Abstract
This paper analyzes the fundamental characteristics of “going out” as a cyclical feature of world economic history. The trend has both contingent and inevitable aspects. The fact that a given country emerges as a “factory of the world” does not mean that its manufacturing sectors and businesses can successfully “go out” (go global). Rather, the success of a country in “going out” depends on whether it can establish core advantages and achieve industrial upgrades in the process of growing its manufacturing sector. To further explore factors shaping this cyclical process, this paper selects Japan’s economic take-off after World War II as a benchmark. It summarizes three reasons for Japan’s rapid rise: an impetus created by the uniquely historic opportunity of serving US “special needs” at the time; a self-perpetuating conglomerate structure as a foundation for development; and the driving forces of micro-innovation and continuous improvement in Japanese enterprises. The paper summarizes three principles of Japanese enterprises “going out” based on case studies of Sony, 7–11, and Muji. By examining when, why, and how enterprises “go out”, this paper provides strategic insights for Chinese enterprises to draw on. Finally, it provides an overview of current “going out” trends in Chinese manufacturing through e-commerce from the perspective of early-stage investors.
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Notes
- 1.
Inamori(2016, p 87).
- 2.
In 1989, the United States formally introduced “Super 301” against Japan with an excuse of unfair trade practices, to impose sanctions against Japan. Meanwhile, the US thought that it was Japan’s economic structure (referring to the conglomerate structure) that prevented US products entering into the Japanese market.
- 3.
Zhou (2005, p 39)
- 4.
Refer to Kondratiev’s economic cycle theory.
- 5.
Zhang (2004, pp 67–73).
- 6.
Report of Frees (13): To understand China’s consumption upgrade, we need to look back Japan 40 years ago [EB/OL] http://www.sohu.com/a/236843895_355022.
- 7.
Inamori Kazuo described: “After the war, Tokyo was in a state of devastation. Only 10% of trolleybuses were running, and 60 buses can be driven, with few cars and trucks. Due to the shortage of liquid fuels, vehicles were transformed to burn coal and wood fuels. Diseases spread in the city, among which, the morbidity of tuberculosis rose violently to 22%”.
- 8.
Inamori(2016, p 73).
- 9.
Zhang(1984).
- 10.
The secret behind Japan’s postwar economic recovery [EB/OL], http://www.cj2p.com/licai/183273.html.
- 11.
The total value of “special needs” orders by the US was US$2.376 billion, i.e., US$150 million in 1950, US$592 million in 1951, US$824 million in 1952, and US$810 million in 1953. At the end of December 1949, Japan’s foreign exchange reserves were only US$230 million, which were increased to US$913 million at the end of December 1951, and even to US$1.14 billion at the end of November 1952, increasing 5 times within 3 years. It is beyond doubt that this massive influx of military orders was timely for Japan, which was suffering from a small domestic market and shrinking exports. According to the statistics, in 1952 Japan’s total exports were US$12.7 billion, foreign currency earnings were US$22.4 billion and GDP was US$17.4 billion; the earnings from “special needs” in that year accounted for 64.6%, 36.6% and 4.7% of the above total amount, respectively.
- 12.
Shibagaki (1978, p 177).
- 13.
Japan’s world factory was built on cheap oil. The United States supplied oil, coal and other industrial raw materials to Japan through non-governmental trades, which provided energy for Japan’s economic development. A total of 1 billion barrels of crude oil were imported from 1955 to 1972 at a price that was 1/6 of market value saving Japan a total of US$395 billion. During this period, oil dominated Japan’s energy consumption.
- 14.
Goto-Jones and Gu (2014, p 155).
- 15.
Bai (2015, pp 78–83).
- 16.
The big six keiretsu included Mitsubishi, Mitsui, Sumitomo, Fuyo (Fuji), Dai-Ichi Kangyo, and Sanwa.
- 17.
Shibagaki (1978).
- 18.
Shibagaki (1978).
- 19.
In 1947, Mitsui and Mitsubishi were targeted for dissolution by the General Headquarters of Allies. The former one was split into 200 companies while the latter one was split into 139 companies. There were about 83 companies targeted for dissolution.
- 20.
In January 1948, the United States Secretary of the Army, Kenneth C. Royal delivered a speech in which he stated that “Japan serves as a deterrent against any other totalitarian war threats”. In May of the same year, the Deconcentration Review Board, composed of five people led by Ruth Bell, president of New York Ship, visited Japan. In September of the same year, they suggested to reduce the applicable scope of the Law for Removal of Excessive Concentrations of Economic Power, under which large number of companies targeted for dissolution had dropped substantially. Later, in 1949 and 1953, the Antimonopoly Act, the last act that hindered the revival of zaibatsu, was revised, which allowed the formation of “rationalization cartels”.
