Analysis of Japanese Automobile Manufacturers as Multinationals

This report examines the strategies employed by Japanese automobile manufacturers to maintain their competitive position as multinational corporations in the global market. It begins with a historical overview of the Japanese automotive industry, tracing its origins from the early 20th century to its rise as a global leader. The report highlights key developments, including the industry's response to environmental concerns through the adoption of fuel-efficient technologies and stringent emission standards. It also explores the strategies implemented by Japanese manufacturers, such as joint ventures and overseas production, to expand their global operations and adapt to changing market conditions. The analysis concludes that despite facing competition from emerging markets, the Japanese automobile industry has demonstrated resilience through continuous innovation and strategic partnerships, supported by effective environmental and tax regulations.

Running head: ASIA PACIFIC MULTINATIONALS
Japanese Automobile Manufacturers
Name of the Student:
Name of the University:
Author Note:

1ASIA PACIFIC MULTINATIONALS
Since 1960 Japan has been within the world’s top 3 largest car making counties, in the
technology and the automobile manufacturing Japan has secured a status of being a world leader.
Some of the most well-known brands that have a global fame are Lexus, Mazda, Subaru,
Mitsubishi, Nissan, Honda and Toyota. These brands are the most famous and are the major car
exporters. The important part is that Japanese automobile components are found to be
manufactured in over 6 continents. 89 percent of the automotive related manufacturing
contributes to Japan’s largest manufacturing sector. Vehicles and the automotive components
amount to 18 percent of all the manufacturing related shipments in Japan (Japan Automobile
Manufacturers Association 2018a). This study is based on the extent to which the Japanese
automobile manufacturers have been able to retain the competitive position as the multinationals
in the international markets.
History of Japanese automotive industry- In the year 1907, Komanusuke Uchiyama
manufactured the first true Japanese car. Torao Yamaha, in the year 1904 built the first bus in
Japan which had a seating capacity of 10 people. Large number of companies along with the
support of the Imperial Army and Japanese government started the manufacture of military
trucks just after the end of World War I (Koichi and Barker 2014). This venture eventually led to
the foundation of automobile companies like Nissan, Toyota. This eventually led to the
beginning of automobile industry in Japan. In the year 1933 a weaving company called Toyota
Jido Shokki founded an automobile department and named it as Toyota. Nissan also developed a
growing company and named it as Nihon Sangyo in the same year. During the period of World
War II, Japanese automobile industry was mainly producing industrial truck, buses and as well as
military trucks. Whereas, after the World War II the Japanese automobile companies where
allowed to make limited number of trucks. At that time Toyota lost all its money and became

2ASIA PACIFIC MULTINATIONALS
bankrupt. The company Toyota however revived from the losses during the Korean War. It was
given contracts for the manufacture of military vehicles and its repairs (Toyota 2018).
In the year 1955 the manufacture of Japanese car increased. Restrictions imposed by the
government on the import of vehicles. At that moment Japanese car market was not large and
that it was not opposed internationally. In the year 1953 number of vehicles manufactured where
10000 and it's doubled in the year 1953. During the 70’s Japanese automobile were not popular,
however due to low price and superb quality the vehicles slowly grabbed attention (Koichi and
Barker 2014). In the year 1973 due to the oil crisis the popularity of the Japanese automobiles
reached the pinnacle due to fuel efficient and small engine. During the year 1970, in US and
Britain the popularity of Japanese automobile increased. Nissan was a popular brand in Britain,
while Honda and Mitsubishi where the popular brands in US. During this period, the export of
the Japanese automobiles reached to great heights. By the year 2000, Japan became one of the
largest manufacturers of automobiles due to affordable and cost-effective manufacturing. Even
though the Japanese car industry was facing fierce competition from countries like India, China,
South Korea still the car industry continued to thrive (Picken 2016).
Japan’s Automobile industry (latest developments) - An automobile typically consists of
20 thousand to 30 thousand parts which is impossible for even the largest automobile
manufacturer to produce themselves. Thus, the automakers either purchase the final products or
outsource them. These components include audio systems, air conditioners, batteries and tires.
The finished products which were purchased by the automobile manufacturers include the
products which were manufactured in different countries and the volume of purchase of the final
products increases every year. Thus, automobile manufacturing can be considered as an
integrated industry and the investments in the research activities, components are marked as an

