have  never  some  systems  smaller for  are  a  industry  less  producers  in  in  heavier  required.  similarity  and,  level  of  The  than  the  average in  concomitantly  industry to  the  this  the  has  a  flatware  sub-industries,  overlap. of  directly of  the  in  industry,  and  The  structural at  The  flatware  equipment  proportion  market  than  of  while  theirs.  larger the  and,  dominant  domestic  the  that  substantial  much  larger  in  paralleled  export-oriented.  majority  been  has  less  i s extensive  flatware, quota  of  a  a  investment  however,  While  they  its origins  is  of  capital  industry  account  has  and  is also  is a  flatware  industry  greater  there  the  industry  size  It  production, are  had  i t s development  producers  than  flatware  and  industry  industry.  Tsubame national  the  them  introduced  the  manufacturers  involved  in  the  in  the  production  are  "refugees"  from  in  the  1950's.  late  industry  the  of  flatware In  the  . 1 22  1970's,  with  the  flatware,  there  migrants  moving  the a  housewares slight  advent  has  been  an  industry. lag,  the  same p a t t e r n  as  i n the  the  variety,  and  competition 6.1.1  of  of  industry  into  as,  with  i s coming Asian  to  NICs  i s beginning  to  Nevertheless,  the  a d v a n t a g e s of  value-added,  reduced  number  from  strategies.  does p r o v i d e  relatively  the  ironic  i n d u s t r y ; and  market, h i g h e r  in  industry  competition  flatware  from A s i a n  in  competition  flatware  housewares  industry  domestic  NIC  i s somewhat  analogous adjustment  housewares  larger  i n the  This  f a c e much t h e  implement  Asian increase  from a base  time  occurred  of  greater  levels  a  product  of  current  NICs.  Product -change w i t h i n While  this  the does  pervasive  and  channels,  production  product  same p r o d u c t  high  usage p o i n t  represent  degree  of  materials  up  a  genera a  change  overlap and  "generic"  of  in  customers,  methods and similarity  product,  the sales  circumstances to  the  of  flatware  business. 6.1.2  Production -area  of  There location, For a  some change is  and  an  enormous  methods o f p r o d u c t i o n  some s u b - c o n t r a c t o r s ,  shift  i n t o the heavier,  overlap  in client  firms.  the For  move may the  h o u s e w a r e s i n d u s t r y can equipment  and  the  of  with the  the  organization,  flatware  involve l i t t l e  industry. more  flatware manufacturers, r e q u i r e the  acquisition  management of a more complex  than entry  of set  new, of  1 23  production as  45  distinct  aspects 6.1.3  stages  of  ( a  coffee  and  major  production  are,  pot,  for  example,  production however,  requires  stages).  relatively  The  as  many  fundamental  familiar  to  them.  Sales  i.  Location While enjoyed  the  a  to  both move in i i .  of  enjoy  to  flatware  the  an  advantage  relative  The  and  is  web  weight  of  greater  familiarity  firms  to  domestic  develop  with a  are  common  and  from  those  the  housewares  overall  final  substantial  basic  employed be,  NIC  in  for  i t ,  the  prime  domestic  allows  firms  competitors costs.  meant  in  Thus,  an  the  increase  sales.  existing  and  trading  relatively  greater  and  the  it  internal  methods  flatware  example,  no  differ  on  market  as  for  there  the  to  and  names  somewhat  industry.  effort  for  sales  brand  association demand  producer's  feasible  Manufacturer's  the  domestic  makes  extensive  sales  industry  the  market,  more  capability.  to  This  wholesalers  but  distribution  appears  larger  domestic  of  important the  i s the  Asian  of  Method  usual  companies  one  generally  of  traditionally  market,  distribution  has  weight  has  industry.  over  and  i n t o housewares  Organization  firms  housewares  information  the  industry  s u b s t a n t i a l export  attractions market  housewares  There part  of  increase  is already  "housewares"  a in  1 24  general. is  almost  on  Thus,  7 9  a l l carried  behalf  efforts, item  of  but  of  the flatware  utilizing  an  capability 6.1.4  brands.  often  manufacturers  These  promotional  on b e h a l f  of not  design-coordinated,  i s undoubtedly industry;  spread  one  the cost  in-house  c a n be  individual  consumer  sales over  a  "line"  major  larger  of  advantage  of developing and  one  and  distribution product  base.  Design  i.  Organization In  view  product move  i i .  into  this more  Method  Location  and  technical  must  production  processes  At  time,  perhaps basic  the design  coordinated  they  do  makes  of products deal  considerations  t h e same  a  higher  level  an  of  that the  in-house  design  crucial.  variety  process  on  i t i s not s u r p r i s i n g  industry  capability  design  Though City.  of the emphasis  differentiation  The  7 9  own  at the f i n a l  are generally  a, This  aimed  o u t by  their  moreover,  housewares. over  promotion  i t opens  products.  a  a  reflecting  competitive  operate  with  and  aesthetic  i n v o l v e d means  i n end-use up  the  wider  variety  Thus,  a  of the  products.  possibility,  wider  the design  cooperative  of  the d i f f e r e n c e s i n  necessity, to apply over  that the  a  and single  range process  "showroom"  of tends  i n Tsubame  1 25  t o be more complex products.  but  also  T h e r e i s some  more  feeling  integrated  t h a t , as regards the  more f a s h i o n a b l e h o u s e w a r e s , an u r b a n d e s i g n is  desireable  the  market.  in  order  t o keep  across  in closer  location touch  with  1 26  6.2  Other  New  Many business some  firms  have  and others  business  in  however, central the  the  data  a dearth result,  regarding  tend  data  is  we  total  firms  manufacturing fabrication  left  businesses,  6%  production  plating,  treating,  many new  heat  miscellaneous  of the firms business  as  b u t be s i m p l y  Japan Metal Flatware (ed.) , op. c i t . p.  of  to  a  with  There  is  for  these  8 0  other  and, moreover,  does  the  53% withdrew  remaining  13%  figures  a from  miscellaneous  metal  related  subcontractors  As t h e s e  into  indicate  non-flatware  t h e i n d u s t r y may slipping  firms  limitations,  1974-1978  specialized and  association  industry sector.  entered  Industry 60.  lines  f i r m s , and such  with  entered  businesses.  leaving  up  changes  industry  member  Even  data  etc.)  closed  There i s ,  changes.  the i n d u s t r y , of which; 28%  these,  a u t h o r i t y charged  on  the service  entirely,  new  that  information.  or former  into  Of  sectors.  these  such  largely  average.  intermediate  various  rely  industry association  o f 47  to report  left  simply  into  of u n c e r t a i n comprehensivity  include migration The  have  t o move  monitoring  must  than  will  any s i n g l e  of r e l e v a n t  industry.  or s e r v i c e  f o r firms  present  t o be l a r g e r  this  attempted  a u t h o r i t y nor i s there  a  some  manufacturing  of  i n d u s t r y have  the housewares  bankrupt,  have  reponsibility  As  0  gone will  i n the flatware  into  no o b l i g a t i o n  therefore,  not  involved  a n d n o t moved  will  shop  Businesses  (metal entered  indicate,  n o t be m i g r a t i n g  to a  extinction.  Association data,  cited  in  Ikeda  1 27  Of  the  business, those  firms  there  moving  official  into  has  Table  10  for  cases  there  been  the  of  of  them  as  appear  specialized but  largest distinct  this  LDCs  number, new  latter  the  most  cases,  nature  such  change such  to as  the  of  of  a  such  niche as  There  whose  of  programmes. entered  indicates,  business  make  new  heat  some  before  the  speculative  businesses  treating  or  move  a  A for  plating,  substantial another,  more  automobiles.  to  the  A  previous  metal  base.  electronics  entered.  of or  production  a  also  change  table  continuation  parts  is  businesses  new  customer  time  of  finished  found  watch these  entry  on  programmes.  the  represent  in  new  into  i n an  migration,  goods  The  production  of  a  but  leisure  flatware lone,  have  skills  one-quarter  competition  one,  business  expanding, or  face  lines  fabrication new  around  steel  With  product  the  housing  now  stainless  bands).  p r e - e x i s t i n g metal the  a s s o c i a t i o n data  new  to  good.  at  that  a l l of  as  new  the  can  a  different  group  to  of  of  to  we  a  assistance  As  assistance  table  migrated  firms  type  migration  however,  frames,  with  industry  a  i f not  (golfballs),  location  a  have  businesses.  1978.  involve  finished  similar  eyeglass  to  industry  Today, of  on  involve  prosperous,  the  and  and  the  activity,  re-focussed  number  to  to  government  timing  1968  of  said  regarding  by  government  basis  observations few  data  considerable  introduction  be  manufacturing  aided  between  can  additional industry  other  o u t l i n e s the  was  On  i s some  government  business  31  which  of  seems  an  evident  link  firms.  In  involve  the  pre-existing,  equipment  (e.g.,  exception  the to  from  (window  domestic sashes,  1 28 Table  10 - M i g r a t i o n s O u t o f t h e F l a t w a r e I n d u s t r y Manufacturing Businesses  Independent  ^\Item  Business  Prefectural No.  New  Federal  Support Business  No.  New  into  New  Support Business  Petal  No.  New  L968  5  Scissors Machinery Parts Stainless Steel Rolling Sewing Machine Parts S t a i n l e s s Bathtubs  L969  1  Metal  1.970  1  Valves  1  1971  2 •  Auto Parts E y e g l a s s Frames  2  L972  3  Curve M i r r o r s Kendo F a c e m a s k s Window S a s h e s  1  Curve  1973  2  Golf Balls Watchbands  3  E l e c t r i c a l Equij Parts Construction Equip. Parts Bicycle Parts  5  L974  2  Auto P a r t s Window S a s h e s  1  Auto  3  L975  2  P r i c e Marker Wooden P r o d u c t s  1  House F i x t u r e s  L976  2  Metal Tempering Home E x e r c i s e Equip.  5  1  Tempering  4  Mirrors  Parts  3 2  L977  4  Freezer Parts Lighting Fixtures Aluminum H a n d l e d Cutlery Sprayer  4  1978  1  Pump P a r t s & Lighting Fixtures  1  Total  20  Source:  Japan Metal  5  6 Flatware  Industry  Association  31  1 29  housing  fixtures,  In  o n l y a few  product  cases  development.  examples  of  mirrors". to  exercise  this In  a growing  There  type;  the  One  wooden  handled  firm  into  the  reinforced  wood  sports  second of  factor  roads usually  do  steel  the a u t o m o b i l e  not  a u t o m o b i l e s on  and  compared t o t h o s e  the  most  "curve m i r r o r " ,  of  which  consists  in  which  and  and  i n , say,  a  producing that  steel  and  i t successfully  also  stores.  linked  market.  1978,  to  the  While  the  increased  by  t h e amount of  Moreover,  Japanese  roads  automotive  traffic  very  are extremely  North  of t r a f f i c of  from  a b l e to d i r e c t  the road i n Japan  8 1  replacement  auto a c c e s s o r y  1965  respoonse automobile  stainless  wheel  "curve  were i m p o r t e d  was a  in  for  experience  s i d e w a l k s ) and  ubiquitous  which  developed  15%.  and  custom  p r o d u c t was  separate pedestrian few  for  of  t e n between by about  are  wheels  i n the domestic  (there  of  interesting  p r o d u c t was  specialty  effectively  one  particularly  flatware  c a s e , t h e new  increased  twisting  innovative  had  had  steering  through  of more t h a n  only  most  development  domestically  number of p r i v a t e a  of  steering  which  stainless  experience  diffusion  two  market  wheels,  Tsubame  the  evidence  c a s e , t h e new  A substantial  Italy.  In  are  sports  first  steering  marketed  i s there clear  demand among young d r i v e r s  accessories. "sports"  equipment).  America.  safety  large  (  narrow Thus,  d e v i c e s i s the about  one-half  m e t r e ) c o n v e x m i r r o r mounted on a p e d e s t a l a t s h a r p bends i n t h e road.  1  p  Keizai 304.  This affords  T o k e i Nenran,  people a preview  1980  of t h e oncoming  (Toyo K e i z a i  Shinposha,  automobile  Tokyo,  1980)  1 30  and  pedestrian  These  mirrors  manner  as  traffic were  made  out  of  them plate  mirrors.  One  flatware  industry  saw  opportunity  polishing  expertise  and  the  develop  made  out  of  highly  successfully  did  so  and  durability success As very to  in this  we  i n d i c a t e d at  new  amount  of  industry  based  (aside  Withdrawal  Includes T h i s may  to  apply  alternative  use  has  won  of  that  the  this  of  Other  much them  that  of  47  movement- o u t  into  the  must  be  the flatware of  housewares  the  8 2  Business  Dependent  c)  Finished  new  (21%)  [47%] customers  subcontracting goods  one merger. i n c l u d e movement  production  into  of  (5%) parts  (16%)  (26%)  service industries.  is  a  migration viewed  as  preceding industry flatware  industry)  (32%)  b)  They  superior  there  [53%]  closure  Same a c t i v i t y ,  curve  considerable  pattern;  a)  metal  steel.  section,  proviso,  experience  business  b)  same  Tsubame  their  type  stainless of  the  the  conclusions  any  movement  New  in  Thus,  Bankruptcy,  to  firms  corner.  market.  outset  suggests  8 3  i n much  available regarding  a)  Migration  in  the  glass,  advantage  and  overall  from  around  information  on  from  following  the  the  the  polished  With  members,  of  an  domestic  speculative.  association  the  large  businesses.  discussion,  had  handling  in  limited  highly  3  awaits  household  mirror  2  that  has  131  7.  MIXED STRATEGIES  Some s t r a t e g i e s a p p e a r types discussed A  above.  company  We  called  a  strategy  businesses,  a  focus  subcontractor flatware  of  of  exemplifies  this  flatware,  various This  as  flatware  a generic  market.  to  The  of  serving  gift-giving  by  the  50%  of  i n t h i s market  by  e n j o y e d a much  company d e c i d e d  t o do  the  escaping  of  the  best  coordinated etc.),  i t might  revealed  gift  while  for only  larger  demand  in  offering a  10%.  for  i t to ceramics the  some that  market  acceptance  and  large  find  linking  so by  a  the  which  supports a  accounted  more  been  moved t o  dishes,  company  of  gaining  had  but  new  production  product  Baado Kogyo f e l t  about  idea  company  The  has  into  the  a means of  (including flatware) the  type,  This  major  Kogyo  movement  "Priere" line  (coffee pots,  held  Bird")  for auto p a r t s  is their  Investigation  metalwares  8 4  the  example.  m a r k e t , and  status.  Japanese custom  products  one  ("Twin  mid-1960's as  i n which T s u i n  gave r i s e  firm's  flatware.  strategy  opportunities. ceramics  i n the  or more of  combines  domestic  subcontractor  The  market  the  of  hollow-ware  chinaware.  Baado  which  on  two  discuss  chromeplating  industry  dependency  gift  lines  will  Tsuin  implemented  of h i g h e r - p r i c e d  t o combine  the  which, gift  coordinated  "tablesetting" . Chinaware p r o d u c t i o n of  stainless steel  methods a r e  flatware  and  quite d i s t i n c t  many of  the  from  traditional  those  Japanese  " T h i s d i s c u s s i o n of T s u i n Baado Kogyo i s b a s e d on a published interview g i v e n by t h e company's managing d i r e c t o r . See, " J i b a Sangyo R i d a no O k i n a C h i e " i n Shoko J i a n a r u A u g u s t , 1980 pp 5-7.  1  ceramics the  sanchi  company d e c i d e d  to u t i l i z e  firms  besides  being  division  of  Tsubame. of  have e s t a b l i s h e d  This  ceramics  in  the  enabled  strength  approached  larger  the  and  obtain  proven  t o be  In my  i n some of line  of  is  e m p h a s i s on  domestic  coordinated  that also  be  are  seen as  (at  an  least be  given  the  necessary  can  jointly  gift  much  like  from a p o s i t i o n  other  ceramics  been h i g h l y  annual  growth  40%.  T h e r e has  market a  market  rate  f o r the  then, merely  moreover,  of  how  theory) with  resources,  each  perhaps s y n e r g i s t i c a l l y ,  line  in support  viable  other.  a number of  a  This  strategies  independently  In  distinct  to  initial  t i e - u p with  a number of  line.  moving The  tactics  and  sales  "Priere"  production. the  in  now,  strategy  and  sanchi.  successful  i s , however, room f o r a r g u m e n t .  incompatible  , and  has  flatware  example of in  the  basically of  There  necessarily  be  over  chinaware are,  strategy.  fine  firm  lines  of  firms;  a  the  higher-priced the  sanchi,  t h a n would have been p o s s i b l e had  1980  this  This  the  a s u b s t a n t i a l export  view,  I t chose  of  product  and  reason,  m a r k e t , has  to negotiate  lower-cost  made a m a j o r c o n t r i b u t i o n t o an 1977  this  production  firms  combined  between  sanchi.  domestic  company  For  collaboration.  among numerous s p e c i a l i s t  component  new  for outside  Tajimi  well-known  chinaware  The  look  i n the  labour  relative  to  reputations.  32  need that  of can  which not case,  strategies  implemented.  1 33  8.  ADJUSTMENT EFFECTIVENESS AND  PROSPECTS  Any c o n c l u s i o n s regarding the f a t e of the Tsubame s t a i n l e s s steel  f l a t w a r e i n d u s t r y and i t s p a r t i c i p a n t s must be  as the adjustment process i s  by  no  means  n e v e r t h e l e s s , p o s s i b l e to make a t e n t a t i v e 8.1  Apparent E f f e c t i v e n e s s Of Adjustment While  Tsubame  cannot  be  said  even s t a b i l i t y ,  the adjustment  have a l r e a d y had an Overall, the decade, 1970.  the  decade.  is,  assessment.  have  period  of  completed  an  growth,  or  s t r a t e g i e s that have been adopted  u n i t volume of p r o d u c t i o n had, by the end of  recovered to approximately the peak l e v e l reached i n  a  steep  While  effectiveness  we of  too, had r e t u r n e d to decline have  to  the  that  little  lasted direct  ( i n r e a l terms)  Mid East and A f r i c a  more  normal  through  of  levels  most of the  information  cost-reduction e f f o r t s ,  to reduce the yen p r i c e exported  It  impact.  Profitability,  following  complete.  Strategies to  adjustment process and a r r i v e d at a new  speculative  on  the i n d u s t r y was low-grade  the able  flatware  r e g i o n ; the one market in  which low-cost, p r i c e - c o m p e t i t i v e l i n e s continue to account  for  almost a l l s a l e s . So,  too,  e f f o r t s to move p r o d u c t i o n i n t o new  exposed to Korean c o m p e t i t i o n had some e f f e c t . Mid East and A f r i c a  region  1979.  to 15.3%, by v a l u e , between  S i m i l a r l y , the share of the domestic market  p r o d u c t i o n rose from 11.5%  less  The share of the  i n Japanese exports rose from 10%  23.4%, by volume, and from 6.4% and  markets  to 1970  in t o t a l  to 18.6%, by volume, and from 15%  to  1 34  30.5%  by  increase of  value by  value  inflation value  be  in and  of  could  same p e r i o d .  The  relatively  greater  t h e move t o w a r d s h i g h e r - p r i c e d  this,  the  lines  of  the  the Mid  1970's.  The  lines  of  fair  to say,  located  Japanese p r o d u c t i o n ,  adversely  levels,  the  producers  of  producers  the Japanese  East  and  both  a  too,  was  half  move  into  Sheffield  flatware patterns.  face and  moderately-priced  precludes  business  other  to  less  by  the  face  end  It i s  t o be  threat  t o come. not  so  whether  products.  to which the  already  appear  has  competition;  simple  businesses.  substantially  business"  any  the migrants  f o r some y e a r s  new  beginning  selling  export  latter  by  some of  Taiwan  substantial  to  of  industry,  making  i n t o new  trends  in overall  beginning  or  o c c u r r e d and  also  the and  moreover,  flatware  has  Korea  the  LDC  migration  subsequent  m a r k e t s by  of  "new  the  Africa  threat  the  as s u r e l y ,  flatware  which  into  in  to lose,  were  examples  now  by  just  Moreover, whatever  regarding migration  t h e movement  removed  affected  K o r e a n Won.  of  in industries  putatively  exchange  however, t h a t  producers,  cases,  the  traditional  generalizations  Japanese  rate c o n t r o l s that supported  of  variety  in  Korean  They were,  higher-priced imitations  undoubtedly  Korean p r o d u c e r s  into  revival  by  g a i n , and  share.  inroads the  to  the  helped  t o be  Japanese p r o d u c t i o n  market  was  K o r e a n Won.  expected  continued  however,  1979-1980 exchange  devaluations  LDC  reflects  against  production  of  the  flatware. As  in  over  In  now from  other  clearly from  LDC  Housewares largest  of  the  competition  is  amount  of  1970's  this  from  LDC  1 35  producers.  Nevertheless,  industry  than  continued  to enjoy  return Firms  on  industry, product  stainless  a  subcontactors competition  efforts  moving from  in  this  levels  of  profit  the  not  out  existing  attractive  flatware  flatware  manufacturing  face  development  i t r e m a i n e d a more  average  versus  major  however,  1980,  steel  higher  investment  seeking  in  role  only  the  a l s o , along  of  the  in  and  the  and 5.9%  0.5%).  housewares  for substantial  with  flatware  firms  (a  industry's  need  but  respect  even  the  minor  industry,  from  fellow  pointed  out,  periods  of  severe would-be  migrants. 8.2  Prospects  8.2.1  Tsubame  As region its  Region  the has  historical  s u r v i v e d a number of  industrial  survival, matter the  the  flatware  well  base and  this  of  be  time,  a  with  and  on not  to  greater  in  inflict  provided  on  only  the  that  the  Tsubame  transition  prosperity.  question.  Its  It i s , rather, a the  region. the  in  problems This  of  could  Japanese n a t i o n a l  founder. improving,  transportation  J a p a n ' s major u r b a n c e n t r e s  lower-cost  location  is  i n d u s t r y might  economy d o e s not  links  gone  earlier  d e g r e e of medium-term d e c l i n e t h a t  minimal,  Good,  introduction  industrial  f o r Japanese  f o r c e and  firms offer  forging,  metal  centre  industry.  make Much  subcontracting  finishing,  and  and  and  communications  established status  Tsubame of  its  an  d i e and  attractive  existing  capabilities,  labour  s u c h as  mold p r o d u c t i o n ,  as  of  metal broad  1 36  utility.  Many  specialist  of  these,  firms  which  moreover, may  are  have  organized  more  into  separate,  inter-industry  mobility  thereby. Aside number These  from  of  potential  other  include,  in  new  industries addition  the  equipment  machinery  used  themselves.  In  industries the  firms  their  Of and  to  course,  others  unlikely  the  casually  inherent  mobility,  will  pose  many  the  flatware  to  inhibit  these of  firms.  many  might  of come  industry effect the  but of  regional  a  flatware  the  latter  case,  that  housewares  the  flatware  probably  search the  harm  decline,  and  unnecessarily perspective,  potential  delaying a  per  irregular  rapid  and  to  not  and  limit  subcontractors industry,  a  great new  recent  pastures  the se,  of  would  by  the  which probably  successful  are their  industry  course  regional  decline  what  do  inter-industry to  as  housewares  sufficiently  greener  greatest  the  slow  for  The  been  well  equipment  However  allegiance  uncertainties.  has  the  industry.  their  prior  industries.  to that  as  the  a  growth. in  and  linked  given  from  the  already  future  machinery  specialist  the  from  farm  has  mentioned  the  industry  not  businesses  by  and  changing  i t s firms,  base  like  abandon  Thus,  to  firms,  unfamiliar  somewhat  Tsubame  capabilities  flatware  these  which  of  i t , have  presently  to  the  production  producing  utility  on  to  discussion, and  industries,  of  ambiguous some  of  mobility economy flatware had  the  be,  from  adjustment.  1 37  8.2.2  The F l a t w a r e  The at  expressed  a minimum,  goal  present  share  the  domestic  market  of  low-priced  price and  lines.  