Term paper
Topic: Feudal System Of Japanese Manufacturing.
Members:
­Rittik Mondal
­ Sachit Aggarwal
­Harsh Faujdar
­Rishi Gupta
­ Prawal Pandey
­Vineet Anand
­Nishant chohla
­Dharmendra Mahjani
­Surya Prakash
­Shubham Patel

Contents: ● Main paper: Feudal System of Japanese Manufacturing) ● Paper 1: Industrial subcontracting and structure in Japan: evolution and recent trend ● Paper 2:The Evolution of Japanese Subcontracting ● Paper 3:
Sustaining growth in electronic manufacturing sector: lessons from Japanese mid­size
EMS providers ● Paper 4: Competitive Marketing Strategies: A Survey of Japanese Manufacturing Firms'
Competitive Performance in the British Market ● Paper 5: Buyer­Supplier Relations In The UK Automative Industry: Strategic Implications of
The Japanese Manufacturing Model ● Paper 6: C orporate Environmental and Economic Performance of Japanese Manufacturing Firms:
Empirical Study for Sustainable Development ● Paper 7: Japanese Manufacturing System: Implications of the organization ● Paper 8: The JIT Philosophy is the culture in Japan ● Paper 9: Kanban System

Feudal World Of Japanese Manufacturing:
­Kuniyasu Sakai Abstract: The entire paper presents us an overview of how Big Industries work in Japan. Subcontracting is the central issue in this paper.
The Author Kuniyasu Sakai himself had built up a group of several dozen small and midsize companies in a wide variety of businesses, most related to electronics manufacturing.HeI knows well the real world of Japanese manufacturing.. He speaks about how exactly japanese manufacturing works through subcontracting. He also explains how subcontracting is a curse for the
Companies who receive subcontracts. Introduction
:
The paper starts with a scene from the film the “Wizard of OZ” .In this scene, Dorothy shatters the myth, revealing the truth about the wizard and his technique for perpetuating his power. The author explains his discontent about why the same thing is not done about Japanese Manufacturing Firms. He is always amused to see books like The Secret of MITI or The Key to Japanese
Management in USA and other western Countries. Hs supposes that these books are intended to explain the myth of "Japan, Inc." to Western executives who are stymied by the allegedly inscrutable nature of our Oriental business practices. To his discontent,
The books that tend to explain everything does not speak anything about the true nature of the industry in japan. He also finds that the American Business People know very little of actually japanese manufacturing system works. He then goes on to express his discontent about how Western executives in important manufacturing industries to know don't even know about the actual subcontractors in The japanese industry. In fact they Know very little about Japanese Corporate Sector. To outsiders, The big Japanese Manufacturing firms tend to build the best products at the cheapest rate and then change the product line easily after a year. So the question that arises are : How can the giant Japanese manufacturers, big and resourceful as they are, continue to come up with one idea after another, make the quantum jump from theoretical to applied technology in a single year, and squeeze production costs below what should be economically feasible? And how do they do it year after year, growing more profitable at every step along the way? The answer to all these questions lies in one concept that is Subcontracting.So we need to understand how does subcontracting work on a practical level? The parent company beg with feedback from its retail outlets to provide the basis for internal discussion of what kind of model to build next year.Then it gives parts of the blueprints to each of several small subcontractors.The biggest parts, of course, go to its immediate partners, who then subcontract the components of those parts to smaller companies, who subcontract even smaller parts to other companies. Essentially, the machine is broken down piece by piece so that many small companies work on it. Almost no small company knows what it's making­­just that the shipment is due on this date and for that price. The Big Manufacturing firms do not develop all of their own product line, nor do they manufacture it. In reality, these huge businesses are more like "trading companies." That is, rather than design and manufacture their own goods, they actually coordinate a complex design and manufacturing process that involves thousands of smaller companies. The goods you buy with a famous maker's name inscribed on the case are seldom the product of that company's factory­and often not even the product of its own research. Someone else designed it, someone else put it together, someone stuck it in a box with the famous maker's name on it and then shipped it to its distributors. Although some of the giant makers are now employing the newest flexible manufacturing systems (FMS) to allow them more freedom in production, this retooling process is something many big companies want to eliminate. Thus they farm out much of this business to subcontractors­­smaller companies they can depend on. These companies in turn, faced with redesigning and producing a product three or four times a year, will subcontract the design or manufacture of a dozen key components to still smaller companies. How extensive is this subcontracting pyramid? One electronics company I know has well over 6,000 subcontractors in its industrial group, most of them tiny shops that exist just to fill a few little orders for the companies above them. Dai Kigyo and Chu­sho Kigyo:
When Western executives talk about "Japanese industry," they are almost always referring to the big, famous companies­­generally the top 1,000 or so that are listed on the first section of the Tokyo Stock Exchange. They think that they are the backbone of the japanese industry. However, Medium­size companies(chu­sho kigyo) make up more than 99% of Japanese

industry and are the real foundation of the Japanese economy. The large companies (dai kigyo) rest at the very top of a huge corporate pyramid.
According to Ministry of Finance statistics, in 1988 there were roughly two million registered joint­stock corporations in Japan
(there are many more unregistered family businesses). Among the official Ministry of Finance­registered businesses, more than
600,000, or 30%, were capitalized at less than $14,000. Roughly another 30% were capitalized between $14,000 and $36,000, and another 15% at less than $70,000. In other words, over 75% of all registered Japanese companies are capitalized under
$70,000­­not what you would call major industry. In fact, only 1% of all companies in Japan are capitalized over $700,000, and less than half of those qualify as large­scale businesses, according to the Ministry of International Trade and Industry. So most of the people miss out on the 99% of the japanese manufacturing firms. According to the author, The word Subcontractor has two very different meanings in the western world and in the japanese
Economy. In the Western World, subcontractors are free agents. Basically, they can work when they want and for whom the want. If they develop relationships with the parent company, they may continue their work. However in Japan, from the day a subcontractor accepts the first contract­­probably from a small subsidiary of one of the giant companies­­it has given up its freedom. It is told what to make, when to put it on line, and how much it will get for it on delivery.The Subcontractor is forced to cut its final price by the Large Company at its will. The "parent" company could demand that it buy some new piece of equipment to increase productivity. And even if the subcontractor neither needs nor wants the equipment, it has no choice: if it refused, the flow of orders from the parent would dry up overnight­­and its business would be gone. Of course, the parent would remain unaffected; it can always obtain supplies from any of the scores of other companies in its group. The Author himself faced such a situation with his own company where his own loyalty was taken for granted and managers were sent to threaten him when he tried to move out of subcontracting and make independent company. Han and Keiretsu
The nation in its old days was divided into small feudal fiefdoms called han. Each Han was under the control of one man­­the daimyo­who lived in a castle town surrounded by the agricultural land that provided his tax base and his power. On the bottom of this social pyramid were the hierarchies of the common people: farmers, artisans, merchants. The commoners, of course, outnumbered the daimyo's inner circle, and it was their work that provided the base on which he could build his castle and rule his fiefdom. Yet the commoners were treated more as property than as human beings. The Author Compares the present situation to what was prevalent in the society almost 200 years ago. The parent company in a manufacturing group thinks of itself as the supreme power. Production flows from the bottom upward and rewards from the top downward. Beneath the parent company's direct family are the trusted retainers­­primary subcontractors­­beneath which lies yet another layer of subcontractors. And beneath the subcontractors are layer upon layer of
"commoner" companies, which have just a handful of employees whose only function is to produce a small quantity of goods­­such as electrical parts­­for the company just above them in the pyramid. These companies are tiny; their names and even their existence are unknown to the daimyo at the top. All it wants to see is the steady flow of production. Vertical hierarchy is the hard and fast rule. Smaller companies produce for the next level up. No matter how bad times may get, companies can never leave their industrial group to seek employment elsewhere. This historical metaphor of the han applies at a larger level as well. Just as groups of daimyo banded together under strong leaders to combine the power of their different han, all the giant manufacturers are members of larger industrial groups designed to further their common competitive goals. The Author cites the example of a gathering in which one of his companies in a northern prefecture decided to throw a get­acquainted party in a hotel and invited representatives from dozens of local businesses. It was clear that the party was given to promote better relations with neighboring subcontractors. Most hotels and restaurants in Japan serve only one kind of beer because they buy from one supplier, such as Kirin, Asahi, Sapporo, or Suntory. But even the beer companies are members of giant keiretsu. So the large urban hotels are always careful to serve all four beers at such gatherings to prevent any hint of favoritism. Asahi beer just happens to be a member of the Sumitomo group­the president is a former

