Investment in the Japanese Automobile Industry Case Study

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Summary

Japan is famous for its creativity and values of perfection in every economic sector. Enthusiasm and imagination for work are greatly expressed in Japanese products, mainly in cars and electronics. Most of the organizations operating in the industry in Japan are local companies. Some of the factors that have led to the industry’s growth include rapid growth in the global market, competitive pricing for most brands from the country, and strong performance. Many sectors are considering investing in the Japanese automobile sector (Cusumano, 2020). Before determining the ability to invest in a foreign country, some of the factors considered include the availability of resources, demand rates of goods and services, and the country’s economies. Present Japan’s automobile industry analysis is aimed to determine the profitability of a foreign country operating in the sector. The study will include the industry’s competition, the cultural differences in Japan, factors that make the automobile industry favorable for investment, and the marketing strategy that would be effective for operations in the country. The last part of the research will include recommendations on whether a foreign organization can invest in the country and remain profitable.

Industry Outlook

The automobile industry in Japan makes the country the largest car-producing nation worldwide. Vehicle manufacturing is an essential pillar in the country’s economy (Imai, 2017). The sector has more than 70 factories in 22 different areas and contributes to 5.5 million people’s employment. Activities in the industry contribute to about 89% of the country’s manufacturing sector (Cusumano, 2020). The supply of parts has also grown substantially over the years. Every organization operating in the sector focuses on producing cars that have spare parts and which will ensure effectiveness for consumers. The automobile industry in Japan is mainly driven by technology and innovativeness. One of the factors leading to the development in the industry is the increased demand for vehicles internationally. The boom in the country’s automobile industry was due to the huge demand for cars in the foreign market from the 1970s (Imai, 2017). One of the factors that have led to increased progress in the automobile industry is its growth in the economy. The Japanese economy has been in enhanced advancement in the past five years and is expected to grow.

Japanese domestic car brands include Mitsubishi, Nissan, Toyota, Suzuki, and Honda. Other foreign car brands have also invested in automobile consumers in the country. Most of the country’s population are consumers of locally assembled products and see foreign-manufactured cars as symbols of status due to their high maintenance costs. Every automaker in the state contributes to the industry to enable the business to reach its current ranking. Government regulations are favorable in automotive commerce due to the recognition of the part that the sector has on the general economy (Yoo & Yoshida, 2019). Earlier, reliability and luxury in the manufacture of vehicles did not go hand in hand. However, innovation in the companies has contributed to the focus on luxury and reliability. The designs have made the Japanese trade area produce cars need for luxury, sports cars, and hybrid features that ensure environmental sustainability. When thinking about Japanese cars, many consumers are looking for excellent quality and reliability in use. The main focus on automobile producers in the manufacturing sector mainly looks at consumer satisfaction.

Investing in the Japanese automobile industry would be the right decision for any foreign investor. Japan is a highly competitive and progressive country, and an organization getting to operate in the automobile industry has opportunities for making profits and increasing revenues. The Japanese economy is stable, and an investment in such an economy implies fewer threats to failure in business. Production in the automobile industry has had increasing growth over the years. Demand for Japanese cars is still high and investing in the sector implies an organization will be getting to close the current demand gap in the international market for the country’s cars. Investing in the industry also allows an organization to work with Japanese clients (Yoo & Yoshida, 2019). The diverse culture in the Japanese economy provides the needed skills and knowledge in the sector. Accessibility to raw materials should be an essential consideration when investing in a foreign market. Automobile raw materials are readily available in Japan. Any organization supporting the sector reduces risks of reduced productivity due to raw materials scarcity.

Competition

Toyota, Nissan, and Honda are the top three players in the automobile industry in Japan. Their operations stretch across the globe and their market reach. Competition among the top three car brands in the country and other small organizations is fierce (Ueno & Muto, 2017). One of the factors that drive increased competition is the relationship that companies have with their suppliers. Smaller automakers in the industry have sometimes aligned their operations with foreign companies to develop vehicles, factories, and technologies to stay together and compete against the large producers (Ueno & Muto, 2017). These days, relationships among companies in the automobile industry are changing to respond to the more globalized supply chain. The automobile industry in Japan operates as an oligopoly. Every organization is looking at getting their suppliers and maintaining their supply chain to meet consumer demands.

Toyota is the leading car manufacturer in Japan and the bestselling car brand globally. Toyotas sales in the past three years have been higher than that of Honda and Suzuki combined (Yoo & Yoshida, 2019). Efficiency is the primary consideration in manufacturing cars by the organization, making it the most preferred car brand globally. Honda is the next top company in the automobile industry in Japan. In 2017, the manufacturer sold around 5 million vehicles, making a Japanese brand appear in the world’s top ten car manufacturers (Yoo & Yoshida, 2019). Nissan is another leading brand in the automobile industry in the world. It has an increasing market share and is effectively competing with some of the top brands.

The global automobile industry is in increased growth, and every organization in Japan is doing everything to ensure the demand gap is reduced. Different factors give a competitive advantage to most organizations operating in the automobile industry in Japan. Accessibility to materials is one element that ensures organizations have the needed materials for the production of goods. Technological advances also dictate the rate of competition and an organization’s ability to remain a significant producer in the industry (Yoo & Yoshida, 2019). Consumers are currently looking at efficiency and luxury in their cars. In such cases, organizations remain competitive by hiring the right skills to ensure continuity in research and technology. Branding is an essential element in the automotive industry in Japan. Most of the top organizations operating in the sector have brand equity.

References

Cusumano, M. A. (2020). The Japanese automobile industry: Technology and Management at Nissan and Toyota. Brill.

Imai, N. (2017). Front loading: Key concept of strategy for business innovation in the Japanese automobile industry. In K. Hamada & S. Hiraoka (Eds.), Management of Innovation Strategy in Japanese Companies (pp. 131-143). World Scientific.

Ueno, H., & Muto, H. (2017). The automobile industry of Japan. In K. Sato (Eds.), Industry and Bus in Japan (pp. 139-190). Routledge.

Yoo, S., & Yoshida, Y. (2019). Consumer preferences and financial incentives in the Japanese automobile industry. Transport Policy, 81, 220-229.

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IvyPanda. (2022, February 27). Investment in the Japanese Automobile Industry. https://ivypanda.com/essays/investment-in-the-japanese-automobile-industry/

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"Investment in the Japanese Automobile Industry." IvyPanda, 27 Feb. 2022, ivypanda.com/essays/investment-in-the-japanese-automobile-industry/.

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IvyPanda. (2022) 'Investment in the Japanese Automobile Industry'. 27 February.

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IvyPanda. 2022. "Investment in the Japanese Automobile Industry." February 27, 2022. https://ivypanda.com/essays/investment-in-the-japanese-automobile-industry/.

1. IvyPanda. "Investment in the Japanese Automobile Industry." February 27, 2022. https://ivypanda.com/essays/investment-in-the-japanese-automobile-industry/.


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IvyPanda. "Investment in the Japanese Automobile Industry." February 27, 2022. https://ivypanda.com/essays/investment-in-the-japanese-automobile-industry/.

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