8  exclusive,  capacity my  flatware  industry  industry  of anything  Of move  to higher to much  flatware  offer reduced  are  position  cost  advantage.  is  likely  flatware western  The e x p a n s i o n  to involve and,  relatively  thus,  considerable  flatware  range  of  The  production jointly  best are  marketed,  the  higher-  the  Tsubame  existence  a s an  these  by  a  market,  of higher  competition  offer,  at  lines  of  Japanese as  well,  quality  prospects  t o be a s a p a r t  coordinated  of  and  from e s t a b l i s h e d  long-term likely  market  manufacturers  merely  volumes  only the  domestic  western  Published interview with the director association. S e e , K a i g a i S h i j o 9/80 p 5 8 .  of  discussed,  of the domestic small  volume  spectacular,  higher-price  eroded  to  and s t r u c t u r e .  and even  The  by t h e famous  be s e r i o u s l y  manufacturers.  Japanese wider  cannot  some  and the p o t e n t i a l  volumes.  some  and i n t o  i t s  strategies  prospects;  is  on a h i g h  technology,  size  reducing  moreover,  failing  to maintain  i t s present  long-term  dominated  their  however,  i s ,  10% t o 15% a s  switching  i n production  lines  unit  hope,  while  adjustment  quality  75%) by  (65% of e x p o r t s )  unlikely  like  the i n d i v i d u a l  appear best,  is  while  out of medium-price  view,  innovation  volume  (about The  of f l a t w a r e ,  In  5  output  emphasis  industry association  export  i s developed.  lines  of export  present  of t o t a l  the present  balance  of the flatware  to maintain  its  maintain  5  Industry  for of a  complementary  the  industry  1 38  products.  Of  most  to  likely  flatware Japan  the  possible  facilitate  i s probably  has  an  "partner-products",  Japanese  chinaware;  established  a  production  of  complementary  reputation  that  both  which  is  higher-priced  product  in  which  domestically  and  internationally. Even  if this  production, will  of  chinaware.  and They  dominate  They  In  of  any  of  change  tactics by  of  case,  the  adopted  developments  domestically,  to  inter-  line the  and  existing  Japanese  flatware  flatware  producers  figures.  There  producers  with  in  of  be  most  candidates  the  industry  be  likely  collaboration,  the  most  'the  size,  etc.)  free  to  flatware  appear  perhaps  production  the  established in  would  indicated,  within  a  quality  whatever i t might  switch  component  to of  a  LDCs.  prospect  reduced  already  capabilities  of  the  are  sales  moreover,  determined  in  of  (acquisition, subcontracting,  volume  be  the  dominant  appear  also,  discussion will  future  ceramics  such  greatly  i t s present  earlier  that  subcontracting  product  industry  clear  would  form  would  international combined  the  international  any  organizational take.  be  be  Japanese  reputations  to  to  i t i s not  themselves  number  is  not  as  within  however,  to  s o l e l y by  Tsubame external  internationally.  flatware  for  little  ten  the  be  the  as  years  actual  a  flatware one-fifth  time.  pace  and  strategies  industry  environment;  but,  As form and also,  regionally,  1 39  8.2.3  Industry  Participants  Adjustment participants  means  d i f f e r e n t things  in the industry.  participant,  the  on  of the surrounding  the nature  industry  necessity  Moreover,  and r e g i o n .  for  the region  can  consider  types  of  for  type  of  and p r o s p e c t s  However,  and the i n d u s t r y the  to the various  pattern  adjustment  the preceding  as a basis  implications  one  f o r adjustment  of  adopting  any  for  depend in  the  prognoses  discussion,  f o r the major  one  manufacturers  of  flatware. If  the industry  smaller  volumes  i s t o come  of  to focus  higher-price  flatware,  then  companies  which  integrated  production  and q u a l i t y  it  seem  this  might  also  have  a  capability. flatware  will  To  modes  the  we  will  with  the smoothest elaborate  on  In e i t h e r  of combining  existing  is  On  design  and  of i t ,  firms  broader evident  and  which  marketing  higher-priced  less  design  those  the face  a  of  capabilities for  those  of  of  lines  favour  favour  that  as a part  lines  of  line  of  that  marketing  those skills  adjustment. point,  as  the  case,  there  them  control.  i t  production  will  in-house  clearly  then  this  and chinaware  process  however,  be m a r k e t e d  the  higher-quality  in-house  posit,  products,  and  greatest  substantial  producers  housewares products.  that  can best  face  adjustment  have  If  complementary flatware  the  on  with  we  most  can take  stainless  steel  promising  complementary  are alternative  organizational  flatware  in a  line  of  complementary  1 40  products.  For  example;  1.  Flatware  2.  Complement  3.  producer  incorporating  producer  complement  incorporating  Flatware-complement  flatware  alliance  (Flatware  producer  alliance  (Complement  producer  dominant) 4.  Complement-flatware  dominant)  The design 1.  flatware producer and  or  marketing  3.;  feasible  both and  investment  combinations smoothest  the  complement product  or  4.  is likely  desire  producer  the  other  Thus,  which  best  for a  seek  hand, of  positioned  on  more  depends or  to  them  such  proves  producers  combination  return  be  them  in-house  make  without  adjustment  flatware are  to  capabilities  the  successful  producers  i s , however,  prove  product, the  facilitate  most  f o r the  particular,  and  on  existing  implications  1.  The  most  complementary  In  them.  existing  more  the  sunk  in-house amenable  to  to  have  the  crucially  upon  the  exploit  existing a  broadened  line.  There  will  those  of  2.  and  whether  because  will,  substantial  capabilities  because  in  capabilities  with  the  the  because  processes  and  the  (including  related  and  stainless  four  modes  of  the  the  suitability industries)  two  products  similarities of  for  the  local  centralized  which  chinaware,  have  different  combination.  would  within  of  or  organizational  complement  basic  question  housewares  These  of  housewares of  crucial  steel  effective.  incorporation  2.),  prior  one in  seem firm  to  (modes  production  infrastructure production  in  141  Tsubame.  The  distinctly  chinaware  and  flatware,  infrastructural be  likely  to  acquisition) two  my  own  (modes view,  higher-priced design  brand  recognition)  producers parent  in  the  market, weaker  for  there  the  most is  the  export  of  likely  dominant  the  other  hand,  (including  producers  complement be  in  the  to  f o r an  the  the  respect  alliance  in which i n the  at  the case  between the of  existing of  partners  (or  least to  as  regards  the  domestic  flatware  flatware Tsuin  that  emergence  dominant  producers,  for  In  (including  favour  With  product  chinaware.  capabilities  flatware  (as  different  alliance  to  i n d u s t r y as  producers  on  separate  effective  markets.  i s scope  of  for  4.).  likely  chinaware  chinaware  either  and  are  to  would,  geographically 3.  processes  likelihood  form  marketing  companies)  production  are  and  the  some  flatware  event,  and  production  requirements,  favour between  industries In  support  different  and  the  producers  Bado  Kogyo),  or  coequal. Figure between be  11  i n d i c a t e s some  flatware  their  and  of  the  complementary  descending  order  various  feasible  products, of  i n what  coalitions I  feasibility  take  and  to  likely  ef f e c t i v e n e s s . Whichever effective, them  of  i t seems  will  contend,  share.  Thus,  in  flatware  the  decade  ahead  for  and  these  ultimately  likely  that,  along  with  in  proves  the  the  there  likelihood  be  medium-term,  i s the that  who  choose  prospect  only  a  few  of will  the a  foreign competitors,  integrated manufacturers business,  to  a  most  number  of  for  market  to  remain  tumultuous be  able  to  142 Figure  1 1 - A l t e r n a t i v e Forms of C o a l i t i o n Between and Complementary P r o d u c t s  Housewares  Flatware  Chinaware  *  S Notes:  Flatware  s  ^  1. P « ^ S s i g n i f i e s a P a r e n t / S u b s i d i a r y - t y p e r e l a t i o n s h i p t h e p a r e n t (P) h a v i n g m a n a g e r i a l control. 2.  with  D «^^S s i g n i f i e s an a l l i a n c e between f i r m s i n w h i c h one f i r m i s d o m i n a n t (D) a n d t h e o t h e r i s s u b o r d i n a t e (S) i n t h e a l l i a n c e .  3. The o r d e r i n g o f t h e h y p o t h e t i c a l c o a l i t i o n s i s i n what I p e r c e i v e t o t h e t h e i r d e c l i n i n g o r d e r o f f e a s i b i l i t y and effectiveness.  1 43  succeed.  1 44  V.  1.  EVIDENCE  case  industry the  study  benefitted  local  of  from  industry  government  spokesmen,  interviews  in  spokesmen.  OTHER  INDUSTRIES  of  field  three  in  Tokyo,  survey  of  regarding three  other  Because  case  and with  Tsubame.  mode o f a d j u s t m e n t  empirical with  evidence  a discussion  variation business.  in  They  into  regarding which  of  number  the  under  same  which the  case  studies  officials  new  there  lines  migration  between  each  of business i s  concludes,  into  these  basis for  is relatively  regarding  and a  reports,  presents  a useful  adjustment  The c h a p t e r evidence  chapter  provide  Migration  pattern  at  government  present  of  of further  out a  on t h e b a s i s o f i n t e r v i e w s ,  features  available.  the  briefer  including This  from  was n o t p o s s i b l e .  to develop  studies.  of the broad  industries  and  government  carried  i n d u s t r y and government  industries.  municipal  wholesalers  of the constraints  literature,  cutlery  and d i s c u s s i o n s with  prefectural  other  this  steel  bankers,  and  with  however,  concerned  additional  comparisons  city  relevant industries  the these  t o Tsubame  manufacturers  was c o n d u c t e d ,  other with  a visit  stainless  be d e s i r e a b l e t o h a v e  was p o s s i b l e ,  of  Tsubame  studies of  detail.  research It  case  the  representatives,  Niigata  I t would  comparative  level  a  SOME  OUTLINE  The  of  FROM  little  therefore,  inter-industry new  lines  of  1 45  2.  NON-LEATHER  2. 1  Introduction  The centred  Japanese  artificial  in  and,  oriented, 51%  by  in  (95%)  As  a  Taiwan,  The  of  1971 loss  volume  of  major  to  nominal record  striking  6  the  sanchi  United  in  exports  1971  volume over  to of  bankruptcies A l l  increase and  the by  value 11%  in  makes  examples,  date,  40%  highly by  producers  the  U.S.A.  than  is  8 6  export-  volume a l l of  production  export  and these  market  and  in the  terms  the  industry  of  38  million  pairs  in  a  the  fell  over  period  successful  one  of  the  without  number  Japanese  46%  almost  halving  the  the  to  this  production  real  and  about  i n Kobe  survived  its  Korea  from  Despite  remarkably, of  in  fell  one-half  reduction  accomplishment to  to  industry  more  was  Almost  same p e r i o d .  or  the  exported  from  less  traditional the  1970's,  industry  States.  annual  the  footwear  production.  competition  industry  the  early  total  production,  terms of  of  figure  manufacturers. managed  to  leather  the  Kobe  its  were  total  of  in  the  of  pairs  1977.  total  1970,  result  total  million  the  Kobe  value  exports  any  FOOTWEAR  of  industry  by  39%  in  period.  This  of  most  the  adjustment  to  LDC  The discussion here is based on an interview with representatives of the Small and Medium E n t e r p r i s e P r o m o t i o n Agency r e g a r d i n g t h e i r i n t e r n a l s t u d i e s of the i n d u s t r y and on the following sources: " S e n s h i n k u n i g a t a S a n g y o e no M i c h i - K o b e Kemikaru Shuzu Sanchi" in, Chosa Geppo August 1979; "Kobe Kemikaru S h u z u S a n g y o n i M i r u Y u s h u t s u S a n g y o no N a i j u S a n g y o e no T e n k a n " i n , op. c i t . Sept. 1979; Sanchi Chusho Kigyo S h i n k o B i j i o n (Kawasei Hakimono S e i z o g y o ) (Tokyoto, Shokobu, Tokyo, undated [1979?])  1 46  competition 2.2  widespread  largely  almost  a  began the  1961  volume high  development  of  substitutes  for  footwear total  sandals,  and  reflection Japanese the  three The  aided  by  the  end  of  which  the  domestic  supply  in  in  in  Japan  accounted  e a r l y postwar  for  period.  the  North  American  the  decade  accounted  a  wide  in  soon  accounted  government  industry  of  leather  footwear and  demand  Japanese  a  natural  footwear  market for  40%  production.  led to  came  the  variety  footwear to  placed  of  rapid  low-cost  production.  dominate  for nearly  on  70%  by  Japanese value  of  1970. western-style Tokyo,  casual  footwear  the  production,  made  has  of been  industry  and  in natural  dominance Kobe  footwear  Shizuoka,  respectively,  of  to  chemical  Japanese  specialized,  by  i n the  a modern  production  located  Domestic  of  production  sanchi  exports  national  leather  The  western-style  production  priority  development  Artificial  of  and  of  of  phenomenon.  Japanese  volumes  around  The the  industry.  diffusion  postwar  a l l of  Substantial  of  Japanese  Background  The is  by  of  Kobe.  leather  These footwear,  artificial  artificial and  i s centred  remains  sanchi ladies  leather.  leather the  in  In  footwear  in  largest  of  sanchi. development  of  the  i t s established status  industry as  a  i n Kobe  centre  for  was the  undoubtedly production  1  of  rubber  goods,  including  rubber b o o t s .  were t h e r e a d y a c c e s s t o raw m a t e r i a l s by facilities  and  propinquity  the the Tokyo-Hiroshima i n the immediate the Japanese  consumer  2.3  Structure  Industry The  division  Kobe  f i r m s i n 1971)  Chemical 6,860  the f i n a l additional  industry  is  characterized  nearly  which c o m p r i s e t h e membership  f i n i s h i n g and workers  of  fine  I n 1978,  the  are  the  These f i r m s  1971)  from Japan  employed  and a r e i n v o l v e d i n  packaging employed  of  (down  in  of  footwear.  about  80  An  smaller  f i r m s w h i c h a r e n o t members o f t h e a s s o c i a t i o n  1,000  of  by a  t h e 298 m a n u f a c t u r i n g f i r m s  (an i n c r e a s e o f 3% o v e r  8,600  manufacturing in  around  assembly,  port  (Osaka-Kobe) of a l a r g e p r o p o r t i o n  ( s i c ) Shoes I n d u s t r y A s s o c i a t i o n .  workers  its  market.  footwear  centred  of  b e l t , a s w e l l as t h e p r e s e n c e  o f l a b o u r among a l a r g e number o f f i r m s .  industry 304  reason  factors  to the p e t r o c h e m i c a l f a c i l i t i e s  industrial  vicinity  Additional  8 7  47  other  firms  engaged  in  and  subcontracted  i n t e r m e d i a t e s t a g e s of p r o d u c t i o n o r i n p a r t s p r o d u c t i o n f o r t h e manufacturers.  The  c o t t a g e w o r k e r s who Thus,  in  total,  employing, d i r e c t l y  industry  also u t i l i z e s  c a r r y out p i e c e w o r k  8  their  5,000 u r b a n own  t h e i n d u s t r y c o n s i s t s o f more t h a n or i n d i r e c t l y ,  o f t h e Kobe i n d u s t r i a l w o r k f o r c e .  7  in  around  homes.  1300  firms  o v e r 20,000 p e o p l e ; a b o u t  15%  8 8  The modern i n d u s t r y began a s e a r l y a s 1908-1909 when t h e f i r s t f o r e i g n d i r e c t investment i n the i n d u s t r y was located i n the Kobe a r e a by I n g r a h a m and D u n l o p , o f t h e U. K. E s t i m a t e d f r o m i n d u s t r i a l w o r k f o r c e d a t a g i v e n i n , 1979 C h i i k i K e i z a i S o r a n (Toyo K e i z a i S h i n p o s h a , T o k y o , 1 9 7 9 ) .  1 48  The 40),  labour  i s rather  70% f e m a l e , and h i g h l y  turnover norm  of  about  design  Wages a r e  a  benefits,  such as i n s u r a n c e  i n those  industry the  higher  resembled  were  specialist  of  and shoes  i n other  selling  to  dealing was,  (which  but  fringe  are substantially  the  sanchi-based  footwear  Kobe  footwear  light  industry,  to  of  the  the  output.  dress  not  early  tied  to that  in  industry  or  seek  the  -boots f o r the handled  to their access to  retailers.  a  side  as w e l l ,  peak,  the  except trading  f o r the l a t e companies  f o r e i g n m a r k e t s were g e n e r a l l y  apparently,  rubber  wholesalers  have  s e t of to  s h o e s a s an a d j u n c t  typically  i s of  entrants  pre-existing  These  and c a s u a l  industry  and e s t a b l i s h e d  i n a wide v a r i e t y o f m i s c e l l a n e o u s  involvement  they a r e  firms  pieceworkers)  leather  on w h o l e s a l e r s  did  On t h e e x p o r t rose  female  than  smaller  in  from  their  leather  exports  of  skilled  supply,  production  Many  migrants  and r e l i e d  lines  in  i t d i d n o t have a s t r o n g  industry  main  short  plans,  of  that  wholesalers.  artificial  labour  of d i s t r i b u t i o n and s a l e s was somewhat d i f f e r e n t .  origin,  distribution  of  firms.  dominant  industry  rate  for  and p e n s i o n  Perhaps because the a r t i f i c i a l postwar  annual  higher  higher  proportion  the s t r u c t u r e  structure  ( a v e r a g e age i s a r o u n d  O v e r a l l , wage l e v e l s a r e a r o u n d t h e  who a r e i n r e l a t i v e l y  staff.  While  (an  but they a r e  utilize  worse  elderly  mobile  25%).  f o r large c i t i e s  pieceworkers, for  force  no the  substantial actual  small rubber  wholesale  manufacturing  or  1960's when involved  trading  houses  goods.  There  trading  operations  in  of  firm the  1 49  industry.  The  implications system.  f o r the  Concern  "dedicated" early  the  industry.  2.4  of  the  contributed  and  the  and  LDC  the  adverse  distribution  to develop  arose,  a  to  more  problem  develop  urgent  competiton  i t s own  therefore,  posed  effort  the  had  in for  such  efforts  and  the  to  rapid  market.  Strategies  to  to  the  to  other,  needed first  facilitated of  of  competiton  awareness  advent  appear  adjustment  b e f o r e LDC  export  Adjustment  There  the  industry  capabilities  early  wholesalers  effectiveness  the  undoubtedly  following  decline  long  This  specialized  domestic  that  1960's,  capabilities so  of  distribution  the  do  lack  two  Kobe  Asian by  be  NIC  far  major  strategies  footwear  industry's  competition;  the  more  that  one  i n the  important,  remarkable export  in  have  the  market  domestic  market. 2.4.1  Export  As almost  mentioned o n e - h a l f of  exports Taiwan 1971  were reduced  levels  declined, This  Markets  to  due  market  largely  antagonistic  production  in  U.S.A.  Kobe's by  preservation was  the  the  about  ( i n nominal rapid  unavailable foreign  1970  .market.  Total  to only  to a  export  market  and  about  Competition  e x p o r t s t o t h e U.S.A.  1978.  however,  value  earlier,  to  exports  from  56%  the  terms)  increase  of  the  and  Exports  of  from  Korea  those and  than  2%  the  Kobe  sanchi  part  of  figure. of  export  t h e U.S.S.R.,  Korea to  for  less  major  South  95%  earlier  in exports to  to Taiwan  relations.  of  accounted  the  because  a of  U.S.S.R.  1 50  increased the  by  latter  over  year,  ,2.4.2 D o m e s t i c  Ameyoko district Strung  and out  encircles The  3,000 p e r c e n t accounted  f o r 98.6%  is  located  Ueno P a r k along  sauce,  central  to  buy  that,  they  Interspersed  Tokyo  under  and  and  the  with  It firm  saw  U.S.A. high  shoes  marked prices  company was was  being  stores  are  and  serve genres  i n 1973, that  to  rapidly  i t was  1970's saw  them. of  by  the  stalls.  throng  giving  foodstuffs  and  kiwi  b a d g e s ; and  to of  soya  away".  surplus battle  are  fruit, fatigues endless  t h e p r e s i d e n t of a Kobe  footwear  h a n d b a g s , and  footwear.  produced  and  export  being  and  sold  This,  exported at  desperately trying  t h e emergence  at a time  domestic  one,  the  when h i s Korea  retail  and shoe  to gain entry.  i n t o young a d u l t h o o d  Among t h e more s t r i k i n g  to  unbelievably  o r d e r s t o Taiwan and  traditional  magazines;  that  an  g e n e r a t i o n of J a p a n e s e and  popular  passing  bananas army  h i s f i r m had  losing  outdoor  Japanese  officer's  that  contrasts.  railway l i n e  "practically  t r e n d y young a d u l t s .  rebuffed  affluent  clothing,  of  goods  mushrooms, seaweed o r  fare;  "Made i n U.S.A."  t o which  The  in  of hawkers t r y i n g  the  traditional  Highway P a t r o l  here,  shouts  or  w a t c h e s , U.S.A.  imported  was  and,  electrical  shops and  persuade  they  these  of  the  mackerel  insist,  Tissot  of  1978  exports.  elevated  i s a warren  otherwise  with  California  variety  total  i s a bazaar  the  m e r c h a n t s p e d d l i n g more e x o t i c Rolex  of  and  between t h e A k i h a b a r a  i n T o k y o and  and  humour, o r  browsers  1971  Market  narrow p a s s a g e w a y s r i n g  bully,  between  of  of t h e  new  of a  new  businesses  to  latter  specializing  were two in  new  weekly  151  listings  of  part-time  (e.g.,"Torabaiyu",  "Arubeito  up-to-date  information  elsewhere  (e.g.,  The  emergence  adornment people  was  industry.  the  by  of  the  of  footwear  often,  by  bypassing  boutiques  Figure adjustment. production the  primarily  selling  footwear  illustrates  The  volume of both  produced  however,  so  more t h a n  three  production  young  12  that  to  out take  an  quality  of  personal  affluent Kobe  the  young  footwear  major  place  and  export  within  more  for  the so  fashionable  p r i c e s per  shoe s t o r e s  pair  small  and,  fashion  adult. main  declined an  featu'res of and  the  rapidly. even  1970.  actual  and  i n d u s t r y managed t o do  production  in  and  of  in  them spend i t .  the  As  resulting  was,  during  of  u n i t p r i c e of  rapid  a result,  increase  the  proportion  The  more  a v e r a g e p r i c e i n 1978  times that  showed  The  the  showed  the  for  money  California  item  trendy  pocket  specializing  in  an  a t much h i g h e r  traditional  exported  as of  had  higher  c a t e r i n g t o the  fads  driven  domestic market.  lines  another,  development  i n d u s t r y was  means of a change t o  them e a r n  Boy"), to h e l p  large population  markets, adjustment confines  latest  footwear  fortuitous  As  help  Nuzu") and  the  casual  a  a  on  to  "Popeye","City  of  for  jobs,  increase,  in real  terms,  the  value  of  the  1970-1978  period. i.  Product  Firms specialists  rely and  specifications.  and  Design  largely do Most  on  internal  practically of  the  designers no  or  production  information  external to  f o r new  design  customer designs  is  1 52 Figure  350  12  - Trends i n A r t i f i c i a l . Leather Footwear P r o d u c t i o n , E x p o r t s , and U n i t P r i c e s  r  i^3 n  \0 r-O» \ 0 v Source  co  0"r\j ^  o r— r** r^N P**  I n d u s t r y A s s o c i a t i o n data  1  <"")  -~r  r * * » r-*i*** '  00  1 53  gathered except  from  f o r e i g n f a s h i o n magazines  for a very  few  and  thus  light  the  importance  firms  do  (around  not  have d i r e c t  appear  $35,000 in  established  strength  licenses  one  for  this  to t h e i r  including  survey) i n the  Most do  from  the  wholesalers,  and  industry.  product not  lines  have t h e  design  salaries  this  is  fees  y e t an  foreign  financial  the  operations  and  not  In  today,  Some f i r m s have from  sales  consumer.  operations  i n v e s t much i n t h e i r  year  specific  or d e s i g n e r s .  