Currently, the Japanese economic performance is ridiculed in the foreign press, and no one is any longer worried that Japan is bound to acquire every foreign company worth mentioning for then to take over the world. Still, it is certainly important to remember that Japan once had its heydays. During the country's high growth period, foreign political scientists and economists published numerous books that in various ways attempted to explain Japan's formidable economic achievements. Chalmers Johnson's "MITI and the Japanese Miracle" argued for what was to become to most accepted theory, namely an emphasis on the role of Japanese bureaucracy in stimulating and fostering economic growth. Many others, though, focused on the unique workings on the Japanese corporations, known in Japan as kaisha. In "Kaisha, the Japanese Corporation", James C. Abegglen and George Stalk, Jr. argue that the success of the Japanese can be explained by addressing the simple realities of international business and economics. The authors help demystify the background for the Japanese achievements by giving Japanese companies credit for the economic growth achieved since the Second World War, this through an attempt to explain why Japanese business practices in many cases surpassed those of their Western counterparts. In fact, a closer study of examples given by the authors shows that the kaisha in many cases utilised ideas known from many famous business models. This paper will give examples of this by applying models as the experience curve, the growth-share matrix, the product-life cycle and others to the examples presented by the authors. It will be argued that the Japanese companies in many ways, either knowingly or unknowingly, took advantage of well-known business strategies to achieve growth, and that Western companies often proved unwilling or unable to follow their example. In conclusion, it will be shown that Japanese companies may be able to continue using a similar approach, but that this not necessarily will help Japan regain the economic strength lost during the past decade.

In one of the opening paragraphs of the book, Abegglen and Stalk list four fundamentals chosen by the successful Japanese corporations:

1. A growth bias
2. A preoccupation with actions of competitors
3. The creation and ruthless exploitation of competitive advantage
4. The choice of corporate financial and personnel policies that are economically consistent with all of the preceding.

Although not necessarily ranked in importance by the authors, it can be argued that the growth bias is particularly important in explaining the mind-set of the kaisha. The experience curve deals with competitive cost dynamics, and focuses on a firm's ability to deliver products at costs that are lower than those of the competitors. Although related to the economies of scale, the experience curve takes several other factors into account. These include economies of learning, specialisation and redesign of labour tasks, product and process improvements, methods and systems rationalisation, and know-how. In brief, the experience curve shows that the cost of doing a repetitive task decreases by a fixed percentage each time the total accumulated volume of production doubles. This evidently makes the slope of the curve important to any given industry, but of additional importance is the speed at which experience accumulates, measured by the rate of growth in the market. As the authors argue, the Japanese seem to have appreciated these points; "Managements with a bias toward growth have distinct mindsets which include the expectation of continued growth, and the unfaltering pursuit of growth unless the very life of the organisation is threatened". If one takes into consideration that the kaisha were built in a very high growth economy that endured for several decades, it can be argued that much of Japan's current economic malaise has been caused by the inability of Japanese companies to adjust to an economy of lower economic growth.

The authors continue to argue that Japanese companies traditionally have anticipated increasing demand by adding physical and human capacity ahead of time. Thus, prices are set as low as possible to fit the available capacity. This point is evidently interrelated with what the authors term a "preoccupation with actions of competitors", as the foremost goal was to capture market share. In contrast to what was once the common belief among Western analysts, the Japanese did not ignore profits, but focused on achieving the latter by becoming the dominant producer and market leader. Write Abegglen and Stalk on the risk companies face guessing the future market growth; "The Japanese face the same risks. Yet the risk of falling behind a competitor is regarded by most kaisha as a far greater risk than the risk that profits will be depressed". Interestingly enough, the experience curve relies on the same principle. A high market share is evidently dependent on a high-accumulated volume, which again normally results in a low unit cost. Consequently, the profitability is high, and market share is therefore by many viewed as a primary variable to identify the strength of the strategic position of a business within a given industry. While following this strategy may forfeit profits in the short run, the successful kaisha and their numerous bankrupt Western counterparts certainly illustrate that this may be a risk worth taking.