Sumitomo director. The sight of all those bottles of Asahi on the tables sent panics among the guests. Despite their best efforts,
They could not convince the people that they had no relation to the Sumitomo group. Cracks In Business Of Japan and Opportunity for Foreign Investors:
The Japanese manufacturers started cracking due to the sudden doubling of the yews value between 1985 and 1987. Because most
Japanese manufacturers relied on exports for a large part of their income, they saw the sudden yen appreciation as a potentially crippling blow. Profits evaporated as the yen continued to climb. In order to recover their costs, they would have to double their export prices, which in turn would boost retail prices overseas, and ultimately the result would be a plunge in market share.The yen appreciation put a great deal of stress on the Japanese economy, and today deregulation in various sectors is keeping that pressure on. The result is an acceleration of the loosening of the keiretsu ties. The keiretsu are not gone by any means­­but they no longer have absolute control as they once did. The biggest cracks in the keiretsu come from changes in workers' attitudes. For decades, Japanese workers have devoted themselves to one employer, working selflessly in the belief that big companies would always return their loyalty. When companies had to lay people off during the oil shocks of the 1970s, it became apparent that this was an illusion. Cracks in keiretsu wails create opportunities for foreign companies­particularly U.S. businesses­­and they should seize them. Few foreign companies seriously consider manufacturing in Japan. Many Japanese companies are making the same move­­but they have no illusions about what they will find in these other countries: cheap mass production, not sophisticated high technology.
They know that they will not find workers outside Japan who are anywhere near as well trained, well equipped, or reliable. The Spartacus Strategy:
The Author then puts forward his own theory about how US Companies can build and produce in Japan. He calls it the Spartacus
Strategy. The U.S. government should establish an office in Tokyo with the single mission of identifying small and medium­size
Japanese companies that are suitable for U.S. manufacturers to use as subcontractors. Let it be known that this office is hard at work at its mission and that its recommendations are going to the widest possible range of U.S. companies.The US Government
Let this agency act as a liaison between U.S. parent companies and Japanese manufacturers, helping to arrange introductions, provide language assistance, make sure specifications are clear to the subcontractors, and tackle other go­between work. This will affect U.S. companies on two levels. On the micro level, the companies will profit directly. They will develop stable, reliable, innovative sources of supply for critical technologies. They will even acquire some surprising new technologies­because many of Japan's top subcontractors have developed. On the macro level, this opening up of opportunities for Japan's small and medium­size businesses will accelerate the erosion of the foundations of the keiretsu­­particularly in the all­important manufacturing sector. Conclusion:
The given Paper talks about the actual strategy applied by the so called bigger well known companies of Japan. The Paper basically explains how the real japanese Manufacturing strategy is way different from “JIT” that has been studied by us in our classes. In fact, The paper talks about how workers are mistreated whereas “Full Utilization of worker’s Capabilities” was the main Tenet of THE JUST IN TIME production System. The author also points out loop­holes and how US Companies can use these loopholes to capitalize and capture the Japanese Manufacturing Market.

Industrial subcontracting and structure in Japan: evolution and recent trend
­M.H. Bala Subramanhya
Abstract:

This paper aims to trace the evolution of industrial subcontracting in Japan, over a period of time. Subsequently, the

transition in the spread and depth of subcontracting along with relative performance of small and medium enterprises (SMEs) in
Japanese industry over a period of time are to be analyzed. Introduction: ccording to the NASEP (1997) SMEs can have multiple benefits from the subcontracting relationship with large
A
firms:
•

Subcontracting enterprises can produce multiple items in small quantities effectively taking advantage of the small size of the organization.

•

Subcontracting enterprises let their parent enterprise develop products, cultivate markets and sell products. This allows them to concentrate on manufacturing activities alone and specialize in specific engineering fields.

•

Subcontracting enterprises can ask their parent enterprise to instruct or advise on technologies and production management, lend facilities, train human resources, and p­rovide with information.

Summary pan has a longstanding history of inter‐firm cooperation and cooperative learning through subcontracting between
: J a larger and smaller enterprises. Subcontracting per se is not unique to Japan. But what is significant is its extensity as well as intensity. Indeed, subcontracting is but one form of inter‐organizational relations: arm's length exchange on the one side and vertical integration on the other. What is different is the extent of the approach in so many sectors and the degree to which small firms acting as suppliers and subcontractors are integrated into the long range planning of big firms (McMillan, 1996). The well‐developed subcontracting system is an important feature of Japanese industrial organization (Minami, 1994). The widespread presence of subcontracting system is one of the peculiarities of Japanese industrial organization (Yokokura, 1988). Subcontracting has come to be a more common practice in the Japanese economy than is typical elsewhere (Francks, 1992).
However, Japanese subcontracting system has undergone transformation since its origin over a period of time. As far as its origin is concerned, there is wide agreement that it primarily took shape after World War I and developed further after World War II but not many have traced the factors that contributed to its emergence. Francks (1992) argued that although some forms of subcontracting hade been utilized in the pre‐World War I industry, the system spread during the period of economic fluctuations in the 1920s and became well established as manufacturing industry expanded rapidly in the 1930s. Minami (1994) attributed the origin of subcontracting after World War I to wage differentials between large and small firms. But according to Friedman (1988), large and small firms had little direct contact until the mid‐1930s. In the pre‐war period, the markets for large and small firms were different: large firms produced commodities such as raw steel stock or silk thread, which small firms made into specialty items. Thus, small and large firms were complementary to each other: the market for the larger firms' products was the small‐scale manufacturing sector. Friedman (1988)attributed the origin of subcontracting to the growth of munitions industry in the 1930s.
Similar to Friedman and Nishiguchi (1994) contends that subcontracting in Japan, as known today is a distinctive product of the wartime economy that started with the outbreak of the Manchurian Incident in 1931. Along with Japan's expansionist involvement in the Sino‐Japanese War in 1937 and World War II in 1941, military demand skyrocketed. At first, large Japanese manufacturers turned to subcontracting as a convenient means of meeting rapid surges in demand. Then the Japanese government introduced a series of laws intended to mobilize a large part of the nation's industrial resources for war purposes. Part of the programme was organizing small firms as subcontractors serving large munitions manufacturers . In addition to increasing demand for munitions, technological development in machine tools and development of transport and communication systems supported the growth of subcontracting .An important development during this period was the introduction of gradational subcontracting. Its origin could be traced to the early 1940s, when Toyota divided the components into three categories:
1.
2.
3.