feedback  of d e s i g n to  per  designers,  from  f i r m s w h i c h have e s t a b l i s h e d r e t a i l  outlets, of  and  for  area  of  obtained  manufacturers  resources  to adopt  approach. A notable  operates design  example of c o o p e r a t i o n  as a c o n s o r t i u m  and  market  manufacturers), The  move  footwear  has  materials  footwear  towards  more e x p e n s i v e  a l s o i n v o l v e d an  of  production  and  In  large  larger  reflection  decrease  i n f a n t ' s and  to  in  the  fallen  in  proportion (down  of  from  with  apparel  l e a t h e r and designs  t o 53.5%  production 36.4%  of L a d y ' s and  in  between  t h e r e has  of  other  and  footwear  trends,  of  jointly  fashionable lines  leather  of d e m o g r a p h i c  that  which  g r o u p members.  shoe  from 98%  i n the p r o d u c t i o n  72.4%).  and  i n c r e a s e d use  artificial  c h i l d r e n s ' s shoes  increase  from 48.9%  has  companies  among t h e  natural fibres)  purely  Ramigo Group  (often, in conjunction  production  industry's 1978.  s i x separate  dividing  (textiles,  proportion  of  i s the  the the 1971  been a  devoted  to  t o 24.4%) and  a  Men's shoes  (up  1 54  a  i i.  Production  The  i n d u s t r y has  high  degree  mobile  of  between  tended  been  u s e f u l when  the  new  to  in  The  Japanese  variety may  of  variations in  Japan,  times  and  ability All  more  items  quality problem  for of  must  than  rapidly of  s i z e ) and  than  control.  not  suited  the  highly as  well,  may  were  of  the  have  a  major  needs  an  The  of  the  average  a  the  v i a new  much of  delivery  reliance  forming less  on  able  to  or  three  North  American  fashionability  is  item,  and  dealing  subcontractors, of  related these  an  essential.  higher  schedules  adopt  store  degree  subcontractors  are  clusters  shoe  given  production a  (including  two  on  any  of  manufacturers  retail  comparable  for  standards  year  carries  emphasis  for  a  the  extraordinary  larger  items-in  manufacturers  their  Others,  time,  demand  meet  requires  same  operations  to  Some  by  of  shoes high  sources,  called  order  i s p o s s i b l e , or  orders  the  would  orders  has  reducing  force,  meeting  distinct  because  between in  have  the  industry  f i l l  this  are  characteristics  export  provided.  1,000  stock  standards. by  quality  be  and to  in  labour  fashionable  At  unpredictability  manufacturers  their  degree  according  to  These  irregular  consumer.  coordination  this  a  Furthermore,  the  The  who  by  served.  market  in colour  more  store.  being  is characterized  subcontractors  i n d u s t r y but "they  footwear  produce  upon  largely  manufacturers.  l a r g e and  domestic of  still  highly mobile.  the  maintenance the  be  markets  and  dependence  client  has  feature  been  of an  maintain with so  firms  the  far  as  under  approaches,  are  1 55  making  efforts  selected  to  maintain  subcontractors  utilization  of  (even  their  own  subcontracting  firms  and  activities.  recreation  intensive  use of a  a  more  at  steady  some  in-house  and t h e i r  smaller  cost  number  to  and  i n company  the e f f o r t  o f more  o f work  the  capacity)  employees  Overall,  flow  rate to  to of  include  celebrations  i s t o make  intimately  more  integrated  subcontractors. The  increased  leather stages  has  increased  somewhat industry  sewing  and other  to  increases Thus,  workers  of the industry firms  there  have is  and w i l l  a  more  much  production i i i .  The was  of  a  industry  new  for  mechanized  artificial  that  those  also  apparently  and t o  t o be a n  future.  moderate  piecework. important  Some  Germany  i t i s not being  and u n t i l  involving depressed  workers  from  on  recently  has  to continue  production  emphasis  cottage-based  equipment  n o t be u n l e s s  The  i n Kobe  of such  pay  evidence  heavily  greater  operations.  are likely  imported  than  especially  f o r the foreseeable  some  utilized  there  of a c t i v i t i e s ,  the supply  i n the rates  other  for labour-intensive  has supported  decorative  increase  these  larger but  types  materials  the need  of the s h i p b u i l d i n g  served  part  of  and t h i s  cottage  state  use  of  and  the  Italy,  efficiently  i t i s integrated  into  (and c a p i t a l - i n t e n s i v e ) o v e r a l l  process. Sales  relatively no  recent  specialized  formation set  of  of t h i s  industry  wholesalers  to  meant  that  effectively  1 56  handle the  the d i s t r i b u t i o n  industry  networks  began  as e a r l y  of  efforts  as t h e  government  assistance  Advancement  Programme)  individual,  larger  (under for  even  i t s greatest  expanded 1979.  problem  i n the  its retail Other,  shoes  urgency,  sales  domestic  tie-ins  has c r e a t e d  manufacturers.  The  also  change  meant  firms.  a  While  of s h i p m e n t ,  130  days  to  r e c e i v e payment  in  of  f o r example, stores  by such  (relative- to  p r o d u c t i o n of a wide the  distribution  inventory control  a l l e x p o r t s were p a i d  problem  for  markets  has  requirements  of  at  the  w a i t , on a v e r a g e ,  f o r more  than  from w h o l e s a l e r s and  30 t o 45  days  f i r m s must now  from  outlets  meant a change  i n the o p e r a t i n g c a p i t a l  t o r e c e i v e payment  such  distribution  43  s w i t c h from e x p o r t t o d o m e s t i c  almost  time  of  complicated  a complex  some,  fashionable  of s t y l e s . and  and  of  of  variety  t o o , has  and  efforts  sales  production  market has  of  with apparel producers.  production for export) to s m a l l - l o t  problem  The  other approaches,  earlier  This  benefit  however, w i t h the l o s s  network t o a t o t a l  and  this,  Modernization  retail  s m a l l e r f i r m s have a d o p t e d  the  the  Kobe L e a t h e r C l o t h ,  change t o a f o c u s upon t h e  for  SME  of  distribution  of d e v e l o p i n g d o m e s t i c  1970's.  as c o o p e r a t i v e m a r k e t i n g The  had  efforts.  established  c h a n n e l s took  markets  i t s own  and  the  those  The  export  develop  mid-1960's  the mid-1960's. on  to  In r e f l e c t i o n  8 9  c o m p a n i e s were more e f f e c t i v e  as Kobe L e a t h e r C l o t h ,  9  i t s output.  for in  cash  retailers.  The m a n u f a c t u r e r , m e n t i o n e d a t t h e o u t s e t o f t h i s s e c t i o n , who was t r y i n g t o b r e a k i n t o t h e d o m e s t i c market had to begin by literally p u t t i n g h i s p r o d u c t i n t o a bag and g o i n g from d o o r t o door i n the r e t a i l shopping d i s t r i c t s .  1 57  Almost the  a l l (96.9%)  manufacturer  have  any  largely  wide  it)  on  and  Korea  Taiwan  of  imports  is  rather  among  retail  store  have  poor  image  in  presently  pose  domestic  market.  derivative today  nature  suggest  goods  an  in  The  that  the  mind  of  the  considerably  Taiwan  and  South  slim  industry a  as  whole,  a  strengthening  the It  to  corporate is possible  basis some  of  a  lines  current places,  that  production for  reputation  as  of  of  do  of not  success  fashion  out  to  to  is  (not  the  retail  from  South  Indeed, of  Southeast "high-style  may  of  this  in  firms  will  position, one  ladies Asia,  a  "production"  these  of  the  shoes where  imported  be  and  do  be  they  time if to  it the  attempt  overt  shift  onto  "design".  capable  of  destined,  goods",  in  but  not  eventually,  enjoy  is  producers  continue  and  consumer  a l l that  some  more  the  industry  "NIC  from for  the  names a n d  Japanese  may  not  in  on  of  something at  a  of  the  exporting  factories visited, was  luxury  they  firms,  and  and  however,  Asian  consumer  stronger  their  brand  of  suffice  of  producers  the  competition  The  domestic  in  terms  consumer  Japanese  image  Japanese  in  far,  the  process  from  ,  Thus of  capabilities  away  run  name  names  shoes  established  aware  some o f  strong  abroad.  seem  sales  focus  threat  This  b u i l d on.  of  mind  greater  Korea.  hope  product  competitive  unfavourable  back  a  brand  Thus,  swing  favourable  design  holding  is  right  managers.  lack  the  the  brand  consumers.  secular  of  the  important  of  the  competitors.  quality, a  the the  i s under  company  among  catching  than  perception  and  in p r a c t i c e ,  getting  more q u i c k l y The  production  recognition  dependent  creating level  but,  of  price  the a l l of  a  the  1 58  locals 2.5  can a f f o r d .  Summary  In to  summary,  the industry  the production  for  the  the  domestic  domestic  demand  more  fashionable  away  from  more  new  f o r such  shoes.  required  It also  has  production  and d i s t r i b u t i o n  operations  of the firms  While it  i t h a s been  seems c l e a r  has  been  truly  industry. not  the do  universal not have Thus,  protected market and  costs  t o what  considerable  These  provide  uses  a  The  o f a .• s t r e a m  of of  managerial  Asian  formidable  such  a  stable  the  of t o t a l  as small  protection  lot-size,  among  to  have  industry despite  themselves  customers.  the Japanese  as well  costs  at present,  among  date,  industry  i n an  i n i t s home m a r k e t  products  the  manufacturers  extent,  to  "fashion"-based  expect  Moreover,  channels; NIC  adjustment  t o be d o n e b e f o r e  of r e c o g n i t i o n  competition  distribution of  h a s moved  leather.  and  in to  f o r the organization  one m i g h t  names,  to  image  shoes  move  a n d now  natural  as a percentage  degree  poor  of  the  leather  change  increase  the industry  successful  into  a high  LDC  with  f o r the f i n a n c i a l  value-added.  characteristics  complex  and  lines  by an  the introduction  remains  use of brand  from  shoes,  including  a notably  contrary  a  In l i n e  implications  transformed  to increase  aided  of a  involved.  much  Materials  decreased,  seeking  that  variety  use of a r t i f i c i a l  of m a t e r i a l s ,  has not simply  by means  high  I t has been  and h i g h e r - p r i c e d  range  designs.  lot-size,  market.  the exclusive  varied  change  of small  has a d j u s t e d  a s by  primarily  volatile the  Japanese  Japanese  industry  is by  demand,  presently consumers.  producers  but  1 59  much  less  substantial recognition  than  they  in-house among  would design  consumers.  enjoy  i f  capabilities  they and  also  had  strong  more brand-  1 60  3.  UMBRELLAS  3.1  Introduction  In  1970,  exporter the a  of  world's  record  the  export  The  9 0  industry  and  was  largest  enjoyed  m o r e o v e r , had  figure that  in February  Association  The  industry  m a r k e t s by  almost  to  441,000  units  in  1978.  losing  i t s d o m e s t i c market  1977,  were  exporting  market, alone,  as  entire  in  world  the  w h i c h have  competiton,  i n the fell The  Japanese peak faced  its  out  Asian  from  as  industry year  of  of  NICs.  8 million  one  of  exported  matched  Japan for  in  In  the  units  competitors units had  1970.  to  the  exported  lack  of  U.S.A., in  i n the  1971  rapidly who,  by  Japanese to  T h e r e must be  a more r a p i d d e c l i n e  o r a more d e s p e r a t e n e e d t o  Umbrella  i t s traditional  m o r e o v e r , was  same many  the doors  industry,  to these  almost  its  1979,  been d r i v e n  competitors  example, J a p a n e s e e x p o r t s  of  closed  had  for  LDC  Japanese  m a r k e t s and,  units, a  later,  Export  industries  l a r g e s t producer  year.  years  business.  world's  l a r g e s t domestic  following  Industry  the  umbrellas.  15 m i l l i o n  Eight  9 0  J a p a n was  face  the few of  adjust.  The d i s c u s s i o n h e r e i s b a s e d on i n t e r v i e w s w i t h r e p r e s e n t a t i v e s of the Small and Medium E n t e r p r i s e P r o m o t i o n A g e n c y r e g a r d i n g t h e i r i n t e r n a l s t u d i e s of t h e i n d u s t r y and w i t h representatives of the MITI Seikatsu Sangyokyoku and r e p r e s e n t a t i v e s of t h e Osaka P r e f e c t u r e Economic R e s e a r c h I n s t i t u t e of Commerce and I n d u s t r y and on the f o l l o w i n g s o u r c e s : F u s h i t a no C h u s h o k o g y o no K o k u s a i k a n Kyoso no Shomondai t o J i t t a i , V 2 (Osaka Prefecture E c o n o m i c R e s e a r c h I n s t i t u t e of Commerce and Industry, Osaka, 1971) pp 69-91.; "Yogasa" i n , K a i g a i S h i j o J u l y , 1979.  161  3.2  Background Western-style  the  early  confines early to  umbrellas  1890's  and,  Pre-Second  W o r l d War  of  first  early  market  manufactured on,  by means  most e x p o r t s were t o K o r e a  i n c l u d e more d i s t a n t  output  very  of t h e d o m e s t i c  1900's  were  markets  producers  escaped  umbrellas,  exports.  In  the  and  Manchuria  but  grew  in  of  the  of  i n Hong Kong, I n d i a ,  p r o d u c t i o n peaked  1,350,000.  i n Japan i n  1937  which  and  with  Africa. a  around  total  40%  were  exported. In of  t h e p o s t w a r p e r i o d t h e r e was  the  domestic  market  popularity  at the  umbrellas  made  industries  employed a b o u t  expense of  There sales  of  as  the  they  umbrella  frames At  commenced  by  about  and  total 88%  from  oiled  By  1955  n e a r l y ten  the  t o former a  rapid  export export growth  in  times  sales  time,  Japanese c o m p e t i t i o n .  1963 as  in Asia  same  of t h e  exports  to  North  1950's a c c o u n t e d By  umbrella  who  by  markets  the  producers  two  While  s k e l e t o n of t h e u m b r e l l a )  were  the  side.  metal  producers  in  industry.  (the  t h e end  size  gained  same number of w o r k e r s but  umbrellas  of t o t a l U.S.A.  U.S.A.  i n the  Japanese-style  paper.  i n d u s t r y employed  industry exports.  Japanese domestic  the  were r e p l a c e d by  same m a r k e t s .  of  and  traditional  were a l s o major c h a n g e s on  declined,  50%  the  traditional  finished  growth  western-style umbrellas  of  bamboo  the w e s t e r n - s t y l e umbrella many p e o p l e  as  a rapid  1961,  Japan  to  of  these  America  f o r as much accounted  as for  imports.  a l s o c a p t u r i n g market lobbied  f o r government  In r e s p o n s e ,  Japan,  share  from  protection  i n 1959,  formed  1 62  the  Japan  charged,  among  regulating market. the and  industry  directed  too,  restraints  they  and  to s e l l  producers finished  1964,  this  on g r o w t h  freed  had a c c e p t e d  accounted  for  in  The  Japanese  innovations  value  and  in  years.  market,  The most  however,  popularity,  was  the  share  the  domestic  market, i n Europe  of  By  their  umbrella  exports  U.S.A.  to  government  producers'  industry  market.  demands f o r  f o r a more v i g o r o u s  In E u r o p e t o o , t h e  local  and began  semi-  the  late  t o source 1960's,  e x p o r t s of u m b r e l l a s  Europe  a n d f o r 49%  frames. has accounted design,  patents".  9 1  f o r numerous i n v e n t i o n s resulting  Most  many o f them w i l l  important  t h e U.S.A.  t o markets  of  and not e n f o r c e a b l e i n t e r n a t i o n a l l y . domestic  of  i n t h e U.S.A.  growth  the  umbrella  "utility  responsibility  p r o t e c t i o n i s m and t h e need t o  Japan.  industry  was  countries.  of  32% o f J a p a n e s e  which  vis-a-vis  dominant  the i n e v i t a b l e  i t s exports of umbrella  patents  a  time,  t o t h e U.S.A.  umbrellas  the  restraints  encountered  f o r the second  protection effort  In  Association  increased attention  on t h e r a t e  markets.  rejected,  9 1  restraints  with  i n a number o f E u r o p e a n  those  the  export  by t h e t h e m i d - 1 9 6 0 ' s h e l d  impose  Export  things,  "voluntary"  Here,  and  Industry  other  With these  imports  of  Umbrella  innovation, in  introduction  in  of these  over  200  a r e of m i n o r  Moreover,  even  in  e x p i r e i n t h e n e x t few terms  of  of the one-touch  subsequent "automatic"  Japanese u t i l i t y patents ("Jitsuyo Shin'an") a r e a p r o p r i e t a r y r i g h t g r a n t e d f o r t e n y e a r s f o r minor innovations a n d on t h e b a s i s of c r i t e r i a l e s s r i g o r o u s than those r e q u i r e d f o r p a t e n t s .  1 63  umbrella.  This  promotional  idea  was d e v i s e d in  effective  extent  that  mountaineering 3.3 S t r u c t u r e  Tokyo  and  long  affected  either  to  ways  apparently  is  now  Osaka  Thus,  first  of  a  subsidiary; i t out of c a r s  developed nylon  being  some  f a b r i c , to  applied  a r e t h e two l a r g e s t c e n t r e s  to  while  the  both  more  on l i g h t  total  such  Osaka  industry  industrial  dominant  been  This  makes  i m p l i c a t i o n s o f LDC c o m p e t i t i o n  strongly  sanchi  that  has  region  has  than Tokyo, a  base  as umbrellas,  i t , vary  have  M o r e o v e r , as t h e Osaka  however, t h e s t r u c t u r e  to  the  centres  i t i s the  competition.  industry,  been  f o r umbrella  90% o f J a p a n e s e e x p o r t s and 50% o f t o t a l  and h a r d e s t .  by LDC  adjust  in  Industry  f o r around  case,  sales  of w a t e r p r o o f i n g  technique  been more d e p e n d e n t  single  has a l s o  by LDC c o m p e t i t i o n ,  hit  industry,  f o r p e o p l e when g e t t i n g  b u t Osaka h a s t r a d i t i o n a l l y  proportion  the  the  Of The  production.  been  the  tents.  and  accounts  affected  of  of t h e T o y o t a a u t o m o b i l e  The i n d u s t r y  particularly  production  outside  as a c o n v e n i e n c e  the r a i n .  the  originated,  has been  larger  adversely  adjustment  in  any  a more a c u t e p r o b l e m .  of the i n d u s t r y  i s such  and t h e p o t e n t i a l f o r  considerably  among  the  In that  firms  industry  participants. This utilizes production  industry, a  fine  like  division  much  of  of labour;  Japanese  i n which v a r i o u s  a r e c a r r i e d o u t by d i s t i n c t  coordination  of  a  smaller  wholesaler/manufacturers.  light  sub-industries  number  The i n d u s t r y  of relies  industry, s t a g e s of under  the  wholesalers  or  heavily  on  urban  1 64  "cottage" income  workers  who  neighbourhoods  sub-assembly  operate  out of t h e i r  ( e s p e c i a l l y f o r much  operations).  These  detected  in official  national  industrial  employees  i n the industry,  whereas  shows  total  50,000  a  census  of  about  industry  as a whole.  engaged  i n at-home  them  statistics.  About  were  probably  This  traditional  In  a  involved  for total  industry people  usually  example,  the 6,000  association  data  workers Many,  i n the industry  not  and  of about  were  production.  i n lower-  assembly  are  1977,  75% o f t h e s e  homes  of the  workers  indicates  piecework  own  occupied were  i n the  privately  i f n o t most, of  on a p a r t - t i m e  basis  only.  important  to  the  production  volumes  pattern  industry in  the  wholesaler/manufacturers surrounding lot-size  rural  lines  distribution of  patterns deserve  of  of  circa  these  respects Most  sales  rapid  growth  of  the  assembly  most  11  across  plants  the various  A number  in  large  indicates  illustrates  of  larger  of high-volume,  i n the industry.  the stages  the  overall  of  features  mention. to  one  process.  to the r e t a i l  i s similar  degree  i n the sense  the production  firms  final  13  the  some  Table  Figure  remains  the  1950's,  and w o r k e r s  1977.  wholesaler/manufacturers  from  late  with  umbrellas.  wholesalers,  coordinating  but,  f o r the production  production  special  Most  areas  production  established  of companies  production,  of  level  to the pattern  are directly  or  that The  another, they  i n some  to i n d i v i d u a l stores  as  are involved  distribution  i s quite  act  in  network  d i r e c t a n d i n many  apparel  industries.  at the r e t a i l  level  Table  11  - D i s t r i b u t i o n of F i r m s and Workers Umbrella Industry, c i r c a 1977  in the  Industry P a r t i c i p a n t s  No. of Firms  No. j Workers of ! per Workers Firm  Umbrella Manufacturing Manufacturers Subcontractors Cottage workers  1,100 450 650 /  20,100 / 6,600 . 14.7 1,500 2.3 12,000 /  i  Umbrella Frames Manufacturing Manufacturers Subcontractors Cottage Workers Umbrella Handles and other parts Manufacturers Subcontractors Cottage workers  /  Manufacturers and Subcontractors only  Source:  30,051 2,081 1,970 26,000 820 • 220 160 440 .  99 39 60  1.539  Totals  NOTE 1.  340 92 248 /  1977 Industry Association survey  1  50,971  / 22.6 7.9 / / 5.6 2.7 / 8.1  1  1 66 Figure  13  ((Foreign  - Pattern  of P r o d u c t i o n and D i s t r i b u t i o n Umbrella Industry  i n the  Buyers)) Urban  Trading  and  Companies  Wholesalers Recallers  Distribution Sales  and  Company-owned Assembly Planes  Umbre1 l a Manufacturers (Assembly)  Wholesale/Manufacturers  Subcontractors; . Parts Manufacturers  Umbrella handle M a k e r s and Wholesalers  Umbrella-frame Makers  Assembly Subcontractors  A-  A-  CoCtage  Source:  Misce1laneous Parts Manufacturers  Cot t a ^ e Worke r s  Workers  Industry Association  data  1 67  (for  the  foreign the  domestic  market)  markets).  or  to  Practically  wholesaler/manufacturers  sales.  They  accessories The  generally  such  independence fact,  frame  much  Many  umbrella  more  of  "orientation. to  the  a  in  the  as  structurally  frame  producers  such  as  light  are  and  almost  pipe  etc.  large  as  they  have,  as  a  a l l  of  i n the  on  are,  use  or  larger  an  of  in  than  industry, or  "demand-  production  Only  and  of  are,  despite a  them.  production  for agricultural  sense  industrial  "sales-"  they  personal  They  their  of  umbrella  distinct  as  (for  most  other  in national  than  dependent  engaged  shawls,  industry  wholesaler/manufacturers  independence,  of  a  and in  manufacturers.  "production-"  However,  outlets  number  have  firms are  manufacturers  companies  specialized  a  umbrella separate  of  a  not  manufacturers  the  c a t e g o r i z e d as  finished  a l l retail  are  deal  trading  scarves, mufflers,  from  statistics.  sold  as  umbrella  export  a  racks  nominal  few  other  is  of  the  products, for  drying  clothes. The  producers  of  clips,  and  skills  which  are  transferable  to  the  moreover,  have  locking  p a r t s and  industry, little The  cottage  other  poorer  (a  couple  urban of  to  uses.  75%  category  the The  enter ot  50 new  the  areas  machines,  such  lines  of  workforce works  out  utilizing for  not  in this  the  handles,  equipment  and  age  and  as  employ  industry  average  largely  residential sewing  generally  i s around  opportunity to  worker  the  mechanisms  particular  approximately  accessories  and  readily  segment  people  of  involved  work.  which of  falls  into  private  minimal  example).  homes  the in  equipment  Their  role  is  168  similar  to that  of p i e c e w o r k  cottage  workers  in  the  apparel  industry. 3.4  A d v e n t Of  In  A s i a n NIC  part  Competition  b e c a u s e of t h e e x p o r t  restraints  were o p e r a t i n g , t h e J a p a n e s e p r o d u c e r s Asian  NIC  Japan  (as  manufacturers the  "voluntary"  largest  export faced  no,  exports.  The  Korea  especially, None  "voluntary"  export  While from  to  to that  throughout exchange for to  of  restraints  other  changes,  1962 rapidly  1972  By  exports  i n 1971  earlier  level.  and  of  a surge  to  declined imports  exports  A s i a n NIC  had imports  the  producers. declined  to  the e a r l y  increase  1970's  of p r e f e r e n t i a l  can  and  be  seen  imports  fallen  to  tariffs  position. imports  i n the  60%  from  Japanese  one-third  About  for  figure,  increased  c a p t u r e d about  (by v o l u m e ) i n 1978.  that  labour costs l e d  nearly equalled total  had  greater  market  i n Japanese  As  South  face  i n J a p a n e s e e x p o r t s and 1977.  