Adjustment Problems in Advanced Open Economies: Japan and Germany [1 ed.] 9783428466238, 9783428066230

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Schriften zu Regional- und Verkehrsproblemen in Industrie- und Entwicklungsländern

Band 49

Adjustment Problems in Advanced Open Economies: Japan and Germany Edited by

Theodor Dams Takashi Matsugi

Duncker & Humblot · Berlin

Adjustment Problems in Advanced Open Economies: Japan and Germany

Schriften zu Regional- und Verkehrsproblemen in Industrie- und Entwicklungsländern Herausgegeben von J. Heinz Müller und Theodor Dams

Band 49

Adjustment Problems in Advanced Open Economies: Japan and Germany edited by Theodor Dams Takashi Matsugi

Duncker & Humblot * Berlin

CIP-Titelaufnahme der Deutschen Bibliothek Adjustment problems in advanced open economies: Japan and Germany / ed. by Theodor Dams ; Takashi Matsugi. — Berlin : Duncker u. Humblot, 1989 (Schriften zu Regional- und Verkehrsproblemen in Industrie- und Entwicklungsländern ; Bd. 49) ISBN 3-428-06623-5 NE: Dams, Theodor [Hrsg.]; GT

Alle Rechte vorbehalten © 1989 Duncker & Humblot GmbH, Berlin 41 Druck: Werner Hildebrand, Berlin 65 Printed in Germany ISSN 0582-0170 ISBN 3-428-06623-5

Editors' Foreword This book of readings contains the results of the 10th Joint Seminar of the Faculties of Economics of Nagoya University, Nagoya/Japan, and of Albert-LudwigsUniversity, Freiburg/FR Germany, held in October 1986. The 10th anniversary of the joint meetings was marked with a jubilee symposium. The symposium was held in Freiburg and was co-sponsored by the regional Chamber of Industry and Commerce (IHK Südlicher Oberrhein). More than one hundred businessmen and businesswomen joined in the one-day event. Freiburg's Faculty of Economics and the Chamber sought to offer the local business world a comprehensive view of German-Japanese business cooperation. Keynote lectures included a report on how to manage a German subsidiary in Japan and how to manage a Japanese subsidiary in the FR Germany. Both of these lectures are included in this volume (papers by Schneidewind of Wella AG and by Kuraku of Panasonic). The afternoon session centered around a discussion of experienced businessmen, coordinated by A. Meckel , manager of the Deutsch-Japanisches Wirtschaftsförderungsbüro (German-Japanese Business Promotion Office), Düsseldorf. Among others, managers from regional small and medium enterprises and representatives of leading banks (Deutsche Bank, Sumitomo Bank) gave their views. The public jubilee symposium again emphasized the pragmatic approach to the Nagoya-Freiburg cooperation: It not only intended to promote basic research on the Japanese and German economy, as well as on their international economic relations, but it should also help companies to gain an understanding on how to internationalize their business and assist them in finding a "niche" in the promising German-Japanese market by producing specialized products of high quality. This is done with a particular emphasis on the problems of small and medium enterprises (SME). Both in the Tokai region of Japan, with its regional capital Nagoya, and in the southern part of Baden, with Freiburg as the "capital of the Black Forest", SMEs make up a large proportion of enterprises. SMEs are both important innovators and employers. However, they are rather fragile institutions, which need to be studied well, if one endeavours to help them. The Economics Faculties of both Freiburg and Nagoya have chosen SMEs as one of their major research subjects. The research-oriented 10th Joint Seminar, whose proceedings are documented in this volume, also gives evidence to this objective. Papers by management scientists Yamada and Fahrion give a very concrete idea of how new technologies enter the business world; SMEs in Japan are emphasized. Hilke and Blümle/Hauser discuss issues facing SMEs in the state of Baden-Württemberg. Matsugi and

VI

Foreword

Pascha analyze trends in the internationalization of the Japanese and German economy on a sectoral level. Mizuno and Oberhauser/Scherf examine how business issues are related to the macroeconomic level and its government policies. Insights into the methodology of how to analyze firms are offered by Schmidt , Kishida, and Saito. These papers reflect the situation in 1986. As is well known, economic conditions in Germany, and possibly even more so in Japan, are changing very fast. Both the yen and the D M have been revalued significantly since 1985, and the effects of this change are still felt. Thus, the papers can but give a condensed view of one stage in the process of continuous change. Still, they may serve readers as documents of how economic change is appreciated while it is taking place and how actors react to limited information at a certain point in time. In giving birth to this publication, many "midwives" have helped. We are particularly grateful to the continuous cooperation of the Nagoya working group under its new chairman, Professor Takashi Matsugi. Financial assistance from the Wissenschaftliche Gesellschaft in Freiburg im Breisgau made this publication possible. Secretarial work was done in Freiburg University's Institute of Development Policy. However, authors remain responsible for their individual contributions. Freiburg, November 1988 J. Heinz Müller

Theodor Dams

Table of Contents ,,Unternehmungsphilosophie'4 and Human Concept — Questions to the Research of Real Theory — Ralf-Bodo Schmidt

1

Entrepreneurship: Management Ideology and Corporate Strategy Tamiki Kishida Management of a German Subsidiary in Japan — Experiences and Challenges — Dieter Schneidewind

21 43

Management of a Japanese Establishment in the Federal Republic of Germany — A Report on Experiences with Problems and Solution Approaches Seinosuke Kuraku Process Innovation and Small Firms in Japan Motonari Yamada

65 77

Fifth Generation Technology — Basic Principles and Economic Implications — Roland Fahrion

91

The Influence of German Business Administration on Japanese Business Administration — Especially in Reference to Accounting Takao Saito

107

Development of External Accounting in the FRG According to the 4th and 7th EC Directives — The New German Accounting and Reporting Law — Wolfgang Hilke

119

The Foreign Trade Structure of Japan Takashi Matsugi

149

Patterns of the Balance of Payments in the Optimal Growth Model Ryuhei Okumura

173

Exports of Baden-Württemberg within the Frame of the Federal Republic of Germany. Structure — Concentration Gerold Bliimle and Siegfried Hauser The Internationalization of Japan's and West Germany's Textile and Clothing Industries, 1970 - 1985 Werner Pascha The Economic Consequences of Government Deficit — The Japanese Case — Masaichi Mizuno

191

215 247

Interactions between the External Economy and the Fiscal and Monetary Policy of the Federal Republic of Germany, in View of Stabilization Policy Wolfgang Scherf and Alois Oberhauser Contributors

275 299

"Unternehmungsphilosophie11 -

Questions t o t h e Research o f Real Theory

Ralf-Bodo

A. At 1.

first:

The

today; it's

subject of the

theme

problems. what

which

The

in

is

my

opinion

suggests,

of

be

treated

these

can't

it's

however,

the very point

study

to

solution

theory.

scientific

rather

a

offer

a

to

A)

Therewith

it

exists

industrial world.

-

number

be p o s s i b l e task

of

a

of

here

and

generation,

program.

Nevertheless

by t h e r e s e a r c h m e t h o d s o f from

can

be

learn

my

point

formulated

of

as

view

of the

-

follows

the in

something from t h e h i s t o r y ?

a plurality

companies

They

economic

a

a

manner:

A r e we a b l e t o rate

causes

in question to explore the efficiency

interest

multidimensional

-

Schmidt

an " U n t e r n e h m u n g s p h l l o s o p h i e " real

a n d Human C o n c e p t

didn't

fortune,

and

chronicles

of

trading-houses

only but

of try

also

to

all

prove

their

At

any

important over

soundly

(attendant)

the their

"social

engagement". Regarding

to

my p r e v i o u s

won't

have

three

reasons:

1)

The

a

great

statements

emphasize ties,

in

that

they

addressed

studies

success

"rejoice",

successes, the

sense

don't to

a

Science".

like

by V i c t o r

Kraft

this

because

of

path of

that

particularly "public

meet t h e

of

the

research following

means of

relations"

and

"Historical in

with

demands w h i c h h a v e t o Research

As

A

t h e y were r e q u i r e d under t h i s latest

they

personali-

1955.

be

Strict title

2

2)

It

exists

help -

of

as

hardly

any

which t h e

elements

of

an

can be measured. result

as

"concepts

scientific

long of

of

think

as

the

with

ethical

of

the

values

such an

normativisms

world";

Instrumentarium

insufficiently

material

"Unternehmungsphllosophie"-

We d i d n ' t

testing

several

statistic

effectiveness

moulded

furthermore

lacked

developed

exact

because

theory

the

of

of

the

social

sciences.

3)

It

seems

to

be

sure,

that

mungsphilosophien"

can't

conditions

company

social

of

the

environment

-

"experienced

be

copied, -

as

B)

Confirming

this

corresponding propagated tion; and

general

was

lacking

means like

therefore

for

example

concept

were

formation,

as

to error

in

1)

To

outline

the

recommending

2)

To

normativismof

instruc-

that

several

ethical

justice,

humanity

characterized

by

a

operationalization of

lack and

the

of

time-

interest

prognosticai

and

pragmatical

t h e o r y h a s t o compound t o it

s h o u l d be a b o u t

possible

"Unternehmungsphilosophien" this

that-

formulas.

Pursueing the explanatory, to this

a

liberty,

s u c h empty

Corresponding

in

personal

added

of

n o t t o m e n t i o n an a n a l y s i s

science a r e a l

basic

time.

content

in

goal of

most

be

orientation; following

active

lapse of

it's

the

self-realization

precise

C)

to

action

that

postulates

argument

because

always

well

human c o n c e p t s c h a n g e i n t h e

Unterneh-

important

content with

criteria

now: of

the of

facts.

alternative intention

of

efficiency

in

context. address

theory.

questions

to

the

research

of

real

3

2.

In

international

literature

"Philosophy

of

the

"Culture

of

the

company".

cogent

business

-

appearance also

-

of

(Wertbasis)

in

what

respect

its

prove

the

If

"ethical

values"

following

it

t o what e x t e n t of

s h o u l d be

i n which respect bilder") which

value are

environment,

and

basis

there

is

of and

(ethische

"human c o n c e p t s "

"ethical

values"

in

the

Secondly:

Figure

1

values

culture

at

Werte) in

the

that

"Unternehmungsphilosophie11

an

obey,

the

by

real

which

theory

they -

-

are

interpreted subjected

to

refutation.

the

"ünternehmungsphilosophie11

relation

(Wertrahmen),

system.

of value,

to

of

of

tensions

between

On t h e one h a n d t h e company i s p u t

area

company

in

The t e r m

shows

valuation.

social

patterns

will

("Menschenand

be m a i n t a i n e d ,

offered

are

decisions

(ethische

goals

it

attempts

Werte)

company.

Subsequent t o t h i s ,

be

values

talk

achievement.

hypothesis

of

i s whether

of goal

as

less

and

different the

or

the

company's d e c i s i o n s

could

of

more

a and

asked,

instrumental

Alternative

B.

-

i n t h e g o a l s and t h e c o m p a n y ' s

goal achievement,

to

Identy"

leadership,

then the question

connected w i t h t h e occurences w i t h i n t h e In the

of

social -

making.

"Unternehmungsphilosophie", in

terms

principles in

references

"Corporate

superficially

decision

find

to

These

enterprise

very

we

and

principles,

the

though

firm",

and

is

Within

which

granted this

(Unternehmungsträger) which are

depends by

the

the

influential

express

concretized

on legal,

value

in a the

framework particular

economic members

individual

and

of

and the

conceptions

i n t h e g o a l s and measures

of

4

goal its

achievement?

style.

On t h e

value

these

respects with

other

a

of

question

and

is

awareness

formal

the

most

structure

the

respective

Then because chosen

by a i m i n g a t "will"

of value tion

der

of

(Sollen),

and v a l u a t i o n

to the

instrumentation company.

the

form

but of

Values

value

the may

application

of

conditioned

by

of

policy

could

etc. shows

followed includes

company

members.

of mutual

that is

In

a lack

the in

of

an a t t e m p t

In

that

acceptance" Western

congruence

the

organiza-

to

influence

(Wertinstrumentalisierung)

connection

goals

for

be

it's

not

an e f f e c t - o r i e n t a t e d "

in

traineeships

and v a l u a t i o n

Akzeptanz).

there

the

general

but which e q u a l l y

of

fact

with

his

disposition.

are

value

the the

latter

result

leads to a migration

of

this

in

The

which

a "philosophy

respectively In

part

in

Therefore

sufficient

order, of

gegenseitigen

the

How:

are

1 permits

values,

the

which

correspond

with

liberty.

figure

of

corresponds

the

C.

investment

programs

economic

on

system

compatible

also

"Unternehmungsphilosophie"

members,

"dogmatic,

is

whether

a "should"

(Wollen)

(Philosophie

life.

or

polarization

r e s p e c t we c o u l d t a l k world t h i s

sharing

arrangement

valid

their

could

and

of

on

(Wertverwirklichung) of

and

leadership

organization

social

justice

ethical

the

the

conceptions

professional

varying

profit

depends

of

a different

The

a

of

in the

of

which

sphere

profit

height

members

values

training

of

necessitate

a

of

liberty,

conceptions

the

but also

Assuming

private

whether

of

the

these

conception

in-service

in

results,

value.

realization

employee's

that

hand,

individualism

professional

and

example

of d i s p o s i t i o n ,

decision

conceptions

a

for

possibilities

and i n

the

a

question

in of

a

acceptance.

goal

achievement

of

the

company 1.

One

essential

of

values

in

problem

goals

and

of

this

measures

study of

is

goal

the

delimitation

achievement.

Only

5

the

subjective

perception

t i o n members e n a b l e s a A)

If

we t a k e ,

assume

above

would

investment

values

the

motives

all,

rather

are

the

for

the

source

of

and r e s u l t

profit

goals

result

of

It

is

to

consumer

and

A

are

the

average

wishes

As

high

distributions

profit-making, from

the

high

of

results

from

this

-

of

for

example

job

l o s s and l o s s o f

liberal and

cash

prefers

high

be

is

be

judged-

of

of

in

trading

however,

capital

can a l s o be

for

retained,

Such a s e c u r i t y

against

may b e a s s o c i a t e d w i t h

of

the

affected

presented

to

organization a

feed-back

is

making o f

t h e company.

Employment e n s u r e s a

corresponding

personality

in

obvious

the

member,

a

of

the

"liberty".

profit

development

to

sphere.

recipients

liberty

that

corresponding

also

expression

procures

may

managers of

might

demand

valuing

an

risk-provision.

feeling

and form

this

can

as

institution.

a company,

for

relation

in the private

profit

the as

profit

t h e company a s a n

The p r o f i t

of

developso f a r

i n which t h e r e

liberty

profit-making

viewpoint

financial Apart

of

than which

development.

the

for

can be s a t i s f i e d ,

be seen an e x p r e s s i o n

in

shareholder

reason

funds

Result

employees in

and

development,

This

to

dividend,

reserve

result

that

we've

managers

connected

sharing

plausible

result,

dispositions.

supposed profit

distribution dividends.

of

a c h i e v e d can be u s e d .

be

high

organiza-

sharing,

result

also help to value the goals of

welcome

the

employees,

value

disposition

only the r e s u l t

by

financial

wage and a c c u m u l a t i o n

the ment

these

a s one g o a l ,

that,

investors

of

valuation.

high

contrast

free to

unemployment.

The

problem

of

subjective

becomes p a r t i c u l a r l y of

profit

and

loss

apparent sharing,

conceptions when s e t t l i n g accumulation

of

justice

the of

quotas

open

and

6

hidden reserves

as w e l l

investments

expansions

ments,

in

research,

further

individual

goals

t h e employee t h a t of

result.

unknown,

but

is

an

the

it

it's

The c h o i c e o f

for

field

of

to

as

mention

technologies,

a

of high sales the

linked

with

employment

is

and

capital

discovered

in

justice, for

if

the

supply,

2.

In

this

study

achievement

Organizational help

of

impossible authorities regulated tions"

formation

different

procedural

as

presuppose

range to

of

to

of

of

the

the

well

as the

growth

guarantee

can the

also

be

company; and

value

policy

which

planning.

in connection

company's

with

organization.

company

is

managed w i t h

the

from

the

structural

and

organization;

so of

efficiency

and t h e in

position,

of

duties

far these to

"mono-linear-organization"

that

and

success

market

a selling

the

instruct

liberty.

products

quality

of values

instruments

measure

to in

limited

individual of

Values

field

to profit

the discovery is

its

product

dominant p a r t s

would be d i s a d v a n t a g e o u s

a

volumes.

investment.

marketing

market

money a r e

and

goal

achieve

personal

company's

this,

by far

represent

new

The

which

goal

of

so

product

practice

due t o t h e a c h i e v e m e n t of

is

company t o

also

to the

countries.

expression

but

to

employment

activities

creation

advertising,

consolidation

of

Western

to

group

than

strategy

commercial

possible

the

by

suggested

and q u a l i t a t i v e

policy

A

case,

the net value,

security

application

self-realization We've

the

the

is

of

I n Japan t h i s

Selling

this

i s more i m p o r t a n t

known i n s e v e r a l

instrument

varied

for

quantitative

result.

it

for

invest-

training.

in

distorted

the distribution

retaining

the

that,

"justice",

o f wage p a y m e n t s

appropriation

profits

and i n - s e r v i c e

one-sidely

to

of

rationalization

shows

are

Referring

the benefit

and

traineeship

investigation

agencies.

B)

as t h e r e t e n t i o n

authoritarian

organization

members

it

follow

and

has

been

aspects. which

"job

leadership possess

The are

descripstyle specific

7

qualities are

of p e r s o n a l i t y .

implied with

"participative In

with

the

is

any

there

profile in

leadership

connection

whether

of v a l u a t i o n

today's

economic

ferten)

instrumented that

an

which

are

organizational

D. A t 1.

fourth;

Different

and

of should

is

be

company a s p l a c e

partly

This

type

what's

mobility

capital-giver;

is

of

have

needs

a direct

the

to

also

the

high

wish

company.

for The

short-term personal

the

and

in

demands

company's

development.

exclude

"peripheral

that

a more

exact

"achievement

man"

by

trying

that, In

contrast

income

to

a to

this

finance

his

Depending

on

level

aspiration

he

of

to

and p a r t l y

to

valid

t o t h e company i s

dividends of

make

professional

a long-term c a p i t a l

motives

to

he's willing

tendency.

analogically

relation for

of

valuation

primarily

individual

combined w i t h t h e d e s i r e

becomes

by v a r y i n g

between

t e n d s more t o company l o y a l i t y

differentiation

it

possible.

of

clear

achievement.

according and

(Wertof-

valuation

personal

not

because

he

value a

not

characterized of

asked

man".

doesn't

more

ambitions

professional

of

with

and

need

be

on one h a n d ,

is

face

made

company a n d ,

real

to

and " p r i v a t e

principally

the

and

particular

However,

goals

income

these

change

personal

in

also

the

between

r e s e a r c h makes i t

in

priorities;

company.

face

career

second

the

granting

Empirical

personality

b e l o n g i n g t o e v e r y man

offers

separation

are

of

(Leistungsmensch)

the

and t h e

human c o n c e p t s c h a r a c t e r i z e d

typification

firs t

(Wertungsprofil) by

could

between

Hum»™ r v m c e p t s a n d p a t t e r n s

differentiation

The

it

similarity

instrumented

expectations

groups".

organization

exact

of

"divisionalization"

m e a s u r e s on t h e o t h e r

possibilities The

qualities

style".

world

evident values

Different

"goal arrangement",

the

entices

change.

for

the

regularly

investment, a change

capital-giver

of are

8

particularly

acute

phllosophie", tion. man

In or

("staff

so

far

as

he

shares") in

can

of

act

ity

of the

man, in

adapt

niques.

Without firm,

employee

promote

or

less

to

It's

ening or

as

burdensome

just.

highest

financially

only of

his

secondary

the

company.

forces

to

him

tech-

who i s that

loyal

than

the

be supposed

that

in the p o s s i b i l i t y therefore

-

The

organization

accept

Private

regard

anyway of

"criteria

effected.

in organization

style.

he d o e s n ' t

up a s l i m i t a t i o n s

less

liberty

personality,

if

of

the

especially,

change.

leadership

restriction strategy

company member,

feel

to

this

goal

has

severe

man,

readiness

With

formation

to

authoritarian -

possibil-

share

willing

might

judge

intention

the

for

usually

and j u s t i c e

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20

Figure 1

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22

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23

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the

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2.1

Hitachi

The

Hitachi

ideal

engineer

into

graduate

of

Under

firms, of

They

organized

Hitachi.

top

Namihei

Kodaira

freely.

specialties

were

Environmental ideal

were

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foreign

machineries.

independent earthquake

war

activities

to a

was

Namahei

made i n

(Hitachi-ism

or

that

Kodairaand

ideology,

World

realize with

an

the

many

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Japanese

Here

leader

from

This

War

and

opened of

destroyed

up

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an

almost

all

of who

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in the

of

Kanto

from

opportunity

technologies

a

ideal.

maturation

firms

of

formed.

development

talents

Japanese

a

become p r e s i d e n t s

common m i s s i o n

encouraged

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Japan.

