Harvard International Review

Japanese Corporate Strategy

Kaisha by James C. Abegglen; George Stalk
Review by: John Beck
Harvard International Review, Vol. 11, No. 1 (November/December 1988), pp. 47-48
Published by: Harvard International Review
Stable URL: http://www.jstor.org/stable/42760981 .
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Japanese

Corporate

Strategy

By John Beck
JamesC. Abegglenand GeorgeStalk, difficult
to competeagainstin a global muchmoreflexible
as inforproduction
Kaisha (NewYork:Basic Books,1988), market.
med by marketneeds.Withinventory
Thisbookalso showswhyequityis deliveredas needed,it was no longer
309pp.,$12.95.
alsomuchcheaper
firm
that necessary
forJapanesemanufactures
to
fora Japanese
mainargument
ofAbegglen
and is growingquicklythanit is for an decideproduction
runsizesweeksoreven
Stalk'sKaishatheJapanese
word Americanfirmwhichpays dividends. months
inadvance,
as wasoftenthecase
The for "company"or"corporation"
that fortheirWestern
firms
Machines
competitors.
Japanese
usually
paya dividend
can be foundon thefront
were
coverof the is equalto onlyabout10 percent
of the and factory
layouts
designedsuch
book. The volumeis subtitled
"How parvalueof thestock.Thustheaverage thatmoregoods,as well as a greater
couldbe moreeffiof products,
Marketing,Money, and Manpower returnon share price paid through variety
Not Management
factories
was only1.8 percent
in major ciently
thanbyany
, Make dividends
Style
Strategy,
byJapanese
world.
the JapaneseWorldPace-Setters."
The Japanese
and
other
factories
in
the
over
companies
Abegglen
authors
theviewsofother
Another
of Japan's
dispute
popular Stalk'speriodof study.Thatcompares
majorcomponent
is its growth
scholarsof Japanesebusinesspractice with7.1 percent
atGeneral
focus
return
Motors, industrial
strategy
and
4.6
of
that
the
business
is
4.7
at
General
Electric
to
cut
claiming
Japanese
percent
willingness Japanese
companies
neither
a "benign"nora "sinister
con- percent
atTexasInstrument
overthesame pricesdeeplytogainmarket
share.Many
Thisattempt
atasserting
a niche period
oftime.
havecommented
on this
spiracy".
Japan-watchers
in factin thecontext
fortheir
bookbydismissing
of international
withequitydividends
com"management Theproblem
but Abegglenand Stalkdraw
com- Japanese
andStalkpoint petition,
firms,
style"as a relatively
unimportant
Abegglen
successstoryis out, is that 10 percentof par value their example from Japan's internal
ponentof theJapanese
boldbutunconvincing.
Theauthors'
tenaciousinsistence
on thispointis Kaishs
mostpervasive
flaw.
Thataside,though,
theauthors
present . . .Another major component of Japan's industrial
valuableandcogentinsights
intosomeof
the management
willingness of Japanese
practicesthat have strategy is its growth focus
to
their
curbrought
Japan'scorporations
companies to cut prices deeply to gain market share. ...
rent
worldwide
status.
leadership
in
Perhapsthemostvaluablechapter
Kaishais theonedevoted
tothefinancial
of Japanese
To my of stocksis expected
to be paidevenin competition.
practices
companies.
TheyciteYamaha'sfailedatfor tempts
toreplaceHondaas thetopdomesknowledge,no book on the popular bad years.Thus,it is notuncommon
Inthiscase,as in
market
has included
so muchdataabout Japanese
to borrow
moneyin ticmotorcycle
producer.
companies
the balance sheets of Japanesecor- orderto paydividends.
Closelyaffiliatedmany international
examples,Honda
itselfwithdeep pricecutsto
porations.
Abegglenand Stalk explain banksaremuchmorelikelytobe forgiv- defended
woesthan consumers,
and a
financial
a ingofa corporation's
financial
distributor
incentives,
bysustaining
Japanese
systems
intheproduct
toAmerican
counter- are shareholders.
This factis one more substantial
increase
variety
lengthy
comparison
firms
turnto debt offered
tothemarket.
Theresult
a tacticwhichmakestheir
wasthat
parts,
argumentreasonwhyJapanese
Yamaha
cut
laid
off
lucid
and
useful
to
the
Wesrather
than
dividends,
financing.
employees
particularly
equity
of financial and eventually
had to sell offassetsto
tern
reader.
Alongwithitsdiscussion
The authors
the practices,Kaisha also offersa clear avoidbankruptcy.
beginby discussing
differencesbetween American and description
of the advantagesof the
For
TheJustfinal corporatestrategyto
examJapanese
corporate
financing.
Japanese
manufacturing
system.
ofinventory
which
andStalkattribute
control,
(JIT)system
ple, Japanesecorporations
relyon debt In-Time
Abegglen
to a muchgreater
wasan outgrowth
oflimited The thesuccessoftheJapanese
kaisha
financing
degreethan forexample,
American
firms.
andStalkpoint storage
factories.
Abegglen
spaceinJapanese
Abeg- is manpower
strategy.
Theydiscussthe
outthatthispossiblebecauseof thein- glenand Stalkshowhow theJapanese "threepillars"of Japanese-style
managedividualkaishas close ties to specific reduced
theirinventory
costsbydevelop- ment: 1) career-long
2)
employment;
banks.The lowercostof capitalthrough ingcloserelationships
withsubcontractors
and3) anenseniority
payandpromotion;
In addition
debt financing
makes Japanesefirms andsuppliers
whowouldstockonlyas the terprise
tothese
unionsystem.
need for that stock became evident. "pillars"the authorsalso pointto the
his PhD. in the However,
as theauthors
JohnBeckis pursuing
ofemployee
ofthefirm
pointout,theJIT aspects
ownership
wasmuchmorethanmerely
anin- and the relatively
even distribution
of
of Sociologyat Harvard system
Department
inthecorporate
controlsystem.It allowedfor money
from
University.
ventory
toptobottom
International Review 47