their  t h e a b s o l u t e volume of  until  introduction  on  initially,  import  to  supplier  far  markets c o n t i n u e d not  Thus,  Hong Kong but  i n the Japanese c o m p e t i t i v e  1977,  J a p a n e s e market  smaller  be  to  agree  restrictions  1960's,  foreign  and  to  imposed upon J a p a n e s e  I t was  deterioration  onwards.  such  they  share  1960's.  forced  countries,  the  the  lose  the  other  t h e U.S.A.  during  Japanese exports  total  of  1960's.  from  was  of  soon came t o  these  14 t r a c e s t h e c h a n g e s  period  half  while  fewer,  Taiwan  manufactures,  a rapid  the  and  the  rate  LDC  Figure  50%  began t o  c o m p e t i t i o n came from  Japan's share  88%  exports  supplier)  or  initial  importance.  first  restraint,  countries  and,  in the  under w h i c h  of  40% of  the  of  the  these  169 Figure  14 - Trends i n Japanese E x p o r t s and Imports of U m b r e l l a s ; 1962-1977  Source: Industry Association data.  1 70  i m p o r t s were from K o r e a and 35% from 3.5 A d j u s t m e n t We w i l l general  Strategies  discuss  relevance  separately for  adjustment  the i n d u s t r y  have a more d i f f e r e n t i a l the  Taiwan.  impact  strategies  which  have  a s a whole and t h o s e  on t h e v a r i o u s  which  participants  in  industry.  3.5.1 L a r g e r W h o l e s a l e r / M a n u f a c t u r e r s There to  the  impact  division less  i s considerable of  other been  Asian  i s the fact  of a d i r e c t  market) market  in  means  level.  Taiwan  and  the  established in  South  unclear, is  fact,  South  of t h i s  Korea  direct  the f a c t  Korea) i t appears  between that  f o r export t o Japan.  1970  Japan  f o r about  Taiwan.  62% o f t o t a l  they  by  from major This firms  (7 i n Taiwan  and 4  While d e t a i l s a r e  overseas  production  60% o f J a p a n e s e  Korean  the  industry.  Conversely,  o f t h e much l a r g e r  which  e l e v e n Japanese  1974.  In 1977, a b o u t  domestic  imports  out  Japanese  a l m o s t a l l of t h i s  and 35% from  percentage points  and  NICs,  of Japanese  that  t h a n do  of c o n t a c t s a t  carried  the  much  many o f them have ( i n the  network  70%  are  within  in part,  volumes  have  facilities  Thus,  overseas manufacturing f a c i l i t i e s  accounted  At the root  from t h e A s i a n  about  were from K o r e a  few  sales  existing  In  at least  industry.  imports  wholesaler/manufacturers reflects,  respect  wholesaler/manufacturers  their  of  through t h e i r  retail  with  stake i n domestic production  to maintain by  i n the i n d u s t r y  NIC p r o d u c t i o n .  that  participants able  division  imports  exports  to  e x p o r t s but o n l y a  Taiwanese  industry.  1 7 1  only  This  means  been  possible  their  bulk  was and  based  these  been  9  2  As A  strategies  of t h e major  while and  because  central,  by  was  coordination.  wholesaler/manufacturers  relevant to distribution  as w e l l  imports  and  sales  a s by d o m e s t i c a l l y  Whole  that  have  one f o r t h e e x p o r t  appear any  market  to  be  prospect  and  the  four of  major  long-term  others  f o r the  market.  i.  Export  As  sales  Markets  t o the major  decline efforts  on  the  timing  Because  U.S.S.R.  no  competition  of  and both from  1970's,  eastern a n d amount  counterbalance  the  traditional  i n the early  The  a major  U.S.A.  control  the industry, per se, there  viability;  U.S.S.R.  production,  has  umbrellas.  adjustment  export  NIC c o m p e t i t i o n  wholesaler/manufacturers  b u t on  and s k i l l s  c a n be s u p p o r t e d  For  steep  to Asian  domestic  n o t on e q u i t y  The I n d u s t r y  domestic  the  of the investment  produced  a  in  in facilities  3.5.2  "adjustment" for  involvement  largely The  of  bloc  nations,  of sales  and South  in this  went  into  especially  the  t o t h e U.S.S.R.  to the decline  Taiwan  markets  the industry refocussed i t s  the antagonistic  them  export  in  foreign Korea,  market.  9 2  exports relations Japan  This  has  have  to  the  between faced  antagonism  is  T h o u g h i t i s w o r t h n o t i n g t h a t some s m a l l p r o p o r t i o n o f e x p o r t s to these countries apparently c o n s i s t s of Taiwanese or South K o r e a n p r o d u c t i o n t h a t h a s been " l a u n d e r e d " by passing through the hands of a Japanese wholesaler/manufacturer.  172  liable  to continue  it  does,  Of  course,  other  this  represents  should  LDCs  relations,  f o r the forseeable a viable  the advantage  with  which  Japanese  the  strategy  of  lower  east  exports  future  to  and, t o the  f o r the medium-term.  cost  bloc  these  extent  production  countries markets  pass  have  would  to  better rapidly  evaporate. i i .  The  domestic  dozen for  Domestic  higher  prices. small  or  goods  to  favour  the  basis the  a  though  is  with  background,  there  reduction  type  need  the size appears  in overall  which industry  on  less  reduce  be  smaller  ultimately capacity.  limited hinge  large  sell  of  unsold to  domestic capacity.  whole  issue  down  to  Against  a  of  levels  repertoire on  on a  continue  current  market.  at  outlets.  of  will  the  demand  important  usually  capacity  a  are  volume  than  underlying  to  of  selling  the return  some  million  involves  which  factors  of  of t h i s  market  product,  These  to  core  delivery to retail  restrictions  problem  a l l of  this  of  existence  of 3  umbrellas  stores,  considerably  the  commensurate  strategies;  t o meet  manufacturer.  pervasive  adjustment  quality  department  no  ( i n excess  substantial stable  and prompt  this  with  continued  production; Thus,  for  i s large  higher  l o t sizes,  outlets  consignment  a  Production  a d d i t i o n , the major  retail  market  and c o n t a i n s  fashionable  variety, In  Japanese  per year)  more  Market  this of  suitable  1 73  •  The  bulk  were  developed  they  have,  of  that,  of  the  which  this  the  imports  or,  case,  major  many  in new  indeed,  Most  next  innovations  in  the the  Change  terms  production  very  imports  i s not so g r e a t by  involved  f o r these  importing  product  barriers  to  at a l l .  In  due  to  efforts,  no  years. Activity  of  firms,  of  whether  are  various  have  "related"  e t c . The c h a l l e n g e  Beyond  clear  effective  i n recent  seal,  importation  legal  and, d e s p i t e  of  the general  of c r e a t i n g  or  of Business  distribution  to  any of t h e f e a t u r e s  wholesaler/manufacturers  mufflers,  challenge  in  arisen  attempts  association  I t i s not  i f i t h a s been  have  two  from  the  approval,  and  into  by t h e c o o p e r a t i v e .  are held.  few y e a r s  rights  firms  inhibit  effective  scarves,  the  their  of the p r o p r i e t a r y rights  the  of  to  to  manufacturers  cooperative  without  f o r domestic  •  involved  act  Recourse  in the industry  cooperatives  i s administered  more  patents  o f member  by means o f a  and  parts  pooled  production  proprietary rights been  and  these  incorporating,  has  expire  of  which  differentiation  any  and u t i l i t y frame  cooperatives  umbrellas on  Protection  patents  Each  of production use  Patent  respectively,  differentiate  the  Differentiation  by u m b r e l l a  cooperatives.  run  Brand  products  Asian insofar  and d i s t r i b u t i n g  long  Asian  NIC as they NIC  been such  as  umbrella co-opt output.  1 74  Nevertheless, are  better  equipped  some  of  their  lines  the  emphasis been  firms  with than  others  on t h e i r  t o adopt  products  existing  specialists,  distribution  investment  ones.  have  Some  been  have  to  have  Thus,  9 3  l e d t o expand place  of those  not  countries  approach  or, at least,  and d i d  capabilities,  i n those  this  wholesaler/manufacturers  of r e l a t e d  export  direct  who  greater  had  earlier  extensive  domestic  entirely  from the  withdrawn  business. This issue  of  producers  strategy  industrial and s m a l l e r  "downstream" umbrellas. in  on  into This  production  orders  from  imports  house  has been  umbrellas  subcontractors;  the  production  h a s been  facilities the large  a means which  some  of  whom  of supporting  o r on a p r o p o r t i o n a t e l y g r e a t e r  of  their  experienced  a who  of  have  and d i s t r i b u t i o n  have  to  i n the case  wholesaler/manufacturers;  Maintenance  the a b i l i t y i s probably  of the vast  be m a i n t a i n e d  of  t o compete  lost  price-competitiveness  portion  9 3  however,  linked  the frame  moved finished  investment decline are  use of t h e i r  in  relying  own  i n -  facilities.  While  can  fundamentally  adjustment,  •  that  more  by means  i n the lowest-priced  forever,  there  is still  medium-priced of cost  Price-competitiveness  an  range  is  some  important  reductions  and  of  expectation  factor  of umbrellas  lines  i n some  and that i t productivity  Though even they f a c e t h e threat of being bypassed through direct imports by l a r g e r e t a i l c h a i n s . While t h i s has a l r e a d y o c c u r r e d , the volumes i n v o l v e d a r e s t i l l t r i v i a l l y small.  1 75  increases. The  major  apparently and  not increased  parts  producers  considerable of  them  operations  the unit  fees  i n the real  been  frames  years  consequence,  utilizing  and umbrellas  paid  to  o r more.  income been  This  of these  unable  a higher  proportion  of  have  subcontractors h a s meant  firms.  to hold  reverting to smaller-scale,  addition, there  both  frames  productivity  bulk  and  by  domestically. the  both  a  Many  onto  their  family-based  family  members  in  workforce. In  of  in  and have  of  for eight  reduction  have,  employees  their  producers  shifting has  of l o w e r - p r i c e d  and,  at  priced  lines  away  production  a population  in  urban  areas  which,  of  the  competition  with  cottage  affected  by  utilization rapidly.  mobility.  time,  This  workers  Those  moving  have,  and i n t o  firms at  of  moving  nearby  rural  of  higher-  internal,  urban  t o the development  and  ex-subcontractors  least,  engage  of umbrellas  course, place  have  group  also  in  has apparently  this  involved  the pattern into  improve  production,  the production  lines  of  taking  o f them  and  of  has c o n t r i b u t e d smaller  producers  in  the  in direct  producers.  workers  regarding  most  taken  production  lowest-priced NIC  costs  location  subcontractors  adjustment  Data that  umbrella  by t h e m a j o r  lower  f o r t h e moment  Asian  of such  to  the  of d i s p l a c e d  production  The  from  efforts  generally  t h e same  facilities.  of  been  umbrellas  This  areas  appears  have  the  been  of workers  a high  degree  i n the production  been  strongly  industry.  The  declining  fairly  are sparse  but i t  of  inter-industry  and i n s t a l l a t i o n  of  1 76  umbrella  fabric  switch  to  favourable to  those  of  increased, had  not  the  are  especially  apparel  mobile,  industry.  alternative opportunities, them even  received  who  have  when an  remained  they  increase  were in  in  In  they  can  reflection  the  piecework  the  industry  working  their  as  for  fees.  readily of  rates have  their paid  steadily  subcontractors  who  1 77  4.  CERAMIC T I L E  4.1  Introduction The  Japanese  success  in  Japanese  industry  of of  major  ceramic  international  In  1969,  import markets  West Germany were, r e s p e c t i v e l y , was  also  markets  the  dominant  in surrounding  Taiwan;  where  in  age  and  began  to  s h a r e were r a p i d  countries  local  markets result, Canada, 44%,  25%,  and and  mosaic  were  share i n  industries  tile.  Germany had  22%.  The  Japan's share Canada,  loss  import by  absolute  97.5%.  as  and Japan  could  Korea  and  not meet t h e  1979  industry  Korean g a i n s  exactly  Japanese  West  t o a number  industries.  almost  the  the  the f a r smaller  such  however, t h e K o r e a n  by a c o r r e s p o n d i n g Japan's  to  remarkable  1960's,  U.S.A.,  developing  export  and  the  supplier  1970's,  the  f o r example,  foreign  the " i n f a n t "  the e a r l y  During  98.5%, 94.2%, and  needs o f t h e d o m e s t i c c o n s t r u c t i o n In  has had  9  to monopolizing exports  markets.  tile  industry "  markets.  came c l o s e  foreign  the mosaic  tile  matched  of market  markets fallen,  volume  of  of  came  of mark'et in  major  share. the  of  As a  U.S.A.,  respectively, Japanese  to  exports  " The d i s c u s s i o n here i s based on interviews with industry association representatives i n Tokyo (August, 1980) and on d i s c u s s i o n s w i t h r e p r e s e n t a t i v e s of JETRO and o f t h e Small and Medium Enterprise Promotion Agency regarding their internal s t u d i e s of the Japanese and Korean industries and on the following sources: 1. "Nagoya no Y u s h u t s u T o j i k i " i n , Shoko A i c h i May, 1979 ( ( A i c h i k e n S h o k o b u ) , 2. " E n d a k a s h i t a no Tojiki Sangyo" i n , J o h o Chosa R e p o t o No. 394, 1979 ( C h u s h o k i g y o J o h o S e n t a ) , 3. " T o j i k i Kogyo no K y o t e k i Shomondai" i n , Seramikusu No. 5, 1979, 4. Itakura, K. ( e d . ) , J i b a Sangyo no M a c h i (Furuima Shoin, Tokyo, 1978), pp174-l86, 5. MITI, Showa Gojunendo no S e i k a t s u y o h i n Sangyo (MITI, T o k y o , 1976) pp374-386.  1 78  continued  to  one-half, period,  as  about  40%  this,  the  capacity entire  total  20%  of  of  the  Japanese the  level  i n d u s t r y was the  order  i n d u s t r y was  active  to continue firms  competition  The  was  had  in  the  beginning  reckoned of  40%  of  1979  in  t o 50%.  t o do  so u n t i l  In  reduced  Over  the  the  have of  or  the  the  to  Despite excess  this,  profitability  s u c h t i m e as  same  fell  decade.  still  by  industry  employment  reflection  reduced  successfully  been  Japanese  to  operating at marginal  substantially  been  Tokai  centuries  Ceramics  and  has  the  and  was  number  of  challenge  of  LDC  met.  Region  even  European p r o d u c e r s . Japan, Japan. which  such 9 5  as  There  have  production  one  such  Kutani, are  of  internationally an  a  have far  synonym as  Seto  of p o t t e r y .  i s centred  i s one  port of  on  the  The  derived  of Nagoya.  of  sanchi  for  the  Japanese  word  from t h e  town of  t h e most  outside  Japan,  of  within  individual  within  for  designs  sanchi  well-known  i s in fact  i n l a n d from the  the  some i n d i v i d u a l become  styles  renowned  on  l a r g e r number of  "pottery", which  influence  reputations,  distinctive  sanchi  kilometres  choice  had  established of  been  I n d e e d , even  "setomono", meaning  9 5  had  production.  firms  at the  J a p a n e s e p o r c e l a i n has  20  1979  by  Background  4.2.1  of  but  t h r o u g h b a n k r u p t c y or c l o s u r e and  of  expected  4.2  had  around  disappeared  1973  increase u n t i l  name  Seto,  located  It i s a  fitting  prominent  The R o y a l D o u l t o n company i n t h e U n i t e d Kingdom, for has a " K u t a n i " l i n e of p o r c e l a i n i n i t s p r o d u c t line.  pottery  example,  1 79  producing  towns  ceramics  in  products  The  Tokai  are  prefectures  Inland  Sea.  The  location  along  Japan  and  from  pine  forests  Nagoya  the  producers  established The  World of  as  the  a  supplies  the  of  I  world  much  copies  pottery  and  regions in  of  a  Japan.  wide  Eventually, include the of  almost  various, Japan.  This  fresh  With  the  the  Meiji  temporarily  cut  market  the  that  border  Japanese  of  of  Gifu  Nagoya  benefitted the  major  water,  clay,  opening  of  and  on  the  from  a  cities  of  and  red  Japan  r e s t o r a t i o n , the of  for  wider  of  the  geographically  was  variety  chinaware  technical a l l of  demand  required  variety  the  of  chinaware  foreign  into a  the  of  the  region  export.  It  the  industry  port as  was  dominant  to  a  not,  European  was  fully  international supplier.  manufacturers of  bulk  city  linking  establishment  and War  the  port  route  following  major  nature  the  historically,  firewood.  pottery  out  large  Tokaido  plentiful  until  where  straddles  the has,  commerce  of  however,  region  region  facilitated  producer  region,  manufactured.  near  for  international  Tokai  ceramics  Aichi  of  the  varied of  and  led  production,  styles associated  the  development  distinct  competence traditional dispersed,  of  production of  the  the  including with  other  proficiency techniques.  region  production  Tokai  came  to  techniques  of  pottery-producing  regions  180  4.2.2  The C e r a m i c  In  the aftermath  industry  underwent  beyond  the  roofing  tiles.  and  goods  1960's.  of  f o r ceramic  Industry  three  tile  main  tile  product  exterior  and f l o o r i n g  distinct  sets  quantities  their  speciality.  Tile  In  circa Types  the  industry  f o r the growing items  to support  showed  and  domestic  as ceramic  the  and h o u s i n g  drain  reconstruction  all  contributed to  -  particularly exports  69% o f t h e t o t a l  can  types;  mosaic  tile.  These  Table  buildings  and  period  rapid  i n the  U.S.A.  It  buildings, This  broadly  early import  some  Of  the  wall  firms  do  by  and  to three produce  to production of  relative  of t i l e  into  tile,  roughly,  as a supplement  type  divided  interior  correspond,  volume  of  market.  Exports  the  Japanese  f o r the use of t i l e  houses.  in tile.  tile,  indicates  And The R o l e  postwar  of e n t i r e  types 12  be  though  1968, f o r e a c h  affinity  surfaced  items,  of a l l t y p e s .  of other  particular  walls  ceramics  diversification  novelty  of s u b s t a n t i a l  of manufacturers,  some  4.3.1  ceramic  industry  held  the Tokai  further  of such  buildings  Japan  War  Structure  Japanese  production,  and  and t i l e  tile  1969,  and  of ceramics  t h e commencement  By  The  revival  World  pottery,  fixtures,  The c e r a m i c with  market  rapid  industry  modernization  growth  of the Second  Production  sanitary  growth.  4.3  a  Industry  traditional  electrical pipe,  Tile  on  has supported  displayed  the exterior  i s not unusual  and even  have  private  t o see the homes,  the development  of  a new  exterior  completely of a  large  Table  12 - Volume of Ceramic T i l e P r o d u c t i o n by Type Market, c i r c a 1968  Mosaic (Market %)  Market ,  -  1  Indoor Wall (Market %)  Exterior (Market %)  A l l Tile (Market %)  {  i  Domestic Type %  (22) 3743.5 15.8  (47) 7550.3 31.9  (96) 124065 52.3  Export Type %  (78) 135873 60.4  (53) 8378.6 37.2  (4)  5273 12.4  224932 100  Overall Type %  (100)173308 37.5  (100)159289 34.5  (100)129338 28.0  461935 100  Data Source:  and  i l  Chushokigyo Shinko Jigyodan, i n t e r n a l export, 1976.  237000 100  182  domestic enjoyed  market a  more  primarily contrast  relatively  followed were  the  other  small  by  mosaic  both  Interior  substantial,  in  types  bathrooms of  tile,  wall  tile  domestic  and  mosaic  has  market,  kitchens. tile  has  In  had  a  market. markets,  tile wall  in  tile.  still  export  interior  small  two  domestic of  with  but  application  terms  reversed;  exterior  limited,  for to  In  for  having tile.  however,  the  largest  E x t e r i o r and  absolute  the  terms  and  situation  export  floor  market,  tile  relative  was  exports  to  total  production. 4.3.2  Different  The  three  production at  are  of  than  those  all  of  line  production. The  firing  equipment The  production Average that  utilizes  of  of  of  the  line  firm mosaic  firms  from  size tile  somewhat  wall  requires  two  sets  is  most  the  in this  two  floor  engage  tile  surface  are  part  tend  to  than  manufacturers.  for  of be to wall  the  much  Practically in  continuous  requires  e f f e c t s ) to  tunnel  capital-  sector  types.  firings  of  only  occasionally, injection  preparation  i s smaller  different  distinct  producers  in this  clay  two  other  and,  and  tile  firms  e x t e r i o r and  production  stages  involve  and  tile  special  Firm C h a r a c t e r i s t i c s  process  the  wall  And  thus,  types  presses  (to produce  in  and,  producing  interior  majority  engage  Interior  three  production  and  tile  Its production the  the  Processes  of  temperatures  used.  intensive larger  types  processes.  different  kilns  Production  form  one  molding  the  tile.  industry  also  integrated across a l l finished tile  but  product. larger  than  1 83  The molding for  production  of mosaic  equipment  but, aside  the i n d i v i d u a l  tile.  The m a j o r  case  of mosaic  array  of such  of  tiles  and  produced glued  of t o t a l  among  tiles  into  a  prominent however,  extensively  of  labour  of  mosaic  on  tile  sets. high  more  slowly.  Productivity  that  of i n t e r i o r  is clay  a  wall  tiles  have  pattern labour-  substantial  the the  a r e some  final  division  production  of  individual  operators The  production who  subcontractors  In r e f l e c t i o n  and  product.  stage  than  i s both  rely for  of t h i s  (in  tons  manufacturers  tile  of  and  annual  manufacturers  size  of the  has  grown  output  i n 1965 was and t h i s  the  division  f o r producers  lower  of  individual  kiln  finished  and  i s smaller  tile  ease  l a b o u r - i n t e n s i t y , the average  and p r o d u c t i v i t y  half  There  labour  producers  mosaic  for a  wholesaler/manufacturers  tile  for  highly  aggregating  in this  two t y p e s  among  a  producing  of the  other  employee),  types;  in  participants  and r e l a t i v e l y  there  operators  i n the assembly  of mosaic  tile  product.  local  b u t an  the desired  is  the  costs.  specializing  local  This  three  kiln  finished  a l s o engage  production  of  itself,  the i n d i v i d u a l  and accounts  of mosaic  specialists,  and f i r m s  are,  production  product,in  tile,  into  process  as f o r e x t e r i o r  or net backing  t o be a r r a n g e d material.  injection  the production  the finished  once  production  firms  tiles,  most  of  the production  preparation  who  need  that  utilize  t h e same  t o a paper  means  to the backing  proportion  this,  is essentially  attached  they  stage  labour  from  not  i s not the i n d i v i d u a l  This  intensive  In  does  difference i s that tile,  installation.  been  tiles  tile  only fell  per oneto  1 84  one-third  of t h a t  4.3.3 S a l e s  tile  are also  differences,  three  different tile Domestically, larger  generally  sell  producing local  the m a n u f a c t u r e r s of i n t e r i o r among  the  output  manufacturers  either  manufacturers the  wholesalers or  used.  exactly  of t h e i r  mosaic  sets  market  urban  wall  of  directly  the  some o f  then  to  and  bulk  wholesalers,  finished  contractors  channels  not correspond  t o urban w h o l e s a l e r s .  sell  sanchi-based  do  manufacturers  t o the  types.  their  or  tile  producers  however,  firms  contractors mosaic  s u b s t a n t i a l d i f f e r e n c e s among  i n t e r m s of t h e s a l e s and d i s t r i b u t i o n  These  the  by 1975.  And D i s t r i b u t i o n  There of  standard  tile  and  exterior  tile  to  construction  In c o n t r a s t  to t h i s , the  smaller  output  whom  exterior  tile  ( s a y , 70%) t o l o c a l ,  are  also  involved  out of i n d i v i d u a l t i l e . the  tile  wholesalers  to  serving  in  These  construction  the c o n s t r u c t i o n  industry. With are  respect  highly  producers  to exports,  dependent of  interior  upon wall  m a j o r d e p e n d e n c e on e x p o r t of  wall  tile  companies  are,  and  appear  exports d i r e c t l y producers, trading of  on  by  tile  trading  the  tile  f a r , the to  sell  other  Of t h e s e least  as  output  tile  for  only  have had any  two, t h e p r o d u c e r s  dependent  on  trading  much a s 40% o f t h e i r  hand, a r e a l m o s t  destined  but  i n f o r e i g n markets.  