"faithfulness"

a typical

diverse

prevented

1923

by

a l l o w i n g h i s members t o p r o p o s e

development in

with

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quake.

will

University.

i n t e g r a t e d u n d e r t h e common

factors

the

Tokyo

management

management

remained a c o o r d i n a t o r opinions

of

Hitachi

together

engineers

toward We

strategy.

1910

technology

"harmony", this

in

some o f whom l a t e r

gathered

young

founded

development

spirit".

and

and T o y o t a

and

engineers,

other

of

two

strategy,

innovation.

the entrpreneurial

was

"frontier

adapt

members

value

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to

conditions

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as

team

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corporate

are

summarized

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independent

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Matsushita,

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to

change

1937).

important

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corporation

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was

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Hitachi vs.

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internal

adaptation

integration,

in relation

2.

the

are

latter"

is the entrepreneur

of

management

both

the

organization

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means

(supply)

through

sense,

control

the

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operates

the

Earth-

importing for

Japan. factories

the The in

24

Tokyo, all,

the

factories

of

and o r d e r s

but

rushed t o

Hitachi.

The c h a r a c t e r i s t i c s as

received

the corporate

strategy

no

damage

at

in Hitachi

are

about e v a l u a t i o n

and

follows.

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t o p management makes d e c i s i o n s

support

of

proposals

management

makes

company-wide investment sector,

priority in

the

of

in

1970s

the

the it

Thirdly,

level. In

heavy

to

institute

1950s,

electronics controls to

the

business

influences

activities the

the

equipment

the

according

and

top

long-range

the

management

utilized

and d e v e l o p m e n t

research

of

electrical

shifted top

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priority

t o p management e x e r c i s e s

research

central

factory

in

resources

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company-wide

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allocation.

was

the

sector.

amount

cycles.

on

changes

resource

but

appliances total

of

of

Hitachi

on

the

especially

Hitachi

research

center. In general,

t h e common v a l u e o f t h e t o p management r e f e r s

the

orientation

strong

there

seems

corporate

to

be

strategy

of high technology

2.2

agreement to allocate

technology

that

this

development,

is

the

through

ideology

a

corporation,

industrialist"

society

was justice

always

realized

founder recognized

of

Matsushita

in

1932

the

field

based

on

production. to his

Thus

reconcile belief

the

behavior

of

and e x p a n d e d when p r o d u c t s

the of

industrialist employees,

and

became they

to

the

market

suitable

the

of our

management

profit-making

that

n e e d s o f t h e masses w e r e s o l d i n a n a p p r o p r i a t e mission

electric

"mission

by w h i c h i s m e a n t t h e c o n t r i b u t i o n abundant

established

social

the

appropriate

resources mainly t o the

products.

Matsushita,

applicances

The

to and

Matsushita

Konosuke the

towards

for

with was the

way. foundation

voluntarily

of held

25

meetings

to

discuss

resulted

in

the

tionalized

as

"father"

of

recession dismiss tion

a

1929,

among

inventory electric

Konosuke

employee

in

and

hours

two

that

The

was

In

the

he

would

although

by h a l f .

enhanced,

not

producresult,

away

demand

was a l s o

the great

As a

sweeping

sustained

This

institu-

the

for

home

fortunate.

of the business p o l i c y

at

Matsushita

follows.

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is

appliances brought

the

specialization

industry.

high

business

resources, that

that

not

could

t h e computer

fully

the

circumstances

slacks

the proper Fourth

is

emphasizes

not

understood

electric

specialization

utilizing capital.

enter

and

in that

quickly

equipment,

and p r o d u c t

certain He

also

into

any

field

did

not

enter

thus

only

firms

are

when

they

capital,

able

to

have

personnel,

cope

enough

inventory,

development.

characteristic

is

the

proper

management

based

on

profit. the

financially

financial

and t h e r e s e r v e

rate

healthiness;

is the establishment

total

marketing.

The

i n d e p e n d e n t management.

and e q u i t y

Fifth

special

that

and

would

dam management

i n terms of

third

asserted

t h e home

industry.

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technology

for

intensively

technology,

with

its

by

Matsushita be

policy

Konosuke

performance

maintained

The

reduced

it.

later

Konosuke

salary,

s i n c e W o r l d War I

characteristics

a r e as

full

was

months.

appliances

The s i x

were

realize

was

community. decided

paid

employees

which

event.

pseudo-family

and w o r k i n g

cohesion

meeting"

company-wide

the

of

an

t h e m i s s i o n and how t o

"morning

financial are very

cost

role

of

is

low

system

and

high.

o f t h e mass p r o d u c t i o n

network

a n d most i m p o r t a n t

the

ratio

Matsushita

affiliated

shops

to the sales

power.

plays

a

26

The

sixth

is,

in

the

a

sense,

element

of

revenue

and e x p e n d i t u r e

nal

organization

the

idea

that

In

comparing ideal

family the

2.3 In

and t h e This

performance

a

as

the

a

core

in

the

decisio-

is

based

whole

Konosuke

strategy

former

technology

R&D a b i l i t y .

with

The

lies

on

rises

efficiently.

with

from t h e computer

as

and

industry

is

The l a t t e r a

big

the

as a n

on

strategy

is

a

father,

short-term

serves

based

oriented

pseudo-

stressing

profit.

The

example.

Toyota the

there

above

each

company.

Toyota

We

will

relationship

Motor

rather

now

of the

Corporation,

invented

Toyota

family.

the

The

succession

(1)

Risaburo Toyota

1950),

(3)

of

Taizo

(1961-1967),

(5)

(1982-

Ki-ichiro,

the

a

(entrepre-

a

strategy

longitudinal,

representative

Toyota, loom

of

(1937-1941), Eiji

combination and c o r p o r a t e

or

Toyota

whose f a t h e r

and

became

Toyota Motor (2)

(4)

a

Sakichi of

Corporation

is

Toyota

Bukio

(1967-1982)

of

symbol

Ki-ichiro

(1950-1961),

firm

and

(1941-

Nakagawa Sho-ichiro

). founder,

production

of

innovator.

Ishida,

business

automatic

Ishida

analysis,

examine

also

presidents

synchronic

combination.

was f o u n d e d by K i - i c h i r o

Toyota

Toyota

and

b e t w e e n management i d e o l o g y

diachronic

Japan,

comparative

e x i s t e d a u n i q u e and s u c c e s s f u l

neurship) in

by p r o d u c t

and M a t s u s h i t a ,

long-range

oriented

optimization.

to the product.

corporate

Hitachi

community

sales

exit

control

i s managed

community

emphasizing

local

system o f M a t s u s h i t a

according

the

when e a c h u n i t

the

a

management

contributed

automobiles

in

Japan.

a professional

opportunities

and

all

He was

manager,

promoted

his an

life

to

the

enthusiastic

took advantage

investment

of

actively.

27

Nakagawa who was c o o p t e d f r o m t h e M i t s u i s y s t e m c r e a t e d by I s h i d a . Corporation

and t h e

and e l a b o r a t i o n down. the

example) all Here the

Toyota

has

Group

directed

division

into

we w i l l case

of

Principles

the Toyota

through the

the

the

risk

the

Motor

reorganization

aversion

new T o y o t a

manufacturing

toward environmental

t h e Toyota

bank m a i n t a i n e d

rationalized

o f management s y s t e m ,

Sho-ichiro sales

Eiji

and

cost

( t h e merger division

of

is

an

a d a p t i o n and an i n t e g r a t i o n

of

group. examine

the

Ki-ichiro by

change

in

and I s h i d a ,

management

in

relation

ideology

to

the

in

Toyota

Sakioki.

The p r i n c i p l e s

are

as

1.

We s h o u l d w o r k

2.

We

3.

We

4.

We

irrespective should

creation

follows:

diligently

of

to

contribute

our

nation,

rank.

give

all

of

our

attention

in order to take the

should

to

not

be

to

lead over

pompous,

rather

research

and

time.

simple

and

have

fortitude. should

be

kind

and

friendly

and

create

a

friendly

atmosphere. 5.

We s h o u l d r e s p e c t God and l i v e of K i - i c h i r o 7 s

The t r a i t tic

idealist

Japan.

mission

nation,

relating was

information this

led

to

the

Toyota

production

and

gratitude.

of

an

enthusias-

components

principles

3,

and

was

with

needs

machinery

automobile

4,

R&D

later no

were to

style

rational

also the

the

to

the

the

second

of

active

Furthermore production and

in

establishment

and

cultivating examples.

humanistic

the

buying

The

such

in

that

reflected

inventory

department

relate

Next,

promotion. the

quantity.

makers 5

of

belief

contributed

mamagement

the

instance, in

the

principle.

the

system

materials

industrial

first by

establishment

for

by

automobiles

the

collection

to

which,

the

was t h a t

enhanced

of

natured

system required

was

production

principle

of

w i t h a m i s s i o n o f p r o d u c i n g a u t o m o b i l e s made

This

domestic

character

a life

of the The

management

28

b a s e d on t h e c o m m u n i t y c o n s c i o u s n e s s . important

business

employees to

through

establish

activities

a

family

To K i - i c h i r o ,

were

cohesion,

à paternalistic

to

to

the

most

integrate

the

develop Toyota,

community w i t h

strong

and

solidar-

ity.

Taizo

Ishida

developed

seven p o i n t s :

(1)

intelligence (3)

rustic

the

these

establishment

and a b i l i t y ,

mind,

sufficiency,

(4)

(6)

principles

(2)

of

into

industry

good p r o d u c t s

indomitable

cooperation

fighting

and

the

following

by

Japanese

a n d good

spirit,

harmony,

ideas,

(5)

(7)

self-

personnel

education.

Closely first

corresponding point

which

to

the

first

parallels

to

principle

p r o d u c i n g a u t o m o b i l e s made i n J a p a n . "Protect the

your

castle

independent

encouraged

spirit

of

yourself"

added t o

investment

development turn

by

in

parallels

to

the

Ishida's is

the

a to

(equipment latter

sentence

t h e age o f

motorization.

Ishida's

second quality

the

Ishida.

third

refers

resulted

principle

a

basis

training experiences Fourthly,

production

of

the

relates

independent

of

This

the

former

employees'

on t h e in

the

(self-sufficiency)

in

second toward

part

suggestion

to

the

oriented

without

personnel

of

of

the

system

for

costs.

cost

organization

of

of

Ishida

investment

to the

in

spirit.

rustic

T h i s shows t h e way T o y o t a men s h o u l d w o r k . using

rationalized the

This

improvement and c u t t i n g

Thirdly, means

second p o i n t

principle.

version

breed

The M o t o m a c h i p l a n t was a p r i o r

of

own o p i n i o n

supremacy).

principle.

Next,

Ishida's

mission

revised

fighting

equipment

technology

is

Ki-ichiro's

abilities

in

Namely

management

redundancy.

education

mind

the

through

This form

in it and

is

also

of

the

repetitive

spot. case

of

Ishida,

the

independent

was e x t e n d e d t o t h e T o y o t a g r o u p

spirit in

order

29

to

emphasize

ships of In

the

the

summary,

tributed

independent

compared

to

the

with

the organization

of the Toyota

chapter,

entrepreneurship deal

with

firms,

the

Ki-ichiro

Toyota,

and

relation-

family

Ishida

and

of

established

and T o y o t a

group.

entrepreneurship

focusing

on t h e no d e b t

financial

will

analyzed.

first

be

observations

and i n t h e t h i r d

con-

stabilization

long term marketing,

No d e b t management a n d

In this

interdependent

rationalization

management b a s e d on t h e

3.

yet

group.

of

section,

The

no

debt

no d e b t

strategy,

two

small

sections

and

large

firms

and no d e b t s m a l l and medium

firms

medium will

be

examined.

3.1 Questionnaire We

sent

firms

out

in

a

1981.

answered our In

all,

the

firms

they

sales

less

within

are the

general

than

300

increasing local

area

are

independent

There

are

two t y p e s

debt?

before

crisis.

the

There firms

arrived

at

small

and

medium

and medium f i r m s ,

are

million each

and

exports

402

also

consciously

no d e b t

small

follows.

First

is

30-99,

though

less

are

not

than

and

annual

these

three

Transactions

when t h e

crisis

two t y p e s aiming

no d e b t w i t h o u t

as

are

done

performed.

Most

subcontractors.

regarding oil

the

is is

yen,

year.

of

Capital

employees

and n o t

first

research

established.

t h e number o f

firms

debt?

debt

description

shown i n t h e

were u s u a l l y

yen,

are

no

questions.

30 m i l l i o n indices

to

Among 8 2 1 no d e b t s m a l l

conclusion,

and medium of

questionnaire

of at

firm

and

first

after

processes no

debt

h a v i n g had i t

the

leading

and

as a

became first

firms

goal.

no oil

to

no

which

30

The

most

influential

"retained the

earnings"

advantages

burden"

and

of of

most

(1)

more

presidents

perhaps

result the in

of

from

(2)

sales

though inclined

No

firms

debt

190

are

165

"passive

when

the

where

are

debt

department at

80

presidents of

many

of

came

no

debt

cases

100

practice

and of

a

while debt

presidents

from

manufac-

borrowing

whenever

established

presidents, Both

in

the

when

by

the

from

his

77

presidents

borrowing

were

policy.

president

firms.

presidents

as

manufacturing

second

founding

This

b e c o m i n g no

among

from

the

firms,

environment,

a d h e r e n c e t o t h e no d e b t

of

selected

among

case

of

from

the

needed

was

on

academic

31 firms

the

borrowing

policy

careers.

and medium

to

firms

interview.

are not o r i e n t e d towards d i v e r s i f i c a t i o n

specialized a

agreed

their

w i t h no d e b t s m a l l

Most f i r m s about

firms,

unconscious

practice

presidents

presidents

Interview

are

among

cases

the

on.

respective

We r a n d o m l y

debt

aimed

cost.

the

conscious

and a

from m a n u f a c t u r i n g .

the

for

payment

induces

borrowing

uncertain

in

the

no

sales

the

or

relatives, Many

the

are

In

turn

were

Therefore

interest

in

of

in

president

founding

agreed

(1)

119

debt

equipment.

department

in

slightly

relatives.

3.2

and

agreed

and

sales

curtail

needed,

the

policy

presidents

because

to

founding

(3)

from

manufacturing

turing

a

conscious

less

"small This

no

profit".

style".

coping w i t h

order

the

of

" l o o s e management"

have

the

are

becoming

rate

are

management

with

and t h e r e is

debt

needed i n p l a n t

Compared

for

"high

management".

firms

is

a

no d e b t ,

and c o n s e r v a t i v e

investment

no

"stable

disadvantages

However,

reasons

and

in

reduction

their of

own

cost

business or

area,

employees

but

bringing (G-l,

L) ,

31

averting

the

investment

subcontractors J. (2)

M,

0,

needed.

of

However,

difference

those

the

conditions

with

its

own

(which

advantage

(1)

the

product

no

a

One

is

debt

are

in

the

firms, In

many

whether

debt

of

policy

firm

takes

rather

two

Both

more

firms were

to

where coopted

recover

from

debt.

of

small

and

with

field,

Here

and

is

medium

mottes

of

the

firm

within

this

proceeded.

firms are the conditions

reasons and

to

the

bring

about

development

the cost

management cases,

on

investment sources

are

orientation.

earnings

is

depends

the

order

innovation

research

another

debt

arises.

banks,

"defender"

narrow

two

no

no

were

outside.

large

and r a t i o n a l

sales a b i l i t y , In

in

the need

banks.

characteristics

and p r o c e s s

There

reflected.

with

party

strategy

w i t h no d e b t

debt.

the

There

and s o l i d i t y

specialized

profit. (2)

the

is

much

important

healthiness)

from

so

not

regarding

are

not

makes

and t h e y b o t h a d h e r e t o no

High p r o f i t no

or

manufacturing

a trade

above,

Interview

to the

firm

through

(U,W,Y).

came

or

management

specialty,

from

when

whenever

steadiness"

is

adhere

are

whether

coming

firms

usually

of (I,

mottoes

and

no d e b t

the transactions

bank

As d e s c r i b e d debt

use

borrowing

there

the

without banks

oriented

bankruptcy,

to

whether

financial

presidents a

that borrow

adheres as

or

of

Presidents

from

the

presidents'

sense,

firms

funds

implies

solidity

this

with

information,

the

for

"faithfulness

which

firm

such

connections

3.3

In

between

and

Whether

balanced

most

management",

"solidity".

the

by

Y).

policy

is

equipment

and i m p r o v i n g t h e p r o c e s s

t h e need

and

no

in

R, W ) ,

2 5 among 3 1 r e c o g n i z e d "balanced

(3)

(G,

of

high

(R&D)

and

reduction.

personality founder

or

is the

highly current

32

president

has

dislikes (3)

Those

firms

dominant In

the

case

business

no

(matured

management a

balanced

borrow

the

management

money w h e n e v e r

large

firms,

emphasizing s t a b i l i t y

debt

select

of

or

needed

are

number. no d e b t

expanding i n t o In

motto

that

in of

mainstream,

a

borrowing.

industry)

a new f i e l d

firms,

the

employs rational

on

(retained

earnings), in

order

the

following

strategic

one

two

in the

hand,

aspects

brings

is

main

actively

are

evident;

in

about

management

integrate

type

hand.

decision-making

which

and to

analyzer"

and e f f i c i e n c y

on t h e o t h e r

pattern

leadership

"the

order

high

personality

members

on

to

profits

the

and

company

level.

4.

Summary a n d c o n c l u d i n g

The r o l e

of

remarks

entrepreneurship

i n combining c o r p o r a t e

w i t h management i d e o l o g y was a n a l y z e d . a

means

by

conditions. ing

which

identity

tions

of

Namihei

firm

adapts

ideology

among members.

t h e s e two f a c t o r s Kodaira,

Matsushita, Hitachi,

a

Management

a

the

corporate

a

of

management strategy

ideology

the

management

ideology

corporate

strategy

combined

into

these

two

of of

is,

for

of

find

new

short

ideal

external maintaincombina-

and

Konosuke

community

Matsushita

sales The

and

the

community

profit

under

difference in the

the

also,

orientation

reflected

In

technology

combined under

In

term

is

innovation.

pseudo-family

Konosuke.

example,

of

were e n t r e p r e n e u r s .

Kodaira.

the

the

long-range

stressing

successful

leadership

firms

of

in

strategy

strategy

role

Hitachi,

and s u c c e s s f u l l y

entrepreneurship

charismatic

of

emphasizing

the

the

Entrepreneurs

Matsushita,

development are u n i q u e l y symbolic

changes

plays

t o b r i n g about

founder

founder

to

Corporate

and are the

between different

33

policy

adopted

regarding

the

entry

into

the

computer

unique

combination

industry. In

successful

management strategic

no

the

the

merchant's

allowed

(solidity)

when

it

with and

However,

trait,

meaning

useful

to

the

appropriate

was

no

of

observed.

debt

For

strategy

are

t h e y a r e combined

entrepreneurship

is

the

analyzer)

supremacy

contradictory.

under

a

(defender,

equipment

superficially Toyota-ism

firms,

ideology patterns

example,

Go-shu

debt

of

Taizo

active

the

firm

Ishida

into as

investment

or

the

a is

corporate

group. Many

problems

scope

of

remain,

entrepreneurship by

teams.

design

glance,

is

for

suitable

is

discover

organization.

an

the

a

way

It of

the

to

that

four

and

increase

ways and

stage

of

at

which

franchising, are,

the

stage

formalization,

combining

at

of

an

a

innovation appropriate

innovation

designing

to

entrepreneurial

decentralization)

may b e a r o l e

the from

implemented

with

the so-called between

in

change

organization

implementation high

attempt

emerging.

is

organizations;

initiation for

the

department,

difference

specialization,

Recently

structure

into

low f o r m a l i z a t i o n ,

structure

(low

is it

individuals argues

This relates

the

the

specialization,

to

in

Entrepreneurship

that

structure

which Namely

entrepreneurial

contradictory.

dilemma,

of

(1981)

entrepreneurship

organization.

tion) .

matured

Peterson

contracting,

tion

one

entrepreneurship.

of

(high and

the

innova-

centralizaambidextrous

entrepreneurship

entrepreneurship

and

34

References HOFER,

C.W./SCHEMDEL,

Concepts, MAO TSE-TUNG: McCLELLAND, MILES,

West,

Practice

D.C.:

PETERSON,

D.C.:

SATO,

Y.:

Faculty

of

K.,

Starbuck

Consideration Kyoyobu

Kiyo

Education) OGAWA ,

(No D e b t F i r m s ) ,

E.,

1952

Van N o s t r a n d , Strategy,

1961

Structure,

1978 Chu-ko Shinsho,

and O r g a n i z a t i o n ,

(eds.):

Handbook o f

Oxford U n i v e r s i t y

Daigaku

TAKIZAWA,

Analytical

O-tsuki-shoten,

Organizational

Entrepreneurship

Design, A

Formulation:

and M a t s u s h i t a .

