Factors Affecting the Automotive Industry in Japan
The automotive industry in Japan enjoyed spectacular success in the 1980s mainly as a result of the ‘lean production system’ applied in the sector. Lean production system can be simply defined as a combination of effective supply system, efficient production system and a product development system. The success of the industry was faced with a downturn in the 1990s due to the Japanese asset price bubble and the appreciation of the currency to the extremes. However, the industry has been able to survive through the hard times and is not currently doing so bad on the global grid. In fact, the Japanese automotive industry is now one of the largest in the world.
Over the years, Japanese automotive industry had been doing so well but a major tragedy that almost brought down the sector struck in the 1990s. The country’s economic bubble burst and became stagnant. This hampered operations in the industry owing to the fact that it had by that time become one of the main contributors. The trough of recession dragged back the automotive industry into a position that production had to be cut down.
The recession that hit Japan almost twenty years ago hit one of the largest car manufacturers in the world Toyota, that has its base in Japan. It made the management of automobile manufacturing operations difficult and the industry had to struggle getting back to its feet. In order to counter this, the industry best player; Toyota was forced to transfer its operations to overseas countries after entering into a joint venture with General Motors. Despite the country’s growing contraction in the automotive industry, the transfer of the corporation’s lean production system to overseas plants has enabled it to brace the hard economic times.
Internalization is a strategy that almost all Japanese car manufacturers adopted in order to counter the economic bubble. However, it has had great impacts on the country’s automotive industry considering that currently, the number of vehicles that are manufactured by Japanese assembles in overseas plants has exceeded that produced at home. Even though internalization has been widely viewed by many as killing the automotive industry in Japan, it has played a role in ensuring that Japanese car manufacturers do not run out of business. It has enabled the car manufacturers to stay afloat amidst the scorching heat of inflation that continues to hurt the country.
In 2011, the Japanese automotive industry was faced yet with another crisis that significantly cut the manufacturers’ profit margins to levels that had never been experienced before. This crisis resulted from the earthquake and tsunami that hit Japan thereby disrupting the operations of the country’s largest chip makers. Besides, the earthquake also destroyed some of the plants of car manufacturers. However, the impact on the chip maker hit the motor industry with a bang since every car manufacturer depends on the custom-made chips in assembling their automobiles. This kept the production levels at less than 50% for quite a long time, hurting the Japan automotive industry as a whole.
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