Book Review:
Can Japan Compete?
Authors: Michael E. Porter, Hirotaka Takeuchi & Mariko Sakakibara

Porter, M. E., Takeuchi, H. & Sakakibara, M., (2000). Can Japan Compete?, Houndmills, Macmillan Press.

Reviewed by: Bill Johnstone

Why might an HR practitioner or academic find a book on the problems and solutions facing Japan of value? Firstly, like all managers, HR specialists need to be able to bridge the big picture issues with the smaller and more detailed issues. Secondly, underneath organisational or personal strengths there are often weaknesses, and much can be learnt by examining the various facets of an organisation and its culture. Thirdly, often Quality Managers report to HR Managers, or are closely related to their function. This book makes clear that achieving operational effectiveness through quality assurance and incremental improvements is no longer a sufficiently distinctive strategy in order to sustain true profitability. Lastly, Professor Michael Porter’s previous books, in particular, Competitive Strategy and The Competitive Advantage of Nations as well as Hirotaka Takeuchi’s The Knowledge-Creating Company have all stood the test of time. They have been subject to scrutiny for both practical and theoretical applications, and remain essential texts in MBA courses worldwide.

These three points demand elaboration. Firstly, the book shows how the usual analysis of Japan’s problems are placed in the field of the big picture – macroeconomic problems of overvalued equities and property, over-regulation and over-protection by government agencies, and mismanaging macroeconomic policy generally by failing to stimulate domestic demand and increasing taxes. Japan’s problems are actually rooted in the smaller picture of microeconomics, with many industry sectors being subject to a government mistrustful of competition by maintaining trade barriers, thwarting consolidation and re-structuring, and other constraints on competition. Government policies demonstrate the classical problem trying to nurture infant industries until they grow up, then facing the problem of the industry learning never to be independent and leaving home, thus only being able to survive under the continued protection of the Government.

Secondly, the obvious strength of the highly competitive industries, such as cars, motorbikes and consumer electronics hides the weaknesses in the large number of uncompetitive industries. These include industries trading internationally, such as chemicals, software and virtually all services as well as domestic industries, such as retailing, wholesaling and construction. A key to Japan’s problems is that the issues facing the uncompetitive industries have become covert, undiscussed, undiscussable and unmentionable, and are hidden from decision-making forums where a more open environment for contributions would make a difference. Coupled with entrenched politics, the continuing inaction has been a contributing factor in dragging down the Nikkei index.

Thirdly, there is a copycat approach to strategy, where companies focus on operational effectiveness, rather than embracing a distinctive strategy, which determines what not to do, and which customers not to seek. “A nail that sticks out will be hammered down” is a saying learnt from an early age in Japan, and this has been transferred to the notion that every customer need is equally valid. Similarly, the Japanese education system produces many generalists for an employment system based on flexible job descriptions and job rotation programs. The downside is that there are too few specialists, particularly in financial securities and software industries. This has potential implications for other countries.

A wealth of research on industry sectors in Japan, particularly the impact of government policies on these industries is evident in this short book of 190 pages. The conclusions support the integrity of Porter’s diamond theory, which offers a powerful explanation for Japan’s competitiveness and lack of competitiveness, and also shows that the Japanese economy is not a special case after all. As part of the Asia-Pacific region, many countries need to better understand the problems and solutions facing this major economy, and this book facilitates that understanding. It is a fascinating analysis of a country in trouble.

Bill Johnstone
University of Technology, Sydney