3ASIA PACIFIC MULTINATIONALS
indicator of the quality of economy. The automotive industry of Japan is one of the core
industrial sectors of Japan's economy (Export.gov 2018). In the year 2014 the total export of
Japanese vehicles accounted to 17.5%, and 40% is the total value of the components shipped.
The automotive shipment included both the export and domestic shipments and the vehicles
exported include auto parts and motorcycles. In the year 2014, the value of the total shipment
totals around 53.3 trillion Yen. While in comparison to 2013, the total shipment of 2014
increased by 2.6%. The automobile production in Japan in the year 2016 was 9.2 million units,
which was 0.8% less than 2015. Passenger car production increased to 0.6% in comparison to
2015 send the total units produced is 7.87 million. The small car and standard card production
increased 3.5% and 5.4% respectively, and 1.61 million and 5 million units were manufactured
respectively. While at the same time the production of mini cars reduced by 7.4% and about 1.26
million units were produced. Violin comparison to 2015 the production of bus and truck
decreased by 5.9% and 8.3% respectively. The total units of bus and truck produced were 130
000 and 1.2 million respectively (Japan Automobile Manufacturers Association 2018b).
Motor vehicles export in the year 2016 increased by 1.2% in comparison to the year 2015
and 4.63 million units were sold. The export of passenger cars increased by 3.7% and a total of
4.12 million units were exported. Whereas, the export of bus and trucks reduced by 6.8% and
17.7% respectively. The units of buses and trucks manufactured were 132000 and 384 000 units
respectively. An increase in the export of motor vehicles to countries like Oceania, North
America, Asia, Europe. In comparison to 2015 the export of motor vehicles in the year 2016 and
climbed up. Data reveal that there is an increase in export and the percentage of increase in
different continents were: in Europe it is 11%, in Asia it is 10.9%, in North America it is 8.6%,
and in Oceania it is 0.7% (Australian Government Department of Foreign Affairs and Trade

4ASIA PACIFIC MULTINATIONALS
2018). Whereas the export to the Middle East has declined by 26.9%, in Africa by 20.1%, in
Latin America by 5.0%. Export of motorcycles in 2016 increased by 2.6% in comparison to the
previous year and the total number of motorcycles manufactured were 429000 units. With
respect to the engine capacity, the export of class 1 and small sized motorcycles increased by
36.3% and 2.3% respectively. The number of class 1 and small sized motorcycles exported were
16000 units and 323000 units respectively. Whereas, the export of class 2 and mini sized
motorcycles reduced by 2.1% and 0.1% respectively, and the total number of units exported
30000 and 60000 units respectively. In comparison to 2015, the export of motorcycles to the
Middle East and Europe has increased by 19.6% and 17.8% respectively. Whereas, the export to
Latin America has reduced by 37.1%, in Oceania by 0.4%, in North America by 3.1%, in Africa
by 8.4% (Eurostat 2018).
Environmental concern and compliance- In the year 2015, the carbon dioxide emissions
in Japan was 1.22 billion tons, among which the percentage contributed by the transport sector
was 18%. Since the year 2001, the carbon dioxide emissions has reduced to a great extent due to
the usage of fuel efficient passenger cars. Automobile industry of Japan promote carbon dioxide
reduction by increasing the production of next generation and fuel efficient vehicles. Following
2009, the Japanese government introduced subsidy programs and tax incentive programs all the
purchase of environment friendly vehicles. The environment friendly next generation vehicles
included new energy, clean diesel, and fuel cell, electric, plug in hybrid, and hybrid vehicles
(Ehsani, Gao and Emadi 2017). The introduction of next generation vehicles led to a surge in the
purchase of passenger cars. The Japanese Automobile Manufacturer Association (JAMA)
voluntarily negated the usage of hazardous substances like cadmium, hexavalent chromium,
Mercury and lead in the new vehicles in order to reduce the environmental impact. The greatest

5ASIA PACIFIC MULTINATIONALS
danger arises when these vehicles previously dismantled after the end of service life. Thus, the
voluntary action by JAMA proved to be effective. In the year 2012, in order to reduce the
volatile organic compounds in passenger cars, ISO 12219-1 was established as a global standard.
JAMA effectively implemented these standards in the buses, trucks and passenger vehicles in
order to reduce the volatile organic compounds. However, the voluntary initiative taken up by
JAMA was restricted to vehicles that were manufactured only in Japan (Yamada 2013).
The vehicular exhaust emissions in in Japan is one of the world's most stringent and due
to this the automobile manufacturers work hard in order to develop technologies that comply
with the stringent laws. Due to these reasons the levels of atmospheric pollutant and NOx
steadily declining in the urban areas of Japan. According to the ministry of environment
recommendations and policies the future emission laws will be even stricter with respect to the
diesel and gasoline vehicles. Japan's local government as well as the central government in the
major Metropolitan areas have implemented laws that will address the problems related to air
quality which is caused by two vehicle emissions. Thus, the automobile manufacturing
companies need to comply with these laws at the time of inspection in order to receive the
inspection compliance certification. Local governments also implemented laws and regulations
in order to reduce particulate matter emissions from the trucks. This implies that the regulations
will put a check on the movement of these vehicles in the concerned areas (Ministry of the
Environment Government of Japan 2018).
Strategies implemented- Japanese automobile manufacturers have developed and
extended its Global operation through joint ventures or fully owned subsidiaries. The Global
operations Japanese automobile manufacturers are found in countries like Russia, China,
Southeast Asia, Europe and United States and other emerging markets in different countries. The