N y s t r o m and W.H. tional

and P a r a d o x .

McGraw-Hill,

Hitachi

R,A.:

Strategy

The A c h i e v i n g S o c i e t y .

R.E./8NOW,

and P r o c e s s . OKAMOTO, Y · :

D. : 1978

on

Press,

Management

(Bulletin

of

Nagoya/Japan, a n d MAKIDO,

Yu-hikaku,

1985

in:

P.C.

Organiza-

1981 Ideology,

Nagoya Vol. T.:

1979

29,

Nagoya

University's 1985

Mu-shakkin

Kigyo

35

Table 1:

A Ocnparison o f Various Authors' Concepts o f Strategy and t h e Strategy Formulation Process

Chandler

Andrews

broad

broad

strategy

strategy

Components o f Broad Concept of Strategy

goals objectives a c t i o n plans resource allocations

goals policies plans

Name f o r Goals & Objectives

goals & objectives

goals & objectives

objectives & constraints

result strategy

Characteristics of Objectives

none specified

none specified

attributes yardsticks goals

attributes indices t a r g e t s & time t i e d t o action strategies

strategy

composite or business strategy

Breadth o f Strategy Def i n i t i o n / C o n œ p t Name f o r Broad Concept o f Strategy

Name f o r Narrow Concept Strategy

Names for Functional Strategies & Policies

Differentiates between Goals & Objectives & Constraints

(continued on next page)

Cannon

narrow

product mark e t scope growth vector none competitive speci f ied advantage synergy

Components of Narrow Concept Strategy

Name f o r Implementation Plans

Ansoff

action strategy

policies

policies

action plans

plans

programs

coitimi tment strategy

no

no

yes

no

36

(Table 1 continued) D i f f e r e n t i a t e s between Corporate Level & Business Level Strategies D i f f e r e n t i a t e s between Goal Formulation Processes & Strategy Formulation Processes D i f f e r e n t i a t e s between A n a l y t i c a l & Organizat i o n a l Aspects of t h e Startegy Formulation

no

no

yes, implicity

yes implicity

no

no

yes

no

does not discuss either

does not discuss organization a l aspects

yes

yes

Continue Table 1

Katz

Ackoff

Breadth o f Strategy Def inition/Concept

broad

does not recognize concept

Name o f Broad Concept o f Strategy

corporate strategy

master strategy

Components o f Broad Concept of Strategy

scope deployments specifications

services technology objectives synergy strategic sequencing posture & timing targets

Name f o r Goals & Objectives

specifica- objectitions & ves & s t r a t e g i c goals criteria

Characteristics o f Objectives

none specified

Name o f Narrow Concept Strategy

scope

(continued on next page)

specified

McNichols

Newman & Logan

broad

goals & objectives

specified root strategy

Uyeterhoeven et. al. both broad & narrow strategy

targets

goals & objectives

none specified

specified strategic posture

37

(Table 1 continued) services technology synergy sequencing & timing

scope competitive posture s e l f concept

Components o f Narrow Concept Strategy

none specified

none specified

Names f o r Functional Strategies & Policies

functional policies policies

operating f u n c t i o n a l functional startegy policies strategies & policies & policies

Name f o r Implementation Plans

deployments

programs, procedures master & courses p l a n of action

programs & plans

no

yes

no

no

no

no

no

no

no

yes

no

yes

Differentiates between Goals & Objectives & Constraints D i f f e r e n t i a t e s between Corporate Level & Business Level Strategies D i f f e r e n t i a t e s between Goal Formulation Processes & Strategy Formulation Processes D i f f e r e n t i a t e s between A n a l y t i c a l & Organizat i o n a l Aspects o f t h e Startegy Formulation

(Continued on next page)

does not discuss organizational aspects

yes

does not discuss organizational aspects

yes

no, but does recognize different organizational levels

no

does not discuss organizational aspects

38

(Table 1 continued)

Breadth o f Strategy Definition/Concept

Paine & Naumes

Glueck

Steiner & Miner

Hofer & Schendel

narrcw

narrcw

broad

narrow

χ

master strategy

grand design

χ

missions purposes objectives policies

objectives strategy policies

purposes & objectives

goals & objectives

Name f o r Broad Concept o f Strategy Components o f Broad Concept o f Strategy Name f o r Goals & Objectives

objectives

objectives

Characteristics o f Objectives

none specified

differentiates between official & operative

none specified

attributes indices targets time

Name f o r Narrow Concept Strategy

overall startegy

strategy

program startegy

corporate or business strategy

Components o f Narrow Concept Startegy

none specified

none specified

none specified

domain or scope resource deployments competitive advantage synergy

Names f o r Functional Strategies & Policies

policies

functional policies

functional strategies & policies

functional strategies & policies

Name f o r Implementation Plans

programs & roles

plans & programs

programs & plans

plans o f action

D i f f e r e n t i a t e s between Goals & Objectives & Constraints

between objectives & constraints

no

no

yes

yes, i n places

yes

D i f f e r e n t i a t e s between Corporate Level & Business Level no Strategies (continued on next page)

39

(Table 1 continued) D i f f e r e n t i a t e s between Goal Formulation Processes & Strategy Formulation Processes D i f f e r e n t i a t e s between A n a l y t i c a l & Organi z a t i o n a l Aspects of t h e Strategy Formulation

not explicitly

yes

yes, i n places

yes

no

no

yes

yes

Source; C. W. Hofer, D. Schendel: Strategy Formulation; A n a l y t i c a l Concepts. West, 1978

40

Table 2: Characteristics of the Defender Entrepreneurial problem

Engineering problem

Administrative problem

Problem: HCM t o "seal o f f " a p o r t i o n o f t h e t o t a l market t o create a stable set o f products and customers

Problem: HCM t o produce and d i s t r i b u t e goods or services as e f f i c i e n t l y as possible

Problem: Hew t o maintain s t r i c t cont r o l o f t h e organization i n order t o ensure e f f i c i e n c y

Solutions: 1. Narrow and s t a b l e domain 2. Aggressive mainte nance o f domain ( e . g . , competitive p r i c i n g and e x c e l l e n t customer service) 3. Tendency of ignore developments o u t side o f domain 4. Cautious and i n c r e mental growth p r i m a r i l y through mark e t penetration 5. Some product d e v e l opment, but c l o s e l y r e l a t e d t o current goods or services

Solutions: 1. C o s t - e f f i c i e n t technology 2 . Single core t e c h nology 3. Tendency tcward v e r t i c a l integration 4 . Continuous improvements i n technology t o maint a i n efficiency

Solutions: 1. F i n a n c i a l and production experts most powerful members o f t h e dominant coalition; limited environmental scanning 2. Tenure o f dominant c o a l i t i o n i s lengthy; promotions from w i t h i n 3. Planning i s i n t e n s i v e , c o s t - o r i e n t e d , and comp l e t e d before a c t i o n i s taken 4. Tendency toward f u n c t i o nal structure with extensive d i v i s i o n of labor and high degree o f formalization 5. C e n t r a l i z e d control and long-looped v e r t i c a l i n formation systems 6. Simple coordination mechanisms and c o n f l i c t s resolved through h i e r a r c h i c a l channels 7. Organizational performance measured against previous years; reward system favors production and finance

Costs and b e n e f i t s : Technological e f f i ciency i s c e n t r a l t o organizational p e r formance, but heavy investment i n t h i s area requires technol o g i c a l problems t o Costs and b e n e f i t s : I t i s d i f f i c u l t f o r com- remain f a m i l i a r and p e t i t o r s t o dislodge t h e p r e d i c t a b l e f o r lengthy periods of organization from i t s small niche i n t h e indus- time t r y , but a major s h i f t i n the market could t h r e a t en s u r v i v a l

Costs and b e n e f i t s : Administrative system i s i d e a l l y s u i t e d t o maintain s t a b i l i t y and e f f i c i e n c y but i s not w e l l s u i t e d t o l o c a t ing and responding t o new product or market opportunities

Source: R. E. M i l e s , D. C. Snew: Organizational Strategy. Structure, and Process. McGraw-Hill, 1978

41

Table

: Characteristics of the

er

Entrepreneurial problem

Engineering problem

Administrative problem

Problem: Hew t o l o c a t e and exp l o i t new product and market opportunities w h i l e simultaneously maintaining a f i r m base o f t r a d i t i o n a l products and customers

Problem: How t o be e f f i c i e n t i n s t a b l e portions of t h e domain and f l e x i b l e i n changing p o r tions

Problem: How t o d i f f e r e n t i a t e t h e o r g a n i z a t i o n ' s s t r u c t u r e and processes t o accommodate both s t a b l e and dynamic areas o f operation

Solutions: 1. Dual technological core ( s t a b l e and f l e x i b l e component) 2. Large and i n f l u e n t i a l applied t o search group 3. Moderate degree of technical e f f i ciency

Solutions: 1. Marketing and applied r e search most i n f l u e n t i a l members o f dominant coal i t i o n , followed closely by production 2. I n t e n s i v e planning between marketing and production concerning s t a b l e p o r t i o n o f domain; comprehensive planning a mong marketing, applied research, and product managers concerning new products and markets 3. M a t r i x s t r u c t u r e comb i n i n g both functional d i v i s i o n s and product groups 4. Moderately c e n t r a l i z e d c o n t r o l system w i t h v e r t i c a l and h o r i z o n t a l feedback loops 5. Extremely complex and expensive coordination mechanisms; some c o n f l i c t r e s o l u t i o n through product managers, some through normal h i e r a r c h i c a l channels 6. Performance appraisal based on both e f f e c t i v e ness and e f f i c i e n c y measures, most rewards t o marketing and applied r e search Costs and b e n e f i t s : Administrative system i s i d e a l l y s u i t e d t o balance s t a b i l i t y and f l e x i b i l i t y , but i f t h i s balance i s l o s t , i t may be d i f f i c u l t t o r e store e q u i l i b r i u m

Solutions: 1. Hybrid domain t h a t i s both s t a b l e and changing 2. Surveilance mechanisms mostly l i m i t e d t o marketing; some research and d e v e l opment 3. Steady growth through market pene t i a t i o n and product market development Costs and b e n e f i t s : Low investment i n r e search and development, combined w i t h i m i t a t i o n o f demonstrab l y successful products, minimizes r i s k , but domain must be o p t i m a l l y balanced a t a l l times between s t a b i l i t y and flexibility

Source: Miles/Snow,

ibid.

Costs and b e n e f i t s : D i a l technological core i s able t o serve hybrid s t a b l e changing domain, but the technology can never be completely e f f e c t i v e or e f f i c i e n t

42

Table 4: Characteristics of the Prospector Entrepreneurial problem

Engineering problem

Administrative problem

Problem: Hew t o l o c a t e and e x p l o i t new product and market opportunities

Problem: Hew t o avoid oang term commitments t o a s i n g l e technologic a l process

Problem: Hew t o f a c i l i t a t e and coord i n a t e numerous and diverse operations

Solutions: 1. Broad and continuously developing domain 2. Monitors wide range o f environmental cond i t i o n s and events 3. Creates change i n t h e industry 4. Growth through produ c t and market d e v e l opment 5. Growth may occur i n spurts

Solutions: 1. F l e x i b l e p r o t o t y p i c a l technologies 2. M u l t i p l e technologies 3. Lew degree o f r o u t i n i z a t i o n and mechanization ; technology embedded i n people

Costs and b e n e f i t s : Technological f l e x i b i l i t y permits a r a p i d Costs and b e n e f i t s : response t o a changProduct and market i n ing domain, but t h e novation protects t h e o r - organization cannot g a n i z a t i o n from a chang- develop maximum e f ing environment, but t h e f i c i e n c y i n i t s producorganization runs t h e t i o n and d i s t r i b u t i o n r i s k of low p r o f i t a b i l i t y system because of and overextension of i t s m u l t i p l e technologies resources

Solutions: 1. Marketing and research and development experts most powerful members of t h e dominant c o a l i t i o n 2. Dominant c o a l i t i o n s i s l a r g e , diverse, and t r a n s i t o r y , many include an inner c i r c l e 3. Tenure dominant c o a l i t i o n not always lengthy, key managers may be h i r e d frati outside as w e l l as promoted from w i t h i n 4. Planning i s broad r a t h e r than i n t e n s i v e , problem oriented, and cannot be f i n a l i z e d before a c t i o n i s taken 5. Tendency toward product s t r u c t u r e w i t h low d i v i sion o f labor and low degree of f o r m a l i z a t i o n 6. Decentralized control and short-looped h o r i z o n t a l information systems 7. Complex coordination mechanisms and c o n f l i c t resolved through i n t e g r a tors 8. Organizational performance measured against import a n t competitors; reward system favors marketing and research and development Costs and b e n e f i t s : Administrative system i s i d e a l l y s u i t e d t o maintain f l e x i b i l i t y and e f f e c t i v e ness but may u n d e r u t i l i z e and m i s u t i l i z e resources

Source: Miles/Snow,

ibid.

Management o f a German S u b s i d i a r y -

Experiences,

Challenges,

Dieter

1.

Introductory

Japan

Solutions

-

Schneidewind

remarks

This contribution second

in

biggest

is

on S u c c e s s f u l Management i n J a p a n -

national

market

on

this

globe

(next

the

to

the

USA) . The

subject

manager

is

for

9

responsible years

in

(Foreign the

years

Board

the

German

the

as

a

history

competence

of

the

Head

an

of

a

University As

a

in

of

the

in hair-care world-market 37

capital. to

nil,

factories

After

before

the

is

can

look

a

and

a

another

8

at

from b o t h

our

FAC

sides:

from

in in

Japan,

will

tell

with

the

I

question

that

I

business Economics

attempt

to

i n Japan through

will

the

of

Asia

at

German/Swiss

Bochum

Ströher-Group,

some 8 5 0 M i o US $ t u r n o v e r ,

products, leaders around

the

and l i c e n s e

being together with L'Oreal

of

field.

We

than

50

this a

turnover of fees.

particular

globe

but

largest

sales

Wei l a predomi-

in the

all

Wella's

today

USA w i t h

US $ p r o f i t s

for the

companies,

Whereas it

in

commands

France

distribution

I

Japan

company

insider.

nantly have

in

for

As

Germany.

member

International

Operation

Asia/Pacific

president

the

lecturer

Japanese

market.

outside.

hammer o u t some g u i d e l i n e s eyes

consumer

Office,

former of

the

for

Company)

and f r o m t h e

Furthermore,

to

of

Member

Affiliated

inside

you

restricted

and

few

i n Japan

operation

more

with in

100

%

Wella

1 9 6 8 was

after

Germany

150 M i o US $ a n d n e a r l y

next and

15 M i o

44

2.

C a s e s t u d y o f a German b e a u t y & h e a l t h c a r e

2 . 1 The l o c a l

distributor

company

and t h e p r e p a r a t i o n

phase

(1969-1971) Wella

had

trade

to

in

appointed sell

exports

1968

the

its

of and

partner agreed

cosmetic products Dr.

industry,

Wella

July

Office

in

language

and

trade phies. books Japan

now

exceeds

over

the

cosmetic

an

import

of

customs

of

the

the

invaluable aquainted

country

(DKS's 2,500?

were

help

and

c o m m u n i t y and a l s o

and for

After

having 19 6 9 ,

in

of

the the

began items

as

by

and

immediately the

Japanese

personnel. well

as

introduction

of

every -

well-running

loyal

reading

books

people

The their

to

the

philososome

dealing

made many

hairdressers, bankers).

for

Soon

Japanese business

has

LuxemLiaison

Japan

learned

flanked he

a

August

products.

few

collection

among

in

partner

with

mid

his

company

employed s t a f f s

DKS a

of

mandatory

new

license

from

to

Wella

US $ .

by -

and b u l k s

local

training

addition

branch

activity

specially

couple

investment

7 months

as

laboratory

a

activities

Japan.

a

cosmetic

the

distributor's

Japanese

parent-company.

extended

These

local

served

from

products

and g e t t i n g on

the

with the

local

managers

president

$

and

German

senior

SA,

which

established

from

for

In

20,000

got

By

sales-promoter

after

Tokyo.

Bank

finished

the

in

with

importing

happen.

own

in

Fuji

distributor

not

his

years

US

developed together liaison-office

did

chair

increase

manufacturing

capitalized

250,000

pharmaceutical local

8

arrived

1969

Patmar

Japan,

in

German

status within the

paper-company,

Tokyo

a

after

and

26th,

established

Patmar

have

the barber

Japan.

bourg

borrowed

to

of

The e x p e c t e d

however

succeeded

(DKS),

joined

on

sales-promoter he

to

Schneidewind

period

distributor

hairdryers.

hair-preparations

local

hairdryer

a local

electric

friends from

400 with all the

45

An

enormous

amount

prospective government

offices,

joint-ventures, The

main

any a t

objective

highlight

the

time

Osaka

was

was

spent

in

and

also

partners

which

if

approaching the The

of

joint-venture

at

that

time

Expo

permitted

to

get

up

The f o r m a t i o n

this

period

1970

with

The

local

the

idea of

of

was

a

a 50:50

application

down.

because

another

DKS:

production

a

material for

maker

historical

objects

a

the

former

closest

managers.

In

sales-joint

both

and

chief

venture together was DKS.

not

with very

Japanese The

the

latter

friends

officers

been and

Factor

by

worked sales

on

for

the

the

were

the

from

vice

and

CEO,

the

side

but b i g morale

of

personal and

and

the

Japanese level

jointly.

This

or

production chose

his

presidents

head-office

joint-venture

president

stores

president

executives

German

by raw

company

drug

their

in,

out

cold-wave a

our

give

executive

chairmen,

the partner's

indirect

pleased to

pharmacies,

(CEO)

acting

from

its

v e n t u r e was w i t h a good

the

was

from

to turn

had

Osaka

and a German e x p a t r i a t e

chairman

and p o s s e s s e d

had an

like

ventures

in

was n o t

they

friend) ,

Max

one o f

of

good

Japanese

satisfying role

1972

with

outlets

DKS was

Nevertheless,

assumed him.

executive

party.

a

in

(1972)

joint-ventures

retail

facility

participation

and a s k e d M I T I

spring

company

(still

and p e r f u m e r i e s ; -

by

50:50

attention.

salon products

joint-venture

two

high-priced

friend

for

But

only

production

Wella's

joint-ventures

distributor

with

various

quantity.

c o s m e t i c museum, w h i c h g a i n e d n a t i o n w i d e

2.2

the

all.

1,000 ton production of

dealing

two

as d i r e c t o r s

for he good

under

salon-distribution

authority.

46

To

make

the

things

headquarters tion

at

company

individual

initial

partners

Due only

the

after

close-down

entire

2.3

of

of

liaison

nevertheless Japanese

fact

partner's US

rental

later

the

$.

DKS '

7 were

spartan

of

company by

the

holds Health

each g i v e n

product,

disastrous

for

the

with

-

only its to

3,000

US

short-term 150,000

office square

salary

occupied feet

the

received local be

very

people an

After

and 2

family.

The

corner

member

major out

of were

staff,

staff

incomes. consider

thus

years

of

of plus -

5

With

this

Wella

from

always

lavishly

no m a j o r

carried-

a

new

independent

i n the apartment

kitchen

the

rent

month

first

served

t h e b a t h r o o m and b a l c o n y a s w a r e h o u s e s , 4

%

another

which

$ per

inexhaustible,

company, up.

meager

did not

i n t h e Roppongi a r e a

embassy

still

a monthly

US

piled

100

w h i c h was

Also

$,

a

with

Also,

to

a

loans

US

1,000

the

$?

collaterals.

was

was r e n t e d Thai

course

7 0 0 US $ m o n t h l y .

multinational losses

of

1976.

