Factors Affecting the Operational Strategy of Japanese TNCs

Japanese TNCs help Japanese TNCs avoid fierce competition from American and Western European TNCs. Not only that, it also allows for the expansion of cooperation and alliances between American TNCs and Japanese TNCs in key areas of the economy . Second, the Japanese yen exchange rate has always been low until 1973, the stability of oil prices on the world market for a long time are also favorable conditions for the extraordinary economic growth of Japan, as well as its TNCs. Third, the abundant, cheap and stable supply of raw materials and energy on the world market are favorable conditions for the development of Japan's heavy and chemical industries as well as favorable conditions for the development of trade. Fourth, the process of internationalization of production activities is increasingly promoted. The internationalization of production and business activities does not allow TNCs to expand the scale of production and business in conditions of increasingly fierce competition among them, but also accelerates the international division of labor. Vertical specialization within them develops. In essence, TNCs in Japan or any other country are the result of the adaptation between the leap in the level of productive forces and production relations at the macro level, in conditions where the socialized nature of production has expanded on an international scale.

2. Characteristics of Japanese TNCs

Firstly, Japanese companies are truly pioneers who played a major role in the recovery and development process, creating Japan's strong competitive potential in the world economy, especially in the period after World War II.

Maybe you are interested!

Japanese TNCs are willing to postpone maximizing immediate profits to increase their market share and influence, to invest boldly in new technology if it will bring long-term benefits in the future, and to concentrate resources on modernizing production processes, even if they still meet current requirements. They train their employees in the skills needed for the future.

In order to expand production and increase revenue, companies are looking for new investment areas. This has led to the breaking of the monopoly of a few companies and fierce competition, especially in the fields of automobile manufacturing, electronic household goods, and synthetic fiber manufacturing.

To solve the technological difficulties, Japanese companies have carried out plans to expand investment in machinery and equipment by increasing profits and expanding production with loans and corporate bonds. Although having to pay high interest rates and gradually pay off debts, by maintaining production and exploiting machinery and equipment with high efficiency, perfecting new facilities with new investments and in favorable international and regional conditions, Japanese companies have achieved positive results.

Second , the Japanese tradition of dedication and loyalty, especially in labor management, has become the main factor determining the success of TNCs themselves.

In the past, employees in companies enjoyed a lifetime employment system. This was a management method that attracted employees to the company so closely that they were forced to devote themselves entirely to the company's interests, and therefore to themselves. This was different from the contract system that was common in the West. This method was people-oriented, taking people and their interests as the center, and considering them as the lever for the development of the company and the Japanese economy. This working system was linked to the mechanism of promotion and salary increase according to the length of service to the company, and only by working for one company could one's interests be guaranteed.

On the company side, when recruiting workers, they are responsible for ensuring material and spiritual benefits, ensuring stability and longevity for employees. The benefits of workers are not only guaranteed in terms of working conditions but also social welfare such as accommodation, education, etc.

In Japan, the system of promotion and salary increase depending on seniority is not only to increase employee commitment to the company but also to create conditions for job stability and harmony between employees and the company. That allows not only the company but also the employees to apply new techniques to improve labor productivity. However, "the biggest limitation of this labor mechanism is that it easily gives rise to dependence, mediocrity, and limits the development of creativity and ideas". 4

Third, along with the human policy, that is, the relationship between employers and employees as mentioned above, Japanese companies always pay attention to education and training and aim to apply new techniques. “Robotics” in production is an example. The Japanese have gone further than the Americans in applying robots to industry. In 1980, the American Robotics Association announced that, at present, 70% of Japanese companies' operations are supported by robots. This happens not only in large companies but also in small and medium-sized enterprises to replace humans in tedious and dangerous operations, allowing for increased labor productivity, for example, instead of hiring 100 skilled workers to operate 68 different new machines to produce 1,400 product details, it is only necessary to introduce 18 computer-controlled robots5 . In addition, Japanese companies have tried to enter into joint ventures with American companies to produce industrial robots – a high-tech approach. The application of high technology requires skilled labor. To this end, Japanese companies advocate close ties with universities that allow them to recruit the appropriate workforce. In fact, when they find talent, they are willing to sign contracts immediately and on favorable terms.

Fourth, Japanese TNCs always focus on efficiency in the management system of the company's activities. These activities include organizing, planning,

4 Authur M.Whitehill, Traditional and Transitional Japanese Management, Center for Japanese Studies, 1996, pp. 374-375

5 Authur M.Whitehill, Traditional and Transitional Japanese Management, Center for Japanese Studies, 1996, pp. 374-376

planning, to labor organization, from career development leadership to information systems and to employee welfare.

The effectiveness of the management system of Japanese TNCs is not only a reflection of the socio-cultural, political and economic principles but also a mechanism for integrating the work life with the private life of all employees working in the company - from the company president to the ordinary worker. Employees in Japanese TNCs always consider themselves as representatives of the company at all times. The firm determination between the public and the private can be mentioned in their daily work and is considered as the pride of each employee towards the company. In case of internal problems, high priority is given to creating harmony and maintaining good internal relations with the goal of all for the development of the company. These valuable characteristics are nurtured and preserved and no employee is allowed to upset the stability of this relationship.