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All use subject to JSTOR Terms and Conditions

andstrucandsomeofthecultural
elements
in management.
as otherimportant
system,
hierarchy
the
that
exist
between
that
the
tural
differences
The
authors
concede
Japanese-style
management.
businesspractice,
and Japanese
ofJapan's management
their
discussion
Throughout
style of the kaisha is Western
success.
a system
uniqueto Japan,but thenthebookis a complete
manpowersytem,Abegglenand Stalk generally
ofJapanese-style
Oncetheimportance
ofthissystem
can
makeitclearthatmuchofthesuccessof beleivethat"elements"
of these
to the operation
theother
andmanufac- "be introduced
intoanymanagement
sys- management
money
marketing,
itis
hasbeenestablished,
con- otherstrategies
restson thebase of the temgivenadequateunderstanding,
turing
strategies
thatsomeof these
to suggest
Whattheydo not appropriate
characteristic
style. viction,and effort."
country's
management
be implemented
in Wesarecon- seemtorecognize
is thatthereis nothing strategies
In a system
in whichemployees
might
forms
that
are
tern
firms
in
this
idea.
about
aware
that
new
compatible
Vogel,
manufacturing
startingly
original
stantly
imand structural
cultural
technology
might
replacetheirownjobs, Ouchi,PascalandAthoshaveall argued withWestern
it is littlewonder
faceop- that Japan had some "lessons for peratives.
thatmanagers
wentfurther
of higher America."Ouchiprobably
positionin the introduction
of insights
or inconsisof
the
is
than
Such
any
benign conspiracy
productivity
systems.
opposition
tenciesin theiroverallargument,
thata
inthisregard,
minimized
inJapanbymanagerial
byshowing
policy theorists
and Stalkhavein one
firms
werealready Regardless
If banks number
of American
of "permanent
Abegglen
employment."
a detailed
of
withthe quiteadeptat "Japanese-style
knowthattheywillbe working
description
manage- volumeprovided
elementsin the Japanesecorporation
same management
team over a long ment.
restsontrying
to whichhavebeenmissedbyotherEnglish
IfKaishas argument
bankscusperiodof time,as Japanese
do,theyaremuchmorelikelyto provethat"management
style"is nota workson thetopic.Especiallyin their
tomarily
on manufacturing
and
intheJapanese
success data-rich
withhigher
levelsofdebt. majorcomponent
trust
a company
chapters
theseauthors
haveaddeda valuis something
less finance,
Whentopmanagers
do nothavetoreport storythantheattempt
success.In fact,thisideais ableempirical
to profit-hungry
shareholdersevery thena raving
pieceto thepopularbody
ofJapanese
business
notonlyby common ofliterature
contradicted
itis mucheasierforthemtopur- flatly
practice.
quarter,
which
hascometo
suestrategies
deeppricecutsin sensebutby muchof theaccurateand Ina fieldofknowledge
involving
substanmoreandmoreofflimsily
thebulkof consist
order
togainmarket
share.Inother
words, valuabledatawhichcomprise
claimsbasedonanecdotal
at leasta partofthesuccessofthe"non- thebook.On theotherhand,ifthepur- tiated
evidence,
to solid
a refreshing
return
someofthe Kaishaoffers
thatAbeg- poseofKaishais todescribe
management
stylestrategies"
ifnotirrefutable,
andthoughtful,
thatareverysuccess- research
toselltoWestern corporate
strategies
glenandStalkaretrying
fulwithina Japanese-style

managementanalysis.
managers hinge on Japanese-style
48 November/December1988

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