125

first

was

(1973-1975)

Luxembourg m o t h e r ,

extended

room h o u s e d b o o k - k e e p i n g , a

own

screening

office

SA

its

accepted

liaison

beginning

spending

and

about

"Gods'

6 months

prove

liaison

amounting

women -

set-up

very

tory,

least

shade o f

Patmar

capitalized

office

fees

forward

of

p a i d b a c k by

Originally,

former

awarded

local

function,

unhappy

in

production

at

German produc-

different

a

of

the

preventive

are

would

of the

holding-company

completely

office

a

position

that

which

factory

role

Basel/Switzerland

the

with

only

each s i n g l e

a

1972

were i n c r e a s i n g l y

operation via

banks

Ströher

out

another

again

had

a period

office

Ströher/Wella

2 00

(for

of

operation.

The c e n t r a l

The

complicated end

self-supporting

to

and q u e s t i o n i n g a

founded,

cosmetic-licenses,

Ministry

the

This

growing

country". all

was

more

at

partners.

because t h e Wella's

even

least)

as

the

of

a

labora-

children's

t h e s t u d y - r o o m was o c c u p i e d by DKS logistics

were

in

the

parents'

47 bedroom,

and

the

living-room

s o m e t i m e s h o s t i n g up t o Despite

the

operation to

in

Patmar,

the of

50/50

tor) ;

Japan t o

all

sales

enabled

companies

sales

its

chief,

a an

able; and

to

he

in

the

first DKS

7

wife

returning

2.4

four

a

he d i d

not

desks

in

at

Headquarters

to

Darmstadt

countless two

called was

it

children

4

the

the

production not

was

always

comfortdifferent

hours

were

over

newly

100

erected

South-East 2

1/4

Asian

years

which

was

then

This

all

resulting

Tokyo

for

the

quickly good

in and

years.)

100 % c o n t r o l to

the

and

the

all

leaving

exactly

of

with

Itami.

After

polar-flights.

became c l e a r

that

due,

fields.

Hamamatsu-cho)

driver)

and on.

up

frequently

all

Countless

in

This

build

four

Y o y o g i and

stood

and

head-office

was

(no

desk

and

German

where

life

to

already

German

side,

office

staff-members

to

the

motor-car

t o Germany a f t e r

partner

all

relations

of

production

logistic

country

Itami-Airport.

frequently

and

time

to

only

Patmar.

funds

and

in the

(Roppongi,

The s h o r t p e r i o d o f n e a r

By t h e tion

by

marketing

addition

another

Regional were

visit

followed

the

from

sufficient

DKS'

went

subcontrac-

liaison

p e r y e a r b e t w e e n Haneda and

1973,

Singapore capitals

turn

between Osaka

riding

in

in

buy

sales

i n Tokyo

return-flights

to and

from

Also

hovered

near

(Later

salon

time.

three

one

spent

the

(using a

the

Weila-

Osaka-Factory

and t h e l i t t l e by

amicable In

place,

the

imports

the

bought

the

man

meeting

the

of

venture

courtesies

sides.

easy

offices,

in

marketing

delegated

be had

having

manufacturing

joint

own i d e n t i t y

friendly

side,

degree;

production

control

particularly gained

extended

have

to

the

DKS c o n t r o l l e d

joint-venture

had

complete

staff, Wella

a large

the

production

was

people.

ventures,

second p r o d u c t i o n they

both

joint

likewise

first the

45

powerful

DKS and W e l l a h a d a l m o s t

(1976) salon

distribu-

complete

control

48 over

their

any

Japanese

access

to

production rented

operation

production

joint-venture

Osaka

Factory

TV-maker's

of

refused.

took

the

on

suit

due

to

a

that

the

other

b o t h companies paid

% of

two

joint

Max

all

holding

DKS

operation in a

to

bankrupt

To t h e

personnel and o f

years

of

M i o US $ f o r

Wella

also

was

in

the

the

-

the

stood

firm

plant

was

-

for

all

total

Wella

course a l l

struggles

% charge

in

and

the the

production

the

% of the

of the

rest. from

loyal

built

at

a

behind Ibaragi-

Eight

Japan w i t h of

of

amount).

friends

from

law

shares

100

10 M i o US $ .

over

surprise

came t o

100

of Japanese p a r t n e r s

hard

backing the

arbitration,

and

majority

side

-

Airport

an

the

against

rejected

ruled

large

opened

demanded;

demand o f d o u b l e t h i s

sales

a

was

(salon-route)

operation

were

operation

7

the

unpleasant.

judge

and

2.5

their

retail

Narita

The

evidence,

volume

The p a r t i c i p a t i o n

After

first

partners)?

The German h e a d - o f f i c e ,

Overnight

months

later

studios.

2.5

be p a i d

sales

8

design sales

side

Factor

offices

% of

of

the

branch 90

former

gain

invade

s i d e demanded a t r i a l

challenge.

lack

easily.

Within

near the

the

plant;

Fortunately former

the

operations

The o t h e r

(against

their

production

DKS.

by

not the

to

70 km f r o m T o k y o ,

DKS, b a s e d on m i s m a n a g e m e n t .

70

forced

o u t and t r i e d

m e e t i n g became e x t r e m e l y

Dissolution

Patmar

they

could

plant.

German s i d e DKS,

they

t h e whole manufacturing

Prefecture,

The s h a r e h o l d e r s '

up

that

formulas,

partner

(owned

c o u n t e r e d by r e l o c a t i n g the Sano/Tochigi

and

sales

modern

former

agent,

former

staff

hair joint

remained.

(1977-1980)

Wella

Japan

Group

was

independent. However

the

hazardous lity,

8,5

owners' %; a n

and p r u d e n t

equity

of

this

1 1 M i o US $ b a n k

cash-management

group

had

loan,

assured

shrunk

high

to

a

profitabi-

survival.

Instead

49

of

the

head

became

office

a true

now

leading

hairdressers,

(nearly

100

partners

shares.

The

capital

key p o s i t i o n tion

felt

and i t

of

their

Japanese

group

was o p e r a t e d

was

colleagues

association's

but

with

an

an

in

company's

everyone

with the

rewarded

key

of

this

as W e l l a

the

with

a

image,

a

with

functions,

the

management

and

philosophy.

partnership

the

a

sitting

Western

of behavior by

with

international executives

in

organiza-

and

appointment

of

its their

Japan v i c e - p r e s i d e n t

of

the

division.

T h i s was a l l Bank t o

e n d o r s e d by p e r s u a d i n g M i t s u b i s h i

each t a k e

over

roughly

5 % of

thus making t h e o p e r a t i o n p o l i t i c a l l y

2 . 6 A m a l g a m a t i o n and c o n s o l i d a t i o n On J u l y office

1, to

Africa,

1978, be

the

and

successor

DKS was board

was

University whereas

Baker

Sendai.

the

member

old

a

the

Factor

the of

partner

friend

in

Tokyo

became

finance

and

sales/marketing

the

organization

success

such

made

it

as

logistics,

services, attractive

EDP to

and h i g h l y

personnel, and

and

a

Imperial

president.

well-functioning, legal

His

a s c h a i r m a n and CEO,

Whereas

services

Asia,

group.

growing

istration,

head-

Pacific,

whole

rapidly

production,

shares,

German

company was h i t h e r t o reasonably

Fuji

invulnerable.

from t h e Japanese

He s e r v e d t a c t i c a l l y Max

to

charge

of

law degrees

remaining

somewhat

back

in

McKenzie,

the

Bank and

(1980-1985)

called

export-activities

German g e n t l e m a n w i t h

in

managers

the

organization

important

appreciated

chairman

middle but

Japan

Wholesalers,

% of

small,

by a g e n u i n e b l e n d

was

Wella

% ugly multinational"

and J a p a n e s e p a t t e r n s

loyalty

25

identification

"100

Even

Japan, country. and

took

and 8 o v e r s e a s

particularly

members' salon

the

in

this

managers

all)

strangers,

president,

techniques

in

involved

atmosphere.

blue-eyed

Trade

top in

complete

was n o t

"butter-smell" Japanese

investing

insider-company

others.

employees

had

was

general

been

lacking admin-

Meanwhile and

The

profitable.

808

its

people

50

joined

the

organization;

universities, nineties. of

fields

result sales In

dropped

1983

the

former

to

separate

the

former

lined

into

As

flexible

a

in

companies,

to-door In

nearly sales

the

which

fired;

In

nearly

instead,

transferred this

to

in

another 100

in

2.7

but

as

a

of

5

had

been

the

stream-

a l s o became CEO. needs,

international

last

6 % in

5 years

1977 t o

efforts

strong

leap could

industry and

door-

27 % i n

1984.

paid

off.

forward

in

be

go,

let they

Both sales not

gradually

wholesalers. for

Wella

organization

r a p i d changes i n t h e Japanese 10

As a

serving

The w h o l e c o s m e t i c

employees

consolidation

changes

techniques

1981 merger

through amicable n e g o t i a t i o n s friendly

sense,

evolutionary

in.

a

however

marketing

from

sophisticated

who was

1976,

rationalization

resulted

profits;

rationalization

production

Company,

during

had s w o l l e n

meantime

strategies and

stagnant

the

e d u c a t i o n programs.

friend,

after

to

from

in

unpleasant.

Cosmetic

response

in the

body

1 9 8 1 as had been p l a n n e d ,

Max F a c t o r

p r o d u c t managers were c a l l e d had been

made

ultimate

one o r g a n i z a t i o n

freshmen

order-taking",

w h i c h was

Fine

100

management

and e x t e n s i v e

also stagnated,

president

were

facilities,

profits

them

the

"mobile

computerized, the

among form

efforts

with

warehouse

totally

will

Enormous

all

robot

who

in

industrial

Japan

always

accordance society

meant

with

in the

the last

years.

Looking t o

Wella

forthcoming

J a p a n now o p e r a t e s

rolling-forward perspectives account,

of

flexible 10

particularly

strategies

with

detailed

5 year plan.

years

periods

in staff

(1986-1995) annual

budgets

Beyond t h a t , are

and l a n d

always

and a

long-term

taken

acquisitions.

into

51

As

the

number

(together

one

with

in

market-segment

in

Consolidation, the

25

%;

tance

full

with

that

Kanebo)

from

Wella

also

furniture,

scissors, as t h e

hairdryers

and r e l a t e d

full

beauty

and

Japan's

number

the

goals

continuing extend

for

service,

these

in

retail

established

salon-business

to

salon-business,

and

specialized

three major o b j e c t i v e s 1)

the

Shiseido

outlets,

is

operates

and b l a d e s

14

of

service barber

the

company

% market

salon

as w e l l

for

e n a b l e d us In

regard

cooperation

that

as

in the world

This

close in

share impor-

for

i n Germany,

salon—field.

chairs,

two

building-up

factories

apparatuses.

in

are

years.

invaluable

leading manufacturer

as

price

there 10

further

present

well

high

the next

and

it

as

the

field

was

to to

with

already

established. 2)

As

for

the

necessity

to

care

famous

European

In

the

area

mass-market for

these

of

various

another

general outlets.

in

these

there

is

cosmetics Contracts

fields

and

the and with

coopera-

care

toilettries,

time.

with

Wella chain

The i n i t i a l

Japan stores

s u c c e s s so f a r

went last has

satisfying.

new

might

sales

coordination CEO

with the

Ultimately

into these

distribution

first

activities

former

together

drug-stores,

envisaged.

hair

fall

the

for

companies

into

All

ing.

of

and out

products

i n Japan a r e

been v e r y

the

branch

health tion 3)

pharmacies

has

again

companies, -

a

head

formed

lead

company a

to

the

culminating Japan

in

establishment ultimately

Japan.

in

Meanwhile

consulting

company

Ströher-Group.

Wella/Ströher

also

wants

to

boost

local

market-

52

3.

Successful

management

of

FAC

in

the

Japanese

consumer

market In

the

following

experiences

I

wish

to

give

and recommendations

involvement w i t h Japanese

3 . 1 Handling the

labor

a

condensed

summary

o u t o f my 17 y e a r s

in

situation

force

acquiring

and

success?

this

I n Japan

it

top-human

handling

people

especially

a truism

Two t h i n g s

Teamwork

is

execution young, end

unique

is

who

have

become

any

important

to

have

dynamic

and

account:

by

in

Japan?

groups,

discuss

Decision

quite

(USP), to

important

They

consensus.

managerial key

are

into

done

experts.

a

main

highly

employees

business

with

the

is

overwhelmingly

of

ringisho

it

a

positions

Japan.

a r e t o be t a k e n

rankless

up

is for

environment,

and

selling

true

that

capacities,

creative. 1)

is

countries

many

is

direct

challenge

resource-scarce

without

of

my

business.

I n s o p h i s t i c a t e d modern b u s i n e s s and t e c h n o l o g y especially

of

famous

often

the with

everything

papers even

and

like in

the

Western

countries. 2)

The

one d r i v i n g

projects, powerful founder has

a

force

though, person or

the

title

is in

because

delegate

a

Without

a

a

foreign

creative strong

philosophical

more the

push t o

often It

very

is

often

not

company man

charismatic

and i m a g i n a t i v e

or

in to

in

not

single

a

new

sometimes his

the

that

ideas

he

over

basis. Japan find

personality

level,

engage

important

he g e t s

on a n i n f o r m a l

dynamic

than

organization,

president.

to the organization Consequently,

behind the

must him

either

in

with

Japanese working

Japan. a

high groups

53

are

often

dull

and h e l p l e s s .

inspiration

t h e y go a l l

Very

retired

often

large

local

out

With the for

personnel

organizations

proper

motivation

and

ministries

and

achievement. (at

55)

provide

from

fine

characters

for

top

positions. Sources

for

the

companies,

average

Japanese

Japanese

overseas

labor

force

companies

in

expatriates

are:

other

financial

coming

foreign

trouble,

back

to

and

their

home

country. Stability

is

given

the

freshmen,

the

organization

to

the

scouted,

educated

over

a

dozen

n e c e s s a r y backbone o f t h e

3.2

The i n e v i t a b l e

It

is

wise

products

in

to

local

reputation

and

image.

the

They

long

built

up

later

build

are But

high

and l o g i s t i c

we

deem

a

by

within the

class,

profitable once

the

basis

unique

local

volumes

production

imported

and b u i l d

and

up a

good

involved

g r o w i n g and m a r k e t s n e e d t o b e s u p p l i e d r e g u l a r l y volumes,

run

company.

with

They

in

and m o r a l l y years.

production

begin

Japan.

organization

with

logistic

are large

base

as

inevitable. Generally,

Japanese

after

the

local

manufacturer

customary

third

The

high

quality high

level

complicated local

plant

and to

in

the

the

the

operating

foreign

situation"

consumer

standards

in

tiring

cannot a

but

prefers obtain

foreign

Japan, service

and p a c k a g i n g

regulations, in

who from

products,

trade

a the

affili-

products.

never

finish

domestic

like

stock

after-service

local

production

control,

of

and

quality

a t e d maker t u r n s

consumers

"out

Japan.

make This

the

excessive

organization,

of

a product

and

it

advisable

to

is

one

of

the

a the

have

safest

54

ways

to

truly

become

an

where

quick

deliveries

cause

severe

headaches

frequently In

unreliable

addition,

insider

and for

considerable

cost

the

import

Japanese

are

less

attitude

advantages

stems

from

with

Wella

very

feels

(importing north-east

than

-

has

developed

two

Besides t h a t ,

as s i t e s

Public

In

personal

at

(near for

field

of p u b l i c

always

relations

the

hate

monk,

proverb. Happy

t a i n i n g them w i t h

is

(after

their

and some

bad

ones.

presently

Kansai

in

Japan

erecting

Ibaragi,

and

consumer

production

-

and

centers,

necessary

a

70 km

country Japan

(Osaka)

two are

salaries consumers

own p r o d u c t i o n

in

prompt

be

an

has thus

conse-

and

logistic

(near

Sapporo)

and m i g h t

serve

4.

exact in

we saw a n e x c e l l e n t image w i t h t h a t also

hate

his

successful

Year's

party

for the

of

idea

the

a

general

public public

In

the

opportunity a true

Japanese his

deliveries

Japan.

clothes"

obtained with the aid of maintains

to

and

insider

food and p r e s e n t s ?

Suntory

artworks

I

Every New

of the p r o f i t

Similarly donates

its

and

to

international

a part

on

with

products,

comparisons

number 3 a n d

and

tried

"If

a

imported

and

Fukuoka)

combine our

conducts

lower

Japanese

w a r e h o u s e s on H o k k a i d o

affairs,

has

Japanese

relying

operate

to

If

o f Osaka

least

plants

can

relations

Wella

I

%) ,

industrial

centers.

3.3

about

(Tokyo)

deserving

on Kyushu

due

As a n e l l i p s e - s h a p e d

Kanto

quently

later

less

with

15

market,

goods

executive

usually

favorable

confident

of Tokyo).

focuses

and

-

70 km n o r t h - e a s t

two

foreign

i m p o r t e d goods v e r s u s d o m e s t i c

less

second p l a n t

less

Japanese

returned

efficiency.

enthusiastic

experiences

the

facilities.

factories

b u t more due t o t h e h i g h e r today

in

frequently

is

to

insider. an

old

wholesaler

clients,

enter-

i s t o pay these

back

clients.

museum,

Mitsubishi

and

department

big

55

stores

provide

a

lot

of

cultural

services

for

their

customers. As e a r l y

as 1970 W e l l a h e l d an e x h i b i t i o n

Pharaohs and t h e t r a v e l i n g the

Osaka

Expo p a v i l i o n s .

conducted spring

for

of

business

1984

the

partners

this

in

the

of

Ballet

Shibuya

many

a

lot

of

magazines,

of

have

Osaka and N a g o y a . danced

NHK-Hall.

to the Tuskuba-Exposition

in

a mirror

the

o f Madame Pompadour

symphony c o n c e r t s

i n Tokyo,

Stuttgart

in

resulted

appearances

Also,

many y e a r s

donated l o r r i e s

All

necessaire

been

In

for

in the

5,000

Naturally

we

1985.

'free

of

charge'

broadcasting

and

public

television

features. It

goes w i t h o u t

Japanese years,

PR

3.4

was

positive

personally

engineers compared court.

for red

legal

In

the

compromise

by

foe.

a

last

Hill

couple

and

in

of an

situation

governmental

and

has

language.

development.

fact

professional

environment

We h a v e

turn

always

made o u r

peace

conviction

that

tape. with few

Germany

the

Japanese

economic g r o w t h , judges

and

always

given

and

business

very

have

in

McGraw

and g o v e r n m e n t a l

this

agree

are

with we

Japanese

manager

with

a r e v e r y good f o r

There

customs

the

considered

with bureaucratic

not.

legal

speaking,

gratefully

I

relations)

educated

Living with the

very

we h a v e e m p l o y e d a

command o f h i g h c l a s s J a p a n e s e

Generally is

(public

who

excellent

saying t h a t

the

in

USA.

According

to

to

we

gladly

case

judge

lawyers

solicitors

tried

district

but

and

settle -

disputes

accepted much

the

disliked

are

Japan local out

of

proposed by

our

56

It -

is

a traditional

regardless

legal for

trial

5

or

against

of

10

years.

we

in

sensitive middle again and

and we

in

that

not

practices,

land

against

echelons and

Obstacles

of

support tive

on a last

discrimination

I

from

and

registration

importation

for

instance

always

top

serve

got

as the

Nevertheless,

all

local

what

rules

we

wanted,

delays.

office

have e x p e r i e n c e d

(particularly

of

c o m p a n i e s by

observed

from head

executive

(particularly

treatment

insist

the bureaucracy.

ultimately

and s u p p o r t

As a n e x p a t r i a t e

Japan

may e a s i l y

any

foreign

patiently,

though sometimes w i t h s i g n i f i c a n t

3.5

they

products,

acquiring

reacted

if

licensing

new

discrimination lower

-

observed

various

or

not

in

litigations.

marketing

have

or

also these t r i a l s

We h a v e

products,

intended

t o punish both p a r t i e s

guilty

parties

feel

procedures an

whether

i n the courts?

foreign

However,

practice

management)

from

the

both the

and

lower

warm

unapprecia-

ranks)

of

the

headquarters. I n my p r e s e n t office

position

staff

understand

their

p e o p l e on t h e In turn, their

I

h a v e made s u r e t h a t

involved roles

in

working

as

service-men

departments

and many

important into the

and o c c a s i o n a l

Japan their office.

of

our

and

head

markets

friends

of

the

o u r o v e r s e a s m a n a g e r s g i v e t h e m a warm r e c e p t i o n a Japanese

o f p r e s e n t s w i t h h i m when v i s i t i n g

laments

Japanese

all

overseas

front.

countries

particularly ces

for

flow

was

Naturally

also of that

achieved it

is

the

information,

than with his

it

overseas

is

easier

against

and to

not

the

to

at

a

It

central

Many a f o r e i g n

own p e o p l e

puzzling

brings

t h e head o f f i c e .

involve

entertainment.

however,

partners

success

to

colleague

seems

service conferen-

manager deal

home a n d with

in lot

the

Frankfurt

in

with that head head-

57

quarters, good

t h a t w h a t i s good f o r

for

Kanji

New Y o r k

Countries

must a l l

or

Tokyo.