Bruce D. Henderson writes "Strategic competition compresses time", and Japanese companies would certainly often make bold moves to gain a competitive edge. To capture market share, kaisha with a growth bias will typically step up their levels of investment even when demand is weak. Prices are cut, product variety increased and distribution is expanded. Western companies have, according to the authors, been less aggressive than their Japanese counterparts and have in many cases therefore been forced to shut down or scale back. This helps explain why all but a few of Europe's and America's electronics manufacturers have disappeared from the market.

The authors present the history of the Japanese motorcycle industry to illustrate the importance placed on market share by the country's executives. In the 1950s, Tohatsu and Honda were Japan's largest motorcycle manufacturers, with a market share of 22 and 20 percent respectively. The former company was by most standards the most successful of the two, but demand was growing at over 40 percent and there were a total of more than fifty competitors. Within a period of five years, however, Honda had become the undisputed market leader with a total share of 44 percent. Tohatsu's market share had, on the other hand, dwindled to less than four percent. The company's financial status was similarly precarious when compared to Honda's. By 1969, Tohatsu was bankrupt and the number of players in the market had decreased to four. Failing to appreciate the experience curve, or what the authors term a "winner's competitive circle", Tohatsu's demise was to blame on a conservative business approach and a refusal to increase production during the period 1955 to 1960. Consequently, the company was easy prey for Honda, which aggressively reduced costs and overwhelmed the competition with a loan-financed production growth.

The high-growth in the motorcycle industry certainly illustrates the importance of the experience curve, yet it will soon be shown that also the growth-share martrix can be successfully applied to illustrate what happened in the low-growth period that followed. By the mid-70s, Honda had become the worldwide market leader in motorcycles. In 1975, the company decided to diversify into the automobile market, which at the time was experiencing heavy turmoil and consolidation. To increase the chances for success, Honda concentrated most of its physical and human resources into the automobile business, thereby leaving its motorcycle unit vulnerable. Tellingly, Yamaha increased its share of the motorcycle market from less than ten percent in the mid-1960s to 35 percent in 1981. Honda, however, experienced a decline that almost exactly matched Yamaha's gains, and did by 1981 control only a few percentage points more of the market than Yamaha. Domestically, Yamaha was trailing Honda by only one percentage point, a fact that evidently increased the confidence of the Yamaha executives.

It should here be noted that Yamaha was committing an almost classic mistake in terms of defining market share. The company's focus was solely on increasing their share of the motorcycle market, while the company president obviously was aware of the fact that Honda was concentrating solely on four-wheel vehicles. This will be commented upon further when discussing the growth-share matrix. Still, in the words of Boston Consulting founder Bruce Henderson; "Market share is a meaningless number unless a company defines the market in terms of the boundaries separating it from its rivals". Yamaha ignored the fact that it was competing against a company which underlying resources greatly surpassed those of its own. The result was dramatic.

When Yamaha in 1981 announced the building of a new motorcycle factory, it was not being particularly secretive about its hope of overtaking Honda as the leading motorcycle manufacturer. Having diversified into no other products, Yamaha thus decided to go for higher share in a market that was experiencing low-growth, and was optimistic enough to invest more in the industry than even its internal cash generation could support. Honda, however, decided it was time for a counterattack after having ignored its motorcycle division for too long. Being less reliant on motorcycles than Yamaha, Honda implemented a price-cutting strategy, increased promotional spending and introduced several new models, all in an effort to crush their strongest competitor. Prices on motorcycles were to fall by a third, but Honda was still able to achieve a higher profit margin than Yamaha due to lower production costs. Abegglen and Stalk, however, consider the use of product variety to be the most innovative element of Honda's counterattack, and argue that it perhaps was as effective as the company's price cutting. By 1983, Yamaha's sales of motorcycles had plummeted by fifty percent, and the downfall of the company drove Yamaha to a virtual bankruptcy.

The authors present two major reasons for Yamaha's quick decline. First, they emphasise Honda's obvious advantage in terms of product development resources. Second, Abegglen and Stalk explain that Yamaha's welfare depended solely on motorcycles, while Honda derived around two-thirds of its sales from automobiles. This evidently points back to the problem of defining one's market, and serves as a good starting point to discuss another significant business model.