c o m p a n i e s and i t a p p e a r s t h a t  the  companies  and m o s a i c  markets.  to importers the  m a n u f a c t u r e r s of a l l types of  a  export  totally  Mosaic  tile  d e p e n d e n t on  substantial involves  total  proportion a  further,  185  intermediate, 4.4  The  Advent  The in in  foreign  the d i r e c t  traditional  Korean  1960's  response It  was  industry  benefitted Asian  from  that  firms;  tradition  in  Japan,  as T a b l e 13  than that  and  Bank and tile  in  by  i n the  imports, meet  o u t by four  the  E x p a n s i o n of  of  substantial  latter  imports  p r o v i d e d , among o t h e r s ,  i n t h e Korean  The  and to  production.  the Japan  of  construction  order  These  in  9 6  is  growth  industry  from J a p a n .  carried  indicates.  major  the importation  financing  Japan.  derive.  domestic  "infant"  of  however,  its  expanding  as an  equipment  is  Korean  ceramics lay  they  tile,  began  involved  fine  from w h i c h  ceramic  the  of m o s a i c  The  materials  of  low-cost  Development  Production  in Korea.  s u p p l y of t h e n e c e s s a r y c l a y  protected  and  suppliers  educated  origin  apparently  industry  highly  industry,  to  domestic  low-cost,  between d o m e s t i c demand and  amounts o f p l a n t  to  a  f r o m J a p a n , were p e r m i t t e d o n l y  shortfall  the  local,  a n t e c e d e n t s of Japanese  recent  market.  to  ceramics  production  in  from  ceramic t i l e  are p r o d u c e r s based  longer  relatively  the  (aside  a plentiful  even  Korean  9 6  markets  enjoys, in addition  an  largely  Competition  markets)  force,  Indeed,  LDC  sanchi-based wholesalers.  c o m p e t i t o r s of t h e J a p a n e s e  international  labour  the  Of  major  industry  and  dependence on  Export-Import industry,  by  Bank.  compared  f e w e r , and much  larger,  largest  account  firms  See, f o r example, t h e d i s c u s s i o n o f t h e c o n n e c t i o n between t h e i n t r o d u c t i o n o f K o r e a n p o t t e r y and other artisanal techniques and t h e d i s s e m i n a t i o n o f Buddhism t o J a p a n f r o m K o r e a ; i n W. T. de Bary (ed.), S o u r c e s of J a p a n e s e T r a d i t i o n , Volume 1 (New Y o r k , C o l u m b i a U n i v e r s i t y P r e s s , 1958) pp 92-93.  186  for  somewhat l e s s  production smaller,  than  i s carried  are larger  By  the l a t e  50% o f t o t a l  o u t by  than  seven  t h e norm  other  and  market.  The volume o f e x p o r t s was f i f t e e n  1975  rose  from  tile of  and  the  about  production  Table  14  eroded  Indeed,  by  What  Korean  while  times  t h e 1971  mosaic same  As i n  most  t o t h e U.S.A.  tile  level  production  period.  Mosaic  e x p o r t s and a c c o u n t e d  i n 1975.  indicates,  Japanese  their is  Japan,  f o r 89%  mosaic  m a r k e t s and a b o u t  tile  90% o f t o t a l  t h e growth of K o r e a n  market  share  in  tile  foreign  certain  the  of the Japanese  most  is  that  immediate  exports  markets.  of mosaic  Japanese c o u n t e r p a r t s i n export  more  i n d u s t r y was  decline  the  tile  some e s t i m a t e s , t h e K o r e a n p r o d u c e r s  overtaken  1979.  54% o v e r  f o r export  which,  exported.  rapidly  had  mosaic  of t o t a l  t o dominate Korean  primarily  was  export  share  e x p o r t s by volume  was p r o d u c e d  As  export  8% t o o v e r  continued  total  to  firms  i n d u s t r y had s u p p l a n t e d  imports  by  begun  The b a l a n c e o f  i n the Japanese i n d u s t r y .  1960's, t h e K o r e a n  had  production.  markets  the development cause  tile  of  the  by  of the rapid  i n d u s t r y d u r i n g t h e 1970's.  4.5 A d j u s t m e n t 4.5.1 The Impact Of LDC The tile It  impact  Competition  of f o r e i g n  i n d u s t r y h a s been a l m o s t  has, moreover, d i f f e r e d  competitors wholly  on t h e J a p a n e s e  limited  to export  ceramic  markets.  c o n s i d e r a b l y among t h e t h r e e t y p e s o f  tile. The  volume o f e x t e r i o r  and  floor  tile  exports-  actually  Table  13  - A  Comparison of Japanese  Firm Size (No. o f Employees)  50 o r l e s s  51 t o 200  201 o r more  Total  Firms  Sources:  Firm S i z e i n the Industries  Korea All No.  Tile %  Mosaic % No.  Korean  and  Japan Mosaic No.  %  4  17  2  17  172  76  13  54  5  46  41  18  7  29  4  36  14  6  24  100  11  100  227  100  K o r e a ; JETRO i n t e r n a l r e p o r t Japan; I n d u s t r y A s s o c i a t i o n data  1 88 Table  14  - Trends  i n Japanese Some M a j o r  U. S.A.  Canada  K 0 R E A  J A P A N  J A P A N  and Korean Markets  W. Germany K 0 R E A  J A P A N  K 0 R E A  Market  Australia J A P A N  K 0 R E A  Share  in  4 Country Total J A P A N  K 0 R E A  1969  98.5  .3  94.2  .2  97.5  .6  93.9  3.5  97.2  .7  1970  98.4  .0  93.1  .0  97.7  .0  93.6  3.3  96.7  .6  1971  98.0  .0  90.2  .0  98.8  .0  95.9  1.2  97.2  .2  1972  94.1  4.4  87.3  .0  89.3  6.9  95.1  .2  92.1  3.7  1973  89.8  10.0  83.0  2.4  60.0  30.3  98.7  .0  84.0  11.1  1974  78.8  17.8  68.8  5.5  38.4  46.7  98.0  .5  77.5  14.3  1975  71.4  22.4  56.1  6.0  26.3  61.0  95.5  1.5  64.4  23.2  1976  64.1  28.2  53.4  18.1  20.2  54.0  87.9  7.9  63.4  23.7  1977  58.6  34.7  47.8  26.4  18.0  47.6  87.0  8.9  60.6  26.6  1978  59.1  36.7  34.6  17.8  15.9  30.0  82.9  10.1  55.3  24.7  1979  43.9  52.7  25.5  23.6  22.2  16.7  81.2  12.2  49.6  33.5  Source:  Industry Association  data  189  increased output  faced  Mexico, a  1975.  was  This  increase  in annual  volume  of  times  that  decline  tile  problem  of  1975  by  1979  the  conveniently  at  least  to  these one  was  the  also  from  hand,  result,  they  1965  and  by  an  however,  p r o d u c t i o n grew  more  same  producers  between  by  Accordingly,  than  two  but  i t s  entry  of  In  continued  experienced  and  fact, to  an the  one-half  posed tile  by  the  volume  into of  15%  however,  Japanese  the  Korean  1973  the  export  level  sector.  activities  i n the  tile  grouped  into  in fell  Thus,  the  is primarily  manufacturing  1973  volume  level.  producers  and  export  from  alone, of  producers  later  by  1975  49%  much  increases until  and  only  substantial  register  down  was  a  t i m i n g was  Korean  only  mosaic  Adjustment  of  period.  were  problem  respectively,  the  the  other  a  exported  total  over  the  As  and  1975  1970's.  1973  Adjustment  Each  to  exports in  adjustment  on  p r o p o r t i o n of  3%  mid-1960's,  volume  for  volume  early  Between and  only  counterbalanced,  manufacturers  closely  mosaic  44%  to  the  1965..  export  exports  in the  demand  in  6%  Philippines.  than  production  i n the  4.5.2  rate  though  manufacturers,  i n the  10%  markets  by  drop  35%,  a mere  the  more  tile  corresponds  1965.  and  of  in  by  beginning  45%  of  Mosaic  tile  domestic  average  1975  from  wall  competition,  experienced  and  fell  Interior  Brazil,  and  1965  exported  period.  in  between  the  Strategies  the  areas  corresponds  adjustment  of to  mosaic three  sales, the  strategy.  categories  product,  major  industry  and  dimension  can  be  related,  production. of  change  for  1 90  i.  Change of M a r k e t  .. • The  and  change  i n the  an  since  Most  in of  probably,  it  shift  and  restraints  to  also  a  the  markets.  producers  in the  change of  competition  but,  not  due  different not  rates  evident  successful industry  to  of  that a  faced  less  f o r example,  accessible  various  to Japanese  "voluntary"  to protectionism in i t may  oncoming wave  traditional type  into,  export  of  markets.  s t r a t e g y , with  markets a t  exports  change  but,  by m a r k e t .  of  different effort  competition  f o l l o w i n g the advent  expansion  export  have been an  of  Most  markets  from  There of  was  Korean  least,  this  rather, Thus, has  r e s p e c t to e x p o r t s ,  to  i t is  been  a  f o r the  whole.  indicated  severe  expansion  of  purposive  •  As  of K o r e a n c o m p e t i t i o n .  d e c l i n e in exports  adjustment  as a  by  among t h e major e x p o r t any  America  of e x p o r t s  initially  this  a  i n the d e s t i n a t i o n  gradual  the  t h e r e was  d e s t i n e d for North  More s p e c u l a t i v e l y ,  some f u r t h e r  was  particular,  shown  and  i n response  s t a y a s t e p a h e a d of  Korean  In  has  f o r Europe  impact  implemented  destination  figures  t o the advent  reflects  by  corresponding  E u r o p e a n m a r k e t s t h a t were producers  1965.  the  this  occurred prior  export  Markets  p r o p o r t i o n of e x p o r t s  increase  Australia. market  Export  p a t t e r n of J a p a n e s e e x p o r t s  considerable decline  (Sales)  Domestic  earlier,  competition  Market  interior  i n export  wall  markets  tile  from  LDC  manufacturers competitors  191  but  were  market.  able  to  Mosaic  adjust  tile  their  output  Korean  competitors  extent,  sold  than  sales  volume  between  any  1972  producers  on  the  did and  also  change  rapidly  increase  by  in  expanding  increased market  the  in  markets.  41%  (from  response  a  to  entry  To  a in  sales.  relatively increases  of  the  decline  domestic  domestic  proportion  following  r e f l e c t e d the  increase  1979  a  international  this  major  of  domestic  into  however,  rather  because  of  large exports  Domestic small  in  base)  domestic  construct ion. Despite tile  producers,  faced of  a  increase in  contrast  tile  (in  fallen  to  decline  in  absolute  domestic  only  the  in  the  decline  between  is  likely, sales  the-  When  from for  sales  other some  of  1973  the  away  the  finishing the  Profitability  figures  for  tile  rate  level  but  and  utilization had,  1965.  overcame  tile  1965  of  in  mosaic  producers,  start)  counterbalanced  tile of  a  the  the  only 1975  sales the  substantial  of  extremely  sector mosaic  interior  materials  increased  mosaic  that  price  from  the  activity  result  mosaic  The  however,  by  Growth relative  increase about and  25% 42%  in of of  1979.  moreover, the  of  between  and  wall  construction  of  volume  were  in  1970's.  per  volume  volume,  market.  construction  export  over-capacity  take  interior  one-quarter  sales  decline  can  to  popularity  the  domestic  absolute  kilograms  o v e r a l l domestic  It  in  d e t e r i o r a t i n g domestic  mosaic  1975, in  an  as  wall  in  volume  ceramic  on tile  the  low  (and,  This  of  prices  latter  falls  tile  well).  low  the  tile  portion  due  half enough,  to of i t  presumably,  seems  to  domestic  industry  these  also  account market. support  1 92  this all  interpretation. three  types  greatest  for  of  Profit  tile  mosaic  as  between tile  a p e r c e n t a g e of  1970  and  producers,  producers.  In c o m p a r i s o n ,  tile  experienced  a more moderate d e c l i n e  Change of  but  followed  tile  ii.  the  1976,  sales the  by  for  drop  was  interior  wall  manufacturers in  fell  of  exterior  profitability,  Product  •  Change  to  Higher-priced  Lines  of  Mosaic  Tile  All  mosaic  tile  from u n p a t t e r n e d , tile and and  i s not  unglazed  incorporating shapes.  The  tile  more  latter  or  are  command c o n s i d e r a b l y  created  individual  output  that  others.  The and  most r e a d i l y  unglazed  steadily production tiles. advent  out  of  of  the  Here of  of  increases  The  prices.  of  h i g h e r - p r i c e d and  exports  of  tile  i n markets  v a r i e t y ranges  size  and  glazes,  basic  pattern Moreover,  both  types  is  produce  between since  more  tile  and  moved  into  face  declined.  A s i a , such  and as  of  the  glazed  of change p r e d a t e s i n the  his  glazed  1965,  commodity-like  d e c l i n e d more s l o w l y  i n Southeast  to  to  sizes  to d i f f e r e n t i a t e  unglazed  less  shape  They a l s o p r o v i d e  i n d u s t r y has,  production  the  the  patterns,  manufacturer  Japanese  the  too,  glazed  novel  measurable d i s t i n c t i o n  Korean c o m p e t i t i o n .  competition, exports  tile.  standard  less  higher  f o r the of  and  g e n e r a l l y more d i f f i c u l t  opportunity from  of  equal  the  Korean  Nevertheless,  even  showed some  Singapore  and  193  Hong Kong.  9 7  •  While distinct  the sets  Change o f P r o d u c t  three of  of  tile  manufacturers,  o v e r l a p among t h e t h r e e Because  types  groups  of the s i m i l a r i t y  producers  larger tile  mosaic  i n terms  during  effect  even  competition. least  effort  is  tile.  not  some  production. the greatest  of m o s a i c  tile  The movement o f t h e  the production and  of e x t e r i o r  has  o f LDC c o m p e t i t i o n directly  to  had  the  onto  that  exposed  to  LDC  a v a i l a b l e f i g u r e s i n d i c a t e t h a t , by 1976, a t tile  m a n u f a c t u r e r s were  also  producing  tile.  Aside  and  The  i t  46% o f t h e m o s a i c  exterior  in  though  their  processes,  substantial  t r a n s m i t t i n g t h e impact  roughly  a l w a y s been  the producers  into  t h e 1970's has been  of  sector,  manufacturers  has of  in production  o f e x t e r i o r and f l o o r tile  correspond  there  d e g r e e o f o v e r l a p h a s been between and  Type  on  from t h i s the part  the production other iii.  major  items  of s m a l l e r  there  was a p p a r e n t l y  producers  to u t i l i z e  o f consumer goods s u c h a s c l o c k s ,  of i n t e r i o r  Changes  trend,  a l s o some  mosaic  tile  lampstands,  decoration.  in Production  •  Change  of  Location  (Foreign  Direct  Investment)  9 7  Though i n S i n g a p o r e , b u t n o t i n Hong Kong, J a p a n c o n t i n u e d t o l o s e market s h a r e t o K o r e a .  194  It  is  not  investment  in  participants the  24  wholly  Korean  mosaic  industry  336  is  two  that  s u c h J a p a n e s e FDI Whatever  the  c o n s i d e r a b l e doubt  industry. tile a  firms  both  i n 1975.  tile  specialized  Both  Japanese  FDI  i t s success.  and  but  trend  as t o whether  one  Japanese in  trading  Tokyo  some o f t h e i r Given industry,  Korean  T h e r e was,  a  quite at size  Korean  source  indicated  there i s  competition.  i n the Korean  appear,  by  t o , or  industry  their based,  The circa  names, t o be respectively,  a r e known t o have e x p o r t e d a t  least  output to Japan.  excess  it  is  a transfer  of  are  i t represents adjustment  or w h o l e s a l e r s  They  the  m a n u f a c t u r e r s might of  they  companies  and Nagoya.  a  evidence for  of J a p a n e s e FDI,  participants  but  was  total  the  Direct  nature  uncertain  of  there  dominates  o f , t h e p r o b l e m of LDC  is  28%  of  i n the  firms are  but  merely a m a n i f e s t a t i o n  1976  venture  of  increased.  level  of t h e J a p a n e s e  one  p r o d u c e r s of e q u i v a l e n t  unavailable  had  direct  However,  i n 1976,  joint  respectively)  t h e b a s i s of was  foreign  and a c c o u n t e d f o r a r o u n d  employees,  1976  tile  another  Korean-owned m o s a i c  or  any,  i n the adjustment a c t i v i t i e s  production  not appear  if  ceramic  and  tile  tile  years since  that  of  These  of m o s a i c  i t does  the  producers  company.  two  role,  has p l a y e d  subsidiary  (360 and  least  what  i n the Japanese mosaic  owned  production  and  LDCs  Korean  Japanese  large  clear  production  conceivable t r y to solve  of p r o d u c t i o n  and  however, no d i r e c t  capacity that  in  the  individual  Japanese Japanese  t h e m a n a g e r i a l p r o b l e m by means production  equipment  e v i d e n c e of t h i s  sort  to of  Korea. activity.  1 95  It  seems  industry  more  likely,  i s being  wholesalers  or  but  any  without  carried  major  advantage  industry  lays  Japanese  The the  stake  most  of  the  Japanese producers  FDI  in  but  production  Production  this  by  established sales  Korean  in  tile  networks  facilities.  Process  means  of  to  effort  1979, had  a  changes  were  widely  some p r o s p e c t , Korean  this  dramatic  held  then,  develop  new  stage  of  reduction  adopted. by  the  though  the has  The  tile  been  the  producers.  The l a r g e r a v e r a g e f i r m a n d e q u i p m e n t may also industry.  This  The  8  the  process.  production tiles  focus  and  industry  is into  of  the  automated  association  equipment  This  was  rights  to  the  of  might,  to  costs,  i f  technology thus,  preventing then,  enable  s i z e a n d a more r e c e n t yield some advantage  capable  expected  industry production  certainty,  9  overcome  individual  i n d u s t r y a s s o c i a t i o n and, no  costs.  production  production. in  to  Japanese  technology.  government  in developing  ways  i n mosaic of  the  labour  i n the  This,  joint  succeeded  c a r r y i n g out in a  to  lower  develop  attachment  panels.  i n d u s t r y over  i t s much  attempted  and  mosaic  apparently  by  tile  with  labour-intensive operation  concerted  result it  by  arrangement  project  of  primarily  advantage  By  of  by  in domestic  Change  i n d u s t r y has  patterned most  not  that  Automation  The  Korean  out  t r a d i n g companies  •  a)  therefore,  its the  there  were was  adoption Japanese  v i n t a g e of p l a n t to the Korean  1 96  industry  t o r e t r i e v e some of  i t s lost  competitiveness  in  export  markets. The was  task  of d i f f u s i n g  complicated,  overcapacity, largest  and  equipment  existing  however,  low  to  technology  by  p r i c e s , and  strongest  i n the  difficult  this  the low  of  levels  proliferation  of  and of  finance,  small  of  able  Even  massive Only  t o adopt  they  its utilization;  f i r m s and  industry  profits.  t o be  circumstances.  justify,  the  presence  f i r m s were l i k e l y  best  within  the this  found  it  given  the  excess c a p a c i t y  in  the  industry. b)  The  The  p e r s i s t e n c e of  industry other for  "Trivialization"  apparently  product  small,  industry, greatest  The  t o the  smaller  this  should  ceramic In  fact,  also  the  to  them a g r e a t e r s u c h as  however, t h e s e  some of firms  mosaic  the  LDC  the  opportunities in  depressed  capacity business  effective,  in  the  had  the  more s o p h i s t i c a t e d f i r m s . specialized  ability  d i n n e r w a r e and  equipment  to migrate ceramic  into  novelty  and  other items.  most n a t u r a l a l t e r n a t i v e i n d u s t r i e s were competition  smaller  t h a t had tile  in  alternatives  were  l a r g e r and  firms  a considerable  adjustment they  Overcapacity  small  endure  f i r m s g e n e r a l l y have l e s s  products,  apparently  that  f o r the  f a c i n g severe  Indeed,  into  extent  afford  and  l a c k of  f i r m s and  firms  available  relevance  The  a relative  f o r such  family-centred  conditions.  Production  a l a r g e number of  reflects  lines  of  mosaic  earlier  industry.  and  resulting tile  migrated  overcapacity.  manufacturers from t h e s e  were  industries  1 97  The evident  vicissitudes adverse  believed  impact  to account  reduction  i n the  considerable  number of  1972  and  the  the  middle-sized  companies.  largest firms  part  to  1%  of m i d d l e - s i z e d  18%.  50  of  1970  or  In  1 0 0  fewer  in  the  most  They  are  approximately  20%  and  firms  from 6%  remained  size.  to  (51  contrast,  Thus,  employees  5%  of  t o 200  the  a result  A  in  the  between  more t h a n the  200  total  but  employees)  fell  proportion  rose  of  1975."  f i r m s employing  firms  had  i n d u s t r y as  middle-sized  proportion only  of an  i n the  between  other  r e d u c e d by  proportion  employing  on  closures  1979,  f r o m 26%  in f a c t ,  were r e d u c e d d r a s t i c a l l y  e m p l o y e e s was the  1970's h a v e ,  number of  and  but  the  f o r the  bankruptcies  industry  of  from 68%  of  firms  t o 77%  of  the  total. c) C a p a c i t y  The  mosaic  approach to the introduce The  Reduction  tile  related  payments a r e  deposited  from  involvement  1 0 0  i n mosaic  and  a  the  novel need  to  equipment.  larger  firms  adopted  overcapacity  p u r c h a s e d automated equipment which i t  to manufacturers wishing the  9 9  p r o b l e m s of  a s s o c i a t i o n has  apparently,  capacity  Automation  i n d u s t r y a s s o c i a t i o n has  labour-saving  l e a s e s out  and  firms.  into  At  a special  wishing tile  t o employ  to  to or  p  buy  the up  eliminate  These  cit.  These  same t i m e ,  fund  reduce  production.  " E n d a k a s h i t a no T o j i k i Sangyo", op. Industry A s s o c i a t i o n data.  the  i t .  are,  9.  are, lease excess their  typically,  1 98  the  smaller At  and  the  t i m e of  effectiveness that  it  p r o b l e m of of  the  this  i n the  field  research  programme.  the  It  A l s o of by  interest  in  i t was  is  divergent  participants  operated  industry.  a c r e a t i v e attempt  reconciling  competition.  their  of  firms  the  represents  various  apparently  weaker  notable,  i s the  to  the  however,  in  address  the  to d i r e c t l y  interests  an  unclear  and  opportunities  industry  faced  fact  the  that  as  with  programme i s  i n d u s t r y p a r t i c i p a n t s themselves  industry a s s o c i a t i o n ) , rather  than  by  LDC  a government  (through agency.  199  5.  THE MIGRATION  5.1  The S c a r c i t y  The  mode  MODE OF  ADJUSTMENT  Of C o m p a r a t i v e  of  Data  adjustment  for  difficult  to obtain  i s adjustment  line  business,  or "migration".  the  of  majority  of sources  industry  facing  industry,  per se.  of  migration  removed  the  the  This  to that  purview  reflects  and  to a  new  the fact  that  relevant  that  extent,  i s most  of a change  of adjustment  to the extent  place;  information  by means  informants  problem  Thus,  takes  from  and  which  to  a  are oriented adjustment  the firms  awareness  given to the  by  means  involved are  of those  sources  and  informants. For  this  adjustment  requires  individual true  when  small, of  reason,  industry  a  privately-owned  publicly available  precluded  under  the  industries. restrict  information  relatively  examples, firms detail which  This  there  regarding  business  examination  the  time,  the investigation to a  i t  single,  a  research,  perhaps  more are  l i m i t e d amount  operations. was  The  c a r r i e d out  large  seemed  of  of the  i s a l l the  is a  research of  mode  examination  f o r which  the present  same  this  as i n the present  detailed  At  on  intensive  and i t s p a r t i c i p a n t s .  the relevant  circumstances  obtaining  number  important  of  not to  idiosyncratic,  industry. In  the  (stainless out  a  event,  steel  number  industries.  i t  cutlery) of  less  In r e f l e c t i o n  was  decided  relatively detailed of  to  examine  intensively examinations  this,  the  case  one  and of  industry to  carry  some  other  study  of  the  200  Tsubame  stainless  some i n f o r m a t i o n  steel  on  evidence  i n d u s t r y was able to provide  the m i g r a t i o n  s t u d i e s of the other little  cutlery  mode  the  regarding  a  more  individual  intensive  industry  and  T h i s does  i s l e s s important  That may or may not be the case.  It  The  relatively  t h i s mode of adjustment.  f a c t that d i r e c t evidence regarding  requires  adjustment.  i n d u s t r i e s , i n c o n t r a s t , provide  not mean that t h i s mode of adjustment industries.  of  i n those  does  reflect  t h i s mode of adjustment  intimate  exposure  to  the  and i t s p a r t i c i p a n t s than was p o s s i b l e f o r  these l e s s d e t a i l e d case s t u d i e s . It  i s especially  alternative available  sources  of  regarding  Fortunately,  the  important  therefore,  comparative  this  information  particular  introduction  of  to  mode  the  consider  that might be  of  adjustment.  