(Japan,

Frankfurt

North

Korea,

China,

be c o n s i d e r e d as c u l t u r a l l y

their

own s o c i a l

Today

we

employ

Taiwan

necessarily EEC a n d

& Hong

different

Japanese

personnel

at

our

helpful

in

dealing

extremely

not the

and

the

Kong)

requiring

regulations.

regularly

Arabian)

is

America,

(and

also

Chinese

German h e a d q u a r t e r s , with

our

which

overseas

and

proves

staffs

and

clients.

3.6 Mastering d i s t r i b u t i o n Whereas

the

Japanese

we

still

sector, partly

-

(door

in

to

retail On

the

sales,

one

other

are yet

it

are

with

only

70

and

card

systems)

systems and

not

the

least systems are

a

minuscule

mission

company c a n e s t a b l i s h

sales

dealers

to

than are

It

130

barber let

secondary is

Germany

new

shops

and

of

a on

systems networks

In

the in

for

last

them d i s t r i b u t e

wholesalers; old

connections

chartings.

restricting

to

in

the

out

the

beauty

10

% of to and their

of

years

we

and

not

all

cases

accomplish relations

Nevertheless,

themselves

Japan-

are

directly 95

much more d i f f i c u l t

logic

in

160,000

countrywide

wholesalers

side.

districts; our

and b a r b e r

salesmen

appointed

succeeded.

more

in

Wella

the

hard

appoint

exclusive

44,000

by

for

struggled

we h a v e

certainly

beauty p a r l o r s

calls

We h a v e

our

at

modern

a r e c o n c e r n e d and no t r a d i t i o n a l

305,000

field merely

is

a foreign

question.

count

credit

wholesale

-

Most

t o change Japanese customs and p a t t e r n s ?

hand,

Direct

have

production

established.

compared USA.

in the

incompetency

sector.

extensive

tertiary

hand,

marketer

w h e r e new p r o d u c t s

There

enormous

distribution

to archaic

efficient

outlets.

foreign the

highly

observe

the

door

contrast

are

problems

2/3

of

designed

58

area.

In

salons their

we

take

a

force

of

via base

complain events

that

our

Germany,

and

business

most

typical

of

of

a

care

about

lack

of

products special

company

of

consultants,

-

our

thus

far 80

tion,

we must

store

foreseeable penetrate that of

future

because of

our

this

rest

have is

of

the

not

social

necessary at

Wella

pleasure

and

pharmacies/drug calls

employ

in

major

range,

moment. well

stores

s e c o n d a r y and t e r t i a r y

than

field.

as

hardly

will

a

served but

for

advising

mass

dozen

retail

penetrate

content

the

In

the

mama & p a p a

If

we

we h a v e t o t o l e r a t e a n army o f

approach

chain

wholesalers

chains.

wholesalers/peddlers

our

distribu-

t o t h e main dozen

appoint

by not

beauty

because of

high prices.

a dogmatic

do

thousand

outlets

a

on

field.

Again,

to

we

However,

we h a v e h a d t o b e

and s m a l l e r

we w i l l

is

treated

Now e n t e r i n g

connections

as

and

concentrating

country

also well

sales promotion.

segment one d a y ,

the distribution

and direct

of the salon

our r e l a t i v e l y

rather

do

and

Wella-affiliated

presently

should

dozen w h o l e s a l e r s

A pragmatic

combined major

making -

They a r e

establish

covering department stores

the

the

organizations

the

educated

the densely populated areas. products

product

for

about

are

(kouriten)

salesmen

stationed

restricted ladies

managers

of meetings,

bring

sons and

shops

rank

women

especially A flurry

their

attention

t h e customers and f o r with

who

knowledge

world.

for

40 w h o l e s a l e r s .

demand t h e A

the

Tokyo h e a d q u a r t e r s

made v a r i o u s

over the

ideal

and

Germany

employ 7 0 salesmen f o r hair

with

instructors,

our

conferences

have to

cosmetic

are

visit

enough.

Some

trips

companies a l l

because

contacts

and whose t e c h n i c a l

salesmen

and n a t i o n w i d e relations.

stores

direct

technical

frequently

on t h e m f r e q u e n t l y

human

The

80

of

upgraded.

wholesalers

call

care

i n our 8 s t u d i o s

regularly All

turn

possibly the

fact

hundreds

nationwide.

is

required

in

59 3.7 1)

Guidelines Market the

for

marketing

Research:

field

of

In

contacts

to

parties,

courses,

personal a

salon

the

we

shop

are

failure

owners

and

and a l s o

we

and

seminars

well

of

field

outlets,

lunch i n v i t a t i o n s

result

trade,

the

special

keep

staffs as

well

and v i s i t s

informed

partly

very by

arranging

as

extending

to night

about

the

o u r c o n c e p t s and t h e

in

close

bars.

needs

latest

As

of

the

trends

in

fashion. For

mass

marketing

we

H e r e we f i n d J a p a n e s e with

foreign

competence Japan

is

2)

Timing

companies

we

are

-

-

Elements:

consumers

Japan

in

Research follow 3)

product

is

consumer

in

not

all

the

information only

for

us

in but

the other

changing

and t h e h i g h

orientation are

marketing is

market.

is

used

but

speed

amazing. to

also

considered

quick on

as

the sales

Nippon.

I

or

have t o fashion

make

categories;

a

be a l w a y s

distinction

traditional

foreign

products,

on a l e r t

to

trends. here

Japanese and

of

three

products,

so-called

modern

products.

little foreign

field;

studies. affiliated

supply

any

quickly

Production

Concepts:

Traditional The

a

companies

and d e v e l o p m e n t

prestigious

have

only

side.

technological

Product

to

Nearly

their

Japanese

not

production service

market

and t h o s e

unfortunately

changing

Accordingly changes,

-

us!

One s o - c a l l e d boom f o l l o w s of

in-depth able

desiring.

available

a l s o about

make

institutes

if

Japanese

products

salability marketer he

outside

is well

desires

are

unique

Japan

or

advised not

market

in design the

Far

to

enter

participation

and

East. -

this for

60

instance

in

the

ties

to

cooperation.

We

create tional

food a

never

Japanese

variety

of

Prestigious small

profit

but

a

per

and a p p r e c i a t i o n

Modern

consumer

the

consumer

produced.

The

can

does

not

care

the

and

If

be

the

must

or

for

individuals

also

be

as

basically

whom t h e y

Japanese be

are

market

manufactured

genuinely

new

products

or t h e overseas head o f f i c e .

come

from

However,

whole

are

then

on

of

the

product

concepts.

manager"

to

countries

i s not yet

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in

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large

which

teams.

production

specialists,

themselves.

Japan

are

-

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are

profile

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operating

in

to

"product

in

western

Japan. mainly

i d e a s and making them m a r k e t a b l e These

involve

engineers,

accounting

makers

requirements .

we

working

p r o d u c t managers d e l e g a t e d by W e l l a

implanting

appearance

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quality

considered

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should

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regulations.

t e a m s and n o t o n l y t h e p r o d u c t - m a n a g e r

members,

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country.

ideas

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a

establish

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where

therefore

for

Turnover

help to

longer

they are c a l l e d

tradi-

suitable

i n Japan.

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no

a

only

ideally

T h e y must f o l l o w m e t i c u l o u s l y

requirements inside

are

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brand.

they w i l l

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fashion products;

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can be h i g h .

right,

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unit

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products

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for

he

of

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beginning

high

-

company

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reasons;

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industry

local

men,

More t h a n

despite

designed

in

sales

legal and

50 % o f

their

people,

experts, also

the

Wella

German

J a p a n and f o r

by

R & D logistic decision

products

in

international Japanese

market

61 4)

Communications: concepts for

Japanese

tions

are

We h a v e of

Similarly

also

are market

needs;

similarly

been v e r y

media

experts,

would

otherwise

product

concepts,

designed

foreign

highly

and

ideas

media

tailored

and

apprecia-

welcome.

influential

concepts,

local

to

particularly

leaving

however.

on t h e

the

style

execution

Countless

jeopardize

and

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message

entirely

language

success

of

to

hazards

our

media

messages. Until in

recently

products; quite

the

doubtful

Going f o r TV

we r e l i e d

specialized

nearly

high

class

hair

dressing

outside

entirely

magazines trade

of trade

on

for

advertising

our

media

elitarian

support

t h e mass m a r k e t we must spend a g r e a t

advertising

and

later

for

is

papers.

campaigning

in

deal

big

on

daily

newspapers. 5)

Sales

Promotion:

refrain system

from

discount

according

sales

promotions

these

Japanese

posters, other

sales

enormous their

trade there

but

scale.

On t h e

In

is and

a

rebate

other

Wella

hand,

followed to

the many

evening-entertainment

for

also

engagement by

still

and

stickers,

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observe

excessively.

habits.

folders,

The h i g h m a r g i n s

light

levels, above

the

of

repair

all

trade. on

used

companies

is

addition presents, consumers. required

western

Here which

expatriates

an is and

families.

Services: the

turnover

are

personal

Japanese

practices,

retailers

particularly

6)

to

favors,

wholesalers,

Leading

the

i n J a p a n must be r e v i e w e d

merchandising services, notorious

A purchase contrary,

is

services,

free

returns

house

from a l l

not a d e f i n i t e

the

advice

relationship

on

deliveries,

legal

in all and

levels

of

act

Japan,

between

in

buyer

the and

62

seller

begins

enormous long is

lasting

4.

-

purchase: required;

personalized

applies

Japan

the

relationship,

entirely

this

with

after-service

even

in

of

curse

market

is

the

is

the

blessing

bad t i m e s .

among J a p a n e s e

a l s o t o W e l l a as an

cornerstone

the the

Business

partners

-

and

insider.

success

in

the

Western

Pacific We recommend g o i n g f i r s t Pacific

markets.

be

for

fit

Whoever

other

already

casts

Taiwan,

whereas

Australia The

are

be

met

in

Japan

by

Pacific needs the

long

of

Rim.

Usually lines

are

or

Rotterdam; t w o weeks

It

is

all

difficult

excellent

from d i s t a n t For

if

China,

Indonesia

which

or

have

case

must

a business

base

the

Indonesia.

from

Kobe

Western consumer Naturally

than

from

Japanese

through,

been

Asia

conquering

necessary,

after-

Frankfurt

these

reasons

for or

San

service-

on w e e k e n d s ,

European

w i t h German Wella

and

South-East

Asia

with

Indonesia,

the

Philippines,

Malaysia

managers

a

from

regional Japan;

Thailand,

and Hong Kong s a l e s

German h e a d q u a r t e r s ,

compete here

companies

concepts,

headquarter step

by

Taiwan,

W i t h o u t any s i g n i f i c a n t

know how,

to

provided

technicians.

started

in

have been e s t a b l i s h e d .

makers

repair-services

for

Korea,

Korea,

serve Japanese

shorter

straight

Japan

day.

extremely the

which

should

South-East

i n Taiwan or

much

work

this

market

nation.

in

for

Asia-

business

of

service

In

products

Francisco

with

and

mandatory

engineers 15 h o u r s a

Thailand,

enterprises

most m a r k e t a b l e

supply

on

resources

new m a r k e t e r . be

Nippon's

consumer

by t h e same

quality

to

in

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natural

by J a p a n e s e every

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shadow

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sought a f t e r

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are

survives

entries.

a

standards

established

t o J a p a n when a p p r o a c h i n g t h e

and help

step

China,

factories from

and r e s o u r c e s

the

could

63 be

extended

Malaysia

from

is

the

base

Japanese

-

in

Japan.

for

Still

managerial

and a l s o t h e p r o d u c t i o n m a n a g e r i n P R C ' s

5.

Japan and t h e w o r l d

Long b e f o r e

Dr.

International lines:

a

presented

transnational

likewise

all

instances

global

book

"Triad

levels,

prominent

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be

applied

Africa

area.

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planned s t r a t e g i e s company

today

and t h e M i d d l e

cultural all to ing

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from

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certain

less

generally

it

means

mandatory share

German

development

in

Wella

along

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be

well

East from

from

Europe

Japan.

marketing

categories

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approach:

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less

Local marketing population

international

and

be

in

must

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local/regional

developed.

activities

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dual

sophisticated

we must remember t h e

a major

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product in

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achievements

make have

must

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the

p r o d u c t s must be Above a l l

for

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for

Power",

base L a t i n American markets might

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marketing

consumer

in

Tientsin.

and S o u t h - E a s t A s i a p l u s t h e S o u t h P a c i f i c In

CEO

purposes-

t h e EEC and J a p a n .

From t h e N o r t h - A m e r i c a n cultivated,

excellent

had i n s t i n c t i v e l y

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markets

Ohmae's

true

today

training

l a r g e Japanese market

and

high

for

a

of

its

technological

globally

oriented

market-cake.

i n Japan,

presently

central

laboratories

order

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profit

from

and

level,

its

which

organization

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building for

is

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up a

branch

research

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brains

& and

experiences.

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would

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idea

J a p a n e s e CEO n o t r e p o r t i n g at

the

head

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extremely directly

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t o a member o f

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the board

Management o f a J a p a n e s e E s t a b l i s h m e n t F e d e r a l R e p u b l i c o f Germany

in

the

-

A R e p o r t on E x p e r i e n c e s w i t h Problems and S o l u t i o n Seinosuke

There

are

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leave

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o n l y m e a n t t o be f o o d

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relinguish;

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salvation", not

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of

Buddha.

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least

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feelings,

life

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everything

ideas.

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heart, In

or

Kuraku

in daily

or also d e s t i n y .

Approaches

Management

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involved. And t h i s

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1 . Management b y a l l A Japanese

proverb

who a r e ids:

the

first

part

o f my

talk.

involved "Tv:ο

know

more

than

one".

As

I

66

b e g a n my j o b activities been

in

increased

involved

were

If

I

managers,

if

in

I

also

that

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person

alone,

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I

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members

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those

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managers, me,

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need

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participate.

responsible

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rather

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several

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analysis

work

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responsible

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task.

2 · A smooth c o m m u n i c a t i o n

involved,

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type

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but

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those

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average

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called

arose

inventory

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and p e r s o n n e l

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the

the

accounts,

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problems

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a solution so

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take part is

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respectively find

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reporting

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accordingly),

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FRG

together

departmental there

the

had been extended

to

be

flow

successful

in

a smooth c o m m u n i c a t i o n and

from

bottom

to

management

f l o w must e x i s t

top

within

system;

between

the

business

management

between

departmental

managers

and s t a f f

between t h e s t a f f

members

by

themselves.

an

and

all

from t o p

to

organization

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members,

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members,

as w e l l

as

67

From t i m e been

in

to

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the

Most

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individual

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In

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goods, etc.,

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the

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from our s a l e s manager:

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Kuraku,

meetings"

many y e a r s was I

once a

year

now.

resistance

at

am d o i n g my b e s t ,

first but

68

you want I

asked

-

not

to

find

all

out where

important

only

staff

members

administration, accounting,

Then

as

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customers diately of I

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69

3·

Setting objectives

B e f o r e we t h i n k we must be

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The

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92

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How d o e s o n e d i s c o v e r a n d p r o m o t e h i d d e n often hear statements

people is

or

wrong.

good

Managerial

education

properly I

personnel

also

and

fulfill think

lazy". them

" I n t h e FRG t o d a y t h e But

personnel show

their

that

such a s ,

are

abilities?

I

believe

must g i v e how

they

the

can

this

young

judgement

young p e o p l e better

and

a

more

tasks.

this

is

not

sufficient.

The

managerial

71

p e r s o n n e l must a l s o h a v e t h e a b i l i t y abilities

of

each

certainly

not

very

say:

"Please

e v e n when

employee easy

is

promote

because

l e a v e me a l o n e

it

difficult,

to recognize

and

most

often

t o go my o l d

the

them.

hidden

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the

is

employees

familiar

way."

management must a l s o m a s t e r

But this

task. Here

is

a n e x a m p l e o f how I

someone his

is

completely

best,

I

creativity

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have

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changes,

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to

he sees i t

decisive

abilities

point

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form

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the

-

certain

a

I

any

transfer

principle

activities.

today

without

a while

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from

a

if

gives

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job this

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of

work

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objectively, than

job through regular the

the

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conviction:

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is this:

improvements.

another

he

w o r k much b e t t e r The

and

any

employee,

rotation, angle,

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yesterday

alteration

with

frequently

lost.

exactly

came t o t h i s

occupied

to

further

form

of

develop

systematic

the

individual

development

on

the

j o b r o t a t i o n w i t h i n a company and n o t

normal

external

change

from

one

company

in to

another. Frequently money. is

it

That

aware

is

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of

the

convinced

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gives

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all

would

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certainly

people

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significance

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here

totally a

of

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explain

this

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on

more

work

but

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if

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closely

job,

then

the

job.

in

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someone

occupation

meaningful

s t r e n g t h and p e r f o r m a n c e to

mainly

wrong,

and he

is also

the

following

at

different

example: Two

bricklayers

places. -

I

asked t h e

w h a t h e was d o i n g .

one

brick

on

top

first

the

same

bricklayer

street I

He a n s w e r e d r a t h e r of

another."

I

met -

he l o o k e d

annoyed:

also

asked

"I the

just

pale lay

second

72

bricklayer

-

explained client

h e l o o k e d h a p p y - w h a t he was d o i n g .

that

and

he

was

building

was

working

finished

quickly

so t h a t

It

without

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goes

finished

earlier.

difference

in the

as

hard

and

which

This

are

connection

it

t o make up

leeway.

I

is

always say,

of of

the

sea,

changes,

the

future

technologies

ever

progressing.

extremely

difficult

must

climber,

be

able

to

management

must

be

field

of

here

the

report

also

makes

in

it

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and great

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constantly

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one

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if

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to

his

predict

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as

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the

sudden

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roar

many

years

weather

foresee

future

as w e l l

an e x p e r i e n c e

of

industrial

80s,

boom r e a c h e d

observing t h e development at

the

hi-fi

carefully

that

time

electronics

automats,

industry.

get time.

beautiful

and i n n o v a t i o n

beginning

ing

to

out

of

as

my

occupation:

70s,

Already

-

able

technology

Allow

In

more

trends

and

preferences.

me t o

was

difference

c h a n g e s i n consumer

management

could

his

a good f i s h e r m a n must be a b l e t o h e a r t h e

and

in

he

proudly for

c o u l d move i n on

house

small

a good m o u n t a i n

experience,

trends

as

He

house

end.

innovations

improvements

beautiful

the c l i e n t

5 · Management m u s t r e c o g n i z e Today's

a

At

know-how t o

as

the

we

the

same

had

boom

increased

time but

robots) this to

to

meant

us i t

and a t

emerged,

o f consumer

(such as b u i l d i n g

industrial

competitors,

video

a climax,

were

electronics.

the

supply

elements, our

we

the

process-

partners

supplying

m e a n t more

of in

industry industrial

cooperation. Simultaneously

we

extended

the

area

of

office

electronics

73 and

increased

The

end

of

started

sales

this

three

structure

of

of

semi-professional

development

years

ago I

electronics

and i n d u s t r i a l to

time

develop

with

o u r company.

that

50%.

other

appliances,

It

sales

besides

was

a

equipment.

three-year-plan

the

goal

ordered t h a t electronics

of

important

areas

including

to

the

which

changing

the share of

be r a i s e d

was

maintaining

video

the

office

f r o m 20%

finally

electric strength

at

further household

of

consumer

electronics. We w i l l This

definitely

is

not

increased

a

reach t h i s

planned

sales

g o a l by t h e

economy,

activity

in

it

is

areas

end o f

only

which

this

the

have

year.

result

a

of

promising

future. This

does

dealers.

not

only

Fifteen

apply

years

s h o u l d s e t up h i - f i room

for

mended

the

the

Those

followed

good b u s i n e s s

sell

I

dealers

and

of

our

and

garages.

radio

technology

with

portable

will

were

they

The pay

leave

telephones.

In

the

pocket

ago

where

to I

make

recom-

consumers

only

able

gained

to

achieve

a good

reputa-

specialist.

this

itself later

dealers

business gained

in

Technology

regarding mobile telephones w i l l in telephone

not

experience for

our they

cameras.

and t e l e v i s i o n

to

to

that

in order

years

studios

also

video

radio

not

ten

applies

dealers

stores

to

video

my a d v i c e

also the

and v i d e o

respectively

radios

it

told

in their

and p r o f i t s ,

recommend

car

us,

I

Eight

recorders

t i o n as a h i - f i Today

boom.

installation video

who

studios

hi-fi

could t e s t

to

ago

to

also the

to car

with

portable

the

future

business

and

sales

know-how

in return

allow

sales

systems.

