Essay on Japanese Automakers Face Endaka

1033 Words Oct 28th, 2008 5 Pages
Japan’s Automakers Face Endeka

In the early 1980s the Japanese auto industry was strong and profitable. The oil shocks that hit the world in ’73 and ’79 created a need for small and fuel efficient cars. At that time this was the exact specialty of the Japanese manufactures. With efficient and well designed cars producers as Toyota, Nissan, Honda and Mazda. Compared to the competitors the Japanese manufactures created a cost advantage per car of $1,500 to $2,000 due to labour differences, technical efficiencies and not least the lower exchange value of the yen.

During the early ‘80s the dollar had strengthened tremendously against the yen due to high US interest rates (and thereby big demand for dollars) and inflow of foreign capital.
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However, with decreasing demand it was almost impossible to avoid operating with excess capacity. The lower sales resulted in lower profits. The auto manufactures had no domestic back up sales as the Japanese economy was in recession as well. With over 40% of Japan’s auto industry still devoted to exports, the appreciating yen drove the dollar price of Japanese cars even higher, especially in the U.S. market.
In 1993, when the Super Endaka hit, the Japanese carmaker had to face sales losses like never before. This time the Japanese automakers had to implement different strategies in order to fight the effects of Super Endaka. The profit margins could not be lowered more and more pressure was put on the suppliers and sales prices raised even further. The steady increase in price gave dealers less and less flexibility in negotiating prices and downsized their respective margins per sale. In order to keep up the sales the Japanese manufactures resorted to marketing and advertising to create sales volume and product efficiencies.
However, in the context of the continuous appreciation of the yen, the Japanese manufactures finally chose to give a stronger emphasis to restructuring the global strategy. Domestic production did not longer constitute a competitive advantage as labour costs went up had to reach another level of cost cutting. The growing opportunities in Asia –

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