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Application of economic principles in areas of demand, supply, market structure & government regulation.... More...
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Paper Abstract:
Application of economic principles in areas of demand, supply, market structure & government regulation.

Paper Introduction:
THE APPLICATION OF ECONOMIC PRINCIPLES IN THE CONDUCT OF BUSINESS IN JAPAN This research examines the application of economic principles in the conduct of business in Japan. The findings of this examination are presented in discussions of demand, supply, market structure, and government regulation of business. Demand Demand may be considered in several contexts. In this examination, demand is addressed primarily with respect to consumption. From 1969 through 1979, the average rate of growth attained by the Japanese economy was five-percent. Since the end of 1979, however, the Japanese economy has not attained a five-percent rate of growth for any full calendar year. For each year since 1979, however, the Japanese economy has recorded som

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[xii]R. W. Government Regulation of Business In Japan, the entire society is based in large part on the concept ofconsensus, and the development and implementation of industrial policy isno exception. Wilson, The Power Economy (Boston: Little, Brown andCompany, 1985), 121. O. Japan does have significantelectrical generating facilities. All most all of its crude oilrequirements must be imported. In this context, however, the countrymust import most of the fuels required to run the generating facilities. "There Are Capitalists, Then There Are the Japanese." Business Week, 8 October 199 , 21.Paxton, J. aredriven to do consumers' bidding not by benevolence but by the search forprofits in a competitive marketplace. Japan's principal imports (in the order oftrading value magnitude) are (1) mineral fuels, (2) foodstuffs, (3) metalores and scrap metals, (4) machinery and transportation equipment, and (5)textile fibers.[vi] Japan's natural resource base is limited. According to the Japanese, thesepractices develop reliable long-term relationships, which cut costs "asbusiness partners learn from and help one another."[xi] Through an industrial policy characterized by high levels ofcooperation by government and industry, cartels are not only permitted inJapan, they are encouraged.[xii] In the contemporary political andeconomic environments in the United States, deregulation, and a tendencytoward non-intervention by government in the private sector-economic orsocial- characterizes the general American attitude toward government'srole in society. To serve their stockholders, theymust serve the public by innovating and holding down costs."[iii] InJapan, however, priority derives to the producer, not to the consumer.Further, profits are not sought primarily for stockholders, but rather toserve "as the wellspring of growth which they see as an integral part ofnation-building."[iv] Japanese companies typically pursue strategies designed to create long-term profitability, as opposed to short-term profitability-the typicalperspective of most American firms. New York: Oxford University Press, 199 .----------------------- [i]The World Bank, World Development Report (New York: OxfordUniversity Press, 199 ), 128. The Japanese economy is not as heavily consumption oriented as is theAmerican economy. Paxton, (Ed.), The Statesman's Year-Book, 128th ed. Rather, the Japanese economy is oriented toward theexport of a high proportion of the goods produced in that country. [xi]Ibid. The Ministry of Trade and Industry makes effective use ofinducements to industry to reinforce consensus behavior.[xviii] Industrialtargeting plays a major role in Japan's industrial policy. The country's principal natural resource is its population. One of the reasons for this state of affairsis the country's lifetime employment policy. Spero, "Patent Protection or Piracy-A CEO Views Japan,"Harvard Business Review, 68 (September-October 199 ): 58. [x]Ibid. This protection is most often inthe form of barriers of one kind or another to the import of goods whichwould compete with the products of the protected sectors and industries.In some instances, the economic sectors and industries provided suchprotection are not particularly efficient, at least not when compared withcounterparts in other countries whose exports to Japan are barred in oneway or another. [xiii]E. [ii]Ibid., 144. S. This factor is one which companies attempting tomarket their products in Japan must confront. In the face of unrestricted foreign competition, many of theprotected economic activities in Japan would either disappear, or thevolume of their operations would be reduced. [xiv]D. [xviii]J. M. S. Market Structure American economic doctrine decries the creation of cartels and thepractice of vertical integration.[ix] In Japan, however, each concept isaccepted and incorporated into the market structure of the economy. Martin's Press, 1991.Reischauer, E. Unemployment is not a serious problem, and has traditionally notbeen a significant problem. Exports account for approximately 11.3 percent of Japan's GNP,compared to about six-percent in the US. "Patent Protection or Piracy-A CEO Views Japan." Harvard Business Review, 68 (September-October 199 ): 58-6 , 62, 64-65, 67.Weinberger, C. Young managers mustwait years for promotion, retirement is early, the employment systemdiscourages company switching, and it is difficult to get fired. First, in the introductory stage, when theindustry is new and growing, and second, in the mature stage, when theindustry faces increased foreign competition, and risks losing itscompetitive advantage.[xix] Summary This research examined the application of economic principles in theconduct of business in Japan. [xvii]C. Approximately 7 percent of Japan's population is of working age (15-to-64 years of age).[vii] Labor force growth is less than one-percent peryear. Similar practices are followed in obtaining capital, and in theretail marketing of their products. Reischauer, The Japanese (Cambridge, Massachusetts:Harvard University Press, 1981), 191-194. Sarathy, "The Interplay of Industrial Policy and InternationalStrategy," California Management Review, 31 (Spring 1989): 132-16 . [iv]Ibid. [vii]World Bank, 148. Thoseenterprises that are state-owned, however, are being privatized.