Japan's Automakers Face Endaka
Case Analysis
Beatrice Galet

1) What happened to Japan's Big four automakers in 1985, and then again in 1993-1995?
Since the end of World War II, Japan's economic strategy for growth was based on exports, that allowed the development of its powerful industrial sector. During the 1980s, Japanese automakers in particular were enjoying an unprecedented and largely unexpected period of prosperity. They managed to establish a successful domestic automobile industry and to gradually sell their products abroad. Thanks to their competitive advantage in producing cars with respect to foreign competitors, due to labor differences, technical efficiencies (lighter and fuel-efficient cars), better designs, and of …show more content…

Firms cut costs even further, raised prices selectively and chose their components from the cheaper suppliers; Toyota opted for cost minimization but this time through plant restructuring, while Honda for a more cost-efficient diversification, by producing a new model using old models' parts. Prices increased further both for wholesalers and retailers, but this time cars manufacturers took the smart decision of doing it more strategically, through a selective tinkering of their price level; the heavily hit product segment was that of the low-volume cars and trucks, while the most profitable family sedans segment remained almost unaffected.
Furthermore, the advertising and marketing strategies, so far not considered the best corrective measure, became instead essential during these years. As plant capacity accumulated, leasing with low interest rates, consumer rebates, advertising and dealer sales bonuses became the central marketing tools that allowed Japan's big Four to boost their sales volumes and justify the high prices.
However, the most effective solution for escaping bigger losses was transferring another significant production capacity out of Japan, this time to the Asia's huge and untapped markets having cheap labor force. Starting from the early 1990s and increasingly from 1995, Japanese manufacturers started therefore to cut production in the domestic market and to outsource in China, Thailand and Philippines with aggressive expansions plans. Nissan