- 21.
“According to the investigation of the Fair Trading Commission, the average shareholding ratio of Japan’s monopolistic financial groups reached 21.2% in the 1970s, among which the Mitsubishi Group had the highest ratio, up to 30.6%. The higher the cross-shareholding ratio was, the stronger the aggregation force would be” (Jin 1983, pp 7–13).
- 22.
“The so-called main bank system, according to Masahiko Aoki, mainly refers to the “corporate financing and governance system including a series of informal practices, institutional arrangements and behaviors among business enterprises, banks, and other financial institutions and administering authorities”. (Masahiko Aoki and Hugh Patrick. The Japanese Main Bank System: Its Relevance for Developing and Transforming Economies [J]. Beijing: China Financial Publishing House, 1998, 3–4).
“The loan system within the group refers to the loans made by banks to their enterprises for the purpose of strengthening exchanges and links. Loans are often designated to group’s own enterprises for purchase of raw materials and the sale of products” (Kazuo 2016, p 180).
- 23.
Overview of enterprise series. Japan: Weekly Toyo Keizai, 1979, 35.
- 24.
These were closely related at early stages, but became increasingly independent.
- 25.
Japan: Economy, issue of January 1976, 12.
- 26.
As of March 1978, the Big Six had shares in, loans with or HR relationships with 538 large corporations, holding about 98.0043 trillion yen in available assets, accounting for 75.72% of the total capital of the companies investigated. Sales volumes reached 124.8624 trillion-yen, accounting for 78.49% of the total sales of the companies investigated (Japan: Economy, issue of January 1976, 243–244).
In 1977, there were 1,793 large private enterprises (excluding the financial sector) with capital holdings of over 1 billion yen, which accounted for 0.13% of the total number of enterprises nationwide, but their total assets accounted for 44.5% and business profits of 44.4% (Japan: Weekly Toyo Keizai, 85–86).
- 27.
Inamori (2016).
- 28.
Ohno (2016).
- 29.
When did Japanese enterprises go out? In the late 1950s and early 1960s, a number of leading brands officially launched overseas expansion. Sony officially launched its overseas business in the late 1950s and Panasonic in the early 1960s. Japan-US TVs were exported to the US market in 1961; in 1957, Toyota exported the Crown to the US for the first time and established the Toyota Automobile Sales Company in the US, followed by the European market in 1962; 7–11 opened up a store in Hong Kong in 1980, while Muji and Uniqlo opened shops in London in 1990 and 1999 respectively.
- 30.
Most of the Japanese companies that “went out” did not have an absolute advantage until the 1990s–2010s. The overseas revenue of Sony exceeded its domestic revenue in 1979, which took 30 years. Toyota produced more automobiles overseas than that produced in Japan in 2010, which took 50 years. The overseas revenues of Uniqlo, Muji and 7–11 exceeded domestic revenue in 2014 (15 years), 2016 (26 years) and 2011 (30 years) respectively.
- 31.
The initial orientation of postwar policy in the Japanese government was the “Inclined Production Mode”, which concentrated forces to restore and develop coal and steel production, and then expanded to important industrial sectors such as electricity, fertilizer and transportation after initial successes, so as to drive the overall recovery of industrial and mining production. Subsequently, the Law on Temporary Measures for the Revitalization of Machine Industries was implemented in 1956 (19 industries in the machinery sector, most of which were basic machine manufacturing and universal parts manufacturing). In the 1970s, with the intensified trade friction between Japan and the United States and the impact of the oil crisis, the leading role of core industries that once drove Japan’s rapid economic growth gradually weakened and industrial policies began to focus on energy policies and the revitalization of knowledge-intensive industries such as computers and electronics.
- 32.
While there was little demand for automobiles in Japan during the 1950s (Japan’s automobile sales numbered only 100,000 in 1956), major car makers like Nissan, Toyota and Isuzu got their start by manufacturing vehicles for the US military, which made Japan the world’s second largest automobile manufacturer by 1967.
- 33.
A Japanese businessman and co-founder of Sony along with Masaru Ibuka, was born on January 26, 1921, in the city of Nagoya.
- 34.