In house componnents
Quasi In house Components
Purchasing : This is subdivided into General, Special and Speciality Factory.

According to Nishiguchi (1994) during this period, government support played its own role by supporting subcontracting in two ways: 1. Demarcation of production according to the specific expertise needed. Major contractors were required to use subcontractors “as much as possible” for those items suitable for subcontracting manufacture or processes.

2. The idea of designating subcontractors was introduced.
It was in the 1960s and 1970s that the status of small firms improved dramatically. The rapid expansion of manufacturing sector due to mass production led to increase in competition among large firms resulting in the adoption of flexible manufacturing principles. The experiences of leading manufacturers spread to other sectors as well – leading to the growth of flexible production in Japanese manufacturing, which further supported the growth of subcontracting. Large firms felt the need for specialist part makers and process subcontractors who could produce in much greater volume than before but to higher specifications, with improved productivity and lower costs in order to enhance the competitiveness of their products. Rapid quantitative and qualitative development prompted large firms to invest/offer technical, managerial and financial assistance in/to subcontractors.
Many subcontractors welcomed the new subcontracting system, for it had three advantages: more stable contractual relations, more opportunities for technological learning, and improved growth prospects.
Thus, the special features of subcontracting system, particularly in the machinery and related industries are:
•

the transactions between the “parent firm” and subcontractors are continuing and long‐term;

•

there is collaboration between the two for mutual advantage; and

•

it is a hierarchical pyramidal structure where a parent firm has a few first‐tier “key subcontractors” who in turn, have second‐, third‐, fourth‐tier subcontractors and so on.

There is direct contact between contractors and subcontractors only between the adjoining tiers. The lower the tier the smaller is the size of subcontractors. As a result, there is no direct contact between the smaller firms of lower tiers and the parent firm, which heads the pyramid.
A significant outcome of this collaborative manufacturing is that, many subcontractors could develop their technological capability over time. Nearly, 80 per cent of small and medium subcontracting enterprises had developed new technology either independently or under the guidance of client firms. Business firms, in turn, had actively supported subcontractors' technology development by loaning machinery and offering technical guidance. Many small and medium subcontracting enterprises that had made such efforts had reported remarkable improvements in their technology level, as well as increased order acceptance (SME
Agency, 1980). Several surveys showed that large firms placed outside orders for reasons that had less to do with costs than with superior technology and quality offered by small producers. For the most part contractors indicated that specialized skills or specialized equipment were much more important to their decision to subcontract than were low‐wage rates or cheap parts
(Friedman, 1988). This was again confirmed by a recent survey of SME Agency (Okamuro, 2002).However, the burst of “bubble economy” in the early 1990s and the increasing trend of globalization since the early 1990s added a new dimension to subcontracting and SMEs in Japan. Since, the early 1990s the Japanese economy has fallen into the longest and severest recession in the post‐war period (Okamuro, 2002). Owing to currency appreciation, many export‐oriented industries have been shifting their bases to other Asian countries resulting in reduced demand for subcontracting enterprises (NASEP, 1997). Owing to the above factors, manufacturing sector has shrunk in terms of number of establishments, employment and even (nominal) value added during 1990‐2003

Conclusion: Industrial subcontracting in Japan is unique due to its extensiveness as well as intensity. The system had its origin in the inter‐war period but its subsequent evolution into the present form was attributed to various factors, the most important being government policy, competition among large firms which prompted them to adopt flexible manufacturing practices and rely more on smaller firms through subcontracting relationship and in the process not only transfer technology but also provide finance and managerial inputs and guidance for capital investments. The transformation of relationship from exploitative to collaborative between larger and smaller firms in the post‐war period marks the most significant phase of subcontracting in Japanese manufacturing. In the process the relationship between larger and smaller firms became continuous and multi‐layered. However, of late, there are further changes taking place in the subcontracting relationship: smaller firms work as subcontractors for not just one single contractor but multiple contractors.
The industry‐wise trends of subcontracting revealed that subcontracting increased up to 1981 but declined thereafter. However, a considerably high proportion of subcontracting SMEs sold almost the entire output under subcontracting arrangement. There was a statistically significant high‐positive correlation between the values of output of large and medium firms and between medium and small firms but not between small and large firms due to the multi‐layered characteristic of subcontracting relationship.
Labour productivity and value added/value of output analysis brought out that smaller firms carry out less value added tasks for larger firms. As a result, value added/value of output is higher and labour productivity is lower for smaller firms compared to larger firms. Despite improvements in labour productivity over time, “labour productivity gap” persisted between small, medium and large firms. Whereas value added/value of output remained, more or less, the same and therefore, the gap persisted. Overall, small, medium and large enterprises are well integrated through industrial subcontracting in the industrial structure of Japan. This would have benefited SMEs to enhance their productivity and competitiveness over the period of time, for the greater success of
Japanese manufacturing.

The Evolution of Japanese Subcontracting
­Toshihiro Nishiguchi • Jonathan Brookfield
Abstract: e article presents information about the development of Japanese subcontracting from just after World War I when the labor
T
h