90s t h e m a j o r i t y telephone,

of

which

the is

population w i l l the

size

calculators.

Then t h e r a d i o / t e l e v i s i o n

good s u c c e s s

in

sales.

of

have

its

own

today's

pocket

business w i l l

achieve

74

Another ces I

experience

in

colors.

remember

At

this

television yellow,

I the

end o f

with

pride

cabinets

or

technical

even look

out

on

the

hi-fi

1 9 6 0 s we w e r e

-

in

the

bringing

market;

military-green for

consumer3'

h a d was r e g a r d i n g

for

bright-colored

white,

portable

components

in

preferen-

successfulred,

curry-

radios

black

in

or

the

the mid-

seventies . This

is

not

also

for

knob

buttons, the

valid

technical

turning In

only

instead

consumer

preferences.

It

is

absolutely

and In

this

the

the

or

remote

station

that

management

the push

control.

in

digital

search

knob

which

is

change

foresees

together

but

of

with

search

innovations

development

form,

substitution

station

manual

or

television

sensors,

technical

necessary

follows

color

future

with

dealers

consumers. 1 9 6 1 as I

were of

and

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of

as

on

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of

example

cabinet

such

contact

radios,

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trends

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channels

buttons,

of

indicators

comfort

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for

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two

Western

founded

t o o k up my j o b h e r e

employees and were r e s p o n s i b l e

Europe.

in

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in a l l

24 y e a r s ,

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my w o r k h a s m a i n l y (apart

t h e German

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all was

in

all

How

the

hidden

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DM. focused

developing

on

the

products

user):

2.

promotes

almost

one b i l l i o n

How one d e v e l o p s a new d i s t r i b u t i o n one

for

we

corporation

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employees

Republic,

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the

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T o d a y we h a v e a l l

During

When t h e

Hamburg,

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FRG; l a s t

in the Federal

method

abilities

of

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75

3. Ad

How one p r e p a r e s 1.

I

could

that

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oneself

arrange

is

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for

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the

the

future.

relations

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the

supplier/buyer

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dealers

so

relationship?

"Through p a r t n e r s h i p ,

mutual

success". Finally

I

could

important so-called at

a general

At

these

which

family

consisting

long-standing

Family"

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comes t o g e t h e r

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"Technics-Family" once a y e a r w i t h

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3.

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our employees

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appeal

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annual

to

family

of

the

warmth,

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to

family. motto

reads:

"Take

part

in

shaping

the

future" . The

background

behind

s u c c e s s i s no g u a r a n t e e everyone

to

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this for

together

motto

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Therefore

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some

Process I n n o v a t i o n and S m a l l Firms i n Motonari

1.

Introduction

In

the

1980's

strong

Yamada

microelectronics

i m p a c t on o u r s o c i e t y .

c h a n g e i n t h e economy.

Japan

(ME)

It

technology

is giving rise

has

to a

Over t h e p a s t

years

been

firms.

kinds

of

Especially

ME m a c h i n e s

the

the machining center become

widely

factories operate

not

only

(FMS) . which

FMC

operations in

run

been

As a r e s u l t

or

is

flexible

the

FMC i s

the

a

process,

machines the

factory.

welding, also

have

and

to

system systems

system

applied

Initially

in

extended

been the

to

they

painting

assembly,

of

FMS

to

various

were

adopted

process.

Now,

inspection,

we a r e

now a b l e

to

control

aided

aided manufacturing design

(CAD)

and

process. In the

that

factory

manufacknown

Furthermore,

appeared

automation

discussed

of

The s y s t e m i s

(CAM).

system

preceding the manufacturing

a series

t h e automation of t h e design works. realized

also

flexible

production

has

been

but

so-called

small

have their

process.

computer

computer

(IR) Now

manufacturing

automatic

into

machine,

robot

firms.

the

t u r i n g p r o c e s s e s by one c o m p u t e r s y s t e m . as

(NC)

them s e p a r a t e l y ,

ME m a c h i n e s .

ME

processing,

the transfer

are

industrial

This

several

machines.

within

have

radical

introduced

controlled

manufacturing

to

(FMC)

FMS

some a few

addition,

they

and t h e

the

try

cell

and

link

and l i n k s In

by

them s y s t e m a t i c a l l y .

manufacturing

have

numerically (MC)

used

a

T h i s new t e c h n o l o g y h a s p r o d u c e d many

t y p e s o f machines w i t h microcomputers. many

had

in

It

last

the

design

facilitated few y e a r s (FA)

by l i n k i n g t h e CAD s y s t e m a n d CAM s y s t e m .

may To p u t

it be it

78

into

practice,

a

system i s b e i n g Also,

many

computer

kinds

of

into

facsimile,

word p r o c e s s o r

We

have

call

presently

ME

their for ride

works the

in

has

link

way.

these

of

their to

the

of

2.

in small

diffusion

of

and

aiding

their (OA).

diffuOA

is

network

in

the

small

firms.

problem

firms.

The

firms have

have

sought

small

to

firms

introduced

the

machines e f f e c t i v e l y ?

Can

systematically?

to consider the

influence

innovations

In short, of

potential

already how do

firms

computerize

enough

have But

to

we w i l l

ME m a c h i n e s

latest

field

on focus

in

our

small

study

of

the

production

data

theme

Japanese will

be

analyzed.

all,

comparison of According

to

manufacturing Enterprise

factory

we w i l l small "a

of

automation i n Japanese

show t h e

firms

survey

firms"

Agency

introduction indicates

machine,

automation

firms

technological

T h e s t a t u s quo o f

First

been

technological

an i n f o r m a t i o n

They

machines t o run

radical

shown a n d

build

ME r e v o l u t i o n .

p a p e r we w o u l d l i k e

manufacturing

price,

Large

In this

the

have

The copy

Recent

office

changes.

recent on

firms.

Do t h e y o p e r a t e t h e i r

plural

equipments

the

stimulated

What p e r c e n t a g e

ME m a c h i n e s ?

of

machines

and computer h e l p t o m e c h a n i z e

change

this

to

wave

(CIM)

inter-firms.

revolution

respond? they

reduced enlarged

and

adapting

manufacturing

business

operations.

this

being

both i n t r a The

offices

office

innovations sion.

the

new

introduced rationalize

integrated

proposed.

with large of

by

the the

is

shown

firms

Japan

for

the

in

the

firms.

1986),

machines

t h a t many l a r g e

on FA i n

production

conducted

(February ME

data

firms

technology Small

and

status

quo

in

have a l r e a d y

Figure

Medium of 1.

introduced

the It some

79 kinds

of

high.

For

ME

welding

machines,

example,

and

machines

and

the

painting

48.1%,

CAD

the

robots 43.1%,

w e l d i n g and p a i n t i n g

introduction

percentage

robots

of

58.0%, etc.

percentage

NC m a c h i n e s

is

automatic

In

inspection

particular,

the

and a u t o m a t i c t r a n s f e r

h a v e i n c r e a s e d by more t h a n t w o t i m e s

in the

is

59.2%,

last

CAD,

equipment three

year

period. These out

results into

confirm that

various the

some

large

During

the

(May 1 9 8 6 ) operated

Japan.

Management factories of

FMS i s These yet

On

in

products

process

known

to

in

factories

that what

machines. on FMS" are

tools,

Association

sample the

of last

which

in

C h i c a g o USA

FMS a r e

now b e i n g

the

diesel

etc.

Today

engine, 370

sets

229

shows

that

factories)

have

three

introduced

years.

88.5%

is

3.1%

the

large

of

introduced

But t h e

FMC

Japanese

percentage

and

that

of

4.8%. suggest

other

that

ME m a c h i n e s

in the t r i a l hand,

how

As

Figure

as

small

firms

most o f

systematically.

firms

have

not

Possibly

they

are

the

new

stage.

technologies?

far

not

can

process

world.

production

into

design

is

spread We

transfer

70 s e t s o f

machine

Consulting

figures

the

that

before.

the

the

it

has

J a p a n w h i c h was c o n d u c t e d by t h e

(total

operated

still

in

Conference

Their

in the

FA m a c h i n e s the

in

systematize these

was r e p o r t e d

survey

and

FA w h i c h

mentioned

However

transmisson,

FMS e x i s t

as

of

automation

"International

in

progress

operations

firms

it

automobile

the

of

manufacturing.

extent

Another

the

processes

advance

links

preceeds

of

support

1

do

shows,

has n o t

b u t t h e NC m a c h i n e a r e

small

the

firms

respond

introduction

increased

rapidly.

of

to

ME

machines

The r a t e

l e s s t h a n 20 %. H o w e v e r ,

of

because

all this

80

survey of

fails

to

clarify

sample f i r m s

in greater When t h e Gifu

the

we w i l l

number

of

answers

move on t o a n a l y z e

and t h e

other

type

information

detail. author

had a chance

Prefecture

in

1983,

to

survey

there

this

were

problem

many

in

the

interesting

findings. In

this

survey

e m p l o y e d more persons

by

and

electrical

robots

made

statistical

out

the

use

of

1986 o r

In

the

were

surveys

satisfied

with

less

(general

precision

mechatronic

Prefecture Almost

indus-

microcomand Osaka or

more

equipment.

Our

Prefecture to

300

metal

machinery,

equipments w i t h

would i n c r e a s e

to

centers,

mechatronic

which

than

and

introduced

same r e s u l t .

half

indicated

over

70% i n

that 1985

1987.

majority the

firms

belonged

machining

in the Gifu

introduction

also

in the Aichi the

small

machinery

had

production

surveys

a n d r e a c h 80% i n some

sample

machines,

estimation

of

and

industries

the

and o t h e r

pointed

had

(and o f

Japan)

transportation

NC

Some o t h e r

rate

course

persons in

of

meaning

Prefecture

the

10

machinery

59.5%

equipment,

firms

to

machinery,

machinery). trial

than

s a m p l e was l i m i t e d

definition

products

puters.

the

of

firms

introduction,

answered

and h a d h a d

that

they

effective

results. Yet

we

could

introduction operating What survey

is

and

rate the

find the

a

strong

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introduced

status

have

Prefecture

57.8% ME

quo

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in

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correlation sales.

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o f t h e s e m a c h i n e s was v e r y

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rate

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many

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in

the

Aichi

Government Prefecture

production

our

experience

former in

this

the

firms

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Prefectural

firms

into

between

the

low.

introduction?

i n v e s t i g a t e d by t h e A i c h i

December, 42.2%

not

precess result

case

is

to

a

last have while

in

Gifu

not

high.

81 The

sample

of

industries. Figure

2

gives

indicates third in

further

second

general is are

are

ceramic

wood

we

industries

in

both

earlier.

can

out

are

have

other

diffusion

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show

notable

and

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plastic

percentages

furniture,

paper

wood

processes

ago.

and

products

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processes

all

are

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electrical in

the

rubber the

to

increase

ME

office

been

is

compared

appeared

and

(FA).

one h a s n o t

working

products

machine

and p r i n t i n g ,

automation

small

rate

estimated

connected

machinery,

a difference

lies

machinery This

had

in

among

machines.

among process

able

found to

in

three

industries? where

ME

introduced.

3 shows,

running

and

publishing

factory

ME

them.

we

product

which

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of

than

some i n d u s t r i e s

ME e a s i l y . and

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of

transportation

plastic

the

applied

difference

make u s e

in

instead of

explanation

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and

progress put

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introduction

firms

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in

a

the

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products

machines a r e

are

and

out

to

rapid

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(OA)

implement

years The

(25.5%),

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suppose

robots

automation

metal

electrical

(71.5%),

products

machinery of

more

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machines

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and

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point

90%

a

industrial

On t h e

machinery

average

high.

which

relation

precision

indicates

it

very

which

(86.9%),

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industries

(31.2%),

approximately

take

precision

machinery

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(69.3%)

the

is

industry

one.

etc.

Therefore In

is

(54.6%),

industries

manufacturing

d a t a one by

The

(72.9%).

high

and g l a s s

products

(33.3%),

percentage

publishing

and r u b b e r p r o d u c t s

all

information.

transportation

very

contrary,

includes

machinery

not

machinery

industries

On t h e

survey

we n e e d t o show t h e i r

highest

the

machinery rate

us

the

(92.9%), the

this

Therefore

them

83.9% o f in

the

the

percentages

are

firms

w h i c h h a v e ME m a c h i n e s

processing less than

process. 15%.

In

other

82

Therefore is

in observing

recognized

assembly.

Even

machinery, other

in

many

machinery glass

rate

and p r i n t i n g in

the

sand,

the

Actually

food

etc.

revolution

innovated

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is of

processes

ceramic

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materials

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Initially

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(42.8%).

innovation

processes,

high

electrical

in

fiber,

innovation.

metal

in

still

plastic,

material

the

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in

foodstuffs

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process

any

process

there

is

transportation

process

in

metal,

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and

process

special

process

of production:

simultaneously change

inspection

processing

advance

have a r e l a t i v e l y

assembly

%) and o t h e r s

among i n d u s t r i e s . as i n p u t s

the

the

little

o p e r a t e d ME i n

Processes t h a t

(33.3%),

(50.0

machinery

have not

are:

(43.7%),

products

one by o n e ,

machinery where t h e c o r e work

precision

firms

than processing.

introduction

Only

industries

in electrical

ME

Such paces

a of

diffusion. To

conclude,

MCs a r e cutting

3.

can

say

robots,

operating

Case

other

and

study -

metal

paint

the

metal

Painting

is

because

the

the

poisonous.

machines

and

industries

for

(CAD,

transfer

of

welding

equipment)

and

are

not

in

the

firms.

the

industry

industrial

or

consists

plastic machine

parts tools

robot

of of

etc.

small

firms

which

automobiles,

home

Most

of

them

are

firms.

t h e most d i s l i k e d w o r k .

with

NC m a c h i n e s

industry

products,

subcontracting

paint

ME

the

and m a c h i n e r y

automatic

introduction

painting

electric

although

i n small manufacturing

metal painting The

that

with the metal

processes,

painting yet

we

popular

spraygun,

paint

Different

the

includes

work an

When a p e r s o n s p r a y s is

dirty

organic

and

solvent

the

dangerous which

measures t o mechanize and a u t o m a t e

is this

83 work

have

been

taken

developed e a r l y several

types

typical

is

teaching

of

the

robots

playback

playback

the

ME m a c h i n e s .

is

the

usage

metal

Kanagawa samples

of

is

painting

the

We

can

per

equipments.

operated

often

find

the

most

most

by

the

painting

economical

relative

employee) .

price

(machine 2.

robots

has n o t

only is

A

year 5

robot's

in

investigated

in

survey

robots.

that

Though

they

the

become common

indicated

unknown,

The

yet

Here

among

l e s s t h a n 3 and sometimes as low as

industry.

has

far,

is

of

last

survey

so

were

Though

index

these

industry

developed

4 shows t h e

cost

painting

in

robots

firms.

Figure

Prefecture

painting

Painting

which

considered

labor

the playback robot

been

robot

system.

robot

annual

However,

long time.

have

in large

The

/

a

playback

playback robots

price

for

i n c o m p a r i s o n w i t h o t h e r ME m a c h i n e s .

have

the

the

metal

number

a total

share

of

total

Aichi

Industrial

of

of 2 01

machines

is

2.5%. For in

the

"Cooperative

Aichi

only

one

Society

Prefecture

on t h e

company

(company

association

consists

information

is

painting

not

firms

introduce

we must c o n s i d e r

3 . 1 The c o n t e n t s The m a n a g e r of

the

(1)

of

A)

hand, had

a

of

it

93

manufacturers. a

comprehensive

the playback

robot.

Although survey,

that The its most

robot. robot?

the conditions

Painting"

was r e p o r t e d

playback

on

To c l a r i f y

in using

the

them.

work

company A p o i n t e d

playback

following

other

do n o t h a v e t h e p l a y b a c k

Why do t h e y n o t reason,

of

based

of

robot.

out

The p l a y b a c k

some o f robot

is

the

advantages

suited

for

the

operations:

painting

many

times

little

by

little

to

make a

smooth

84 surface?

for

example,

plastic

parts

of

home

electric

products (2)

p r o d u c i n g t h e same p a r t s

(3)

painting the

not

parts,

only

the

periodically

outside

especially

the

but

concave

also or

the

inside

corner

of

them?

p l a y b a c k r o b o t h a s a n arm w h i c h c a n e x p a n d and quite (4)

with

products

in partial in

a

contract

freely big

saving (5)

of

which

require

charge of painting?

more

than

one r o b o t

two

is

persons

sufficient,

labor

operations

where

dust

and

dirt

deteriorate

the

quality? because city, It

is

desirable

robots robot,

rather

for

parts

for

than

generally

adhere t o

these

have

operations

by men.

But

Company

plastic

A

operates

parts,

the

to

small the

other

for

more t h a n 3 m o n t h s .

robot

in

only

operated

4

rate

3.2

robot

Even

The p r i c e if

the

firm

can be u s e d , The

price

million merely

of

the

yen,

5 or

has o p e r a t i o n s

t h e next problem i s

yen.

employees, for

of playback

kinds is

a

playback

This

sum

equivalent as

Figure

6 years

is

robot is

to 4

the

of

of

in

their

cases:

one be the

and

the

15%.

playback

robot

cost. is

over

because

it

labor

cost

of

leasing

cost

which

of

the

which w i l l

accessories

cost

by

use

products

investment

annual

t h e monthly

two

i n which t h e

The

not

As a r e s u l t ,

exorbitant,

shows.

which equals the s a l a r y

in

less than

with

not

undertaken do

parts

for

is

electri-

is present

robot

is

be

firms

produced r e p e a t e d l y

average monthly o p e r a t i n g

static

them

when o n l y one o f t h e s e c o n d i t i o n s

operation. is

plastic

d u s t and d i r t

3 00 o r

400

one s k i l l e d w o r k e r

2

10 is

or

3

runs

thousand in

Japan.

85

However,

one

introduced

alternative

machine can c o n t r o l to

the

sequence

imply

or

of

not

and

Therefore have

more

the

order

to

work

yen.

As

develop

to

equipment

the

easy

compete

performance

and

with

cheap

robot

and h a n d w o r k ,

in

the present.

it

for

introducing

the

progress

technology.

in

robot

Technological in the

capability

parts,

A

the

as

a

firms

is

2 sprayguns

or

3

is

it

is

4

this

important

chance

to

in

cost

and h i g h e r . of

most m a n a g e r s w i l l

of

the robot,

delicate

When i t

paints

required to

days skilled

reported

is

manufacturers the

But

in

operate

that

to

teach

the

the of

When

reciproprefer to

to

regard

make

rapid

order

needed

corner

adjust

the

of

robot

a first-class

most

difficult

takes charge of

several

firms

the

sprayed So

without

the

painter. work,

it

if

It a

it.

up

introducing

the

in teaching.

Challenging

the

i n t h e showroom t h e y r e a l i z e d

gave

for

of

o f t h e gun e x a c t l y .

engineer

the d i f f i c u l t y

is

inside to

technological

discussion.

knowhow the

the playback

and knowledge e q u i v a l e n t 2

r o b o t because of robot

immature

equipment

becomes a s u b j e c t

reported,

robot.

difficult

considerably It

would

automative

valuable

introduction

teaching

very

skills

several

which

manufacturers,

v o l u m e s a n d t h e s p e e d and d i s t a n c e

takes

equal

capability

of the

company

teaching

is

that

is

but

machine

by a c o m b i n a t i o n

equipment

Thirdly,

with

o f t h e e q u i p m e n t becomes h i g h e r

can be p e r f o r m e d

invest

As

have This

speaking,

robots,

robots,

painting

cative

3.3

strictly genuine

high-grade

reciprocative

million

endeavor

the

firms

sprayguns.

instead.

price 5

Several

with

An i m m a t u r e a u t o m a t e d m a c h i n e

robot. do

playback

robots The

firms

exists.

equipment

t h e s p r a y e d volumes and t h e b r e a d t h

t h e sprayguns r e p e a t . painting

still

reciprocative

t h e degree of

difficulty

86

involved. the

This

suggests t h a t

performance

method.

At the

of

need

absorbing

to

required

improve

it. for

and

the

in

small

introducing

it

must

receptivity

for

T h e y must h a v e a s t r o n g d e s i r e

Intensive

and

enthusiastic

are

of using the playback

robot

firms.

