The Business Reinvention of Japan

Ulrike Schaede, who teaches Japanese business at the University of California San Diego, argues that Japanese firms did not stagnate during the decades after 1990 but repositioned. Her claim is that they moved out of consumer-facing final products, where Korean and Chinese competitors won on cost, and into upstream materials, components and manufacturing equipment, where they hold positions that are difficult to contest.

Her term for this is the aggregate niche strategy: a firm occupies a large number of small, technically demanding markets in which it holds high share and high margin, rather than competing in visible mass markets. She gives examples across carbon fibre, semiconductor materials and equipment, precision components, chemicals and specialty steel, and shows the market shares Japanese firms hold in inputs that most consumers never see. Shin-Etsu in silicon wafers and Murata in electronic components are among the cases.

She also examines the organisational changes this required: the choose and focus restructuring in which firms exited businesses, the changes in corporate governance including the introduction of outside directors and the stewardship and governance codes, the slow shift in employment practice, and the tension between these changes and the social contract Japanese firms had maintained. She argues that Japanese firms changed while retaining a distinctive approach rather than converging on an American model. The book was published in 2020 and is the most current serious account of Japanese corporate strategy.