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OM in the News: Japanese Manufacturing–Then and Now

January 26, 2012

When you are in the swamp and an alligator is nibbling on your leg, they say it’s hard to see the big picture. So today, despite the gnawing pain we feel from global competition, let us recall the world just 27 years ago, when Japan was the gator and US manufacturing was being threatened by the likes of  Toyota, Mitsubishi, Sony and many others.

Industrialist Matsushita on Time Cover in 1962

Here is a quote from an OM in Action box in the 2nd edition of our text 24 years ago, based on a 1985 speech by Konosuke Matsushita, CEO of Matsushita Electric Industrial Co., to a group of Western  managers. “We are going to win and the industrial West is going to lose: there is nothing much you can do about it.”

Those were heady days in Japan, when its quality products and overpowering automation were driving its export-led growth.  But The Wall Street Journal (Jan.24, 2012) reports that those days may be over, with a front page headline “End of Era for Japan’s Exports”. Japan  just announced  that it recorded its first trade deficit since 1980, a sign that one of the world’s greatest manufacturing  machines may be running low on steam.

It is a combination of three factors. First, a decline in corporate competitiveness that has been bubbling under the surface for years as Japan transitions into a nation of pensioners. Second, the disastrous earthquake and tsunami last March destroyed factories, crippled supply chains, and idled many of the country’s nuclear reactors. (Before the Fukushima accident, nuclear provided 30% of Japan’s electricity. Now just 4 of the nation’s 54 reactors are in service). And third, despite weaknesses in Japan’s economy, the  yen has remained a strong and safe haven for currency traders (meaning exports are very expensive and creating a need to move production offshore).

Discussion questions:

1. Is the era its leaders called the  “Japanese miracle”  over? Why?

2. What can the US do to protect its manufacturing power?

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