The Growth-Share Matrix is another widely used model developed by the Boston Consulting Group. It displays graphically, on a 2-by-2 matrix, the position of each business in a company's portfolio. A firm is presented in terms of a portfolio of businesses, and the strategic directions of the latter are distinctively addressed. The matrix displays three variables, namely the firm's dollar sales, the firm's relative market share and the growth rate of the market in which the business competes. The four quadrants of the matrix are usually given names, all of which can be derived from the motorcycle industry example. In the 1950s, Honda's motorcycle production was a "star". It was a high-growth, high-share business, and started to generate cash once Tohatsu had been pushed out of the market and Honda had become the dominant manufacturer. As the growth in demand started to weaken, Honda decided to invest in another rising industry; automobiles. The company did initially have a very small share in a fast growing market, and can therefore be considered to have been a "question mark". As Honda's relative position in the automobile market strengthened, and it started generating cash for the company, the business can be interpreted as having become a "star". The goal for any company is to turn the question marks into stars, for then to keep them as "cash cows" once slow growth sets in. Cash cows generate cash and demand little investment, but companies are evidently not able to treat them as such in a high-growth market. Tohatsu made this mistake when failing to invest in its motorcycle business in the 1950s, and thus ended up becoming a "dog" before succumbing into bankruptcy. The latter category consists of businesses with small shares in low-growth industries. Understanding the growth-share matrix can be of great importance, but benefits can be added by seeing the model in relation to yet another well-known marketing concept.

The product life cycle basically follows a product from its market introduction to its demise from the market. Conventionally, it is divided into four phases: introduction, growth, maturity, and decline. At the first stage, the rate of market penetration is low and sales are small. The product is generally relatively unknown to consumers, the latter of whom the first to purchase the product are referred to as early adapters. During the growth stage, prices fall and market penetration is accelerated. This process continues as the product reaches the maturity stage, when the market nears saturation and growth slows. In the decline stage, the industry is challenged by superior substitute products, and the decline may eventually cause the original product to disappear from the market. As will be shown, the product life cycle can help explain why Honda succeeded in capturing market share from Tohatsu while Yamaha failed using a similar strategy only a few decades later.

If Tohatsu had not failed to realise its relatively vulnerable position in the early 1950s, the company could have managed to take many of the same steps that proved so successful to Honda. As it was stronger positioned financially than its counterpart, Tohatsu could have prospered if it had acknowledged that investments were needed to ensure that motorcycles were to become a future cash cow for the company. Similarly, Yamaha failed to discover that a diversification of its business portfolio would help ensure the future growth of the company. Instead, the company re-invested capital in an already slowing industry, thereby suboptimising the uses of its resources. Honda was able to gain market share from Tohatsu simply because the market was growing very rapidly, and a firm can thus penetrate aggressively without necessarily eroding the total sales of its competitors. With the market growing at as much as forty percent a year, even Tohatsu may have experienced an increase in total sales, but may not have realised a tremendous deterioration of their relative competitive position. Evidently, the executives of a company whose market is growing at forty percent a year must plan to increase production by forty percent every year just to maintain a competitive position. Yamaha, on the other hand, attempted to gain market share in a mature industry, a task that can not be achieved without decreasing the dollar sales of a competitor. As earlier mentioned, Yamaha greatly underestimated the competitive strength of Honda, and the latter company did not hesitate to react when realising that its relative position in the motorcycle market was threatened. Although it is said that a good offence is the best defense, Yamaha could have learnt from another well-know business model not to put all its eggs in the same basket.

This model is used to suggest and develop investment strategies, as well as overall strategies, for the different businesses a company may be involved in. It displays graphically, on a 3-by-3 matrix, the position of each business in a company's portfolio. The two variables measured are the relative attractiveness of the industry in which the business competes, and the strength of the business versus its competitors. While both variables are ranked on a scale low-medium-high, even a quick study of the matrix should have told Yamaha to choose a different strategy. First of all, as earlier commented upon, the company greatly overestimated its own business strength, and did not foresee an unavoidable response from Honda. Additionally, although enough details are not given in the case to fully support this argument, it appears that Yamaha also exaggerated the attractiveness of the industry. As the authors comment, the company did not leave itself much choice: "Since Yamaha had no other businesses with significant growth potential it was prepared to invest heavily in motorcycles". The company thus ignored the industry attractiveness model, and decided against diversifying into different industries. Honda, however, realised early on that it would be important for future growth to enter the automobile industry, and evidently considered the industry attractiveness of the latter to be high enough to defend the risk associated with entering the market. Again, we here return to the issue of defining one's market.