market in Japan divided into two areas: large firms and the rest of the economy. The roots of Japans subcontracting are found in its industrial reorganization during World War II. Several factors were responsible for the development of subcontracting, including a burgeoning demand for munitions, the availability of cheap labor, changes in infrastructure and technology, and politics. The modern form of Japanese subcontracting relies on distinct practices that have developed around the system of clustered control and joint problem solving. Japanese manufacturers lower costs of new products at the design stage by first determining the sale price, decomposing the price into desired profit and costs, and then breaking down costs to evaluate and price every part. Throughout the process, suppliers provide input. The authors address several prevalent theories for the evolution and growth of Japanese subcontracting: dualism, flexible specialization, transaction cost economics, and cultural specificity. Introduction:
Japanese subcontracting is complex and evolutionary, a result of the interplay of historical events and human agents.
Consequently, no single theory —whether dualism, flexible specialization, transaction cost economics, or cultural specificity
(which we discuss later) — is sufficient to explain it. In this paper, we detail the evolution of Japanese industrial sourcing and view subcontracting as a movement toward collaborative manufacturing based on problem­solving principles.
1
We argue that the evolution is best explained by political, economic, technological, and strategic factors, not by a single theory. Today, the major advantages of Japanese subcontracting are the economic benefits of interfirm problem solving that ensures the continuous production of high­quality, low­cost products.
Dualist System Emerges:
In the nineteenth century, labor immobility in Japan resulted in substantial regional wage differences.
By the turn of the twentieth century, however, such differences had narrowed, and workers frequently moved from one employer to another seeking better working conditions. There is little evidence of company commitments to lifetime employment at this time.We can trace the emergence of segmented labor markets in Japan to a period just after World War I, when the labor market
.Along with the division of labor came firm­specific skills. How jobs were classified and tasks defined differed substantially from one firm to another, so workers had to be trained according to new requirements. Of course, it would make no sense to train workers if they left for better opportunities. Worker education, therefore, needed to coexist with a more stable labor situation.A powerful way to stabilize labor was to link length of service and incremental pay and also introduce retirement pay schemes. As a result, wage differentials in the various segments of the economy expanded, large firms began to hire temporary workers extensively, and a dualist system emerged.
Government Mandates : Japanese manufacturers turned to subcontracting, which had become feasible on a large scale due to improvements in the industrial infrastructure and technology. The expansion of national transportation and communication systems made small firms’ output more marketable. Standardized manufacturing processes and mass production methods gave rise to simple machining and drilling jobs for subcontractors. Electrical power and increased use of electrical or gasoline­powered machines in small firms moved them away from traditional craft production. All these changes permitted even the smallest family operation to be integrated into the standard routines of large, advanced firms.
Between 1940 and 1945, in a struggle to establish an independent economy, the Japanese government, through the Ministry of
Commerce and Industry (MCI), intervened to rationalize subcontracting systems. The ministry mandated that companies should promote specialists, divide production by specialty, and phase out production of overlapping components by major contractors. It required subcontractors to maintain dedicated relationships with designated “parent” contractors and established subcontractors’ organizations
(
controlled by their prime contractors. In 1943, the government created enterprise groups
(kigyo shudan)
.
Expanded Subcontracting:
After World War II, demand for munitions abruptly ceased, and investments in new territories were lost. There was a huge influx of demobilized soldiers and an enormous scarcity of basic materials, including food and clothing.
The nation’s manufacturing capacity was temporarily paralyzed.In 1945, the Supreme Commander for the Allied Powers, General
Douglas MacArthur, ordered the Japanese government to promote the production of basic commodities, which created a shift to nonmilitary manufacturing. The first Japanese labor union laws were passed, guaranteeing most workers the right to organize, collectively bargain, and strike — rights further protected by the constitution.Under such protection, unions flourished,. Because unions were so well protected, management could no longer arbitrarily fire employees. Given this constraint, the logic of using more flexible labor resources outside the firm as a buffer was compelling. Management achievements during this period produced a new equilibrium of power, with wage differentials widening and the number of union members declining, particularly in the small manufacturing sector. In the immediate postwar period, wages in small companies had been as good as or better than in the large firms, due to small firms’ maneuverability in the black market. By 1948, compensation in large firms had surpassed that in smaller firms. As Japanese subcontracting grew, suppliers were squeezed by lower prices and deferred payments. Prime contractors adopted multiple sourcing strategies, strengthened their bargaining power over price, and increasingly used temporary workers in a clear manifestation of a dualist strategy. To cope, first­tier suppliers segmented their jobs and assigned their simple, messier, more labor­intensive jobs to second­tier suppliers, earning a small profit. Politics, too, played a significant role in stabilizing the small­firm sector. Because managers and workers in small firms were a sizable source of votes, it was in the state’s interest to secure their support. Those efforts helped create a favorable environment for the transformation of Japanese

subcontracting. Overall, this legislation made it easier for small firms to obtain the capital they needed to grow. Given a viable small­firm sector coupled with continued labor difficulties, large firms continued to expand their subcontracting.
Transformation:
Japanese subcontracting, as we know it today, is a product of the high­growth economy that began in the early
1960s. Since then, Japan’s domestic market has had rapid, continuous growth, heavy competition, and product proliferation.The fact that subcontracting continues to play an important part in the Japanese economy is itself revealing. As demand surged in the
1960s, labor became scarce, and the wage differential between the large and small company sectors of the Japanese economy narrowed Moreover, the percentage of temporary workers noticeably decreased from 7.7 percent to 4.5 percent between 1959 and
1965. In short, subcontracting continued but less along dualist lines.Understanding the context here is essential. By the late 1950s and early 1960s, large Japanese producers faced difficult challenges in manufacturing complexity, and small firms were constrained by technical and financial resources. To meet these challenges (and plan for impending liberalization of foreign investment regulations in Japan), large manufacturers began to invest heavily in their subcontractors. In the process, Japanese producers developed a distinctive sourcing strategy to delegate work to major subcontractors. In general, major firms concentrated their resources on strategically important products and processes, while they delegated the assembly of more mature products, small batch items, and the manufacture of subsystems to subcontractors. Often, subcontractors, originally responsible only for discrete treatments, were strategically converted over time into subsystems manufacturers and contract assemblers. Outsourcing relieved assemblers from increasingly complex operational and administrative tasks.
Strategic Industrial Sourcing: odern Japanese subcontracting relies on clustered control, in which firms at the top buy
M
complete assemblies and systems components from a concentrated base of first­tier subcontractors, which in turn buy specialized parts from a group of second­tier subcontractors, which buy discrete parts and labor from third­tier subcontractors, and so on.
Distinctive practices and routines have developed around this system of clustered control and joint problem solving. Taken together, they have moved Japanese subcontracting from a system of exploitation and “win­lose” decisions to collaborative manufacturing. ∙ Target Costing.:
Target costing of new product development may be the most critical practice.
∙ Value Analysis.:
Value analysis (VA), a technique to decompose increasingly complex cost structures so that cost­sensitive elements can be identified item by item is essential to Japanese target pricing. Companies use the technique at both the prime contractor and subcontractor levels. Customers often request detailed cost data from subcontractors in order to look at possible cost reduction at the source.
∙ Bilateral Design.:
As the practice of bilateral design has spread, supplier­driven innovations have become increasingly significant. The modularization of wire harnesses is one example. In a typical passenger car, the electrical wires for the dashboard alone doubled from 70 in 1973 to 140 in 1985. For a luxury model, there were approximately 1,500 to 1,600 electrical wires per vehicle in 1988, which increased the weight, bulk, and manufacturing complexity of the wire harness assemblies and potentially compromised their reliability.
∙ Subcontractor Evaluation.: hile Japanese companies tend to share more design work with their suppliers than companies in
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the United States do, they do not do so blindly. The prime contractor continually evaluates subcontractors’ performance on product quality, price, delivery, engineering, management competence, and long­term viability. In general, the contractor gives subcontractors grades and detailed scores that indicate weak areas for improvement. It gives those with better grades more responsibilities and long­term commitments and those with poor grades a chance to do better. If they fail to improve after several checks, however, poor performers may be either discharged or forced to become lower­tier subcontractors. The move toward clustered control is thus aided by the application of systematic performance measurement. Subcontractor grading is closely linked with quality assurance.
∙ Purchasing Agents’ Role: idespread evaluation of suppliers coupled with suppliers’ increasingly sophisticated design skills
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have substantially changed the purchasing agents’ role. No longer are they merely downstream price negotiators but evaluators of subcontractor performance, interfirm coordinators, and teachers. At Toyota, all purchasing agents acquire sufficient technical knowledge to evaluate subcontractors’ technical competence and teach them the principles of the Toyota production system.
Theories on the Evolution of Subcontracting
Several theories have attempted to explain the evolution and growth of Japanese subcontracting, including liberal and radical dualism, flexible specialization, transaction cost economics, and cultural specificity. As we review the theories, we find that all have critical shortcomings and, because the historical origins, economic rationale, and organizational functions of subcontracting differ so dramatically over time and place, no single theory may be sufficient to explain it fully.
Dualism:
The core of dualist theory is that society may be segmented into separate and unequal parts. Dualists see inequality between internal and external labor markets, primary and secondary industry sectors, and core and peripheral economies. Berger