6ASIA PACIFIC MULTINATIONALS
expansion of business outside Japan creates opportunities through employment creation, earning
from export revenue for the host country, purchase of local parts, locally produced parts like
engine and transmission of automobiles, and also strengthens the local economics. The finished
vehicles can also be transported to other countries and also in Japan. The Global manufacturing
operations of Japanese automobile sector continues to grow by emphasizing on the onsite
manufacturing in order to meet the local needs (Japan Automobile Manufacturers Association
2018b). Whether as a fully owned subsidiary or as a joint venture, the independent operations
were conducted by the local manufacturers that are located in different countries around the
world. In the year 2016 Japanese automobile manufacturers International or the overseas
production were calculated to be 19 million units. The highest production is seen in countries
like Europe and Asia and they have significantly increased over the past few years. With the
increase in economic globalization, the Japanese automobile manufacturers have adapted rapidly
changing market conditions, Japanese automobile manufacturers not only shift to those markets,
but also form joint ventures and alliances with the International manufacturers. Recently it has
been seen that Japanese automobile manufacturers have formed partnerships with the car
manufacturers of United States and Europe. These partnerships include cooperative sales ties,
production operations, joint research and development, technical tie ups and capital. With the
rapid increase in motorization in in Southeast Asia in China, the Japanese automobile
manufacturers are building tie ups with the local manufacturers on the basis of supply of
production, capital tie ups and supply of safety and environment related technologies (Japan
Automobile Manufacturers Association 2018b).
Therefore, from the above study it can be concluded that Japan has been a country that
had experienced up and downs in the auto mobile manufacturing just after the end of the world

7ASIA PACIFIC MULTINATIONALS
war I. The country still arose after a set back and with the effective stringent environmental, and
tax laws the premier automobile manufacturers of the country persistently tries to design and
deliver automotive products which will be beneficial for the Japanese and the international
automobile markets. The strict adherence to the environmental compliance not only increases the
international favorability of the Japanese automobiles, it is also environment friendly. The
Japanese automotive sector is now one of the highly acclaimed brands in the world with the
competitive edge and the marketing agenda followed by the different Japanese companies.

8ASIA PACIFIC MULTINATIONALS
Reference
Australian Government Department of Foreign Affairs and Trade, 2018. [online] Dfat.gov.au.
Available at: https://dfat.gov.au/trade/resources/Documents/japan.pdf [Accessed 22 Feb. 2018].
Ehsani, M., Gao, Y. and Emadi, A., 2017. Modern electric, hybrid electric, and fuel cell
vehicles: fundamentals, theory, and design. CRC press.
Eurostat, 2018. International trade in motor vehicles - Statistics Explained. [online]
Ec.europa.eu. Available at:
http://ec.europa.eu/eurostat/statistics-explained/index.php/International_trade_in_motor_vehicles
[Accessed 22 Feb. 2018].
Export.gov, 2018. Japan - Market Overview | export.gov. [online] Export.gov. Available at:
https://www.export.gov/article?id=Japan-Market-Overview [Accessed 22 Feb. 2018].
Japan Automobile Manufacturers Association, 2018a. JAMA - Japan Automobile Manufacturers
Association, Inc. [online] Jama-english.jp. Available at: http://www.jama-english.jp/ [Accessed
21 Feb. 2018].
Japan Automobile Manufacturers Association, 2018b. [online] Jama-english.jp. Available at:
http://www.jama-english.jp/publications/MIJ2017.pdf [Accessed 22 Feb. 2018].
koichi, S and Barker, T., 2014. Japanese automobile industry: a business history. 1st ed.
London: Bloomsbury Academic press
Ministry of the Environment Government of Japan, 2018. [online] Env.go.jp. Available at:
https://www.env.go.jp/en/air/aq/mv/table_290628.pdf [Accessed 22 Feb. 2018].
Picken, S.D., 2016. Historical dictionary of Japanese business. Rowman & Littlefield.

9ASIA PACIFIC MULTINATIONALS
Toyota, 2018. Toyota History. [online] Toyota. Available at:
http://www.toyota.co.jp/en/history/1867.html [Accessed 21 Feb. 2018].
Yamada, H., 2013. Contribution of evaporative emissions from gasoline vehicles toward total
VOC emissions in Japan. Science of the total environment, 449, pp.143-149.