Evidently, it should not be forgotten that the most appropriate strategy appears much clearer in hindsight. Still, if Yamaha had reasoned that it was a medium-strength business in a medium-attractive industry, perhaps it would have chosen a different strategy than an all-out attack on Honda. It can be argued that Yamaha should have gone for a strategy of selective investment and specialisation in the motorcycle industry, for then to diversify into other industries. That could have contributed to giving the company a competitive advantage versus Honda, thereby leaving Yamaha less vulnerable to Honda's eventual counterattack. Though certainly less ambitious than the strategy Yamaha eventually chose, at least it would have been a more realistic option.

Abegglen and Stalk emphasise that the Japanese have understood that "In high-growth markets investments in people and in plant are made to meet real competitive threats rather than abstract financial criteria". They claim, however, that Western companies in general are unable to make this priority and thus end up losing market share to the Japanese. To meet the challenge posed by Japan, the authors recommend Western companies to enter the Japanese market in order to learn the workings of the kaisha. Doing so, they reason, will prepare the Western companies to compete with the Japanese also in their home market. Finally, Abegglen and Stalk go on to reason how the kaisha have been able to gain a competitive edge in say the automobile industry.

Things, however, have changed considerably since "Kaisha, the Japanese Corporation" was written. While the authors seemingly marvel at the efficiency of the Japanese automobile manufacturers, many of the latter have ironically enough been forced to merge or enter partnerships with foreign partners. In 2001, the Japanese industrial production slid to its lowest level in fourteen years, and unemployment rose to a record high of 5,5%. There seem to be no ending to the country's economic woes and The Economist forecasts a GDP contraction of 0,8 this year. That obviously raises the question if Japanese companies can still achieve success by using the traditional kaisha strategies as outlined by Abegglen and Stalk, or if the heydays of the kaisha truly are gone forever.

While most economists seem to agree that the future of the Japanese economy can not continue to rely on traditional Japanese manufacturers as Matsushita and Toyota, some still believe that Japan should attempt to export itself out of the economic slump. Both foreign and domestic analysts have thus viewed the recent depreciation of they yen with positive eyes, but the country will eventually have to clean up its banking system. In this respect, it should be remembered that the Japanese corporations to a large extent were able to implement their aggressive sales strategies due to the fact that they were able to raise cash from supportive banks. As an additional benefit, the kaisha did not need to worry about stockholders expecting short-term profits and dividends on a regular basis. Although Honda succeeded in becoming the leading manufacturer in the motorcycle industry, a Japanese company would currently find it difficult to implement similar strategies due to a lack of support from the banking sector. Sony and other Japanese corporations with positive cash flows can afford to take positive advantage of the experience curve, but at the moment the country does not seem capable of sufficiently nurturing the up-and-coming companies that could potentially become the kaisha of the future.

Additionally, it is doubtful that the future of Japan lies in manufacturing. Although Japanese corporations can move their production facilities abroad, that is of little use to the Japanese entrepreneurs who wish to foster the kaisha of tomorrow. Notwithstanding that many kaisha have moved their operations abroad, the consensus is that Japan still is too reliant on the manufacturing sector. A revival of the Japanese economy may thus depend upon the creation of successful kaisha in the services industry, but it remains to be seen if the business models discussed in this paper can be of similar use to the kaisha as they face a new economic challenges. Abegglen and Stalk comment that the productivity advantage of the kaisha has increased in correlation with the complexity of the manufacturing process, but this is likely to be less true today as foreign companies have become more efficient while production costs in Japan have increased. It is likely that the country's corporations will need to reinvent themselves to create a competitive advantage in what appears to be the new growth sectors. The foreign observers currently ridiculing Japan for its indecisiveness and inability to change know that the Japanese have a lot of catching-up to do in industries as finance and information-technology, for to mention but a few. Many foreign companies have, in addition, followed the advice of the authors and established a presence in Japan. It has thus become harder for Japanese companies to make surprise moves on their competitors abroad, and an acceptance of this new reality is necessary if the country is to avoid continued economic contraction. The point is therefore not to forget the strategies that worked in the past, but rather to complement those with new ideas that can help create the kaisha of tomorrow.