and Piore have proposed a dynamic theory of dualism in which the strategic use of subcontracting, by shifting many productive processes and therefore risks to the secondary sector, would help large firms survive uncertainty and change. In contrast, Edwards has proposed that differentiated labor markets result from employers’ attempts, in a capitalistic economy, to break up the working class. 8 From this perspective, fragmentation of the working class through the creation of artificial inequalities and gradation between different factions is essential to bourgeois dominance. Both theories lack an analysis of the properties of products, markets, and producer strategies that constrict the use of subcontracting. Technological requirements, for example, may even differ for the same product, depending on the area of processing. Moreover, some dualist literature uncritically assumes that opportunities to exploit advanced technology are unequivocally limited to the primary sector.
9
Furthermore, dualism often implies a retreat of the small­firm sector that parallels larger firms’ domination. As we have seen earlier, however, evidence rejects this notion. Neither subcontracting nor dualism were essential features of the Japanese economy at the beginning of the twentieth century. As a traditional argument explaining Japanese prosperity, dualism posits the sacrifice of many small subcontractors.
Small firms are characterized as “sweatshops” with cheap labor and labor­intensive technologies. If this claim were correct, the competitiveness of Japanese industry might have declined when inter­scale wage differentials substantially narrowed in the mid­1960s to international levels. If Japanese subcontractors were only an exploited pool of cheap labor, they might have withered away, as the dualists predicted. Empirical evidence rejects these contentions. Despite a narrowing wage differential and a stabilized union density, small firms continue to keep pace with larger firms. During the past three decades, small Japanese firms have consistently contributed one­third of the value added in the Japanese economy. Their share of the total working population has been three­fourths. Moreover, the number of small manufacturing firms that subcontract has steadily risen ( Small firms in
Japan not only have grown in parallel but also have connected with large firms via subcontracting. As we have already indicated, producers’ distinctive strategy to manage the demands of increasing product proliferation and manufacturing complexity has led to increased outsourcing and subcontractor development in Japan. Over time, many subcontractors have been converted from single discrete­process specialists to contract assemblers and components manufacturers. This arrangement has allowed primary producers to focus on strategic activities while providing subcontractors with new opportunities to learn and develop technical expertise .
Cultural Specificity:
Dore’s contention of cultural specificity and Williamson’s transaction cost economics begin poles apart, yet as a natural outcome of their reasoning, they both envision similar social structures. Dore offers a cultural explanation for
17
Japanese subcontracting, arguing that relational (obligational) contracting is reliant on the benevolence, loyalty, and goodwill found in Japanese culture. As a result of these cultural characteristics, transaction costs for large Japanese firms may well be
18
lower than elsewhere, and opportunism may be less a danger because of the explicit encouragement and actual prevalence in the
Japanese economy of what we might call moralized trading relationships of mutual goodwill.
Conclusion
Since the 1960s, Japanese producers have achieved notable growth, not by unilaterally exploiting subcontractors but by strategically creating, and benefiting from, distinctive institutional arrangements. As the product of a complex historical interaction among market demand, politics, technology, and producer strategy, the evolution of Japanese subcontracting cannot be explained by a single theory. Subcontracting, as it now exists in Japan, consists of a series of collaborative relationships based on problem­solving principles for the manufacture of high­quality, low­cost goods; its essence can be applied across national boundaries. Sustaining growth in electronic manufacturing sector: lessons from Japanese mid-size EMS providers

!
Many small and medium enterprises (SMEs) suffered badly from the recent economic crisis.
However, a range of overseas Japanese SMEs in the electronic manufacturing sector seemed to do well, even achieving significant growth. Despite that, the electronic sector is in deep recession. Using three in-depth cases in the electronic manufacturing sector, this article discusses how successful overseas Japanese SMEs could achieve further growth and resilience to marketplace uncertainties. The findings suggest that firm growth could be achieved through (1) re-organising of manufacturing supply chain by reducing overseas
Keiretsu obligations; (2) gaining negotiation powers to achieve econo- mies of scale through acquisitions; and (3) adopting IT technology to achieve Lean and increase responsiveness to market changes. The implications of these findings for SMEs in other sectors are additionally explored.
Despite the recent economic crisis, the electronic manufacturing service (EMS) sector is still performing strongly. It is estimated that the EMS market will reach $387.42 billion in
2013 (Frost and Sullivan 2007). EMS is a business targeting products that are difficult to differentiate through the production process (Kita 2001, Zhai et al. 2007). Thus, the profit margin of EMS providers is low (5–8%) as compared to many other sectors. But, how can overseas Japanese small and medium enterprises (SMEs) in the EMS sector sustain growth and resilience in the present turbulent environment?
We have conducted primary research over the past 6 years to focus on 15 high growth
Japanese manufacturing SMEs. All of these companies are listed in the Tokyo stock exchange. The three cases selected represent three groups of chosen growth paths that the successful Japanese SMEs grow in the turbulent global financial crises time. More importantly, the cases have shown the different ways in which resilient SMEs can be developed to face severe business uncertainties.
Many SMEs in the EMS sector foreclosed in light of the recent financial crisis. However, a group of Japanese SMEs in EMS have demonstrated strong resilience by taking advantage of the crisis to gain significant growth. This research identified three resilient models used by EMS SMEs, which could be of significant use to SMEs in other sectors.
. SCM reorganisation to sustain growth – Due to globalisation, SCM now plays an important role in enhancing SME performance. However, research in SCM and operation strategies predominantly focuses on large firms and developed markets. There is limited understanding of how SMEs develop international supply chain activities strategically to support firm performance and competitive advantages. The findings from this research addresses this gap by identifying some key issues concerning the extent of SME international supply chain involvement and the trend of Keiretsu meltdown in Japanese
SMEs.