SME Change of Business  Programme i n 1976 has e s t a b l i s h e d t h i s mode of adjustment matter  of some o f f i c i a l concern.  to a s m a l l , but growing body concrete  instances  of  of  any  as a  T h i s , i n t u r n , has given government  records  rise  regarding  change of business adjustment i n a wide  v a r i e t y of i n d u s t r i e s . 5.2 Government Data On Adjustment 5.2.1  Aggregate The  activity  Patterns  1980 survey of SME under  Assistance  the  SME  policy Change  1 0 1  of  presents  a  Business Programme.  source i n d i c a t e s t h a t , of a l l the manufacturing firms  Chusho Kigyo Shisaku no Aramashi op.  summary  c i t . , p 126.  of This  receiving  201  assistance  up t o December  new m a n u f a c t u r i n g manufacturing  of 1 9 7 9 , o n l y  business  while  s e c t o r and i n t o  of  firms  i n t h e i n d u s t r i e s examined of  migration  what b r o a d  economic  Linkages  of  This  approval,  located, The  sector  t o shed  and b r i e f  report  makes  prefecture  attempt  in  mode  adjustment.  available across  comparative data  industries.  speculative Table manufacturing there  only  which  the  As  of  does,  with  such,  f i r m s which  cross-classified  as t o t h e subject  provide breadth  i t  some  from  or  Trade  and  is  an  in this  the  only  of coverage  basis  for a  patterns. adjustment  industries  some d e g r e e o f LDC c o m p e t i t i o n . between t h e e c o n o m i c  date  on t h e  This  considerable  adjustment  was  firm i s  of p a t t e r n s  affords  a  businesses.  business.  however,  migrated  issues,  any commentary  summarizes change o f b u s i n e s s  i s arguably  (Manufacturing  on t h e s e  f o r examination  a n a l y s i s of m i g r a t i o n 15  t o know n o t m e r e l y  r e p o r t on a p p r o v a l s  to provide  shallow  It  somewhat  t o b u t a l s o what i s  information  admittedly  base  high  the o l d business.  internal  r a t i o n a l e o f t h e change data  In  o f most  the  is  d e s c r i p t i o n s o f t h e o l d and new no  the  Sector  underlying  of  services  some f u r t h e r l i g h t  report provides the  and  the firms migrate  of l i n k a g e w i t h  of  skills  studies,  i t would be h e l p f u l  t h e SMEA c a s e - b y - c a s e  obtained. of  trades  out  to a  and s e r v i c e s s e c t o r .  i n the case  By B r o a d E c o n o m i c  In an e f f o r t copy  into  In any c a s e ,  d e g r e e and t y p e  5.2.2  moving  t h e r a t h e r narrow, p r o d u c t i o n - o r i e n t e d ,  surprising.  the  were  the trade  view  level  53%  4 7 % were m i g r a t i n g  f o r 107  in  which  The c a s e s a r e  s e c t o r o f t h e new  business  S e r v i c e s ) and f o u r c a t e g o r i e s o f  202 Table  15 - Linkage P a t t e r n s i n Change of B u s i n e s s A s s i s t a n c e A p p r o v a l s up to A p r i l , 1980  [no. o f c a s e s ,  Linkage 0  1  Know-how/Technology  with  • Trade  a )  and S e r v i c e s  Totals  Skill specific ( u n r e l a t e d to p r i o r product)  Product s p e c i f i c ( r e l a t e d to p r i o r product)  d  New \. „ \J5usiness Business  Manufacturing  (%)]  e  14 )  (13) 3  (3)  17  (16)  5 )  25  Land or Buildings  25  d )  14  (13) 53  (49)  h )  22  (21) 54  (51)  (23) g) (23)  Totals  Other  2 9  (27)  29  (27)  36  (34) 107(100)  Notes: 1.  Examples of  Classifications  a)  Weaving •* Woolen Garments; Lumber Wood f u r n i t u r e ; C o t t o n T e x t i l e s •+ Outerwear; L a d i e s and C h i l d r e n ' s Wear.  b)  Matches •+ p a r t s f o r m u s i c a l i n s t r u m e n t s . Stainless Steel Cutlery Lighting Fixtures.  d)  C o t t o n S p i n n i n g -*• E l e c t r o n i c P a r t s ; C o t t o n T e x t i l e s •*• Ceramic P l a n t e r s ; T e x t i l e s •* Candymaking; O i l f o r M a r i n e use -*• S u s h i Shop C o u n t e r s .  e)  W h o l e s a l i n g of P r e v i o u s P r o d u c t ( e . g . s o c k s ) ; S h i p b u i l d i n g S u b c o n t r a c t o r •* S h i p w r e c k i n g and R e p a i r .  g)  T e x t i l e s ->• T e n n i s C o u r t s ; Swimming P o o l ; H o t e l ; B u i l d i n g Lumber -+ T a x i Company.  h)  T e x t i l e s -*• R e t a i l  Grocery;  Rental  C o f f e e Shop; Noodle Shop.  2.  The and  l i n k a g e c a t e g o r i z a t i o n s a r e based on b r i e f d e s c r i p t i o n s o f the new b u s i n e s s f o r each c a s e and a r e h i g h l y s p e c u l a t i v e .  3.  T h i s t a b l e c o v e r s o n l y the s u b s e t o f c a s e s which o r i g i n a t e d  in  prior  IDC-competitive  industries.  Source:  Summary r e p o r t s on the Change o f B u s i n e s s A s s i s t a n c e Programme (S.M.E.A., A p r i l 1980). [internal report].  203  linkage  with  Where  a prior  knowledge was  or  then  made  apparently and  as  a perceived  Where  this  perceived  to  t o t h e new  business,  where  to the previous i t was  not  A  t h e new  incorporate  a  linkage  business  d i d n o t seem the  provide  case  the basis  t o be an  some  illustrative  linkage  itself,  was  ("Product-specific") In the  we  point  category.  the  or b u i l d i n g s . of  linkage,  The  examples  absence  considered  of land  important  i n the "Other"  some  distinction  business,  ("Skill-specific").  on  the  further  "Know-How/Technology"-linkage,  of  classified table  relevant  between c a s e s  where  possibility  was  "Know-How/Technology".  linked  those  business.  business  skills  classified  was  of  the o r i g i n a l  of  notes  we  to the  the  resulting  (74%) of  migrations  classifications. Not into  other  degree the  fields  the  vast  of manufacturing  of Know-How/Technology  previous  trade of  surprisingly,  and  business. services  linkage  other  surprising.  than  One firms  would  majority  of  carried  out  relevant  to the trade  h a v e many  the  same  sector.  of  expect,  for  however,  firms  (previous)  and s e r v i c e s  of downstream d i s t r i b u t i o n  majority  migration  was  is  into  case  given  studies  their  the  trade  that, and  the were  skills  relative  capabilities.  i t i s surprising to find the  of  not  that  business-linked  sector,  into  high  also  example,  and m a r k e t i n g  (51%) m i g r a t e  a  (94% of a l l c a s e s )  Know-How/Technology not  by  to the c h a r a c t e r i s t i c s  the predominance  lack  a  where  accompanied  i n the i n d u s t r i e s f o r which  would  reason,  was  linkage  For cases  sector,  majority  For again,  services  204  5.2.3  Differences  It of  previous  inter-industry between  the  important  to  other  to  with  (downstream)  (16  related  of  than  relatively  firms  of  in  basis  distinct  apparent  the  linkage  destination  and  the  the  some  the  and  presents  there  the  data  of  trade  and  organized  into  of  cases)  were  the  of  industries,  13  between  cases  Here,  most  Know-How/Technology  however,  the  where  the  activity.  cases).  the  to  manufacture  however,  into  to  business  into  difference  industries.  industries,  out  a  comparisons  course,  previous  (11  is  restrict  of  group  the  sector the  intermediate  which  nature  manufacturing  the  reflects  Footwear  goods  reveals  on  For  manufacture  of  the  the  linkage  of  a  the  majority  For  is  related  Metalworking of  migrations  less  obviously  Textile  Products,  products.  This and  16  is,  product  22  further  manufacturing  we  movement  Machinery out  so  businesses  the  when  Textiles-Footwear associated  the  indicates,  linkage  attributable  cases  industries.  even is  in  Table  table  industries migration  of  the  Doing  new  between  groups As  and  sectors.  Origin  subdivide  differences  as  services  to  Of  industry.  previous  migration  and  Industry  is possible  their  three  By  larger firm  There  is  from  can a  has  a  that  such  number  Textiles, proportion  and  Textiles, of  related  Machinery there  are  of  intermediate  sector. likely  (downstream)  For  an  be  a  to  products  into  migrate.  major  various  as  the  larger  Metalworking  good,  the  fact  difference,  industries  to  as  well,  migrate  in into  the the  propensity  of  manufacturing  205 Table  16 - L i n k a g e P a t t e r n s  by I n d u s t r y  of O r i g i n  [no. of cases, (%)] APPARENT LINKAGE Other  Horizontal  Land or Buildings  (11)  1  (2)  0  8  2 9  (3) (14)  0  (0)  1  (2)  24 24  6  (20)  Know-How/Technology  Industry OLD  Textiles; Textile Products; and Footwear Metal Manufactures; Machinery & Equipment Miscellaneous Other Manufactures Totals Grand Total  N E W  Vertical  M  7  S T M S T M S T M S  6 1 1 2 14 3  (20) (6) (6) (12) (13) (3)  T  17  (16)  0 (0)  16  (53)  0  (0)  0  (0)  0  (0)  25  (23)  16 8 8 25  (53) (50) (50) (23)  T 0. T A L  Proportion(%) Sector  Overall  (13) ' 16  26  15  19 (31) 27 (44)  45 61  74 100  42 57  29 (27)  4 2 6 2 1 3 14 22  (13) (7) (20) (13) (6) (19) (13) (21)  26 4 30 11 5 16 53 54  87 13 100 69 31 100 49 51  24 4 28 10 5 15 49 51  29 (27)  36 (34)  107  100  100  (0) (39) (39)  0 1(0) 2 2  (7) (7)  3 3  (19) (19)  0  0 (4)  Note: The "New" industry i s indicated as "M" (Manufacturing) or "S" (trade or Services). Their sum by sector and linkage i s given as "T". The indicated linkages are speculative and based only on an examination of b r i e f descriptions of p r i o r and new business.  Source:  Summary reports on the Change of Business Assistance Programme (S.M.E.A., A p r i l , 1980). [internal r e p o r t ] .  206  sector  as opposed  while  the o v e r a l l  migrations cutlery were in  that  and  two  sectors,  the  contrast, apparel), strong  and s e r v i c e s  industries  the pattern  the pattern  competition  into  textiles.  On  some  the other  i n d u s t r i e s , such  developed 5.2.4  wider  some  operator  of  appear  hand,  of  Textile almost  Products reversed, into the of  i t i s most  Machinery  steel  industries.  infiltration  skills  cutlery,  industrial  other  similar  of  manufacturing,  cases, a  Of A d j u s t m e n t  a s when  noodle  trivial  Assistance  a textile  such  implicit  may  have  application  LDC as to an  within  or c o f f e e  in relation  and s e r v i c e s  that  such  change  the proportion  sector  which  involve  becomes  service  previous  ( o r even q u a s i - e x t i n c t i o n ) .  i s possible  t o term  t h e new  the  but  decline  i s tempted  shop,  to  Data  manufacturer  One  trades  pattern  (74%) being  the production  as s t a i n l e s s range  of  business.  It  is  pervasive  firms  metalworking  in a miscellany  and  steel  the The  of  industries.  two, t h o u g h  sectors  of  other  industries  more  division  countries.  Implications  In  the  The p a t t e r n  broad  91%  in the Textiles,  the other  a  even  Thus,  the s t a i n l e s s  and equipment  i n the Metalworking  reflect  inherently  in  sector.  industries.  of the migrations  sector.  between  in  f o r example,  repeated  majority  lies  may  is  services  manufacturing  and Footwear  trade  and  industry,  i n the machinery  a  may  an a p p r o x i m a t e l y  to other  with  some  show  industry  In  This  figures  and housewares  industries  to  trades  between  migrating  (lace,  to the  the  business  manufacturing  not  "adjustment"  of migrations a substantial  into  the  reduction  207  in  the  size  migrations  of  within  this  is  trade  and s e r v i c e s  both  cases  to  operations  greater  the manufacturing  sector  i s more  of successful  representing business  relative  scale  of the p r i o r  possible  to assess  t h e change  To t h e e x t e n t of migration  and cases  than  a n d new  which  businesses,  commensurability  includes  are closer  adjustment.  f o r example, t h e i t i s not  and, thus,  represents adjustment  that  into the  i t  successful  information regarding,  their  i s the case f o r  understandable;  failure  detailed  which  level  adjustment  more  than  sector.  so, the unexpectiedly high  Without  to  i s  rather  the  than  really extent  business  failure. If  there  however,  i t  distinctly this-is  firms  to  that  with  i n many  this  Tsubame.  firms  mode  industries  t o new  t o emerge  different  in  of adjustment In will  manufacturing  previous  in  be c a u t i o u s  industry.  are available  the  indication  t o them product  far  than  often appears  An  i t seems  fewer  t o have  can face  from  of the  stainless  likely  opportunities  and those  be m o r e  data,  implication  i n t h e Tsubame  businesses  will  this  generalizing  particular, face  from  industries  migration opportunities.  one s h o u l d  cutlery  migrate which  is  different  that  experience steel  i s one c l e a r  that to  opportunities  closely been  related  the case i n  208  VI.  LESS-DEVELOPED  COUNTRY C O M P E T I T I O N  AND  FOREIGN  DIRECT  INVESTMENT  1.  T H E NATURE OF  1.1  The R o l e The  the  Japanese  the  the  policies  In  each  the  regime  of  but  What  change  threat  to  importantly and  national  i s more  i n the  crises  implications  that less  o f some  each  This  examined producers  striking  international  was  rates  1  0  importantly economy; and  2  of  this  study  increased  related the  the  t o two  end  of  the  introduction  Both  of these  h a d a more  may  A  mixed  p r o d u c t i o n i s n o t o n l y more have  a of  changes  of t h e LDCs.  energy-intensive i t  third impact  labourfavoured  goods. these  the-changes,  The currencies depreciate relative  of t h e 1970's, LDC  in  dramatically  the competitive position  but a l s o  producers  industries  f o r LDC m a n u f a c t u r e s .  the extent  While  2  serious  advantages  countries.  of exogenous  exchange  the energy  intensive LDC  as a  obviously,  comparative  o f A s i a n NIC  tariff  t o improve  to  was,  i n the i n t e r n a t i o n a l  fixed  preferential  change,  examined  1970's.  changes  of  served  the  threat  early  distinct  producers  economy.  competitive in  NIC  of those  role  CHALLENGE  Change  respective  apparent  political  COMPETITIVE  of Asian  industries  to  development  LDC  Of E x o g e n o u s  emergence  related  is  THE  changes  had economic  themselves,  of the Asian t o the Japanese  were more  NICs Yen.  antecedents political  thereafter  tended  and than  to  209  economic and On  i n nature.  actions  taken  balance,  specific  yet  they  Japanese  was  organizations.  altered  and Asian  decisions  the  relative  NIC p r o d u c e r s  n o t t r i g g e r e d by c o n d i t i o n s  event  evident  industries. European  many  This  goods.  was  NICs in  the  Most  i n many in  this  cessation  them  the  those  improved  profound  improve  lay outside  Just  temporarily  cut  implications  for  for  their  many  able  their  many the  Japanese i n world  to maintain following  a s i n t h e 1970's,  of  markets f o r  position  position  of the a f f e c t e d  sort of  subsequently  competitive  those  development  opportunity  were  of h o s t i l i t i e s .  causes  War  from  a similar  s u p p l i e r s out of i n t e r n a t i o n a l  provided  of  different  prewar  World  industries to dramatically  markets.  quite  i n t h e 1970's,  The F i r s t  traditional  their  dramatically  were  the specific  phenomenon  extend  of p o l i t i c a l  of i n t e r n a t i o n a l  of Japanese  b e n e f i t t e d the Asian  light  the result  i n d u s t r i e s and c o u n t r i e s .  While which  changes  strength  industries;  was  i n the context  these  competitive  Each  or the  the events  and  i n d u s t r i e s y e t they  had  international  competitive  position. The improved large  striking their  part, took  such  exogenous  have  place.  The more  changes  discontinuous  profound  positions  competitive  with  of  nature  general  Asian  NIC  producers  i n t h e 1970's  i s due, i n  of the exogenous  changes  i m p l i c a t i o n , however,  i s that  i n the international or gradual,  implications LDC  which  position  to the discontinuous  that  whether  rapidity  for  producers.  have the The  political  had and w i l l relative current  economy,  continue  to  competitive drift  towards  210  protectionism example.  say,  or  a  countries  or  other,  affect  such  as  future  1.2  Asian  NICs  the  effect  of  more as  1  0  the  in their In  Asian  through  China  be  a  and  indicate  exogenous  is  not 1  0  3  an  important  Asian  NICs  and  change  that  changes  impact of  are  on  those  the  other  footsteps. NIC  Competitive  i n Japan  the  that  I t appears  Japanese  cause  be  FDI  Japan  and  decline  in  in to the  Empirical  studies  defined  industry  so-called  feature  industries  to  of  broadly  to  Development  exports  this,  important  defined  O.E.C.D.  Exogenous  industries.  that  the  investment  have  primary  at  arrangements international  and  foreign  subsequent  domestic  clear  i n the  umbrella  evidence  investment  and  of  the  See, f o r example; N. Watanabe , op. c i t .  3  of  on  current  of  "boomerang",  Japan-Asian  relatively  examined  NIC  unimportant  i n the  present  well.  Only  the  inevitably  Japanese  narrowly  between  possible  some c o n c e r n  relations.  defaults  of  markets,  FDI  endemic  obvious  trading  competitive positions.  would,  levels  economic  there  of  examples  macro-economic  sectoral  international  inward  follow  been  most  on  Complicity  has  the  policy  will  would  but  in relations  relative  Japanese  study  in  competitive position  which  the  is  result  in Chinese  corresponding  in  a  shift  third-country  at  change  as  these  There the  DCs  hypothetical,  would  LDCs  the  Major  (arising, debt)  in  and  i n the  Japanese apparent  Suzuki  mosaic  FDI. volume  (ed.)  Even of  tile so,  the  ,  industries the  timing  resulting  op.  c i t .  was of  exports,  and  T.  21 1  relative this  to  was  of  broader later  in this the  indirect  benefitted Import  Asian  Japanese needs  of  (whether  capital  and  or  Thus,  Asian  impetus  (the  is  discussed  Asian of  NIC  plant  These  by  and  the  is  equipment  and  to  plant  financing  is  among  were  also  moreover, Export-  probably  quite  Japan  strength in  was  thereby  i t was  and  and  the  of  the  supplying  equipment-  involved), the  the  not  ultimately  were,  developed  the  provided  exports  there  other  a v a i l a b l e to  and  uniquely  Japanese  positions  strength  on  i s the  developed  i n d u s t r i e s examined  Asian  to  NICs.  Asian  dependent  in  factor  NIC upon  relevant  impact  country  this  of  present  in production  over  means  of  various  an  expansion  exports  to  study  the  to  earlier  markets.  substantial increases of  by  Japan  between  competitive  of  competitive  exports,  provided  ties  evidence  industries.  FDI  competitive  Japanese  by  decline  activity.  important  of  period  that  however,  manufacturers  sources  that  Japanese  NICs'  most  that  indicate  strategy  activity  and  concessional  competitive  their  to  in  economic  light  respect  Japanese the  close  development,  more  of  equipment  relevant  whatever  A  of  was,  exports  finance  experience  and  there  sector.  sort  the  the  of  goods  countries  specifically  cause  complicity  low-cost  not  competitive  a  production,  adjustment  industry  non-Japanese  industrial  as  an  form  This  with  however,  tile  given  the  as  the  plant  Both  the  in  Bank.  NICs  FDI  Japanese  from  widespread,  importance  of  mosaic  Japanese  in Japanese  chapter).  development, the  decline  marginal  issue  In more  the  A l l made  postwar O.E.C.D.  212  countries.  As t h e p r e v a l a n c e  the  examined  that  accompanied  expense  of  industries indicates, this  caused in  the course  significant  those.markets.  were  reduced  involved only  increased  national  to imports;  the of  absolute  amount  stainless  steel  the  domestic  had  largely  imports.  cutlery  for  at the  and demand industries  capacity.  and  had,  the a b i l i t y further  i n some  This  not  of  the  proportion de  facto,  of those  erosion  industries,  i n d u s t r y had i m p l e m e n t e d an a d j u s t m e n t removed  the  of  (now, their  such as the  i n d u s t r i e s i n West Germany and t h e U.K.,  i t from d i r e c t  At t h e same t i m e ,  arrangements  against  Moreover,  at  a p p e a r s t o have  domestic  industries  i t a l s o reduced  position.  share  number of f i r m s and employees  production  absolute  in  markets.  competing  the  i n d u s t r i e s to lobby  competitive  only  i n the c o n d i t i o n s of supply  of  terms  the  not  but, s u b s t a n t i a l l y ,  i n those  market w h i c h t h e d o m e s t i c  conceded smaller)  change  and i n t h e i r  was  quotas  o f market  of the postwar p e r i o d , t h i s  Many  in  exporters  producers  export  the capture  Japanese expansion  third-country  expense o f d o m e s t i c Over  of " v o l u n t a r y "  competition  with  t h e c o n s u m e r s and t h e  distribution  had  become  process  far  that  low-priced  institutional more  "import-  oriented" . Thus, t o a l a r g e e x t e n t , 1970's, r e l a t i v e of  them),  countries.  faced  to t h e i r a  the Asian  NIC  producers  Japanese predecessors  more  The r e c e p t i v i t y  receptive of  market  distributors  (indeed, in  and  in  the  because  t h e O.E.C.D. consumers  to  213  imports  1 0  *  and the a b s o l u t e  greater. share  Moreover,  were  O.E.C.D.  producers,  than  which to  reaction.  expand  their  exogenous  were It  which  NIC p r o d u c e r s  in  i s  likely  Asian  to  the  market  much  i n market  and not the domestic  likely  this  Japanese  accounts  were  NIC g a i n s  less  i n the examined  exports  changes  that  of the Japanese,  they  any other,  Asian  of t h e import  to the extent  a t the expense  protectionist more  size  to  provoke  "contribution",  f o r the rapidity industries  O.E.C.D.  markets  international  a  with  were  able  following the  environment  in  the  that  LDC  1970's. 1.3 T h e C o u r s e  O f LDC C o m p e t i t i v e  1.3.1  And P r o d u c t i o n  Products  Comparative competitive  advantage  strength  will  the  intensive  proceed,  with  development,  intensive  production  emphasize,  on t h e o t h e r  products  and  Rather,  they  competitive  development  of r e l a t i v e l y  towards  hand,  of trade  in production  more  activities.  T h e two  emphasize  theories  use  production  differentiated.  Technology  begin  require  Development  capital-  Product  towards  propositions two d i f f e r e n t  activities  unskilled  are  from  those not  dimensions  -which  labour and  life-cycle  LDC p r o g r e s s i o n  processes  suggest  and  skilltheories  standardized which  a r e more  antagonistic. along  which  LDC  proceeds.  " T h e g e o g r a p h i c a l p r o p i n q u i t y o f K o r e a a n d T a i w a n t o J a p a n may also be relevant. Once a distributor, or brand-name m a n u f a c t u r e r , f r o m a n O.E.C.D. c o u n t r y has a c c e p t e d the i d e a of sourcing production i n Japan i t takes no great leap of imagination, or of a i r f a r e , to consider the a l t e r n a t i v e s o f f e r e d by p r o d u c e r s i n Korea or Taiwan.  214  It these  was  not  the  purpose  propositions  the  basis  of  are  broadly  of  regarding  the  LDC  evidence  consistent  with  fairly  standardized  glazed  tile)  Asian  NIC  tile  was  that  and  had  found  these  clear  on  whether  to  example,  that  Japanese  the  scale in,  i t i s the  skill-intensity  and  of  more varied  in  the  Korean  Europe or  and,  the  for  then,  of  the  production  cutlery  and  producers  or  in,  products.  of  organization  Japanese  decline  complex  counterparts.  