[xvii]Nippon Telegraph & Telephone has been sold, and plans are being implementedto sell the operating companies of Japan Railways. Cambridge, Massachusetts: Harvard University Press, 1981.Sarathy, R. Beyond the objective of assuring the sharing of technology,Japanese patent law is designed to encourage the "rapid spread oftechnological know-how among competitors in a manner that avoidslitigation, encourages broad-scale cooperation, and promotes Japaneseindustry as a whole."[xvi] Japan also as a policy of providing protection to some sectors of itseconomy, and to some specific industries. [vi]J. Rather, theylook to their regular supplier, who quite probably is a member of theirkeiretsu. THE APPLICATION OF ECONOMIC PRINCIPLES IN THE CONDUCT OF BUSINESS IN JAPAN This research examines the application of economic principles in theconduct of business in Japan. Blinder, "There Are Capitalists, Then There Are theJapanese," Business Week, 8 October 199 , 21. [v]Ibid. Its domestic sources of coal, iron, and allother minerals are also extremely limited. Almosteverything about Japan's management of labor is wrong according toconventional American economic wisdom; yet it is the Japanese who areachieving the greatest productivity gains. M. Few of Japan's major industrial firms are state-owned. [xv]Ibid. Japan, thus, is far less prone toconsume than is the US. The objective ofAmerican patent law is "to protect and reward individual entrepreneurs andinnovative businesses, to encourage innovation and the advancement ofknowledge."[xiv] By contrast, the objective of Japanese patent law is topromote the sharing of technology.[xv] Sharing technology implies thatinnovation will not be protected, as such protection is understood in theUnited States. According to western economic theory,long-term profits should be reflected in equity stock prices. The Statesman's Year-Book, 128th ed. In Japan, however, government intervention, and evengovernment partnership with private sector organizations, is an acceptedway of life.[xiii] Unlike the United States, Japan has a de jureindustrial policy. Endnotes BibliographyBlinder, A. New York: St. The high levels of education and training whichcharacterize the population as a whole, together with the number of people,constitute a major natural resource for the country. Private consumption accounts for approximately 51 percent of Japan'sgross national product (GNP), compared to about 6 percent in the UnitedStates (US).[ii] Japanese public consumption accounts for 8.7 percent ofGNP, compared to about 17 percent in the US, while investment in Japanaccounts for approximately 29 percent of GNP, compared to about 17 percentin the US. Conventional western economic wisdom holds that the "economic systemexists to serve the wants of consumers ... O. Thepopulation of approximately 12 million has been stabilized at this levelfor more than a decade. Martin's Press, 1991), 8 6. "The Interplay of Industrial Policy and International Strategy." California Management Review, 31 (Spring 1989): 132-16 .Spero, D. (New York:St. The findings revealed that, although Japanis generally considered to a western-style free-market economy, significantdifferences exist between Japanese and western, particularly American,economic philosophies. The lifetime employmentpolicy is not practiced by all Japanese employers, but it is practiced bymost major employers. Business managers ... The findings of this examination arepresented in discussions of demand, supply, market structure, andgovernment regulation of business. The Japanese. W. Under such a system, the Japanese are able to developcomprehensive and explicit policies for industrial development, within astructure of cooperation and mutual assistance between industrialenterprises and government. O. Plans are also beingdeveloped for the privatization of Japan Tobacco. [viii]Blinder, 21. O. Weinberger, "Changes in Japan-Lessons for the U.S.,"Forbes, 13 May 1991, 33. By protecting comparatively inefficient sectors and industries fromforeign competition, Japan is able to maintain domestic employment in theseindustries. In this examination,demand is addressed primarily with respect to consumption. . "Changes in Japan-Lessons for the U.S." Forbes, 13 May 1991, 33.Wilson, J. In Japan,however, "managerial decisions are rarely driven by stock prices."[v] Supply Significant levels of some resources required by Japan must beacquired through importation. TheAmerican economy, by contrast, is heavily oriented toward domesticconsumption. Thekeiretsu is a vertically integrated megacompany.[x] Major Japanesemanufacturers seldom seek out the lowest-cost supply source. Demand Demand may be considered in several contexts. Itsdomestic crude oil reserves are minimal. [xvi]Ibid. World Development Report. When industrial policy is translated into patent law in Japan, theresult is quite different from American patent law. Boston: Little, Brown and Company, 1985.The World Bank. [xix]Ibid., 127. From 1969through 1979, the average rate of growth attained by the Japanese economywas five-percent.[i] Since the end of 1979, however, the Japanese economyhas not attained a five-percent rate of growth for any full calendar year.For each year since 1979, however, the Japanese economy has recorded somelevel of growth between two- and five-percent. The Power Economy. [ix]Ibid. Japan reliesprimarily on tax incentives to support targeted industries. In either instance,employment in the affected economic activities would be reduced, and, byinference, unemployment in Japan would be increased, assuming that theJapanese economy would be unable, in such an event, to find an economic usein other industries for the dislocated workers. [iii]A. (Ed.). Japanese labor relations policies are typically viewed by Americans asbeing mistaken.[viii] In Japan, wages are closely tied to seniority, andsalary differentiation by rank and grade are small. Japaneseindustrial policy seeks to provide assistance to industry at two criticalstages of the life cycle.

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