Comparative Responses to Globalization

Japanese firms have been global leaders in manufacturing. For several decades, services have been among the leading exports of Britain. Amid the current economic downturn, policymakers and business leaders in both countries have been debating how best to respond to the pressures of globalization by rebalancing their economies — albeit in opposite directions.¹ While Japan has attempted to develop its services sector, Britain has focused on reinvigorating its manufacturing sector.² The study of these ‘opposites’ raises some questions. For example, is Japan simply following Britain’s path of deindustrialization? If we believe in the free market and Michael Porter’s argument of competitive advantage, we would assume that countries would do well to specialize, or become ‘unbalanced’. Yet both economies appear keen to achieve greater ‘balance’. Does history suggest that countries prefer ‘balance’ over ‘imbalance’ amid globalization?

From the perspective of the consumer, the eighteenth century was a period of rapidly widening horizons as goods poured into Britain from an ever-expanding variety of places. This was particularly true of groceries, which lie at the heart of a set of macroeconomic changes often characterized as a commercial revolution. Estimates vary, but the value of imports and exports increased three- or four-fold between the 1660s and 1770s, growth which was closely linked to Britain’s imperial ambitions, most particularly across the Atlantic and in the Far East, but also in west and southern Africa.¹ These built on patterns that were already established and well recognized in the mid-seventeenth century. In laying out the operations of the various trading companies, Lewes Roberts’ Merchants Mappe of Commerce (1638) provides a detailed picture of the provenance of a wide range of groceries. Trading with India, Persia, and Arabia, the East India Company brought back a range of spices and drugs as well as textiles, precious stones, and ‘infinite other commodities’. The Turkey Company imported, amongst other things, ‘muscadins of Gandia’ and ‘corance [currants] and oils of Zante, Cephalonia and Morea’; the Muscovy Company brought home honey, pitch, tax, wax, and rosin; and the French Company salt, wines, oils, and almonds. From Spain and Portugal came wine, rosin, olives, oils, sugar, soap, aniseed, liquorice, and so on, whilst Italy supplied oils and rice, as well as acted as a conduit for Eastern produce.

In 1883, the British wire industry adopted a standard gauge to measure sizes of wire and wire products. Wire sizes were one of the indicators of the quality of wire products and wire gauges were the crucial technology that made such measurements possible. The standard gauge replaced more than 40 different gauges that were in use in different parts of the country. The emergence of the standardized version of the gauge was the result of intense negotiation, acrimonious debate, and reluctant compromise between rival manufacturers and users of wire products. In an industry characterized by horizontal and vertical specialization, and widespread agency issues due to multiple quality standards, the entrenched interests of small and large firms prevented the introduction of a scientifically derived solution. The state acted as an arbitrator between rival interests as firms cooperated with potential competitors to prevent the industry from being locked into what each group perceived to be the ‘wrong’ standards. The 1883 standard potentially solved many of the agency issues that firms faced in market transactions and very likely helped the industry to survive in the face of intense global competition.

The British experience of globalization was fundamentally different from that of Japan. In the seventeenth and eighteenth centuries, Britain created a global trading network, whereas Japan isolated itself from the world. By the nineteenth century, London was the world’s financial capital. Moreover, British people established overseas settlements that later helped to make English the language of global business. Another outcome of British colonization was that the legal systems of the United States and the British Dominions were derived from that of England and Wales. Law and finance economists such as Rafael La Porta and his colleagues regard Anglo-American common law as the legal tradition most conducive to the development of capital markets.¹ By spreading English common law throughout the world, British colonization also helped to lay the foundations of the Anglo-Saxon model of capitalism, which closely resembles the liberal market economy identified by Peter A. Hall and David Soskice.² Even in the twenty-first century, Britain’s linguistic and cultural ties to the New World continue to facilitate its international trade. Japan opened up to the world economy only in the middle of the nineteenth century and its efforts to establish Japanese colonies overseas came to an abrupt end in 1945. Japan’s failure to create any daughter nations overseas or to make its language the lingua franca of global commerce has made that country’s experience of globalization fundamentally different from that of Britain.