Acquisition – Although acquisition has been noted as one of the key strategies for SME growth, there is little empirical work in this aspect. This research shows that acquisition could be more beneficial than organic growth, especially in a fast moving industry.
Responsiveness – Literature is abound with panacea on how to sustain growth. For SMEs with limited resources, it is hard to adopt what has been the ‘solution’ for MNCs. This research shows that effective operations and IT investment are vital for firm improvement.
Focusing on the basics like standardising ordering and purchasing processes, vendor management systems and information sharing can increase firms’ agility, even in a highly turbulent and competitive industry.
The cases presented showed that SME business resilience can appear in many forms.
However, a resilient SME can adapt and develop new opportunities, and raise competitiveness at firm levels. Most interviewees mentioned that they had not been conscious of the fact they were successful in showing resilience. In hindsight, they have shown that SMEs can be resilient at any time, i.e. to rebound and learn from adversity; to adapt; to take risks; and self-renew. In other words, the ability of a firm to adhere to what they know best and continuously adapt to gain a bigger market share is required to maintain competitiveness. The EMS sector is always the first to bear the brunt of economic downturn. Yet, the resilient models used by the EMS SMEs have not been properly researched. This research is the first attempt to shed light on this aspect. Nonetheless, the limitation in this study is that internationalisation strategy and the role of supply chain involvement for EMS SMEs is likely to be different in other markets. Hence, there is a need for more research to investigate the impact of international supply chain activities on SME firms. This article calls for more SME-oriented conceptual and empirical research that links international supply chain strategy with international entrepreneurships and internationalisation.
Based on a sample of 15 firms, this study is small. As in any qualitative study, the results, while rich in individual in-depth cases, are not statistically significant. Moreover, the analyses was based on retrospective data which may have introduced an additional source of bias resulting from retrospective sense making on the part of the informants. Attempts were made to limit this bias by using multiple informants, triangulation and performing longitudinal studies for each firm, in addition to data from the company website and independent publications.
Nevertheless, this study does represent an initial step in empirically examining the growth strategies of Japanese EMS SMEs. The three cases and 6-year longitudinal study ensure a rich database and external validity of the research, which enables the findings to be generalisable to SMEs in other non-technological industries. A better understanding of the current development of Japanese SME behaviour will not only help in collaborating with western firms, but will also greatly enrich the theory of the SME growth and resilience models. !

Competitive Marketing Strategies: A Survey of Japanese
Manufacturing Firms' Competitive Performance in the
British Market

!
The role of Japanese corporations in world markets has become so crucial that an understanding of
Ike rules of competition employed by the Japanese is essential for all those involved in international business. The aim of this survey was to gain an insight into the role marketing plays in affecting the competitive position of Japanese firms in the British market. In particular the researcher focused on the overall approach of Japanese companies to the marketplace and the process by which they identify and bring products to the market. The broad findings emerging from this study present few surprises. Japanese companies do not seem to suffer from a "sales orientation", a "production orientation" or "finance orientation" as opposed lo a "marketing orientation". The in-roads being made into the British market are based by and large on a strategy aimed at satisfying customer needs and wants. Japanese companies saw their strengths in placing emphasis on research and engineering and bringing the right product to the market quickly and decisively.

The findings emerging from this survey present few surprises. These findings are summarised below:

1. Overall, it is clear that the Japanese do not seem to suffer from a "sales orientation", a
"production orientation" or a "finance orientation" as opposed to a "marketing orientation". The marketing concept defined as the total integration of business activities aimed at providing customer satisfaction at a profit is wholly adopted and implemented by the Japanese companies under investigation.

2. Despite this strong commitment to marketing, Japanese companies do not appear to ignore the potential benefits other functional areas could offer to enhance the competitive position of the firm. Japanese companies mobilise all their resources, not just one department's, to satisfy customers—a key element of "real" marketing. It is not a matter of either/or decisions-marketing, R&D, or production. Instead, in
Japanese companies there is a close link and balance between different functional areas which are integrated into the mainstream of the business and used to their fullest potential. 3. Apparently, Japanese companies in our sample do not rely heavily on the services of outside management consultancy. While, in part, this reflects a high degree of self confidence on the part of Japanese companies, another reason why Japanese companies are not dependent on outside management services is their tendency to run what can be termed as a "closed system" (Prestowitz 1988). A key difference between Western and Japanese investments, as reported by James (1989) and
Prestowitz (1988), is the tendency of Japanese companies to internalise their knowledge to retain their competitive advantage. For example, the Japanese prefer

forming companies belonging to the same group. This leads to the development of lai^e conglomerates of interrelated industrial, financial, and commercial enterprises, that are affiliated with, say, the Toyota group. These interrelated organisations are capable of undertaking full research activities the company would have otherwise relied on external agencies to perform. This pattern of integration is being used to reinforce an already strong market position by internalising information within the boundaries of the organisation.
4. It would appear, contrary to popular opinion, that the Japanese pay a lot of attention to market research. Particularly in NPD, market research was ranked high by Japanese subsidiaries in our sample as a trigger to introduce new products rated by the company as successful.In fact 86% of the companies in our sample appeared to conduct in- house market research, which compares with only 52% of successful British companies in Baker and Hart's study (1989). Perhaps the active involvement in marketing research prior to launch of new products is the reason why Japanese subsidiaries do not spend a lot of time test marketing their products before they finally launch them.
5.

Japanese companies are concerned with steadily increasing sales and long-term growth rather than maximising profits and return on investment on the short run. This research finding is in line with the general theme reported in the literature and confirms Wong, Saunders and Doyle's survey (1987). They found that most of the
Japanese subsidiaries were more oriented to long-term market share than short- term profits. By contrast, British companies in their sample emphasised short-term profitability. Our research findings are also in line with a study conducted by Japan's economic planning agency in 1981. The study showed a marked difference in the emphasis Japanese and Western managers put on growth. On a scale of 0 to 10,
American managers ranked return on investment as their primary corporate goal, with a score of 8.1. Market share got 2.4. For the Japanese, the scores were 4.8 for market share, and 4.1 for return on investment (Abegglen and Stalk 1985).

6. Our research findings indicate that the new product development process in Japanese companies is driven by bringing the product to the market quickly to be first in the market. This research finding confirms the results of a survey published by the Royal
Institute for International Affairs (British Chamber of Commerce 1988). The report, based on a survey carried out by the British Chamber of Commerce in Japan, shows that most industrial sectors take less than two years from the beginning of a product development to bringing the product to the market. 7. Our study findings also have shown that Japanese companies place great importance on research and technology as key factors for maintaining and enhancing their competitive advantage. Again, this was in line with the study conducted by the
British Chamber of Commerce in Japan which showed that large companies typically have hundreds of development projects under way at once, with some computer companies repiorting up to 700 on the go at any one time. Companies reported also to sp)end between 5 and 15% of sales on R&D.