These a r e

and

t h e v o l u m e and i t e m s

preference

several the

improve

obstacles

it.

must

reciprocative

But

be

of

receiving

technological

and

from

to

alternatives,

w h i c h we c o u l d n o t make r e f e r e n c e .

believe

desire

to

factors switch

to

efforts

capability we

improve teaching

success.

cost to

the

capabilities.

technological

We h a v e d i s c u s s e d t h e c o n d i t i o n s orders,

simplify

firms

own t e c h n o l o g i c a l

new t e c h n o l o g y .

challenge

t h e r o b o t makers s h o u l d

robot

same t i m e t h e s m a l l

strengthen t h e i r They

the

there

removed

equipment

are

In

to

other

conclusion

in

order

the

to

playback

robot.

4.

Concluding

In this

remarks

p a p e r we e x a m i n e d t h e t r e n d o f

small

manufacturing

case

study.

We

Nevertheless several have

years

already

for

products introduced pace

small

been

been

the

could

into

of

progress

factors

which had e f f e c t s

firms

We

independently

apparently

to

the

in

data

related FA.

each

on t h e

As m e n t i o n e d

take

process

of

Today

they

processes.

or

case

to

each

have

process

examine

the

diffusion.

innovations

of whether

will

other

industry

one

in one

B u t ME m a c h i n e s

industries. and

and

matters.

It

processing

industries

they

the metal painting

small.

all

attain

into

presented

technological

I n t h e case of

firms

other

greatly.

recent

cover

automation

latest

f a c t s were found.

machinery

varies

The

not

diffused

and

factory

b a s e d on t h e

some i n t e r e s t i n g

metal Yet

firms,

are are

influencing

aware

industry,

before,

only

of

it

direct a

few

or

small not.

impact

is

playback

87

r o b o t s have been i n t r o d u c e d . invest

and

painting robot

machine

the the

providing more

the

plastics

entrants. the

robot the

or

company

synthetic must

is to

should

keen

better the

have

are to

up in

of

and parts

from m e t a l

response,

the

equipment.

industry

being

link

results

materials

new

compete

performance

changed

In

introduce compel

or

new their

to

firms

to

to old

the

improve

competition

with

resins.

appearing the

even s m a l l

ME r e v o l u t i o n . their

old

by

order

themselves

Moreover,

then

to

in

forced As t h e

to

metal In

this

innovate

its

equipment.

situation

firms

Some

orders

technologies

restricted all,

The firms

machines.

parent

new

for

makers. painting

efforts

robots

are

threatened

products

market

context,

the

making new

produce

manufacturing

After

are

develop

firms

indirectly.

are

to

firms

not

However t h e machines

new

painting

This

of

manufacturers

to

automated

which

type

they

and

challenged with

new

makers,

products with

use

firms

and

other

to

of

industries.

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production

facilities.

cannot avoid being

We r e a l i z e

endeavor

survival

in

innovation

absorb

growth.

once

again

and t o

also

influenced

that

adapt

is

the

new

by

smallest

technology

88

Figure 1

The introduction of ME machines 3 8 W

_KO ι

small firms

CAD

largefirms 11.8

31.3

Κ5

9.8" "

8.023

small firms large firms

NC machine 16.0 1.2

small firms

Machining center (MC)

largefirms 25.9

11.1

smallfirms large firms

â9J

|;;j|;|;|||||||||||| 29.0

j 9.7

small firms

Assembly

large firms

robot 12.3 I 7.5

smallfirms largefirms

Welding and painting robot

12.3

10.5

5.04.5

«II 10.5

Automatic transfer equipment 5 f

7.9 ^

small firms

Automatic inspection machine

large firms 15.4 20

73 J

40

lllll

previous 3 year period

1:1111

recent 3 year period

60

—ι— 80

100 %

future 3 year period Source: Chushokigyo hakusho (Small and Medium Enterprise White Paper) 1986, p.213, ed. by the Small and Medium Enterprise Agency

89

Figure 2

The industries in which ME machines are introduced ]ü6.9

Foodstuffs

52.7 j

Textiles and apparel Furniture, wood and wood products

31.2

Paper and paper processed products

133.3 jij71.5

Publishing and printing

69.3

Plastic and rubber products

3 25.5

Ceramics andglass 58.7 lllllllll

Metal products 7 1

·9

General machinery

54.6

Electrical machinery

j

lll||l||||ll|||fllll||||||||||||||||||||||||||||œ.Q llllllllllllllllllllllllllllllllllllllllllllllllllllllll

I D 60.8 20

AO

—» 60

Transportation machinery

92

·9

Precision machinery others

I 80

1— 100%

90

Figure 3

Processes in which ME machines are introduced 183.9 ^ g

Processing Special process (welding, plating, etc.)

|l4.2

Assembly

U

Inspection 7.4

Transfer

7 9

Design and others

0

20

40

60

80

100 %

Figure 4

The reduction of the relative price of ME machines machine price/annual labor cost per employee)

Machining center NC grinding machine NC lathe Playback robot 1975 76

77

78

79

80

81

1982

F i f t h Generation -

Basic P r i n c i p l e s

and Economic I m p l i c a t i o n s

Roland

1.

Technology -

Fahrion

Introduction

Methods and t e c h n i q u e s verge

of

achieving

scientific

increased

research.

Intelligence that

is

would

of A r t i f i c i a l

"the

beginning of t h i s

science

be

Since

assigned

then

field

within

to

the

During

an

as

program

large

Japanese

Corp.,

etc.)

standards target

in

was t h a t

for

"project

this

assumption

sector

of

areas

of

science, output

and

century"

and

be

in

and the

in in

is

efforts

fifth

generation Information

a new r e s e a r c h

cooperation

of

Nippon

made

to

new

The

industry, for

new main

"intelligent"

The

motivation fundamen-

especially forces

or

fundamental

education.

eight

define

(1981)). and

and

Electric

b a s e d on t h e

nineties,

demand

1956.

substantial

(Japan

1990/91.

become t h e

life:

culture

the

by

John point

Anglo-American

Hitachi,

to

services,

will

on

architectures

the

The

systems.

(see JIPDEC

avalilable in

facilities

starting

the

JIPDEC

(Fujitsu, was

things

men".

Dartmouth

announced

industry

the

everyday

of

by

become a

in

which under

of

systems

in

the

Center)

that

goods

information

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of

Artificial

machines done

Intelligence

new h a r d w a r e

systems

tal

in

i n computer

software

fields

most

stems from t h e work o f

science

companies the

the

(1966)

but the o f f i c i a l

1981,

Development

development

if

a r e on

i n J a p a n w h i c h h a s made l a r g e

international

systems

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making

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computer

as w e l l

in

Minsky

intelligence

in developing A r t i f i c i a l

computer

of

new d i s c i p l i n e

artificial

hemisphere

to

intelligence

v o n Neumann and A l a n T u r i n g , can

importance

According

require

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in types

tool

in

the of all

administration

and

But

and

the

input

applications

of

fast

92

processing

business

understanding to

fulfill

these

capacities

In

following

the

Fifth

need o f

software

al

the control Nefiodow consist

made,

79).

of

various The

and

given,

the

generation and

new h a r d w a r e

information

be

The

first

which

have

and

society

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on

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flexibly.

milliseconds

generation,

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transistors

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to

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1964

generation in

to

the

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years

amounts

IBM 1 4 0 1 ,

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in

the

the

1957

to

next 1964,

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data,

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for

RCA 3 0 0 ,

and

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circuits

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the

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where the

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Univac

0

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large

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(see

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704,

assigned

store

speed i s

and

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(IBM

semiconductors

possible

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1957

principle

programs

to

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controlled

and

generation.

data,

hints

from g e n e r a t i o n

developed

are

1951

function-

according

and o p e r a t i n g

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German i n d u s t r y .

average,

will

the

to

systems

in

as

general,

believe

communication role

and

jobs

experts.

education

in

generation,

to

are

expert

with the

are

the

the

distinguish

files

and s o c i o - e c o n o m i c

rationalization lost

All

conceived

computers

difficult

not

Prolog

techniques.

Technological

The u s e

structures does

in

the

which

permits

i.e.

t h u s no d i f f e r e n c e

exists.

be

Prolog

structures,

p r o b l e m d a t a and p r o c e d u r e s , types

procedure

interpreter.

of

available

searched

of

with

steps

must

what t h e system should perform w i t h P r o l o g . understood

Prolog

Whereas

The

probably

research

and

101

development. automatic in

Then

medicine

Expert

will

systems

automation

reason

for

tional

software

both

require

expensive

is

expert

that

expert

it

is

will could

very

every

stage over the

believed

that

the

same

the

as

seventies, standard forced

to

offer

an

operating compared

the

be

used

future

system with

Malthus sequence,

Due

increasing

to

early

more p o w e r f u l of

the of

new

IBM i s

observed

the

growth

poverty,

and

But not

production

this aware

that

he

therefore prophecy

ago

of

would

the be

t h e upcoming i n d u s t r i a l i z a t i o n

out

new t e c h n i q u e s

process.

a

in

to of

the

and new

may

be

Thomas

goods

recommended

developed

1985 about

a

when

nutrition

turned

was

computers

prophecied he

the

in

and

be and

IBM

and

and t h e g r o w t h o f p o p u l a t i o n as a observations

1981

been

situation

years of

in

presently

units

this

hundred

nearly

would

1983

personal

processor

Perhaps

computer in

have as

future

sixties

model AT,

same r e a s o n

two

these

was

should

as

over

marriage. he

XT

OS/2.

one

the

PC

point

efficiently.

For example:

But

powerful

the

development

1990.

family

with

more

in

most

traditional to

underestimated

development

and

comparison

forecast

years.

conven-

will

in

of development

been

The

efficient

changed

to

or

systems

negated.

systems

be

thirty

the

entire

linear

tural

be

model

the

For

Robert

because

to

announce

workstations

child

the

office

whether

Furthermore,

micro-computer

mainframe

up

AT03.

has

last

the

i.e. model

model

one.

in

not

difficult

technology

IBM

to

can

small

development because t h e r a p i d n e s s software

of

of

become more

systems.

systems

Nevertheless,

the

question

that

will

especially

structures

systems.

area

b e n o t e d a s much more " p r i c e - s e n s i t i v e "

communication

and

based

the

the

systems

develop between e x p e r t

assertion

cheaper;

the

in

diagnosis

knowledge

technology

development

systems

as

penetrate

Hence,

software an

control

as w e l l

probably

slowly.

such

essentially to

goods

competition w i l l

traditional

likely

modern

of

will

very

not a future and

the

production

as

a

geometric gradually the be

onewrong

agriculcourse

of

102

As

for

the

expert

market

systems

techniques, or

but

PROLOG

situation

are

expert

with

object-oriented

(which

is

favored

efficient

systems.

Then

qualified

knowledge

can

employees.

for

realized

The

programming

by

Japan)

services be

problem

lead

with

later The

can be r e t a i n e d

u s e d by s u c c e s s o r

most

tions

probable

will

be

technical defined

in

development

where

on

rule

the area

of

expert

special

or

precise

manner.

of public

conventional

According billion

ment

of

expert

optimistic assumption

handling.

methods

for

of user

The e m p l o y m e n t o f a

quick

of

to

a

the terms,

again into on o f f i c e

context

or in

in

will

mainly and

can

software 1990

the

the

have

a

in

the

man

we u r g e n t l y

systems w i l l on

mixed

changing

advantages, and

places

example,

customer's

more

developThis

fundamental much

larger

process

need

of

specific

and c o n c e p t s

of

become a p o w e r f u l market the

administration employment.

the

one w o r k i n g p r o c e s s .

of

conditions.

upcoming In

separated

credit-worthiness,

and t h e c o n t r o l

activities,

will of

be

application. to

problem d e s c r i p t i o n ,

expert

for

of

the

where

Little,

due

in can

systems

structures

invested

areas

we

organization

to

orders,

examining delivery

in

systems

for

profiles.

reaction

trend

customer

this

competition

taylorism

imply

and

implementa-

techniques

likely

behavior

a general

the analysis

for

In

be

all

most

future

the

problem

will

in

is

in

about

software

a s t u d y by A . D .

systems

that

knowledge

addition

to

dollars

forecast

specialists

Expert

by

1.25

will

storage

administration

p r o c e s s i n g obeys p r e d e f i n a b l e

than

of

applications

production

information packages.

qualified

system

be

realized

more

employees.

a relatively

not penetrate

to

companies

i n t h e knowledge base

concentrated

area

LIPS

highly-

less

within

many

as

require

d e c r e a s e b e c a u s e t h e k n o w l e d g e and e x p e r i e n c e who l e a v e

today

programming

methods

will

which

achieved

fluctuation

systems,

traditional

employment a r e

As f o r

taylorism w i l l

the

units

will

processing control

of of

integrated

long-term

d e c r e a s e by

In

reduction

processes

the

tool

effects

summarizing

103

various

activities

station. fusion

of

effects

imply

of

DIW

that

and

is

with

a

unemployment employees year in

2020.

increase of

72

In

the

labor

current

But

as

development

introduction

of

a

is

new

38

100

are

für

FRG)

in

1983:

computers handling

the 8

of

with

must

computer

experience see e . g .

main be

which

unemploy-

pensioners

higher

per

100

for

the

forecasted

alternatives

total

with

hours,

is

in

the

computeriza-

a polling involved are

detail was

of

and

the

of

Without

and

evaluating

the

that

computers

are

and

unemployment. because

substantially

made

GMD

Bonn,

i n t h e use

accepted.

cautiously

on j o b s

Henning and M u n t e r

and

partially

Datenverarbeitung,

rationalization

been

the

rationalization

of

und

an

increasing

labor

F o r most p e o p l e

is

employment

technologies

technologies

evaluated has

industry

show

first

result

effects

a

The

computers

catalogue

the

associated

pollings

judgement on

query

the

to

two

result

Mathematik

more

results,

strongly Such

the

economy

According

counter-effective,

correlated was

in

changes

only

The more a n e m p l o y e e i s

the the

polling

are

information

with non-acceptance. This

percent

contract.

of

rather

für the

one

second would be t h e

rise

are

makes

conversely,

had

strongly

(Gesellschaft

a

productivity

we

confronted

unemployment.

by

Wirtschaftsforschung,

per

tion

is

(Institut

FRG)

only

but

of

production

to

IAB

the

für

there

the

and

market

between i n c r e a s i n g

generation

hours,

information

productivity.

run

working stronger

labor

employment.

rate

1980

long

the

cyclical

productivity,

this

a

stations

Nürnberg,

Institut

In

work

imply

in

pensioners

with

in

new

and t h a t

low growth

rates.

and

keeping

on

changes

no c o r r e l a t i o n

increasing

branches

and

one

to

activities.

decrease

(Deutsches

there

at

trend

For example,

technical

i n employment,

a

areas

und B e r u f s f o r s c h u n g ,

report

ment

8

persons

be

computerization

a much h i g h e r

Berlin)

will

living

discussed c o n t r o v e r s e l y .

decrease

various

administration

Arbeitsmarktassertion

by

there

private

decentralizing The

done

Furthermore,

by

(1985),

a 332

single pp.

the

depends person

104

with

the

new

comparison Great

devices

with

Britain,

the

lowest

USA

and

the

in

the

Japan.

nologies

organization

countries

acceptance

In

of

the

U.S.

computer

the

rationalization

and

technologies. such

as

new

jobs

a

30

1985.

increase

in

were

or

technologies

is

introduction

of

new

of

industrial

all

percent

Especially

created.

employment

and

In a

the

in

areas

employment in

those

c o m p u t e r i z a t i o n was a n n o u n c e d t o g e n e r a t e h i g h many

In

France

not t o mention a comparison w i t h

created

1972

communication

European

FRG,

and t h e

between

and

other

Japan

strong

tech-

increase

jobs

where

unemployment,

we

see

increase

both, in

an

produc-

tivity. Are

future

have

a

world

-

which

perspectives

deep

and

which will

is

optimistic

rapid

necessary

cause

a

or

pessimistic?

technological from

deep

change

an economic

change

in

all

T o d a y we over

the

viewpoint,

society.

The

but main

arguments modern of

techniques

and

rationalization

versus

of

"performance information can

all

the

be

principle

a growing

human i s o l a t i o n

pressure"

by

of

if,

within

individual

The m u t u a l

a well-working

development

t h e adequate c h a n n e l i n g o f t h e changes

of

these technological

concerning

quality

modern

a

conditions of

more in

various

humane

self-realization.

interest

developments

production

democracy,

guaranteed

provide

working

control

is

too.

improvement

of

of

technology

invalidated

In conclusion,

and g r o w t h

employment

future,

higher

transparency

man

implication

better

loss

employment

modern c o m m u n i c a t i o n t e c h n i q u e s v e r s u s t h e of

the

labor

in a

in

groups society.

represent

an

environment,

industries,

and

a

105 References CLOCKSIN, W. F . / M E L L I S H , Verlag, HEHNING,

Berlin,

Entwicklungen. Berlin

(Japan

MINSKY,

Information

M.L.:

NEFIODOW,

of

L.A.:

P.:

Europas für

die

WATERMAN,

Processing

Fifth

D.A.:

Mathware-Verlag

Development

International

Center):

Conference

(October

Intelligence.

19-22,

Freeman

on

1981)

edition,

1966

Chancen neuen

-

im

Computer-Zeitalter.

Technologien.

Einführung

München

Kindler

Ein

Verlag

in

die

Programmierpraxi s.

1986

One S t e p F o r w a r d -

i n t h e US,

Grundlagen.

1984

PROLOG

Hanser V e r l a g , STAKEM, P · :

Trends.

Computer S y s t e m s

San F r a n c i s c o

GmbH, München SCHNUPP,

the

Artificial

Plädoyer

Springer

1981

Expertensysteme:

Anwendungen.

Generation

London,

H.:

New Y o r k

in Logic,

1985

Proceedings Fifth

Programming

Heidelberg,

R.-D./MONTER,

GmbH, JIPEDC

C.S·:

Space Program, Introduction

W e s l e y P u b l i s h i n g Company,

Three Steps Backup. BYTE to

(September

Expert

Reading

Computing

1981)

Systems. (Mass.)

1985

Addison-

The I n f l u e n c e

o f German B u s i n e s s

Administration

on Japanese Business A d m i n i s t r a t i o n Especially

i n Reference Takao

1. The

Introduction relation

in

Japan

of

Germany.

the of At

In

than

in

the

and in

it

not

this

in

also

is:

a

I

general I of

The

am

this

two

study

large and

science,

would

areas:

respectively sions

I a

accounting

be s c i e n t i f i c a l l y scientific

deal

of

their course But

German

in

inherent

in the nature

completely

in

divide

accounting

as

social

a

including

etc.,

(2)

both must of

areas

on

century.

into

system,

legal

provi-

accounting and s h o u l d

as

the

problems

correspond,

which

a

solely

T h i s d i v i s i o n may c o n t a i n

division since

accounting

is

some and of

accounting. is

a special

accounting

feature

should

of

have

our been

practice-oriented.

however,

viewpoint

this

Japan

last

the university

(successes)

nevertheless,

to

guidelines,

solutions

teaching

Since,

like

accounting

since

administration. administra-

researched.

dangers

in

course w i t h business

constitution at

subject.

engaged

accounting,

first

which i s taught

of

frame

with

influence

(1)

social

out

the

separate

mainly

J a p a n e s e a c c o u n t i n g s i n c e t h e end o f t h e

In

Republic

developed

business

primarily

accounting

but w i t h i n

completely

Nagoya,

paper

when n e c e s s a r y topic

is

of

and

Federal

accounting c e r t a i n l y

studies

University

My

administration

of business a d m i n i s t r a t i o n ,

accounting

tion.

methods

business

Japan,

Accounting

Saito

somewhat d i f f e r e n t

university

Therefore but

research

between

is

science the

-

to

I

provided

wish t o by

present

this

the

division

German i n f l u e n c e , can

even

be

the

advanta-

108

geous,

because

the

influence

affects

each

of

the

two

areas

differently. Proceeding

on

the

acceptable,

the

efforts

the

for

economic part,

first

principles shall

areas

them

be

into

stage

part

by

that

deals

harmonization

scientists'

relations two

assumption of

of

business

work

based

presented.

such

with

the

the

legal

the I

stage

German

is

struggles

and and

In

the

different

Finally

development

division

regulations

accounting. on

historical for

a

will

subdivide

periods

influence

second economic

and

the

examine

upon

Japanese

accounting.

2.

The i n f l u e n c e

on a c c o u n t i n g a s a s o c i a l

Accounting

as

accounting

which

gives

it

present to

to

or are

course,

the

is,

in

actual

customers,

shareholders

my

opinion,

value

business

circulation

so t h a t

on t h e

in this

On

the

and

one

can d e c i d e whether

shareholders.

interested

the

government

groups

are

in

hand

they

want

other

hand,

a c c o u n t due t o t h e i r

claims

For

competition

between commercial

lines, this

law and

generally part,

history

of

a

strong

very

present

the is

Japanese

this

to

has

a

strong

governmental

i n business

this

reason

legal

tax

is and

laws,

problems

and

not

be p r e s e n t e d , always

business long

dispute,

regarding

accounting

I

wish

to

In

is

relation

divide

guide-

between relation

back,

characterized to the

a

etc.