Technology has been the foundation of human command over nature. The availability of technology determines the quality of physical capital and, somewhat less intuitively, of human capital.¹ Furthermore, technology has been a key technical foundation of globalization.

Globalization increases the pressure towards international standardization in fields such as accounting practices, financial systems, corporate management systems, and management education. Policymakers and managers in many countries are confronted with the problem of whether or not to adopt global standards instead of their own particular modus operandi. Their choices will determine whether the existing variants of capitalism will converge towards a single model. This chapter will address this issue by examining the recent experience of Idemitsu Kosan Co., Ltd. (Idemitsu), a large Japanese oil company.

Industrial policy within the United Kingdom has a long and detailed history. Early forms of government regulation of industrial development can be dated back at least to the formation of monopoly companies in the form of the East and West India Companies for the exploitation of trade with the East and West Indies.¹ More commonly, however, industrial policy is considered to have evolved in the twentieth century in response to the collapse of free trade and the Great Depression. The development of a ‘managed economy’ from the interwar years and extended further, following the successful organization of industry in wartime Britain, into the post-war era marked a new era in government’s role within the private economy.²

Amid globalization and the internationalization of Japanese companies, this chapter examines the strategies used by Japanese automakers in low-income countries. In developing countries, automobile manufacturers have to develop compact and low-cost vehicles in order to cater to demand. While Korean and Chinese automobile makers have aggressively entered into the compact vehicle segments in these low-income markets, Japanese manufacturers have delayed the development of such vehicles. This chapter considers how Japanese manufacturers might penetrate these markets. In order to examine what sort of marketing strategies might work, this chapter incorporates comparative and historical data and looks at the current status of compact vehicle segments in developing countries.

Three Japanese department stores were within the top 100 global retailers in the 2010 fiscal year: Isetan Mitsukoshi Holdings ranked sixtyfourth, J. Front Retailing ranked ninety-fourth, and Takashimaya ranked hundredth. There were just six other department-stores on this list: these were American (three), Spanish (one), British (one), and South Korean (one).¹ Japanese department stores have enjoyed modest success in overseas markets. In 2008, Mitsukoshi had 10 overseas stores, representing 35.7 per cent of its total number of stores; and Isetan had 14 overseas stores, representing 58.3 per cent of its total stores. The proportion of the number of overseas stores to total stores among these department stores are much higher compared to that of Aeon, the leading retail group in Japan, where only 1.1 per cent of its total number of stores are located overseas. However, the proportion of overseas sales to total sales are much lower. Overseas sales at Mitsukoshi and Isetan totalled just 1.4 per cent and 9.1 per cent of total sales, respectively, while the equivalent figures at Aeon, Tesco, and Carrefour were 11.2 per cent, 24 per cent, and 54.2 per cent.² Furthermore, Japanese department stores found that their gross profit margins in other Asian countries were low compared to those at their stores in Japan. Indeed, 70 per cent of overseas Japanese department stores and supermarkets have been closed by the parent company.³

In the 1990s, the Japanese pharmaceutical industry faced a crisis caused by the government’s decision to open the domestic market toforeign competition.¹ Prior to the 1990s, Japan’s pharmaceutical firms had been sheltered by protectionist policies. In certain industries, such as automobile or consumer electronics, Japan had managed to develop competitive advantages over its American or European rivals. However, Japan was a second-tier player in the global pharmaceutical industry. Japan’s leading pharmaceutical firms were less R&D-oriented, launched few global blockbuster drugs, and recorded fewer sales (Table 10.1) compared to leading global firms in the United States, the United Kingdom, or Switzerland. Japan was a net importer of pharmaceuticals and largely remained a peripheral player in the global pharmaceutical industry.

In the 1980s, the word ‘globalization’ came into popular use to describe a number of changes occurring to large corporations and the environment in which they operated.