The Challenge for Japanese Multinationals

The concept of Regional Headquarters (RHQ) was devised as part of the way in which multinational corporations are organized. The idea of the RHQ also challenged the American multinationals, which so far have dealt mainly with domestic markets, to incorporate regional strategies into the framework of their management organization, leading to the creation of a new model (matrix organization) through the combination of product and regional organizations. I have been studying regional strategies and structures of multinationals, especially comparative studies of Japanese and American multinationals and RHQs, since 1987. I visited the RHQs of Japanese companies in North America and interviewed their executives and managers. Since the Japanese yen was strong at the time, foreign investment by Japanese companies in developed countries was increasing rapidly. In the latter part of the 1980s, when the so-called Bubble Economy was coming to an end, the total annual amount of foreign investments reached its peak, at US$67.5 billion, and large Japanese multinationals established a number of business units within the same region.

The management environment of Japanese companies changed drastically in the early 2010s. Until that point, the main characteristic of Japanese management was one of employee centrism, and companies were seen as “warm,” not laying off employees as easily as American companies. But now the manufacturing industry that has supported the growth of Japanese companies, especially mass-production industries, is starting to lose its competitive superiority in the world market. In order for the manufacturing companies to grow again, the industry has to change its fundamental manufacturing structure to one appropriate for the 21st century. The management of a company where profits are made in response to shareholder trust, in other words, shareholder centrism based on the logic of capitalism, is being questioned. However, it is not a matter of simply copying the American style of management. We must pursue the true nature of corporate governance that matches Japan and its management characteristics.

In Japan, corporate scandals have become apparent through measures taken against corporate extortionists (soukaiya), insider trading, loss compensation, violations of antitrust laws and illegal contributions; and scandals relating to violations of commercial laws stemming from collusion have been criticized as being major social issues.

This chapter examines R&D from the standpoint of network organization. The business activities of Japanese companies now being in the stage of globalization, their traditional limitations ought to be reconsidered, and be replaced by a new viewpoint of a global R&D network. The buildup of a global R&D network aims at a dynamic use of knowledge available both in Japan and elsewhere by creating linkages not only with organizations’ own research laboratories inside and outside their own country, but also with other organizations’ research-based units.

Unlike the manufacturing industry, which makes tangible products such as automobiles, electronics, chemicals, foods, etc., the service industry belongs to the field of nonmanufacturing industries which basically offers intangible services such as construction, commerce, finance, insurance, communication, etc.

Training for those who are to direct global corporations is taken seriously in Japan; top management and CEOs are beginning to realize the importance of strategic development for future leaders from an early stage.