say,  produce  progression  organization  and  to  the  more  examined DC  methods  to  on  to  unglazed  find  integrated  industries  ceramic  were  much  production  than  In  the  of  production  North Korean  absence  of in  America,  i t is  pattern  that  unusual. does  nature  of  well)  might  large  seem  of  the  firms,  It  relatively  integrated  policy  favour  integrated  in  likely,  industrial  convenience.  use  unexpected  their  data  simple  of  but,  relative  (first,  with  to  industries  pattern  industry  from  more  in  same  It  are  tile  the  either  development  and  production  consistent  for  a  capital-  standardized  rather  comparative  is  from  industries,  larger  not  Japanese  and  They  Moreover,  producers  processes It  l e v e l s of  is also  competitive  have,  utilize  the  assess  them.  low  example,  to  the  norms,  products.  study  encountered,  country  standardized  this  may  these  skills.  in Korea  be,  of  that (and  establishment  i f only  shorter  organization  however,  as  as  well,  a  highly  directive  in  other  LDCs,  a  matter that  supply production More  of  the  in  l i m i t e d number of  basic LDCs  serves  managerial  to  of  administrative  and  c e r t a i n l y , any  as  that  economize effort  to  skills a  more on  the  quickly  215  establish even  on  a  manufacturing  entirely  integrated long 1.3.2  Other  indirectly  other  develop.  The they  of  industries,  only  modest these  design  and  in  early  firms  These for  some  the an  It  that  which  h e i r a r c h y of  grew  Tsubame  out  in  more  of  the  Japan.  to  present  study  factor-intensity  characteristics, LDC  in this from  competitive and  study  the  and  there  are  strength  may  markets.  were  and  of  that  NICs we  and  because  a  found,  related  i n each  characteristically  acquired.  in these  Japanese  selected  distribution  recently  activity  were  Asian  producers  design  skills The  industries,  exports,  was  of had  and  that  bulk  of  especially  carried  out  by  manufacturers.  in  other  of  the  functions could  manufacturer.  require a  i n the  competence  Japanese  skills  the  portion  good,  Development  is significant  development  were,  distribution  along  examined  internal  than  process  to  which  examined  and  export  Competence.  distribution  other  that  in addition  competition  limited  novel  f o r example,  functional  problem.  these  a  is likely  Competitive  that,  are,  severe  of,  industries  product  industries  adjustment  the  the  Functional  faced  even  Of  dimensions These  iv.  initiative,  traditions  from  in  o r g a n i z a t i o n than  suggests  stability  two  of  Dimensions  Evidence  the  private  form  industrial  capability  This  business  words, product be  suggests  industries range  provided the  activities  by  i n which the  least  design  and  sources  possibility through  at  which  that LDC  external there  to is  competence  216  develops  and  production, in  these  that  the  per  se.  if  appropriate  markedly  "Functional along  which  one  would  LDC  This  competitive  and  design  the  through  distributors production),  will  on  by  on  and  a,  course, or  product  their  relatively  lacking  in  the  design be  is  arose  by  develop, of  can  third  then,  and  particularly  non-existent variant  could  in  be  the  develop  that  or  from  where  if  that  by  such  foreign  manufacturers  reliance  on  dimension  this  is  so,  stages  of  strengths  in  specialization  in  the  distribution  external  organizations  similarly  "the  If  earlier  narrow  is,  parties,  another  competitive  provided be  be  develops.  their  f u n c t i o n can  and or  LDC  industries,  reliance  based  i s small  that,  facilitate  example,  would,  these  competition  explained  to  strength  industries  for  LDC  of  markets.  an  function,  develop,  production  different  industrialization,  In  that  narrowly  market  hypothesize  production.  to  part  in  Competence",  which  in  difficult  domestic  in export  first  fact  are  competence  LDC  a  the  which  more  and  be  competence.  the  demands  may  firms  but  distribution  it  to  acquired,  necessary,  true  Thus,  industries  accessibility easily  easiest,  externalized;  as  design (i.e.,  market"  either  consultants, subcontracted  (made-to-order  or  217  standardized One  products).  would  within  any  product  variants  available on  the  feasible  or  less  their  (or  some  Japanese  case  export Europe  and,  Export  studies to  than  market  and  and  of of  those  functions  large  Japanese  markets  until  competences  the are  where less  consumer  d i s t r i b u t i o n and  firms  are  is  external  Taiwanese  from  functions  towards  these  place  developing  design  the  take  sales  1960's.  now  extending  downstream  :  into  sales.  Growth  some m a r k e t s  on  functional  exports  uniform.  Many  to  producers  unimportant)  foreign  Korean  and  LDC  provision  relied  serve  National  The  are  effective.  internal  v.  s i m i l a r phenomenon  distribution  external  to  distribution  5  where  manufacturers  Similarly,  a  industry;., w i t h  externally  specialists  0  expect  given  reliance  goods  1  also  1 0 5  Markets  suggest  various  occured i t did  to  national  earlier, in  penetration  then,  that  Eastern  or  others. was  from  the  pattern  export  more  general  North  growth  markets  proceeded The  of  was  rapidly, sequence  America  to  in not in of  Western  Europe.  The product life cycle approach also relates product s t a n d a r d i z a t i o n t o LDC p r o d u c t i o n , but in a quite d i f f e r e n t way. T h e r e , the argument i s t h a t as product characteristics become standardized, price-competitiveness becomes a dominant consideration and favours the transfer of production to locations affording the lowest production costs, often these w i l l be i n t h e L D C s . The f o c u s i s , t h e r e f o r e , on t h e conditions o f demand i n consuming nations. Here, we are emphasizing, instead, a p r o g r e s s i v e c h a n g e i n c o n d i t i o n s o f s u p p l y among LDC p r o d u c e r s ( f u n c t i o n a l competence development). In r e a l i t y , both (DC) demand a n d (LDC) supply c o n d i t i o n s are relevant.  218  Similarly, these  various  development Japanese  pattern  markets  path  of  at  markets  experienced In  to  earlier  by  relative  degree  or  the  times  at  competitive  development  example, no  explained  market  unique  design  independent  (e.g., this  function  These  be  conditions  competence It  was  seems  markets  for  producers  carried  out  would  them  given  LDC  due  to  overall  ties  with  various  example,  that  the  France  the  the  penetrated  Asian  degrees  of  penetration to  of  that  n a t i o n a l markets to  of  time,  I t may  and  be  which  production  have  even are  particular  U.S.A.  for are  requires  that  themselves.  in  the  LDCs  whose  alone. where  the  of  export  identical,  different  pattern  are  has,  specialists  essentially  quite  of say,  there  manufacturers,  that  that,  market  thus  producers  the  can  dimensions  distribution  product  in  competition,  over  U.S.A.  lacks  the  on  LDC  the  foreign countries.  the  different  similar  p r o d u c t - s p e c i f i c market and  NIC  (regarding  product will  of  different  terms  favour  however,  i n any  of  by  likely,  to  features  the  centred  specific  pattern  general  increases  in  or  not  the  broadly  to  handle  infer  discussed.  narrowly  the  of  requirements  to  If  we  to  producers.  already  access  for  with  in part  consultants)  wholesalers)  and  this  relative  exports  have  receptivity  which  be  French  to  been  or  Japanese  the  d i f f e r e n c e s among  undoubtedly  the  from  seem  Japanese  exposure  rate  in  uniform.  sequencing  have  such  of  not  also  the  seems  general,  in  they  Moreover,  decline  competition  different  rapidity.  of  was  LDC  decline,  markets  DC  the  the  ease  of  county's  Even  i f we  and  institutional  identical,  assume,  we  would  219  expect have  LDC p r o d u c e r s  quite  markets  different  because  political,  differences  relevant  quite  More  among  LDCs  commercial,  similarity  penetration  for  suggests,  however,  accessibility similarity  in  Japanese  among the  the  a  generally  the  various  sequence  of  Japanese  and Asian  not  as  indicating  a universal  all  LDCs  but rather,  as  Japanese Of Asia.  and Asian particular While  an  NIC t i e s  indication with  importance  motivated  by  NIC  market  producers  The  perhaps  the DC  of broad  penetration  penetration of  market  hierarchy  market  the various  complex  of  markets.  i s the postwar a  be  institutions  patterns  NIC p r o d u c e r s i s , however, market  of  to  markets.  similar  export  in  "know-how", a n d  Asian  DC  of  between t h e  likely  trade-related  later,  terms  availability  apparent  and,  1 0 6  differences,  are  developed country  in  in  and l i n g u i s t i c  and other  economic,  agreements  there  to  t h e s e two  cultural,  directly  i n the local  cultural  into  the c o u n t r i e s .  bilateral  certainly,  Philippines  expansion  product-specific from  to the different  The  0  manifest even  the  the  between  and g e n e r a l  financial,  in  links  resulting  concerned.  information  1  be  and  of export  differences  perhaps  access  countries  of  of  may  differences,  major  patterns  and h i s t o r i c a l  This  market  i n , say, A l g e r i a  best  by  seen  sequence f o r  similarity  of  countries.  U.S.A.  of broad  presence i n political  and  In t h i s example, t h e r e i s of c o u r s e t h e element o f g e o g r a p h i c proximity; though transport costs appear to be relatively u n i m p o r t a n t f o r many o f t h e r e l e v a n t p r o d u c t s . Postwar advances in communications, including transportation, have also been reducing the absolute importance of geographic proximity.  6  220  economic in  this  Asia  factors, unrelated study,  has  market,  market and,  the postwar  probably,  relative  producers  in  as  expansion  Western  Europe,  these  competitive  in Malaysia,  are relatively  differ  same  those  made  more Thus,  examined  presence  the North  in  American  accessible  to  Asian  the patterns  of  export  North  America  t o Western  from  Germany  to other  Europe European  i n d u s t r i e s t o become i n t e r n a t i o n a l l y  Africa,  stronger  of p r o g r e s s i o n from  by-product,  from  industries  o f t h e U.S.A.'s  markets,  proceeded  Were  pattern  a  industries.  countries.  there  dominance  to other  those  within  to the s p e c i f i c  into  displayed  or  links  the with  Mediterranean;  European  the various  DC  i n the cases  countries,  markets  of Japan  where  would  the  likely  and the  Asian  NICs. The will It  general  follow  t h e same  i s ,rather,  any  point  given  that  LDC  and  pattern  and  ties  another, strength 1.3.3  fact  established  relevant cases  that  i t will  of o v e r a l l  with  an  with  market some  strongly  i n a l l LDCs  penetration. sequence f o r  influenced  linguistic,  the various  along  such  DCs.  which  by t h e  political,  This  LDC  Industrial  then i s  competitive  Skills  i n t e r n a t i o n a l l y competitive that,  skills  in  be  producers  to develop.  implies  production  examined  relevant  that  t o be  cultural,  dimension  c a n be e x p e c t e d  export  is likely  o f t h e LDC  "market",  not that  i n DC  S p e c i f i c i t y - G e n e r a l i t y Of  The been  sequence there  pre-existing economic  i s ,then,  this  respect  a t a minimum,  have study to  also  been  indicate other,  industry  has  a c e r t a i n amount o f established.  such  skills  quite  The  are often distinct,  2 2 1  product/industries Thus, strength  cutlery of  readily  in  metal  also  they  cutlery  of a v a r i e t y  of metal  competition but  industry and  Japanese that  housewares. mosaic of  of  to  new  which  require  are also  LDC  ceramics business  industries  extent  production  which  skills  sector  received  variety  o f new  The  skills  possessed  industries,  the  differ  production  relevant  of q u i t e  as  and  a  to  firms  other  to  The  majority  manufacturing  entirely  and  into  competitiveness, in  competences,  the  afford  of  of these  the trades  importance  and markets  the  product  i n which  them  i t  and a  firms  and of  these into  footwear  within  moved  services  out  i t s  life-cycles, becomes  more the of  sector.  considering of  a  sector.  much  opportunities  and t h e d i r e c t i o n and pace terms  migrated  to  within  within  textile  the  appear  relevance  Firms  the  of m i g r a t i o n  sector.  suggests  and  the manufacturing  in  manufacturing  This  general  assistance  within  seemed  range  particular,  whole.  adjustment  by  in  industries, in general,  businesses  in contrast,  amount  i n Tsubame,  machinery  wide  only  moved  manifestation  suggests  of the  have  to the production on  on t h e  i n the Japanese  one  data  implicitly  manufacturing  industries  not  and Korea,  and i n d u s t r i e s .  working  limited  Japan  skills,  relevant  assistance i n terms  incorporate the  skills  both  metalworking  be  The  which  The  to  general.  considerably  products  o f LDC  appears of  adjustment  skills  general  the problem  acquisition  in  the production  industry  products  well. producers  their  into  Similarly, tile  as  LDC  development, functional  established,  but  222  also  in  t e r m s of t h e u n d e r l y i n g  Analysis  which  product)  transferability  clarify  focuses  both the  competitive THE  2.1  I n t r o d u c t ion  indicates  that  has  increasing  been  Japanese  this  FDI  operated  by  (in  t h o s e of some does  responsive face  LDCs.  study,  foreign  can s e r v e  of  to  development  SME  is  direct  of t o t a l  in recent  view  FDI  production  FDI  (or  further of  Moreover,  1 0 7  provided  itself,  investment  LDC  by  feel  not o n l y  SME  financing  institutions  suggests that  financing  FDI  to  accounted for  much of t h e  This  that  1978,  financial  1 0 8  activity  attributable  y e a r s and, by  of t h e government  and o p p o r t u n i t i e s  This  the  pace  by t h e J a p a n e s e g o v e r n m e n t .  -and  which  and  of a l l c a s e s .  J a p a n e s e government,  to  inter-industry  these s k i l l s  the p r o p o r t i o n  one-half  needs  relative  i t implies.  ROLE OF FOREIGN DIRECT INVESTMENT  on  firms  of  direction  Data  for  the  skills  strength.  2.  fully  on  production  many  involved)  i s responsive  of l a r g e c o r p o r a t i o n s  the  to  the  but  also  SME. not  necessarily  mean,  t o t h e needs and o p p o r t u n i t i e s t h e need t o a d j u s t Indeed,  facilities  inside  the  of f i r m s  to competition  i n the i n d u s t r i e s  (specifically,  however,  examined  equity-based  that  FDI  is  in industries  from p r o d u c e r s i n in  the  present  establishment  of  t h e c o m p e t i n g LDCs) does n o t a p p e a r  SMEA, C h u s h o k i g y o no K a i g a i T o s h i no G e n j o , I g i , O y o b i M o n d a i t e n ( C h u s h o k i g y o c h o , T o k y o , 1980) p21 See, S h o k o k u m i a i Chuo K i n k o , K o k u s a i b u , C h u s h o k i g y o no K a i g a i T o s h i J i t t a i Chosa ( S h o k o k u m i a i Chuo K i n k o , T o k y o , 1979) p11. 7  223  t o have been FDI  as  an  important aspect  did  occur  was  domestically,  either  distribution  activities  involvement se.  totally or  were  precisely  business a c t i v i t i e s  to d i r e c t  dominated  competition  manufacturers adjust.  The  conduit  for  and  which  had  the f i r m s ,  in  a  design  by  and strong  production,  i n o t h e r words,  least  exposed  immediate  s u c h f i r m s was  adjustment  problem,  per  i n which  production-oriented)  the  impact of FDI  were,  relatively to  such  which  were, f o r t h e moment, l e a s t  faced  existing  Moreover,  firms  as o p p o s e d  (narrowly  which  overall the  from  by  specialized  i n those a c t i v i t i e s ,  These  existing  of a d j u s t m e n t .  LDC  need t o  t o a c t as a  not  as  its  solut ion. The did  industries  relatively  that  literature partly in the  0  pose two  m a n u f a c t u r i n g FDI dominated  rather  than  by  firms  production?  does not appear t o d i r e c t l y  because  any c a s e , overall  encountered  1  little  which d i d occur  distribution  examined  FDI  activities  in isolation of  literature  the  firm  questions;  why  take place?  and why  was  primarily  involved  in  The  existing  address either  i t deals with aggregate data  i t treats  no  distinct  and  question;  and p a r t l y not i n  or  which c o n c r e t e l y  Japanese  because,  relation  industry. relates  FDI  1 0 9  to We  to the  See C h u s h o k i g y o c h o , 1980, (, op. c i t . , p21) and S h o k o k u m i a i Chuo K i n k o , 1979 (, op. c i t . , p l T T and, f o r example: Sakamoto Yasuhiro, "Kokusaika no Shinten to S h i t a u k e C h u s h o k i g y o no K a i g a i S h i n s h i t s u " i n , C h u s h o k i g y o t o K u m i a i No. 4, 1980, pp49; Kurii Takashi, "Chushokigyo no Kaigaitoshi no Doko to Tokucho" i n , K i n y u Z a i s e i J i j o June, 1979, pp40-44; Kanayama Norio, "Chushokigyo no Kokusai Tekioryoku" i n Shoko J i a n a r u J u l y , 1978; K i t a m u r a M u r a h i r o and M o r i Ken (eds.), Wagakuni no K a i g a i T o s h i t o K o k u s a i Bungyo o Meguru Shomondai (Ajia Keizai Kenkyusho, T o k y o , 1979), pp175-200;  9  224  problem  of  adjustment  competition. t h e two 2.1.1  We  firms  and  c a n , however, o f f e r  industries  facing  some h y p o t h e s e s  LDC  regarding  questions.  The  D e a r t h Of  Current only  in  when  present. i.  theorizing the  That  FDI  firm  suggests that  it  believes certain  will  occur  conditions  are  are:  t h e f i r m has  access as  about  investing  These  1 1 0  FDI  exclusive  to) i n t e r n a t i o n a l l y  capital,  provide  it  equipment, with  entrepreneurs.  an  possession  of  transferable patents  advantage  These  are  (or s u p e r i o r assets  (such  or  know-how)  that  over  local,  LDC,  termed,  "ownership  advantages".  ii.  That  i t i s in  internalize (whether rather are iii.  use  interests  of  these  utilization  "internalization  the f o r e i g n  markets  1  best  of  the  ownership  o r by  firm  "rental"  o f them)  c o u n t r y ( e . g . , LDC)  inputs,  These  advantages".  or l o c a t i o n - s p e c i f i c , for  to  advantages  t h a n d i s p o s e o f them on t h e open m a r k e t .  immobile,  1  the  by d i r e c t  termed  That  the  including  affords  endowments labour,  superior  (e.g., or t h e  the local  See, f o r example; Rugman, A. M., "Internalization as a General Theory of F o r e i g n D i r e c t Investment: A R e a p p r a i s a l of the L i t e r a t u r e " i n , W e l t w i r t s c h a f t l i c h e s A r c h i v V 116, 1980, pp365~379 and Dunning, J. H., " E x p l a i n i n g t h e I n t e r n a t i o n a l D i r e c t I n v e s t m e n t P o s i t i o n o f C o u n t r i e s : Towards a Dynamic or D e v e l o p m e n t a l A p p r o a c h " i n , op. c i t . , v 117, 1981, pp30-64.  0  225  tax/incentive  regime).  These  are  termed,  "locational  advantages".  The  last  clearly The  explained, two  which words, (as  is  most  are  industrial and  and  may  relevance  advantages, to  this  i n d u s t r i e s examined  absence  these,  merely to  involved are); the  (by  of  the of  one  or  first, the  the  is  study.  might  other  be  of  the  ownership-specific  second  and,  i n any  are  FDI  is  recipients  them,  i f they  their  case,  of  time  or  from  "re-invention",  However,  as  acquired  by  advantages  etc.)  other  capacity  advantages Prior  of  the  are  to  (or,  and  the  may  more  through  a LDC by  requisite  advantages  LDC  vanish  in  third-parties,  these the  assets  are,  is crucial.  FDI  of  industrial  ownership-specific  ownership-specific  viable.  equivalents)  to  in developing  element  by  passive  transfer  then  equipment, be  the  purchase  ownership-specific  exist  exactly,  other  means,  viability  of  lost.  The  Such  the  the  precondition  the  the  in  Of  espionage,  skills  their  FDI  decide  and  acquisition  locational  i n d u s t r i e s of  by  not  clearly  asset  LDC  pertinent.  firms  they  FDI  of  a  actively  wasting  the  however,  LDCs  DC  conditions,  conditions.  the If  in  dearth  advantages, seems  these  present  relative  other  of  present  problem  of  adjusting  industries  producers equipment.  have To  study  are,  already the  i s concerned to by  existing  much  that  i n d u s t r i e s which  competition  definition,  acquired extent  with  of this  ones the is  in  from which  relevant so,  LDCs. the  skills  the  face  LDC and  Japanese  226  producers LDC  will  possess  production  explanation, producers  a s m a l l e r , and p e r h a p s no,  over  the  however, begs t h e  d i d n o t engage  requisite  skills  FDI  until  such  realized data  and time  would  why  the  of  a l l SME  be  made  in  anticipation  r e q u i r e some a b i l i t y  most  show  fairly  of the  the  of LDC p r o d u c t i o n  1 1 2  The  investment  is  aggregate  within  burden  and c e r t a i n l y  of the f i r m s i n the i n d u s t r i e s  LDC  profitability,  implied financial  o f many S M E  of  to finance the  rapid  recovering their  Nevertheless,  1 1 1  This  Japanese  t o LDC a c q u i s i t i o n  as t h e c o m p e t i t i v e n e s s  exceeds the c a p a b i l i t y of  of  a n d t h e c o s t s o f t h e FDI a r e r e c o v e r e d .  61%  years.  question  producers.  in  and e q u i p m e n t .  on FDI by J a p a n e s e SME  with  LDC  i n FDI p r i o r  Such FDI would have t o competitiveness  existing  advantage  examined  five  probably  exceeds t h a t  i n the present  study. The probably  rapidity made s u c h  industries  w i t h w h i c h LDC c o m p e t i t i v e n e s s p r o s p e c t i v e FDI l e s s  e x a m i n e d , J a p a n e s e FDI was p r o b a b l y  the mid- t o l a t e - 1 9 6 0 ' s ; domestic relatively  production  but t h i s  was g e n e r a l l y  was e x p a n d i n g  itself  I n most o f most a  the  feasible in period  a n d LDC c o m p e t i t i o n  when  seemed a  remote t h r e a t .  Moreover,  1 1 1  likely.  revealed  the fact  t h a t LDC p r o d u c e r s  in  these  industries  See Shoko K u m i a i Chuo K i n k o , (1979, , op. c i t . ) . Such performance, o f c o u r s e , may n o t have been p o s s i b l e , even under the best of c i r c u m s t a n c e s , i n the i n d u s t r i e s examined in this present study. The c o m b i n a t i o n , i n a t l e a s t some SME, of a p o t e n t i a l f o r profitable FDI and a l i m i t e d c a p a c i t y t o f i n a n c e i t p r e s u m a b l y accounts f o r the extensive government involvement in the f i n a n c i n g o f FDI by J a p a n e s e SME.  1 1 2  227  appear this  to is  adopt the  countries.  and  of  FDI.  labour  have  some  time,  resources  tile  engage  on  be  terms  assistance  Finally, specific them.  industries producers  at  or  be  specific  be  regenerate  to  product  or  greatest  weakness.  For  relatively  little  FDI  had  outside to  the that  single  the  the  industry  designs.  i t is i n the  firms  the the  industry  even  in time, Japanese  FDI. Japanese  This  than  firms  maintain in  these by  to  have  developing  is precisely  their  that  examined.  area  there It  LDC  maintain  f i r m s would  surprising  export  ownership-  acquired  example,  industries  itself,  better  i t must  Thus,  the  equipment  government  perhaps  firm  as  capital  possess  for  not  individual  a  Japanese  by,  skills  relevant expertise  eventually  the  of  Moreover,  of  as  advantages"  industry.  the  were  potential  Japanese  point  by  them  the  the  ("social")  amalgam  few  Japanese  producers,  and  reasons,  were  indicated,  advantages  process  these  while  these  nature,of  limited  management.  