KAISHA, THE JAPANESE CORPORATION. By James C. Abegglen and George Stalk Jr. Basic Books. 309 pp. $22.50.
TRIAD POWER; The Coming Shape of Global Competition. By Kenichi Ohmae Free Press. 220 pp. $19.95.
THE PHENOMENON of Japan's economic success, notably its extraordinary ability to penetrate Western markets with manufactured goods of all kinds, has spawned a separate industry, that of the "explainer" book that tells how the Japanese do it.
I've never counted them, and of course haven't read them all -- there must have been hundreds of such books published in the past 10 years. But Kaisha, the Japanese Corporation by management consultants James C. Abegglen and George Stalk Jr., is by far the best book I have seen on why Japan -- and the authors mean the companies rather than the nation -- is winning the trade war with the United States and Europe.
If it were possible for every senator and congressman to absorb both the information and lessons in this book, there might be a more intelligent approach to dealing with the economic threat posed by the growing power of Japan than the protectionist responses most of them advocate.
Abegglen and Stalk argue that the threat doesn't arise from either "a benign conspiracy" generated through "paternalistic corporate cultures," or "a sinister conspiracy" managed by that old devil, the Ministry of International Trade and Industry (MITI) in co- operation with the companies and the banks.
Au contraire, the danger comes from an American complacency and smugness -- even in the face of the extraordinary Japanese successes -- that seems to be assuring Japanese victory without a fight.
On a recent visit to Japan to report on trade issues for The Washington Post, I was told repeatedly by Japanese businessmen that they are no longer concerned about future competition from American companies, but the competition from the Koreans, Taiwanese, and to some extent the Hong Kong Chinese who are breathing down their necks.
If these Japanese businessmen are right, American industry is in deep trouble. "One highly visible consequence (of the absence of U.S. corporate planning on a global basis) is that the kaisha are positioned in the home markets of Western competitors who are not positioned in the home market of their Japanese competitors . . . Too many Western competitors have ceded the merging 'high ground' to the Japanese companies, to the kaisha," the authors say.
A similar point is made in a book published earlier this year, Triad Power: The Coming Shape of Global Competition by Kenichi Ohmae, Tokyo office manager of McKinsey & Company. Ohmae, who plays down Japanese success stories and contends that some American companies have achieved dominant positions in Japan, holds that corporations who want to survive must become "insiders" in what he calls the Triad of big powers -- the United States, Japan and Europe.
Through joint ventures or consortia, Ohmae suggests, corporations should lose their national identity: "They (would) behave so naturally it would be difficult to distinguish them from incumbents. In fact, being a Triad power is nothing but being an 'honorable incumbent.'"
A central theme of the Abegglen-Stalk book is that the Japanese companies were the first to catch onto the idea of a single global market, and ruthlessly force themselves into it with steady advances in cost or quality.
They are unsparing in their revelations of the no-quarter-given, fierce competitive struggles for market shares within Japan among the Japanese companies. A classic is their story of how Honda set out to crush Yamaha in the fight for leadership in motorcycles, after Yamaha president Koike said: "As long as I am president of this company, we will surrender our number one spot to no one."
Honda president Kawashima issued a battle cry: "Yamaha wo tsubusu!," which can be variously translated as "We will crush (break, smash, butcher, slaughter, or destroy) Yamaha.' And so Honda proceeded to do just that."
Within a year's time, during which Honda slashed prices and introduced a spectacular 81 new models, Yamaha sued for peace. Its president said: "From now on, I want to move cautiously and ensure Yamaha's relative position (as second to Honda)."
What should be the Western strategy to meet "the creation and ruthless exploitation of competitive advantage"? The authors suggest that foreign companies have to play the same kind of hard-ball, putting growth ahead of immediate profit. But first, they have to get into the Japanese market.
"Competition from the kaisha can best be met, and in many cases can only be met by market competition inside Japan," Abegglen and Stalk say. "All too often, by the time a Japanese product begins to appear in volume in Western markets, the competitive advantage has already shifted away from the Western competitor. The strategic battleground is the Japanese economy: it has been yielded by too many Western competitors without a fight."
I CAN SENSE that many a reader of this review will be ready to say, "Ah- ha! That's just the trouble: Japan has blocked access to its markets for Western competitors. How can they compete if they can't get in?"
Abegglen's view on that, which he expressed more precisely in a recent interview in Tokyo than he does in the book, is that high-quality and aggressive American and European companies can and will make good scores in Japan, and that it is the "losers" who do most of the complaining. Ohmae would agree. But surely, as a world-class power, Japan now has the obligation to abandon most of its remaining non-tariff barriers that make it tough for Third World nations in Asia as well as its First World competitors in Europe and America.
Abegglen and Stalk readily concede that foreign investment in Japan is abnormally low. (Ohmae does not.) But they say this is not because the economy is closed, but because of the "indifference and ignorance of possible foreign investors regarding Japan, and their unwillingness in many cases to pay the price in effort and patience to make the investment."
Even during 1952-64, when Japan actively discouraged foreign entry, it was possible for foreign companies to get into Japan by creating what are known as "yen companies." This led to the creation of hundreds of American-controlled companies, led by Coca- Cola, IBM and Schick that are household names in Japan.
But in hindsight, the sad part of the story is that in the 1952-64 period, most Western companies -- Europe's were just as guilty as America's -- chose instead to forgo the hard work (and the risks) of getting into the Japanese market in favo of making a fast buck by selling their technology to the Japanese.
The story of what Abegglen and Stalk call Japan's brilliant "make or buy" technology decision is not new, to be sure. But so far as I know, the scope of what the Japanese were able to pick up at bargain basement prices hasn't been outlined this way before. From 1951 through 1984, Japanese companies entered into 42,000 contracts for the importation of foreign technology for a total of only $17 billion.
This is a pittance -- a fraction of the U.S. annual outlay today for research and development: "These 42,000 contracts represented the best of the technology available in the world. . . It has been through these contracts that Japanese industry built its position in synthetic textiles, for example, licensing DuPont's nylon patent and ICI's Terylene. . . Bell Laboratory's transistor technology started Japan's semiconductor industry; RCA's licenses allowed entry into color television. . ." and, so on and on.
Japan still doesn't hesitate to pick up whatever new advances are made abroad, while Western companies still believe that the Japanese can't develop anything really new on its own.
Despite Japan's achievements in business, industry, art, architecture, high fashion and design, a good deal of skepticism persists about Japanese creativity. With some residual arrogance, the Western world, or much of it, still prefers to think of the Japanese as imitators, simply because they have been clever enough to commercialize or adapt Western technology more rapidly than Westerners.
The authors approvingly quote Harvard Prof. Harvey Brooks who told a House subcommitee in 1983 that "successful imitation . . . is the first step of learning to be creative . . . It may be only those who try continually to reinvent the wheel that will lose out in the innovative race. In my opinion, the United States, so long accustomed to leading the world, may have lost the art of creative imitation, and is deficient in scanning the world's science and technology for potential commercial opportunities relative to what is done by its competitors, particularly in Japan."
Abegglen and Stalk think the West has badly underestimated the Japanese drive for technological leadership. They see mankind as the ultimate winners. The losers, they say, will be among the American companies, who underrated the Japanese when they sold off their patents, and who will be surprised again as Japan companies, as innovators, become "a major source of technology to the world over the coming years."