For the company's leadership, management decisions are only made after consulting from the bottom up. This is an important feature to prevent the values and relationships in the company from being disrupted as mentioned above. In many cases, management ideas are discussed from the bottom up, and if there is a disagreement at some point, the idea is discussed at a more important level. However, it cannot be said that the final decisions belong to the discussions at the lower levels. In fact, it is a process of consulting and improving the management ability and responsibility in the management of employees, increasing loyalty to the company. The final decision belongs to the highest management level.

Although management decisions are made at all relevant levels and are consulted, this does not reduce the responsibility of the leaders. Once there are conflicts related to the company's reputation, the leaders will immediately accept criticism, consider it and be ready to apologize, even resign.

Fifth, like TNCs of other countries, Japanese TNCs have contributed to promoting the trend of globalization and regionalization of the world economy. The practice of expanding business scale, increasing foreign direct investment, and expanding internal trade of Japanese TNCs and between Japanese TNCs and TNCs of other countries clearly reflects that process.

The economic linkages of Japanese TNCs horizontally and vertically are increasingly strengthened, and their capital combination with many companies in other countries is taking place rapidly. The wave of mergers and acquisitions of foreign companies by Japanese TNCs is no less exciting.

In line with this trend, Japanese companies have expanded their research and development activities since the early 1980s, most notably in the electronics, automobile, and machinery manufacturing industries. Along with expanding their office networks, establishing branches and overseas companies through investment activities, hiring foreign scientists and engineers, sending their scientists and engineers abroad to study, and establishing overseas laboratory systems are being promoted by Japanese TNCs.

Thus, in all their activities, Japanese TNCs have maintained and rapidly developed the inherent traditions of the Japanese people, the Japanese style of organization and management, and absorbed advanced ideas on management science and technology of the European and American industries. Japanese TNCs are growing stronger and becoming formidable competitors of European and American TNCs.

Chapter 2

OPERATIONAL STRATEGY

OF JAPANESE TRANNSNATIONAL COMPANIES FROM 1990 TO PRESENT

I. Factors affecting the operational strategies of Japanese TNCs

1. Internal factors

In the 1990s, Japan had just emerged from the bubble economy and was immediately plunged into a severe recession. The domestic business environment changed in an unfavorable direction, forcing TNCs to find ways to promote their activities in the world market. The main factors that affected the operational strategies of Japanese TNCs can be listed as follows:

1.1. Harsh natural conditions

Japan has a total area of 377,834 km². The land of Japan is an island chain stretching in an arc shape next to the East of the Asian continent, 3,800 km long. The terrain is mainly mountainous (71%). There are many mountains of volcanic origin, some of which are still active, typically Mount Fuji (3,776 m). Earthquakes occur quite frequently, on average about 400 large and small earthquakes a year. Apart from limestone and sulfide gas, Japan has very few mineral resources, and that is a fundamental, inevitable natural disadvantage of the Japanese economy up to now. Most of the strategic raw materials and fuels needed for modern industry and daily life must be imported almost entirely. For example, 94% of petroleum must be imported from abroad, especially from Middle Eastern countries, which is one of the world's hot spots. Japan also has iron, copper, gold, silver, lead mines, etc., but the reserves are very small. It can be said that this weakness has made Japan's giant industry very vulnerable to economic, political and natural fluctuations in the world. Japan's scarcity of natural resources

This means that in order to successfully industrialize, Japan had to import a large amount of raw materials and export manufactured goods. Those harsh natural conditions, over thousands of years of development, have forged in the Japanese typical strong personalities, which are diligence, hard work, creativity and loyalty. It has become a symbol of the bushido spirit and community solidarity of the Japanese people. This has deeply influenced the business philosophy of the Japanese business community.

In such a difficult situation of raw materials and minerals, in order to develop the economy of the country as well as of each enterprise, all Japanese business entities are looking for ways to go outward, taking the world market as the main area of operation. These are also the deep-rooted reasons leading to the formation and development of the operating strategy of Japanese TNCs.

1.2. The Yen appreciates and production costs in Japan are high.

In September 1985, the Finance Ministers of the G5 (including the US, Japan, West Germany, the UK and France) signed the Plaza Accord, agreeing to devalue the US dollar against the Japanese Yen and the German Mark to improve the US trade balance and increase the competitiveness of the US economy. During the period 1985-1988, the Yen appreciated by about 33%. This negatively affected Japan's exports of goods, narrowing domestic production. However, in terms of capital exports, Japan had an advantage over the US, because the cost of investment projects in Yen would be lower than the cost in USD, encouraging Japanese TNCs to actively invest abroad.

In the late 20th and early 21st centuries, the Yen continued to appreciate against the USD. If in 1975 the exchange rate was 229 Yen / 1 USD, then by 1986 it was

159.87 Yen / 1 USD, an increase of 39%, by the end of 1995 and early 1996 the exchange rate was 100 Yen / 1 USD and the current exchange rate fluctuates around this number 6. However, not only has the price increased, the Yen also sometimes shows signs of fluctuation and fluctuation compared to other strong currencies such as USD and EURO. Therefore, in order to stabilize production and business and create strong relationships with international customers and partners, Japanese TNCs must

6 Source: Embassy of Japan http://www.vn.emb-japan.go.jp/html/vjp_info.html

must strengthen their international investment strategies, in order to maintain their advantages, and at the same time create trust with foreign partners when using payments in USD or other strong currencies. Figures 1 and 2 show the change in the exchange rate of Yen compared to USD and EURO in the 3 months before March 24, 2009:

Figure 1. Fluctuations in the Yen and USD exchange rates (first quarter of 2009)