due  without  ownership able  also  necessary  and  enough a  the  from  possessed  could with  fragmented  that  for  intra-industry  there  firms within  i t i s not  skills  the  suggests  production  industries,  study  are,  advantages  The  production, of  have  production  available  to  may  a l l  machinery  available  the  i n FDI,'  them  which to  to  these  i n d u s t r y case  may  then  constituted  integrated  required  those  to  of  form  so,  due  of  mode  incorporated "ownership-specific  incorporated  mosaic  is  employed,  may  regarding  and  this  i n any  at  which  efficient  For,  whole  which,  most  industries,  division  a  integrated  If  Japanese  for  an  should  to new of  was be  228  noted,  however, t h a t even  it  would o n l y  (or  the  the  other  of d i r e c t  firm's) assets  perhaps  criteria most,  into  this  2.1.2  FDI  By  t h a t were  the  distribution  the  LDC  distribution  specialists  (LDC)  explanation  is  less  clear  these  the  of  FDI  industry's  mobile, that  and  met  many,  and  i n d u s t r i e s d i d not  fall  source  of  that  for  acquiring  assets  indicates  that, overall,  i s conducted  i n the  by  which  such i t .  firms  LDCs on about  commercial  3  favourable  clearly Japanese  I t i s not did  evident  not  simply  LDC  firms operated  be  the an  most  terms.  by  likely  opportunity design  m a r k e t as  o f J a p a n e s e SME  (i.e.,  the  was  b e n e f i t t e d the  regarding  domestic  17%  1  perceived  advantages  Japanese  1  occur FDI  by  FDI  firms,  to e x i s t i n g  did  This  faced  What seems t o  these  the  how  similar  supply  entrepreneurs. is  FDI  that conducted  ownership-specific  distribution  FDI  of  challenge  firms, u n l i k e other  their  utilize  of  appear  specialists.  competitive  It  local  would  assets  producers.  switch  to those  deal  Wholesaler/Manufacturers  by  aggravated  these  It  been a g r e a t  internationally  i n d u s t r i e s examined, the  dominated  why  relevance  f o r FDI.  of  had  category.  In t h e  One  to and  a means of survey  1 1  "  manufacturing  non-manufacturing) f i r m s .  I t may be, of c o u r s e , t h a t i t d i d not benefit them. There a p p e a r s t o have been a "bandwagon" e f f e c t i n J a p a n e s e FDI i n t h e e a r l y ' 1 9 7 0 ' s w i t h c o n s i d e r a b l e FDI b e i n g u n d e r t a k e n on t h e b a s i s of only s u p e r f i c i a l a n a l y s e s of i t s m e r i t s . In t h e a b s e n c e of d e t a i l e d i n f o r m a t i o n on FDI i n t h e i n d u s t r i e s examined in the present study, one cannot t e l l whether i t was m i s g u i d e d ; but that i s a d i s t i n c t p o s s i b i l i t y . " See, Shoko K u m i a i Chuo K i n k o , (1979, , orn c i t . ) p23.  1 1 3  1 1  be  i f there  229  One  should  probably  distributors,  including  manufacturers category. figure  include  (i.e., If these  might  examination, manufacturing specialists The  those  much  higher.  by  industry, out  for  seem  problem  Asian  preceding  to  know  assistance  how to  explicit  proportions and  industries  much FDI  and, i n e f f e c t ,  explanations  competence  some NICs  point,  of  production  I t would  Japanese  SME  goes  to  exacerbates  the  i n the industry.  Development  o f t h e FDI p a t t e r n s  i s c o n s i s t e n t with  development  be  of  by  thereby  producers  introduced  may  say i n the l a t e  have  of the r e q u i s i t e  have  even  export  been  markets.  greater  advantages years, say,  same  encountered  the concept  o f LDC  a t the beginning  of  chapter. At  had  no  of i n v e s t i g a t i o n .  F D I A n d LDC F u n c t i o n a l C o m p e t e n c e  functional  none  relative  distribution  worthy  example,  financial  the examined  nominally  uncovered.  of the a c t u a l  this  the  by  adjustment  in  were  Unfortunately,  of  firms  The  only  included the  distribution-based  2.1.3  are  primarily  wholesalers/manufacturers  i s s u e would  government  which  are  i n the  FDI c a r r i e d  interesting,  which  the wholesaler/manufacturers),  be  was  a l l firms  Korea  production  entrepreneurs  or had access  skills  and  equipment  and  of the existence  of the product  At that  p o i n t , Japanese  producers  ownership-specific favoured  balance  changed  advantages,  Japanese  of l o c a t i o n a l  b u t , a t t h e same  time,  though  production.  advantage  i n the  to, essentially  unaware  probably  the  possessed,  1950's,  between  the access  may  and  i t s  undoubtedly locational Over  the  Japan  and,  of  Korean  230  entrepreneurs also  these  "window  once  Korean  possible  changes  competence was  for  higher-order functional These  latter  delay  their  on  parallel  of o p p o r t u n i t y "  opportunity  it  information,  skills,  and  equipment  improved. As  a  to the relevant  more  f o r FDI  Japanese  FDI  by  in design  firms,  had been point, only  and  evidence  be  period of  have  established, F D I may  f o r those i n Korea,  noted,  still  but, this be  possessing such  as  distribution. are  and, t h e r e f o r e ,  LDC  created  producers  in foreign  i t should time  may  Japanese  At that but  they  not y e t e s t a b l i s h e d  to a later  certain  1 1 5  firms;  competences  Japanese  place  in production  foreclosed.  competences  take  able can  competitiveness  to base in  product ion.  1  1  5  W h i l e , i n t h e example g i v e n , the o p p o r t u n i t y f o r FDI i n Korea is foreclosed, F D I may s t i l l b e p o s s i b l e e l s e w h e r e . FDI w h i c h " l e a p f r o g s " t h e A s i a n NICs and i s aimed a t less industrialized LDCs, such as Malaysia a n d t h e P h i l i p p i n e s , was n o t , h o w e v e r , observed.  231  VII.  1.  ADJUSTMENT  The  case  activities. these or  AND  flatware  i.  i i .  i i i .  iv.  activities  coherent  sets  industry  Revival  Shift  t o New  goes  beyond  can,  f o r example,  case  studies  were  possible  in  industry  or  clustered  into  which  define  study  of  characterized  adjustment firm, more  distinct  the  Tsubame  as;  Markets  Lines  Business  seen  do  appear  t o have  study.  a  relevance  Analogous  i n the industries  for  that  strategies  which  briefer  conducted. in  i t would these  adjustment  t o be  case  p a r t i c u l a r case be  of c o n c r e t e  Competitiveness  strategies  Nevertheless, alternatives  the  to Higher-grade  that  seen  activities  were  t o a New  adjustment  c a n be  In  of P r i c e  Shift  Move  these  a variety  of a p a r t i c u l a r  of  strategies.  These  observed  revealed  In t h e c o n t e x t  adjustment  ALTERNATIVES  VALUE-ADDED  studies  concrete  less  ADJUSTMENT  a  general  be  imprudent  case  studies  s t r a t e g i e s , much  discussion to  assert  exhausts less  of  adjustment  that  what  the e n t i r e  of concrete  range  was of  activities  232  relevant of  to adjustment.  adjustment  relating  What  alternatives  strategies  i s needed  i s , therefore,  and  concrete  observed;  to adjustment,  to each  activities  and  that  the  strategies  particular  provides  cases  it.  use  o t h e r , and  economic ninety  The  difference  five  c e n t s worth  to produce  [$10.00 -  ($.95  activity  can  i n p u t s and  involved sidewalk entire company  as  to other  concept  between  the c o s t s of the  activities.  value-added  The  such  those  adjustment  d i d n o t happen t o be o b s e r v e d  examined.  i s the  ( p r o d u c t ) and  charcoal The  activities  of  number is  + $.05)  = $9.00].  country or  components;  over  in  value-added  he  sells  The  of  of  one  or  f o r example,  may  cents f o r ten  worth  of  dollars.  i s , then, nine  changes  an  in generating  set  value-added  with  complexity far  of  dollars  of any  given  i n the c o s t s  but  the  basic  invested  wages.  and  when  firm,  we an  principle  value-added and  the . economic  greater  but a m a n u f a c t u r i n g  industry,  to the c a p i t a l  five  activity  time  price  of  of o u t p u t s .  and  profits  and  which  economic  obviously  artist  of p a p e r  of t h i s  the p r i c e  by a  A sidewalk a r t i s t ,  a portrait  change  the  i n p u t s used  I t i s a measure o f t h e v a l u e c r e a t e d  more  a conceptual basis for  this.  Value-added output  for a general discussion  1 1 6  can The  the l a t t e r  be  activities  consider industry,  is  or  t h e same.  divided  t o the  an In a  into  former p r o v i d e s a a return  not a  two  return  labour.  Rent and interest are also explicitly included in the e c o n o m i s t ' s d e f i n i t i o n o f v a l u e - a d d e d but we o m i t them h e r e for s i m p l i c i t y ' s sake. T h e i r i n c l u s i o n would not i m p o r t a n t l y change the a n a l y s i s . 6  233  For  an  economic  combination  organization,  of labour  and c a p i t a l ,  returns  t o each  If  do n o t , one o r t h e o t h e r  they  organization material will the in  input  increase return  total  seen  i t  the  wage  the problem  i t  activities,  then,  value-added,  which  is  they  will  cease  to  could  be. a  in  terms  i s simply  problem, a  can the  t h e sum  the  elsewhere.  with  i n the  constant  wage  rate  increase  therefore,  situation  c a n be  whereby t h e  the labour and  categorize way  that  a t t h e expense of  returns to both  of  that  corresponding  of r e - e s t a b l i s h i n g  We  particular  obtain  Even  rise  i s a  The adjustment  adequate  some  necessary  of value-added  there  employs.  as  become u n a v a i l a b l e t o  prices  share  unless  can provide  capital  i t  those  will  value-added.  as  match  c o s t s and output  to capital  organization the  o f them  and  seen  adjustment  i n which  they  affect  of the r e t u r n s t o these  two  factors. Adjustment value-added  i.  activities  can i n c r e a s e or r e s t o r e  the level  of  definition  of  by  Improving  (increasing)  prices  or  or  i i .  Improving  by  some  adjustment, different and  these,  (lowering)  combination  however,  business  of  includes  activity  t o o , can improve  costs  the  two.  the p o s s i b i l i t y  (function)  The  of a change  or to a d i f f e r e n t  value-added.  to  a  product  234  In  the  activity,  however,  between basis  case  of  f o r comparing products  move  or f u n c t i o n s .  terminology  f o r improvements  costs  termed, but of  function  product  term  one  a l l fall  make  The  consider  distinct  into  findings  i s no  relevant  where  logical  to the  a comparison To  two  of the  d i s t i n g u i s h the  due t o a  function),  the  change  t h e "margin"  of  in prices  former  can  referred  but i s reserved  activities of  A  for  relevant  or be  to i s  the  strategy,  associated  contribution  discuss,  of  case  the  with  of  case  adjustment  such  must,  Priceconsists  activities. strategy  need  collectively,  value-added.  under  studies  in turn,  a given  but they  to improving  sections  to  Cost-improving,  a s e t of one)  t h e same c a t e g o r y  following  distinction  due t o improvement  categories  activities  a coherent  major  and  a  as there  only  functional  change.  s e t (perhaps  concrete  not  those  or  make  i n value-added  and Margin-improving.  a coherent  to  possible.  f o r value-added,  can  the three  improving,  The  product  or function  Thus  of  from  Here,  i s  "margin-improvement";  another  under  value-added  (for a given  product  the c o s t s or the p r i c e s  in  or  a new  i n c o s t s and p r i c e s  difference  product  to  i t i s not meaningful  improvements  different  a  each  category,  regarding  the  adjustment  activities. 2.  ' COST-IMPROVING ADJUSTMENT  The category; transfer  case  studies  change  reveal  two m a j o r  of production  of production.  types  technology  of a c t i v i t y and  the  in this  (domestic)  235  2.1  Change  2.1.1  The  In  Of  "Deus  the  industry  Ex  case  studies,  research,  quite  for  problem look  in a  for  central ratio  such  of  by  Beyond  a  that  least  traumatic. factories  competition  few  appeal  of  New  the  one  discrete,  matters  to  or  swoop,  technical  four  suggested  the  a  adjustment  instinct  so  to  aside  be  is likely is  to  because  a  (the  can  the  to the  be  to  widely be  the  the into  of  LDC  requisite change  usual".  simplistically,  solution  to  threat  from as  a  wheeled  is restored  "business  quite  the  value-added  machinery  firm, to  The  productivity  seems  solution  value-added  reverts  and  i f only  thus,  there  of  fell  introduce  than  The  i s that  flatware  technology.  improved  industry  perceive a  sort  and  more  solution  and,  however,  and  many  technology.  years  the  adjustment.  presented  a  production  in  technology,  would  200  this  of  understandable  inputs) of  and  develop  means  are  for  is  past  a  tile  to  with  production  that  and,  as  look  i s vanquished,  and  production  to  to  1 1 7  efforts  studies  instinct,  perception  levels,  the  change  held  the  of  outputs  increased  case  ceramic  dealt  solutions of  the  technology  instinct  change  lesson  both  however,  which  general  Syndrome  concerted  production  industries  Technology  Machina"  revealed  innovative field  Production  the  in  While basic  adjustment  There is also the fact that, largely due to recent developments in micro-electronics, the possibility and potentials of highly automated production systems are increasingly evident. Thus, the apparent t e c h n i c a l c r e d i b i l i t y of the a p p r o a c h has increased. 7  236  problem  rests  in  part  on  some  variation  of  this  "Deus ex  Machina" s c e n a r i o . Despite to  the  widespread  adjustment  encountered  no  this  fairly  recently  as  and  2.1.2  of  and and  their  its  of t h i s  t o implement  success.  the adjustment to  as y e t ,  flatware industries. of a p p a r e n t  i t , we  In  many  process  began  implement  results,  approach  1 1 8  a  technical  inconclusive;  We  d i d however,  failures.  Failures  most  industry. "in  striking  There,  1 1 9  export  domestic  market  market,  in  literally,  invariably  of  i n the  in  the  men's  shirt  competition  as t h e mid-1960's and the  1960's.  The  from i n the  domestic  more v u l n e r a b l e t h a n many e x p o r t  of demand.  "white  favoured p l a i n  Japanese  collar" white  businessmen  w o r k e r s as J a p a n e s e  dress  shirts  the  relative  both  men away  office.  uniformity of  was  is  began t o f e e l  as e a r l y  of t h e n a t u r e  almost  simplicity  industry  respect,  quite  work and  these  t o w a r d s t h e end  were,  This  the  of  markets  one  markets because  from  of e f f o r t s  efforts  anecdotal evidence  The  LDCs  tile  and  because  the  incomplete  i n the mosaic  of t h e a p p e a l  examples  i s undoubtedly  are  encounter  problem,  striking  cases,  solution  evidence  of  constructing  style shirts  and  from  unpatterned  technical shirting  However, i t s h o u l d be n o t e d , t h e s e l e c t i o n p r o c e d u r e s were not oriented towards finding industries which had successfully completed adjustment (by whatever means) but, r a t h e r , those w h i c h were f a c i n g an a d j u s t m e n t problem. The a c c o u n t h e r e i s b a s e d on d i s c u s s i o n s w i t h a r e p r e s e n t a t i v e of the Japan S h i r t s A s s o c i a t i o n and w i t h spokesmen f o r MITI'.s S e i k a t s u k y o k u i n June and August o f 1980.  1 1 8  1 1 9  237  material the  both  served  t o make t h e  of  demand  characteristics,  basis  competition 1969  and  threat  than  1972, by  a  the  t h a t of any  introduction (produced,  "modernization"  of  provision  of  other  substantial effort  making equipment  of  more  was  on  to  LDC  country.  made  to  specialized  Between  overcome  shirt-  i n West Germany).  This  through  high  this  speed  e q u i p m e n t was  financing  least  exposed  developed  apparently,  production  low-cost  Japanese market, at  facilitated  Japanese  by  the  government  agenc i e s . In  fact,  fashions  the  and  w a r d r o b e of industry  1970's saw  a  rapid  most  (like  a dramatic  diffusion  men.  As  much of  the  a  healthy  s t a t e by  the  had  based,  however,  on  increased LDC  prices  intensive the and  fashionability  newly  on  into  acquired  of  the  the  shirts  by  specialized  to  an  undercutting  means of more 1975-1976,  production  in a  Adjustment  adapting on  the  shirt  i n d u s t r y ) was  and  Thus, by  into  men's  1970's.  promoting  white  shirts  equipment  capitalmost was  of  idled  awaiting d i s p o s a l .  the  but  related,  i n t r o d u c t i o n of a u t o m a t e d  a sanchi  There,  there  specialized  in  were a p p a r e n t l y  This example is cooperative manager in August, 1980. 0  end  technology.  A somewhat d i f f e r e n t , by  consequence,  i n men's c l o t h i n g , not  standard  production  i n J a p a n e s e men's  of p a t t e r n e d  Japanese apparel  relatively been  change  the a  based on in Sanjo,  problem  is  exemplified  sharpening/polishing production  relatively  small  of  equipment  scissors.  number o f  1 2 0  firms  a discussion with a factory a hand t o o l s a n c h i n e a r Tsubame,  238  engaged of  i n p o l i s h i n g and sharpening.  more  efficient  equipment  means  of responding  effective (again, all  with  firms  with  acquired  an enormous In  (at  the benefit  this  least,  not y e t ) evident  i s that  capacity  that  there  expansion  technology The  i s being  examples  government  been  made,  from new  also  The  men's  may  be  that  t o make  i t i s not  modernization  is  an  What  i s evident,  of  competitive  risk  when  may less  economics  such  be w o r s e worse  while  government  improved  o f f than  i t s competitors  New  performance  characteristics  i t had p r e v i o u s l y  triggers  i t  went  a  investment.  the investment  Production  had  ahead  has  refrained with  their  Technology  industries Thus,  involved  the general  of the equipment, proven  situation.  investment.  and the s c i s s o r s equipment.  i f  financial  also  uneconomic  off after  equipment  of the  assistance  otherwise  And D i f f u s i n g  shirt  because  the underlying  of e x i s t i n g  that  industry,  overcapacity  provide  arise  introduction  fact  production.  equipment  (government-assisted) Developing  up  uneconomic  the investment  2.1.3  ended  i n t e r v e n t i o n can stimulate  firm  i t may  assistance),  evidence  necessity a  shirt  result  introduced.  i t i s possible  while  of  most  anecdotal  obscures  Thus,  stage  competition.  resulting  As a  and t h e i n d u s t r y  equipment  LDC  the  some  assistance  competitive  that  be  financial  c a n be c o n s i d e r a b l e  cited  This  addition,  in this  to  competition.  t h e men's  to  and  investment.  In  unlike  response  t o LDC  equipment  overcapacity  too, the introduction  perceived  government  automated  case,  inappropriate however,  of  was  Here  economically  technical  i t s cost, viable  the  and the  elsewhere  239  were  a l l known  uncertainty,  these  the  adjustment  of  uncertainty  the  mosaic  higher  beforehand.  problem  this  to introduce  were  regarding  tile  as both  efforts  Despite  a technical  not s u c c e s s f u l . technical  and  flatware  cases  involved  reduction  The  industries efforts  was  solution  overall  and economic  of  level  feasibility  presumably  t o newly  devise  to  in  much  production  technology. Aside  from  feasibility, relating  however,  to  the  industry.  There  attractive  the  i t counts  whole  or  cases,  i f we  in  this  that  production stages  was  adopt their  the the  new  finance  footwear  none t h e new  well.  reaction,  case  how  economic (  In a l l  in four  financial  the  there  at  unless  and t h i s  one  of  was  some  stage  of  and u n t i l  other  participants)  were  led  profitably.  various  introduction  the scissors  the impact  can a f f e c t  how  study,  introduced  In  operate  technology  of  of d i f f e r e n t  the technology could  and  industry  to the  efficiently  i n t h e hands  adopted  matter  problem.  equipment  as  or  into the  of government  react  not operate  no  its acquisition.  will  modern  that  the firm  i n the industry the  technology  fact  problem  In  economic  uncertainties  i s i n the technical  unless  as a  and  indicate  the  modernized  overcapacity;  also  by t h e p r o v i s i o n  seen  technical  is  could  competitors  and  can  there  (presently  suitably  of  first,  f o r nought  technology.  evidence  cases  technology  can judge  participants  firms  i s ,  part)  Secondly,  new  the  regarding  diffusion  new  sense,  assistance,  uncertainty  industry, a l l  to  Even  on t h o s e  the p r o f i t a b i l i t y  substantial when  who  not a l l do  not,  of those  who  240  do.  I f , f o r example,  produce,  returns  that  adopted  have  Moreover, is  being  when  industry, access of  the improved  lower  profits  industry, technology,  need  this  to  among  will  and d i f f u s i o n  be  problem  received  be  firms  reduced.  of the technology  or with  In  explicit  required,  the adjustment  those  to  government  i n the net benefits, ofi t s  reconciled.  technology  to assist  firms  and continue  including  o u t on a c o o p e r a t i v e b a s i s ,  t o t h e new  funds  adopt  to the entire  differences  introduction  accept  the development  carried  assistance,  they  the  tile  attention.  in effect,  of those  mosaic  a  There,  contribution  firms which  did  not  types  of  the technology. Thus,  the  uncertainty production  i.  cases  involved  suggest  i n the development  technology.  Technical Is  Given  diffusion  contemplated  system  of  Feasibility  the present  and  anticipated  (e.g.,  would  the  investment,  i n the absence  of the  existing  attractive  Financial the  new  feasible?  environment,  Can  of  production  economic  be  i i i .  and  Feasibility  the  Economic  interrelated,  These a r e ;  technologically  i i .  four,  relative  to alternative  Japanese)  implied  new  industry,  investments?  Feasibility firm  or  the industry  ( i n whole  or i n part)  241  finance  the" a c q u i s i t i o n  o f t h e new  production  system?  and, iv.  Intra-industry Would  the  net  production and,  The practical  while  concern  for  would  industry  participants  potential 2.2  between  costs  of  regions  into  lower-cost  to  differentials  of  production  these,  an  with  likely  i s of  is  being  ( o r government)-  individual the effect  reactions  technology,  because  firm,  on  other  to  i t s  of  their  feasibility.  Of L o c a t i o n  Of  Production  within  firms.  Japan  Thus,  to t r y to shift  are  o n e way  not  uniform  of a d j u s t i n g to  the l o c a t i o n  of  production  regions.  umbrella  production  feasibility?  of cooperative  their  (equitably)  technology  Even  new  participants  be  last  new  be c o n c e r n e d  production  is  the  firm.  and  or between  competition  cost-reducing  to  on o v e r a l l  Transfers  LDC  The  new  impact  Domestic  The  need  of  by means  single  overall  the  the  industry  differences  in  where  diffused  however,  introduction  these  equity,  introducing  among  preserving  only  a n d n o t by a  of  vary  can  resolved  and  benefits  system  so,  relevance  developed action  i f  Feasibility  industry  adjustment lower-cost among  provides by means regions  regions  the  clearest  of the geographic of  the  example  of  transfer  of  country.  Cost  c a n be due t o d i f f e r e n c e s n o t o n l y  242  in  the p r e v a i l i n g  land,  construction,  overall  cost  index  of  southern  in  pollution  per  only  regional  capita  income  southern  Osaka, and T o k y o .  Kyushu have  indices  The more r u r a l r e g i o n s  3.  the d i f f e r e n c e s  which u m b r e l l