The rise of globalization has presented both opportunities and challenges for Japanese multinational companies. As the world becomes increasingly interconnected, Japanese companies have had to adapt to new and ever-changing market conditions.

Despite the widespread international recognition enjoyed by Japan’s leading corporations, many of them still trail behind their global counterparts in crucial markets. With demographic and economic trends pointing towards slow or stagnant growth in Japan’s domestic market, the ability of many Japanese companies to substantially increase their overseas revenue and profits is of utmost importance. Even companies that have established themselves as global entities face more intense competition and need to revamp their overseas business models.

To develop a globalized enterprise, Japanese executives must think in innovative and unfamiliar ways about organizing, marketing, and strategizing. Strategies that have been successful in the past, such as replicating Japanese market practices in foreign operations, are no longer effective.

In this article, we will examine some of the challenges of globalization for Japanese multinationals, as well as, how they are responding to these challenges.

The Challenges

Increased competition around the Globe

One of the primary challenges faced by Japanese multinationals in the era of globalization is increased competition. As more and more companies enter the global marketplace, competition has become fiercer than ever before. Japanese companies must not only compete with other multinational corporations, but also with local companies that have significant advantages in terms of familiarity with local markets and consumers.

Adapting to the Norms of the Country they Operate in

Japanese multinationals need to adapt to the different cultural, legal, and regulatory environments in which they operate. Each country has its own unique culture, language, and business practices, and it can be difficult for Japanese companies to understand and navigate these differences. Additionally, laws and regulations vary widely between countries, and compliance with these regulations can be a significant challenge for multinationals.

Developing Global Talent

The distinct features of the human resources framework implemented by Japanese corporations include, promotion based on seniority, fair remuneration, and job security until retirement. As a result, most of the senior executives are Japanese. While they may possess sufficient expertise in managing domestic businesses, they are finding it more challenging to run the global enterprises. In 2010, a government survey interviewed 263 Japanese top-level executives, and they identified the primary obstacle for global expansion was the “securing and training of human resources in Japan.”

Therefore, a major challenge for Japanese multinationals is the need to develop global talent, employees who can effectively operate in different cultures and languages.

Solutions

Innovation and Product Differentiation

Despite the mentioned challenges, Japanese multinationals have responded by implementing a number of strategies to compete in the global marketplace. One such strategy is to develop products that are unique and offer value to customers. In this way, Japanese multinationals differentiate themselves from competitors and create a competitive advantage.

Forming Strategic Partnerships and Alliances

By partnering with companies that have complementary strengths and capabilities, Japanese multinationals gain access to new markets and technologies. This strategy also allows companies to share risks and costs, and can lead to increased efficiency and competitiveness.

Focusing on Developing Global Talent

As mentioned above, for effectively operating in different cultures and business environments, companies are investing heavily in training and development programs. This helps employees build the needed skills and knowledge. But above all, companies are recruiting talent from around the world to build a diverse and global workforce.

Examples

Toyota

One notable example of a Japanese multinational that has successfully adapted to the challenges of globalization is Toyota. As the world’s largest automaker, Toyota has operations in more than 170 countries and regions. To compete in this global marketplace, Toyota has focused on innovation and differentiation. The company has invested heavily in research and development to create unique products and technologies, such as the hybrid Prius vehicle.

Toyota has also formed strategic partnerships with other companies to gain access to new markets and technologies. For example, the company has partnered with BMW to develop fuel cell technology, and with Panasonic to develop batteries for electric vehicles. These partnerships have allowed Toyota to stay at the forefront of the industry and maintain its competitive edge.

Sony

Another example of a Japanese multinational that has adapted well to globalization is Sony. The electronics giant has operations around the world and is known for its innovative products, such as the Walkman and PlayStation. To stay competitive, Sony has focused on innovation and differentiation, investing heavily in research and development to create new products and technologies.

Sony has also formed strategic partnerships with other companies to gain access to new markets and technologies. For example, the company has partnered with Ericsson to develop mobile phones and with Olympus to develop medical equipment. These partnerships have allowed Sony to expand its product offerings and gain access to new markets.

Hitachi

In addition to focusing on innovation and strategic partnerships, Japanese multinationals are also investing heavily in developing global talent. For example, Hitachi has implemented a global talent program that aims to develop employees who can work effectively in different cultures and languages.