Sony’s “going out” strategy was based on overseas technology acquisition and the strong independent R&D capabilities of its domestic team. Sony released the first semiconductor radio in the world in 1955 (using a patent purchased from Western Electric) and released the world’s first semiconductor TV 1960, Trinitron TV imaging technology, with some disruptive technologies, was released in 1968 (patent purchased Paramount), and the revolutionary Walkman, first of its kind in the world, was released in 1979. For example, “upsizing” was the main trend in television market in 1959 and the Radio Corporation of America had controlled the market for a long time, which inspired so Sony to make products smaller before developing Trinitron technology, successfully creating a new market segment.
- 35.
Matsui (2017).
- 36.
French people have the habit of “carefully and intently using their favorite items” (p9) and people with a passion for fashion and interior design are more receptive to Muji. As the birthplace of the “Slow Food Movement”, Italians avoid fast food, which is also consistent with Muji’s philosophy.
- 37.
The dilemma for Muji was mainly caused by blind expansion—stores in key cities were usually profitable, but stores experienced losses after expanding smaller cities. For example, the UK Muji store in London experienced good profitability, but stores in Liverpool and Glasgow suffered due to the low consumer response in the European market and consumer habits in different cities. Expansion did not go well in Europe, so Muji adjusted its strategy and focused on developing countries with emerging economies. Data shows that opening stores in Asia was relatively easy as local consumers were attracted by “high-quality Japanese products” even if the price in local Muji stores was three times the price in Japan; Muji even developed local fans. The only reason for the losses was operational, mainly caused by failing to control the rising of rent costs.
- 38.
Muji opened its first store in the U.K. in Liberty, one of London’s most exclusive department stores. Its founder and designer participated in the Arts and Crafts Movement and the New Art Movement and Liberty was officially completed in 1875. It was known as the most cultural and artistic mall in the UK, showing that Muji products had effortlessly entered the lives of Londoners as early as 1991.
- 39.
Tao Jiang. How much money China earns from the huge export volume?—Taking the value chain of iWatch as example. 2017-07-10.
- 40.
Some experts believe China’s current stage of development is similar to Japan in the 1990s, because of the soft landing China experienced after its economic take-off. Others believe China was 60 years behind Japan in 2010 and even farther behind Europe and the United States (i.e. similar to Japan in the 1960–1970s).
- 41.
How many players are there in the B2C field on earth? According to data from Beluga Global, there are more than 7000 companies “going out” in China. This includes 639 e-commerce enterprises and innumerable small sellers. According to data released by 1688.com, as of the end of March 2018, nearly 500,000 high-quality small and medium-sized enterprises from more than 220 countries and regions all over the world provide dedicated services for AliExpress, Amazon, Wish, eBay, and Lazada through the online platform 1688.com.
However, what do we know about their market shares? As a cross-border exporting platform under the beigest B2C platform in China, Alibaba, the operating income of AliExpress reached RMB5.5 billion in 2016, which only accounted for 0.7% of total cross-border exports. In addition, the revenues of some self-operated (independent brands) cross-border exporting e-commerce companies including Shenzhen Globalegrow, Anker, Shenzhen Youkeshu Tecnology, Anker, TOMTOP, Sailvan Networ, Patozon and ValueLink were RMB6.74, 2.51, 2.49, 2.22, 2.20, 1.48, 1.29, 0.46 billion respectively. In total, this amounts to RMB19.39 billion, accounting for 2.7% of all cross-border exports. According to statistics, there are 1000 active companies in South China and 100 active companies in East China with certain sales revenue (known as “Big Sellers in the Industry”, which deliver 10,000 orders per day, with unit price of RMB60 per customer. The average annual sales of each of these companies is between RMB100–200 million in southern China and eastern China. This means that the top ten companies of the industry make up a mere 5–7% of the total market share, and the top 1000 companies of the industry (including the top ten) only account for 30% of the total market share.
- 42.
There is still an enormous gap in the maturity of logistics warehousing services and financial payment services in the industry when compared to those of domestic service providers. It is reported that a company with annual sales of RMB100–200 million will subcontract its logistics services to 10 logistics distributors with different prices and efficiency according to time targets and/or the cost factors of commodities. Although there are different methods by which such concerns can be solved, the current imperfect state has not influenced the demand for commodities. According to the enterprises interviewed.
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Tang, Q. (2023). Basic Characteristics and Strategic Insights of “Going Out” from a Historical Perspective—Comparing Current Trends in China with Japan’s Experience. In: Wang, H., Miao, L. (eds) Strategies for Chinese Enterprises Going Global. The Chinese Enterprise Globalization Series. Springer, Singapore. https://doi.org/10.1007/978-981-19-6120-5_2
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