For British firms, several implications and recommendations emerge from this study:
First: At a micro level, it would seem that a strategic view of a firm's technology is called for. The pace of technology in recent year? has been rapid and its impact on businesses in most cases has been dramatic. These features are thought to provide compelling reasons for
British firms to place R&D and technology in general, in a strategic context, and to include technology as an important part of the firm's overall competitive strategy. Moreover, the relevance of technology to British firms should not be confined to "high technology" industries. In fact. Porter (1985) argues that there is no such thing as "low" technology industry if one takes the broad view of technology.
Second: Having said that technology should become a principal factor driving British firms, this is not to propose that British firms have to become technology-led rather than marketdriven. Companies cannot compete on technology. Nor can they count on technologies to know what customers need and want. Indeed, what British firms need most is a merger of technology and marketing under a customer value perspective. British firms need to strive for synergy at the technology/marketing interface. Perhaps Utterback's definition (1979) of technological innovation as "a new combination of a user need and a technological means to meet that need" makes clear that NPD, for example, is as much a technological as a marketing exercise, it is the result of interdepartmental integration linking technology to market. British firms need to recognise and treat technology both as a viable asset and a competitive weapon. In the meantime, they must implant more of a marketing orientation in each and every business function.
In so doing, the orientation of top management clearly has an important role to play in the integration of marketing, R&D and indeed ali functional areas into the mainstream of the organisation. Third: At a macro level, it is unwise to rely on protection-seeking policies to enhance the competitive position of British manufacturers against Japanese firms. Protection-seeking measures penalise consumers, but rarely require actions on the part of British manufacturers to strengthen their competitive position. Instead, British firms ought to consider what strategic actions they have to take to meet the competitive strength of their Japanese counterparts. Their response should be based on a careful analysis of Japanese firms strengths and weaknesses, and would include emulation,where appropriate.
Fourth: Japanese investments create a sense of urgency of what must be done to improve competitiveness in Britain and help demonstrate that this can be done. Japanese companies that have risen to global leadership over the past 30 years invariably began with ambitions that were out of all proportions to their resources and capabilities.
For British firms, revitalising corporate performance to regain competi- tiveness means a whole new model of strategy. British firms have to develop an obsession with winning at all levels and sustain that obsession over a long period in search for global leadership; what
Hamel and Prahalad (1989) call a "strategic intent".

British firms have to develop a strong and urgent competitive drive in the organisation that envisions a desired leadership position. Today it is not sufficient for British companies to be good, they have to be better than their Japanese rivals
An urgent drive to beat Japanese competitors encompasses focusing the organisation's attention on the essence of winning, creating a climate that leaves room for individual and group contributions and communicating the value of the target market to the members of the organisation. !
!

BUYER-SUPPLIER RELATIONS IN THE UK AUTOMOTIVE INDUSTRY: STRATEGIC
IMPLICATIONS OF THE JAPANESE MANUFACTURING MODEL
PETER TURNBULL, NICK OLIVER and BARRY WILKINSON

This paper documents the adoption of the Japanese model of manufacturing in the U.K. motor industry.
It is argued that the Japanese model involves very high intra- and inter-organizational dependencies.
Although this does not cause problems in Japan due to the structure of the Japanese motor industry, the structure of the UK vehicle industry presents severe obstacles to the successful use of Japanese methods. Recent years have seen widespread moves to emulate Japanese manufacturing practices, and nowhere are this more apparent than in the world car industry. Within the U.K., the motor industry represents the biggest single source of manufacturing output. Currently, the world vehicle industry is characterized by intense competition and excess capacity. Recent research indicates that Japanese plants in Japan can produce a car of comparable specification with only half the labor hours input of European manufacturers operating in Europe. On quality the Japanese are still market leaders but the Europeans are standing still. In contrast, the best North American plants now have comparable levels of productivity and rapidly improving levels of quality. This improvement is regarded by motor industry analysts as an indirect consequence of competition from Japanese transplants in the USA, and a direct result of emulating Japanese manufacturing techniques which have improved the workflow through the plant and from suppliers.
Recent years have, therefore, witnessed fundamental organizational changes both within vehicle assemblers themselves and between assemblers and suppliers as a direct response to the Japanese challenge. All vehicle manufacturers have attempted to adopt Japanese-style just-in-time (JIT) manufacturing techniques, JIT delivery of component supplies, minimum inventory programs, and total quality control (TQC). These changes are a direct response to the U.K. vehicle industry's central problem of the 1970s, namely poor productivity. Thus, as a fundamentally new 'manufacturing philosophy' the
Japanese system is seen as the solution to the generally poor manufacturing performance of the U.K. automotive industry.
JIT manufacture requires that the exact quantity of defect free raw materials, parts and subassemblies are produced 'just-in-time' for the next stage of the manufacturing process. This principle is extended backwards to suppliers, and also forward to the final customer. With JIT the aim is to perfectly match the output of a manufacturing system with the needs of the market, eliminating waste in all its forms.
Waste is defined as anything which adds cost, but not value, to the product. Stocks of finished goods arise when there are mismatches between demand and supply. Successful just-in-time production implies that either products are made to order or that demand can be forecast with reasonable accuracy. In both cases a reasonable fit between the demands of the market and the capacity of the manufacturing system is assumed.

Team-based work organization and total quality control are the natural counterparts of JIT production.
As JIT systems run with virtually no margin for error, it is essential that upstream work stations deliver to their downstream ones on time, in the right quantity, with goods of the right quality—there are no margins for error.
BUYER-SUPPLIER RELATIONS
The recent performance improvement of North American car plants highlights the fact that the competitiveness of any manufacturing firm is determined by two major factors, namely internal efficiency and the management of external relationships, with respect to both customers and suppliers.
The unit cost performance of most manufacturing operations is highly dependent on the effectiveness of purchasing. For the average U.K. manufacturing firm bought-out items account for over 50 percent of total costs. Bought-out components are therefore the major cost item of producing motor vehicles.
Buyer-supplier relations therefore have a very significant impact on the efficiency and competitiveness of the vehicle assemblers.
THE EVOLVING BUYER-SUPPLIER RELATIONSHIP IN THE U.K.
In the U.K. motor industry the 'traditional' buyer-supplier relationship was premised on stable, high volume, low variety production. A major change in the nature of the traditional model came in the mid1970s. Following the first oil shock of 1973-4 there was a marked intensification of competition in the motor industry as demand fell and car design 'converged' on the smaller, more fuel efficient models. The industry was struck by excess capacity and Japanese exports of high quality, low cost vehicles began to make significant in-roads into the U.K. market. The combined import share of the three major Japanese motor manufacturers—Toyota, Nissan and Honda—was less than 0.5 percent of the U.K. market in 1970 but over 10 percent by the late 1970s. Under a more competitive environment, the traditional buyersupplier relationship came under increasing stress. Raw material prices and energy costs were increasing at a time when motor manufacturers were seeking to reduce costs, and component prices became an obvious target for cost reduction. Attempting to realize their market power, vehicle assemblers began to demand lower real prices for their bought-out parts and assemblies, which often sparked a price war among the supplier community. In the face of falling demand, lower production volumes, and growing import penetration, 'requirement schedules from motor manufacturers began to fall leading to bankruptcy or liquidation among many suppliers. Multiple sourcing was used to put further downward pressure on prices and to ensure the continuity of supply. But multiple sourcing simply reduced production volumes at the supplier still further and added to the atmosphere of adversarial relations between buyer and supplier. This relationship proved to be both counterproductive in the long run and did little to improve the competitiveness of the British car industry in the key areas of quality, design and delivery.
The focus therefore shifted towards reducing unit costs via a 'partnership' relationship, resolving scheduling problems, technical difficulties and the like through a process of cooperation rather than competition. The new buyer-supplier arrangements involved a reduction in the number of suppliers and the closing off of a number of direct supply lines to the motor manufacturer. Reducing the supplier base

