Part I Global Business Strategy
5 New Business Model as Response to Competition
5.6 Conclusion
In this chapter, we discussed how Japanese companies can best create business strategies while keeping in mind competition with local companies that emerge with the rise of developing countries, from the perspectives of a “customer value” model and product architecture theory.
The customer-centric model repudiates the corporation-leaning logic of “make good products and they will sell.” It focuses on services provided by products and displays the concept of rebuilding business models from the perspective of improv-ing customer value. A product-centric business strategy that chases product func-tionality and performance will lose effectiveness at a stage where product performance exceeds the level of customer demand. In developing countries such as China and India, “good-enough” product markets feature in a volume zone, and have a lower-than-average level of customer demand compared with markets in developed countries. Accordingly, competing with companies by using a strategy that emphasizes performance and functionality is diffi cult, and companies should instead design products and services from the perspective of maximizing customer value. The value customers seek from products is derived as they use those prod-ucts. Thus, companies must focus on services derived from products and create business models that increase customer satisfaction across the product’s lifecycle.
Next, companies must formulate strategies that correspond to the characteristics of product architecture. In particular, products with a modular architecture are easy for companies in developing countries to catch up with and will dramatically increase the competition faced by Japanese companies. In those situations, compa-nies must consider strategies to improve the technology or differentiate products at the modular level. In addition, companies may take the opposite approach and become system integrators, providing valuable systems for customers by combining multiple products. As can be seen in system integration services for information equipment, customers have various needs, and providing turnkey services that
5 New Business Model as Response to Competition from Emerging Economies
optimally combine IT systems is characteristic of integral architecture. This is because of the expertise required to optimally combine these products to meet cus-tomer needs, rather than the performance of the components themselves.
In this chapter, we discussed the export of infrastructure business packages, such as railway services, as examples of system integration services. Providing railway services requires knowledge of signaling systems and railcar management, in addi-tion to that of hardware infrastructure such as railcars, tracks, and staaddi-tions. The fact that each system component is not modularized, but rather requires mutual collabo-ration for an integrated design, is characteristic of integral architecture. Japan’s rail-way services have a high level of safety and accuracy. However, competition among railway operators is absent in Japan unlike Europe, and the passiveness shown by Japan Railways and other private railway companies in pursuing overseas expan-sion has caused Japan to fall behind in overseas expanexpan-sion. Moving forward with an overseas business will fi rst require Japan’s railway operators to clarify the extent of their expertise on system integration and management. With that done, they must formulate proposals to countries and regions that make use of Japan’s strengths.
Open Access This chapter is distributed under the terms of the Creative Commons Attribution Noncommercial License, which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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© The Author(s) 2015
K. Motohashi, Global Business Strategy, Springer Texts in Business and Economics, DOI 10.1007/978-4-431-55468-4_6
for Japanese Firms 6
6.1 Introduction
India is second only to China in terms of population. India’s economic growth since the mid-2000s has risen to around 8 %, and is now considered as having a promising future market. However, the driving force behind this economic growth is the coun-try’s service industry, particularly its IT service industry. As compared to China, India trails in its growth in the manufacturing industry. One reason for this gap is the lack of infrastructure in India. For a manufacturing industry to grow, basic infra-structure, such as power and water, and logistics facilities, such as roads, railways, and ports for imports and exports, are required. However, infrastructure develop-ment in India has not progressed as planned. Half of India’s population is under the age of 25, resulting in a relatively low average age. Therefore, creation of employ-ment opportunities for this younger generation is important. For this reason, it is necessary to promote the manufacturing industry having a high employment absorp-tion capacity. Infrastructure creaabsorp-tion is thus an important policy issue for the Indian government.
The Neemrana Industrial Park for Japanese fi rms was created with the coopera-tion of the Japanese government and the state government of Rajasthan, situated to the southwest of Delhi. This project has become a highly anticipated one even within the Indian government. Industries in Rajasthan have focused on agriculture and mining such as for marble and cement. The relative lag in industrialization has motivated the Rajasthan state government to provide incentives to factories to set up operations such as automotive industries having high employment absorption capacity. On the other hand, India carries a relatively higher investment risk for Japanese companies for a variety of reasons than do other nearby Asian countries, such as China. These companies fi nd themselves forced to make investment deci-sions based on insuffi cient decision-making information, for example, the accessi-bility of infrastructure such as power and water necessary to operate factories, availability of effi cient and appropriate workers, or the ability to adequately respond
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to various central or local government regulations and directives. Maruti Suzuki and Honda, which together comprise more than 40 % of India’s passenger cars, operate factories near Delhi and have strong incentives to attract parts and materials manu-facturers to India to strengthen cost competitiveness. Against this backdrop, Japan’s External Trade Organization (JETRO) has taken the lead in outfi tting the industrial parks to lure, primarily, Japanese auto-related companies to India, thereby reducing risks that individual companies otherwise could not handle.
6.2 Background of Neemrana Industrial Park
The Neemrana Industrial Park is located in the state of Rajasthan, and is approxi-mately 105 km southwest of Delhi’s Indira Gandhi International Airport (a 90 min drive). The Park faces National Highway 8, connecting Delhi and Mumbai. With the establishment of Phase III (1,166 acres), it will be the fi rst in India to be developed specifi cally for Japanese companies (Fig. 6.1 ).
India has pursued industrial decentralization policies aiming to balance develop-ment since the 1970s by providing industrial location guidance to underdeveloped and unindustrialized regions. In addition to the Delhi Special Area, the center of development since the latter half of the 1980s, development plans have expanded in the neighboring states of Uttar Pradesh (UP), Haryana, and Rajasthan (in part), all of which comprise the National Capital Region (NCR). These plans aim to relieve overpopulated conditions in the capital and decentralize economic activities.
Fig. 6.1 Map of Neemrana Industrial Park and surrounding area