is just one feature of the current transformation from the 'resolved model' of the early 1980s to a
Japanese-style model.
THE JAPANESE MODEL OF SUPPLIER RELATIONS
In Japan, motor manufacturers have a largely dedicated supplier base consisting of an industrial grouping of affiliated companies which are closely involved as 'sole suppliers' in product development work, design, and technology transfer. The Japanese system is characterized by a very high degree of dependency between organizations. There is some 'sharing' of major suppliers among the major motor manufacturers, and a common secondary/tertiary supplier base. In contrast, the structure of the U.K. automotive industry is a largely independent and 'shared' first tier of suppliers, as well as a shared secondary/tertiary tier.
The significance of the Japanese structure is that it allows greater technological diffusion between a given vehicle assembler and its suppliers, and facilitates the tighter coordination necessary to operate
JIT. In contrast, the structure of the U.K. automotive industry, where suppliers are shared by a number of vehicle assemblers, creates obstacles to technology transfer and to the tight synchronization and cooperation between buyer and supplier demanded by JIT production.
The high-dependency manufacturing strategy of the Japanese vehicle assemblers is facilitated, and perhaps only permitted, by the structure of the industry. In the Japanese automotive industry, where motor manufacturers preside over an essentially dedicated group of suppliers, the structure of the industry itself provides a logistical and political context appropriate to the demands of a highdependency system of production such as JIT. The fact that the system is divided vertically rather than horizontally permits greater technological diffusion between the vehicle assemblers and their suppliers.
At present, the vehicle assemblers in U.K. appear to be pursuing the advantages of the Japanese model whilst paying insufficient attention to the conditions necessary to support it. If U.K. assemblers are serious about applying the best Japanese practice—and not just the cheapest version of it—then their much-vaunted "new relationship" with suppliers should offer a little more carrot and rather less stick.
CONCLUSION
Industrial structure has been demonstrated to be a crucial element in the success of the Japanese motor industry. That structure compliments a particular manufacturing strategy which requires buyer-supplier relations compatible with the dependencies inherent in a JIT system. In contrast, the U.K. automotive industry possesses a quite different structure which is acting as a significant restriction on the industry's capacity to emulate the Japanese model successfully. Problems appear to eminate from the imposition of a particular manufacturing strategy which is, in many respects, incompatible with the existing structure of the industry. Equally problematic, however, is the inability or unwillingness of the major motor manufacturers to emulate that strategy whole heartedly.

Corporate Environmental and Economic Performance of Japanese
Manufacturing Firms: Empirical Study for Sustainable Development
Abstract :­

The study in this research paper relates between environmental performance and economic performance in Japanese manufacturing firms. Some of the indicators include CO2 emissions and aggregate toxic related to chemical emissions. A significant relationship was observed between financial performance and environmental performance based on CO2 emissions.

Introduction :­
It is believed that technological development and improved resource productivity can increase firms' competitiveness and enhance their overall economic performance.
The studies focus on the sign of relationship between environmental and economic performance.Additionally, cost and economic benefit from pollution abatement are different for different types of pollution because the abatement technology and required equipment differ. The cost of corporate environmental management (hereafter,
CEM) for firms is generally on the rise, although it is difficult to define and measure this cost because CEM includes a wide range of business activities in addition to compliance with environmental regulations.

Research Framework and Hypotheses :­
A theoretical model of the relationship between the environmental and economic performance of firms was proposed by Wagner.Revisionists point out that pollution abatement costs and expenditure can be considered an investment in innovative new environmental technology that decreases abatement costs. The revisionists’ point of view can be divided into three hypotheses. First, economic performance increases when environmental performance improves. Second, the relationship between environmental performance and economic performance is U­shaped. Finally, the relationship between environmental performance and economic performance has an inverted U­shape.
Objective and Hypotheses :­
The objective of this study is to clarify the relationship between environmental and economic performance using both linear and quadratic functions. We focus on the three economic performance indicators to examine the causal relationship between environmental and economic performance in detail. In general,
CEM contributes to economic performance though: (i) a cost­saving effect and (ii) a productivity improvement effect. The former effect includes reductions in intermediate material costs, energy input costs, and pollution abatement costs as a result of pollution­prevention activity. The latter effect is achieved through improved capacity utilization and increased sales from environmentally friendly product design.

Cost­saving Effect :­
Reducing CO2 emissions is mainly achieved by the manufacturing firm via fossil fuel energy conservation, which saves energy costs if sales are constant. Thus, decreasing CO2 emissions reduces production costs, and this contributes to increased profitability.
Capital Productivity Improvement :­
If a manufacturing firm reduces CO2 emissions by introducing new energy efficient production equipment, capital productivity falls temporarily. However, low­carbon products have strong market competitiveness if

consumer preference and markets shift to environmentally friendly products. In this case, reduction of CO2 emissions has the effect of increasing capital productivity gradually.

Overall Economic Performance :­
We define overall economic performance as financial performance considering both profitability and capital productivity. There is no clear relationship between CO2 emissions reduction and increased market competitiveness. Thus, we predict that the increase in environmental performance measured by CO2 emissions increases overall economic performance through improvement in corporate profitability.
Methodology :­
ROA indicates the profitability of a firm relative to its total assets. ROA is a generally accepted measure of a firm’s financial performance that has been used as an economic performance variable in many previous studies. ROA= Profit/Asset=Profit/Sales*Sales/Assets

This means that improvements in ROA can be caused by an increase in profits divided by sales (i.e. ROS), or by an increase in sales divided by assets.

Results :­
In considering ROS and CT, we find that EECO2 has a monotonically positive effect on ROS because squared term of EECO2 is significantly positive and the single power of EECO2 is not statistically significant. There is also no significant effect on CT. Based on these results, we can conclude that EECO2 affects ROA through ROS because both ROA and ROS have a positive relationship with EECO2, and the relationship between EECO2 and CT is not statistically significant.
There are two main approaches to reducing CO missions in manufacturing firms. he first approach is to
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T
introduce more energy­efficient production equipment and switch from fossil fuels to forms of energy with a lower carbon intensity. This approach requires additional investment and costs. The second approach is to improve the production process and employee efforts to save energy, which requires better corporate management, including better employee education and excellent leadership.

Conclusion :­
Firms improved their overall economic performance due to savings on intermediate energy costs.
Furthermore, reduction of CO2 emissions may not improve capital productivity in the short term.
Environmentally friendly behavior regarding CO2 reduction is worthwhile for firms seeking to improve their profitability but not their capital productivity. One interpretation of the results for capital productivity is the limited market preference for environmental friendliness.
First, the government needs to encourage industrial associations to put on workshops and seminars to educate firms about reducing emissions of CO2 and toxic chemical substances effectively without large investment. This progressive approach will help firms with low levels of environmental technology to reduce emissions of pollutants without damaging their economic performance.
Second, financial support for investment in environmentally friendly production equipment is important.
Our research clarifies that management of both CO2 and toxic chemical substances contributes to increased financial performance at a low level of environmental performance. Small and medium­scale firms have difficulty in investing for environmental protection due to budget constraints, even though they realize the positive relationship between pollution reduction and economic performance. To solve this problem, low­interest loans for investments in environmental protection are required.