Looking

order

very

accounting

because t h e i r

similar.

dispute.

for

usually

accounting

the

in

revenues.

accounting there

provisions

laws,

interest tax

accepted accounting p r i n c i p l e s ,

economics w i l l

accounting

also

regard

interested

reasons.

principles:

to

up

become

accounting

different

In

system

business.

business Other

sums

and f u t u r e

creditors

Of

social

prospective

remain

on t h e

a

system

the by

more

clearly

last

hundred

109

years

since

periods,

the

essentially (1)

The

time

lasts

period

until

in

accounting In

the This

period

of

of

II.

WW

accounting even

apart

begin with

This

type

of

was

Japan's

" C h o a i no ho"

from

by Y .

already

an

unmistakable Japanese

in

law.

The

draft

this

such

legislation

was

the in

law.

that

Yoshikawa

that

to

to

when

Fukuzawa

deal of

the

(187 3 of

which

a for

account-

attention

origins

not

in

only

and

a

Japanese

German,

which

had

been

But,

due

to

had

been

Herman German trans-

the

fact

confronted

with

embarrassment several

of

government

first

was b a s e d on t h e

(1884) one

on t h a t

Meiji

the

appointed

general

9 years

left,

introduction

accounting

Japanese.

time

Japan,

German

The b i l l

time

into

first

approximately

right

countries.

promulgate

government

the of

of

1890,

attempt

law

in other

influence

came

the

Restora-

new a n d good way o f

received a great

the

"Daifuku-

a c c o u n t i n g method i n J a p a n ,

i n Germany b u t a l s o

K.

in

genuine

Meiji

so-called

T h i s t y p e o f a c c o u n t i n g has i t s

corporation

were

at

several

the

the

vertically

be a t o t a l l y

i n g and t h e r e f o r e

to

the

defeat

beginning

were

before

from

actually

European

seemed t o

commercial

epoch

accounting

with

there

methods

w h i c h was w r i t t e n

74) .

and

generally

this

principles

Although

cho",

undertook

were

independent

became of

business

ends

accounting

(1868),

Japan.

laws

number o f

half

over

period

tion

took

is

II.

end

by

three

era.

principles

second

controls

The

we w i l l

It

Showa

accepted.

Rössler,

following

commercial

business

Japanese

lated

Meiji

i n w h i c h an i n c r e a s i n g

us

the

as seen by s t a g e s ,

The p e r i o d

W o r l d War

the

which

the beginning of

strengthened.

The

into

T h i s p e r i o d e x t e n d s beyond t h e T a i s h o e r a

governmental

(3)

Restoration

important:

dominant.

(2)

Meiji

w h e r e b y t h e German i n f l u e n c e ,

prevailed.

revisions

before

110

t h e government passed

as

commercial been

first

rather

in

in

the

German

and

law,

must

disclose

year to

that,

law

back

which

annual the

accounting

that

several time,

difficult

but

considered the in

commercial

until

I

do

not

wish

for

tax

governmental

to

end

II,

which

was

carried

Shaup.

The

consider to

the

business

more

Reasons

of

the

greater

but

I

for

rather

will

yearly

system with

for

World

the tax

this

help

of

system can be

in

theory

the

balance

there Japan

was a before

in

1950, C.

S.

introduced

that

s h e e t as fiscal for

which

economy.

the

first

times

at

American,

in

law.

charac-

the

reform

an

was

seen

governmental

we do n o t y e t h a v e a n i n d e p e n d e n t

War, of

tax

of the tax balance to

was

about

taxes the

very

several

mention t h a t

until

a

on

(Rechen-

considered

improved

depth

own

this

be

accounting

Second

from

accountant)

the reconstruction

income

fundament but

has been

correctly out

modern

the

law

is

the

their of

to

the

balance

Apart

to

master

public

business

into

ordinance

War

thereafter.

go

purposes,

World

sheet.

which

of

t i m e a l a w was p a s s e d f o r

sheet

1927,

law

state

the

finally

followed

accounting

accounting (certified

teristic

of

established.

passed

this

end

were

C.P.A.

the

the

accounting o f f i c e s

was

then,

to

care

the

since

According

take

So

the

corporations,

one was o b l i g a t e d

forerunner Although

it

by

and

balance

meisterrecht) of

not but

Of c o u r s e t h i s

purposes

could

have

not

one

affair.

balance,

static

Since

at

the

Germany, call

law.

report

finally then

influenced

course a l l

included.

practical

practices.

in

strongly

French

business

as t h e

for

commercial o n e ' s own,

by

as

generally

was

inventory,

be u n d e r s t o o d businesses

We

was

Since

accounting

law,

and o f

and l o s s a c c o u n t a r e

accounting

At

Code.

The

further

law.

commercial

every businessman,

in

profit

law.

an

1899«the b i l l

corporation

Commercial

even

this

for

the

commercial

In

Japanese commercial

regulations

included

Meiji

is

acknowledged i t .

the

we do

not

belonging

policy,

business

and

taxes.

1 11

During

the

developed

second out

considerations, further

under

regard this

to

the

the

of

This

the

Trustees

The C o m m i t t e e within

As

a

sheet,

Finance

of

1930 the

valuation.

the and

für

In

more

call

order

at

in to

the

end

Rationalization Industry

DepartTrustees

Wirtschaftlichkeit).

Administration,

w h i c h was

first

widely

develop

several and

draft

sought known,

accounting

accounting

1934: for

These

interim

the

created

t o make and

the

then

for

guidelines

the

guidelines

draft

for

standard

depreciation,

were

not

yet

1934.

The

to

set

guideline

sought

and p u b l i s h e d

designed

to

rules,

which

accounting the the

companies

it

according direction military to

adhere

of and to

in

the

1937.

model

had

for

up

been

loss

and

a

This of

government

so-

combined

led

accounting

at

was

also cost

that

time

ministry.

obligated at

for

German

economics

guidelines

account,

guideline

developed

the

up

remained

cost

several

German

set

balance

guidelines

endeavors

the these

and

finalized

of

also

All

were

standard

the

to the accounting guidelines

committee

reports.

the

profit

for

these

Japan,

One may

t h e German B o a r d o f

of

under

year.

Code

instruction.

guidelines

called

the

the depression

trustees,

to

practically

Commercial

Commerce

of

accounting

tried

were

were

economic

the

created

the

of

guidelines

practical

guidelines.

(Reichskuratorium

result,

the

within

for

purpose

between

end o f

government

the board

significance practical

the

of

accounting

was a n i m i t a t i o n

Efficiency

this

at of

of

enterprises

control

weak economy d u r i n g

1920s,

Board

from

legal

period

accounting

necessity

although the

the

ment. for

the

accounting

era

stimulate of

period,

of

the

the

In

large

outbreak

of

WW I I . Despite developed time, the

military in

terms

which l e d t o

present.

control, of

accounting

technique

a state

that

to

a

as high

a

social degree

system at

this

c a n b e somewhat c o m p a r e d

to

112

The t h i r d time of

period,

which began a f t e r

accounting p r i n c i p l e s .

a c c o u n t i n g was c r u c i a l i.e.

the

balance

an e a r n i n g s

importance t o and

the

finally This

ciples"

in

after

large due

this

interim

the

was

set

to

managed t o were

and on t h e

earlier

binding the

law,

all

are

procedures, this,

one

rather

but

a

not

of

security

which trading.

for

This

models

caused. however, stabili-

the

govern-

a

There

of

the

important

are to

not

a

only,

just in

as the

accounting

concept

several

took place w i t h

elements

to,

various

social

various

is

guideline

adhere

The

countries

Buchführung)

are

promotion

principles

different

of

from

purposes.

T h i s model

standard

As shown a b o v e ,

Most

thus

accounting

voluntarily

from t h e ownership o f

principles.

from

destruc-

a n economy

of

working c a p i t a l

ing

reports the

of

was

(General

were,

practical

a collection

the

GHQ

situation over

Prin-

standard.

i n Japan

the

GHQ as p a r t

comprise

is

law

accounting

the accounting committee

"moral"

process.

task

about

handed

ordnungsmäßiger

only

they

certain

a

favor

foremost endeavors

the

business

report

experience.

should

(Grundsätze

They

requires

on t h e

in

"Accounting

reason

s e t up c o d i f i e d

Japanese

companies

G.o.B.

F.R.G.

but

based

the

between

of

was

Therefore

1 9 4 9 as a c c o u n t i n g g u i d e l i n e s

which

the

actual

up by t h e efforts,

and

difficult

report

required

and o u t m o d e d .

war,

century.

this

and t h e

the

was o f

compatibility

not

statements

intensive

office

For

U.S.A.

war

principles

of

first,

the

Japanese

against

year it

establishment

At

corporations

the

office After

the

These

a

an

financial

inadequate

of

of

decide

t h e w a r t h e most u r g e n t

of

to

end o f

the

economy.

stock

annual

zation

in

1949.

the

Headquarters)

ment.

the

with

c a n be named

t h e end o f

to

I n o t h e r words,

principles.

rather

Immediately

very

at

idea

solve t h e problem of

begins

but

rebuilding

tions

sheet

the

took over a quarter

principles

The

of

statement.

accounting

period

the

in the time a f t e r

generalization

internal of

WW I I ,

The m o d e r n i z a t i o n

which

reasons

for

democratization

the

separation

of

capital. essential

mention

are

for the

accountGerman

11 3

corporate stone

law

of

and

the

principles

consist

principles

of

the balance added

to

1:

and

part

truth, of

sheet. years

and

profit

believe contents

The

of

principles

the This

tendency

think

that

German

Part

an

possibly

basically sheet

sheet

principles: separation caution,

added

later).

and

law,

and

accepted

German

loss

as

it

rendering the

directly stems

G.o.B.,

accounting

is

of

also

due t o which

of

the

the

because

U.S.A.,

but

I

of

the

translated

and

then.

of the balance

s h e e t a r e b a s e d on

conception

show

and

the

valuation

time,

attempt

principles

competed

and t h e r e f o r e

was

made

to

it

attain

took

with

the

commercial

such a l o n g

compatibility

time of

the

concepts.

I n t h e m e a n t i m e a compromise b e t w e e n t h e t w o

has

accomplished.

been

in

accounts.

influence

was

are

sheet.

obvious

accounts,

rendering

from

conception,

the

Japan.

this,

from

I

uniformity

although

generally by t h e

2

the at

price.

accounting that

was

The

profit

i n t o Japan back

balance

purchase

at

is

it

omitted

3 : The p r i n c i p l e s

dynamic

The

is

balance

introduced

eight

part

than those of the balance

o f t h e two b u s i n e s s

inventory

for

continuity,

influenced

understand

were

unfortunately

valid

continuity

altered.

of

of

principles,

latter

r e c o g n i z e d by us i n

certainly

the order

following

(the

were

2)

principles

were

equally

transparency,

somewhat

principles,

3)

rectification.

accounting

c o n s i d e r e d more s i g n i f i c a n t One c a n

but

are

the

corner-

accounting

accounting guidelines

transparency,

principles

generally 2:

general

f r o m t h e German a c c o u n t i n g

are

accounting

for

principles

importance

truth,

1)

the

summary,

accounting,

i n the next

capital,

come i n d i r e c t l y

Part

later

accepted

and

that

loss

formed

In

principles,

consist

from

uniformity,

they

three parts:

Procedures

The g e n e r a l 3

Together principles.

and

basic

generally

as i s

of

profit

these

removed f i v e Part

G.ο.Β.

accounting

But

considering

the

law until two sides

circumstances,

114 several

professors

are

accounting p r i n c i p l e s

3.

The i n f l u e n c e

Here

we w o u l d

always

are

like

like

authors

to

to

select

the

principles

into

Japanese

Ueno a t

the

Ρ = K) on

of

University

of

Schär's

theory:

sheet over

the best A

few

theory.

After

I

important

the

publication

translated

introduced

to

Ρ +

all

and

the

1920s,

by

R.

Professor

M.

Schär's

efforts

Κ.

Ueno

of

Japan

in

Schär's theory

had s t u d i e d

with

under

i n t r o d u c e d many o f

theory specifi-

considered

one

of

topic.

stronger in

the

Kunimatsu.

which he w r o t e

even

up

sheet

Gerstner's

r e a d b o o k s on t h i s was

the

tackled

t o J a p a n by Y .

originated

in

time.

t h e P.

sheets,

most

picked

connection

was a l s o g e n e r a l l y

which

my m e n t o r

also

many

books,

made e n t r y

balance

law a t t h a t

account-

equation

Ueno w r o t e and

and i t

static

introduced

first, he

it his

sheet theory,

purpose,

1930,

not

"mathematical"

His

was

Tokyo

on b a l a n c e

influence than

until

Schär's. ed., In

His

and most w i d e l y

lasting 1928

a

of

point,

i d e a s were s i m u l t a n e o u s l y

A =

almost

book

are

this

the

1925.

of t h e commercial

this

second

F.

5th

Due

theory.

was a u t h o r i t a t i v e , for

only

with

Schär's theory,

Regarding the balance

cally

of

teaching

schools

they

at

i n Japan.

topic.

taught

Kunimatsu's

theory,

and s o u g h t t o s p r e a d

Nicklisch's

formulation

for

by t h e c a p i t a l

H.

prevailed

German Since

Therefore,

J.

in

practice. balance

influence

started

Bilanz",

universities with

distorted.

(which i s c h a r a c t e r i z e d this

actual

science

opinions

influence

Hayashi

books

the

e x p o u n d upon t h e m .

und

A -

that

and s t u d e n t s .

practice.

"Buchhaltung

ing theory

what

significant

for

initial

accounting

show

scholars

and b r i e f l y

A strong

opinion

h a v e become somewhat

mainly

relevant

would

the

on a c c o u n t i n g as a

h a s h a d on J a p a n e s e thought

of

E.

and

longer

Schmalenbach's

Schmalenbach

Schmalenbach's

from works

115

in

the

But

form

at

of

first

articles

one

had

in trade

b a c h ' s t h e o r y due t o t h e divorce

oneself

from

commercial

law

The

framework

entire

bach' s

was

addition Iwata,

into

from

Bilanz",

publications continued.

Toki

interpreted to

his

new not

students

efforts, neither

in

in

many

general,

with

correctly

i n Japan.

only

researched

In

are:

I.

Kurosawa. all

1931,

but

also

Despite

nor

grasped

system o f a

der

dynamithe

intensively Toki's

the

of

it

great

theory

as a s o c i a l

a c c o u n t s was

means

work

he e x p l a i n e d

understood as

"Die

translations

moreover,

articles.

II

works

his

Schmalenbach's

exceptions,

WW

sheet

of

"Grundlagen

few

during

Most

balance

1935,

a

Only t h e uniform

Schär.

1931.

static

translated,

in

in

K.

of

to

Toki

Toki7 s

Schmalenbach's t h e o r y ;

of

mentioning

Preispolitik", editions

theory

Schmalen-

by

the

the

difficult

sheet of

translate

With

it

Schmalen-

framework

worth

Kontenrahmen", und

1938/39. of

Japan

Toki

translations.

theory

Yamashita,

let

"Der

Selbstkostenrechnung sche

balance

more t o w a r d s

Schmalenbach

Japanese:

one f o u n d

names

Y.

and

understanding

accounting

into

other

lean

that

static

the

Nakanishi,

though,

in

the theoretical

of

Toki,

T.

theory.

fact

the

introduced

to

authors,

and

journals

difficulty

was

system

officially

controlling

the

economy. As

accounting

noticed

for

principles that

principles the

first

pursued that

after

the

idea

the of

was b a s e d on S c h m a l e n b a c h ' s d y n a m i c t h e o r y .

works.

meritorious Kobe

In

place

this in

University eightieth

bestowed

especially stood tation

in

of

those

Japan;

the

other on

one

all

Since famous

Schmalenbach has g a i n e d a accounting.

their

For

honorary

this

very

reason,

doctorate

of

upon S c h m a l e n b a c h on t h e o c c a s i o n

birthday.

member

Unfortunately,

way,

Japanese

business a d m i n i s t r a t i o n honorary

war,

accounting

t i m e h i s t h e o r y h a s made i t s way i n t o a l m o s t

Japanese

his

were time

Toki,

in

turn,

Schmalenbach outstanding

cost

Society

works

accounting,

t h e y were p u b l i s h e d

to the accounting p r i n c i p l e s

was

in

are

by

selected of

as

time.

Schmalenbach,

still

1962

that

of

as a

i n an a t t e m p t

not

under-

supplemento

improve

116 cost

accounting guidelines.

examine

Schmalenbach's

One h a s

namely

American

recognized,

management

t o accomplish t h a t . administration of

the

In

history

addition as

following Heinen,

K.

as

short,

other,

4.

the

spread

I

simply

lately,

(1)

law

belong quickly

in

American

German there

were

to

the

Mellerowicz, famous

for

E.

us

in

Hilke.

examine

American

or

legal

the

German

theory

two

this

ways

takes

that

on

the

This

type

the

influences

has

the

wide-

undoubtably

the

comes of

the

commer-

and d u r i n g

influence

practice.

help

to More

influence

the

example,

before of

from

become

is undeniable.

with For

guidelines

affects

This

place

institutions.

category.

German

continues

influence.

accounting

and d i r e c t l y

the

accounting

accounting

are

Influence

and

Walb

two.

illuminated

fundamental

said,

government

have

Although

have a g r e a t about:

also

remarks

now

sides.

to

authors

applies

K.

Japan

the

other

and E.

this

Hax,

in

and

viewpoint

attempts

times

B r i n k and W.

students hand,

also

especially

H. J .

business

the

administration.

Japanese) K.

Kern;

zum Toki

Tageswertbilanz",

years,

Kosiol,

Schmidt,

one

are

earlier

into

o r choose between t h e

Up u n t i l

cial

There

of

very

assisted

from

of business

recent

W.

university

on

Concluding

two

E.

Riebel,

Nagoya a r e R . - B . In

In

are

Wirtschaft I

to

again.

introduction

Schmalenbach's

examined

in

once

ideas

freien

organische

Yamashita

authors: P.

theory

ideas.

well.

"Der

been

("Die

the his

1960 as w e l l ;

Schmalenbach,

by

of

that

from t h a t ,

has

theories

Schmidt

known

in

one h a s b e g u n

accounting

light

believe.

Apart

of

other

to

F.

translated well

I

theory

systemize his

such

in

was t r a n s l a t e d

years

on c o s t

accounting,

management-oriented, Gedächtnis"

In recent

ideas

takes

WW

II

place

117

(2)

The

second

students

themselves, slowly This for

way

study

is

slower

German

and i n t r o d u c e

takes

roots

requires example

a

in

the

it

the

great

in

and more

theory

deal

of

to

business

as

whose

in

as

the

information may

I

sought.

countries

a r e t o be found

scientists.

Allow

world

me t o

it

lags

appear-

the

dynamic

Japanese

Japan have within

These

and

business

our

to

problems

can

be

deal

with

special

field

have

traced

their

back

to

in the practice

as w e l l

as

with

name b u t

catchwords

only

balance

accounting,

of

where

framework.

strongly.

we i n

problems

be

case

accounting,

above, of

must

various

reasons t h a t such

types

solution

origin the

implied

time

by

Schmalenbach.

a c c o u n t i n g has c o n t i n u e d t o d e v e l o p

different

ideas

academia,

and

shown

Japanese

of

theoretical

time,

previously

Thanks

Currently,

system

into Japan's

s h e e t c o n c e p t i o n by E .

many

burdensome.

a

Japanese

balance

German

or

sheet,

current

cost

a

few

accounting accounting,

guidelines, etc.

This

suffice.

believe

attempt

the

time

to create

has

o u r own

come

in

which

accounting.

we

Japanese

should

D e v e l o p m e n t o f E x t e r n a l A c c o u n t i n g i n t h e FRG A c c o r d i n g t o t h e 4 t h a n d 7 t h EC -

Wolfgang

1.

-

Hilke

Introduction

This and

Directives

T h e New German A c c o u n t i n g a n d R e p o r t i n g L a v

contribution reporting

law

will

give

a

survey

of

t h e German P a r l i a m e n t

i n December

of

the

German p r o v i s i o n s in particular

new

4th,

7th

implement

accounting adopted

by

1985.

The new German a c c o u n t i n g a n d r e p o r t i n g regulations

the

("Bilanzirichtlinien-Gesetz" )

and 8 t h

law i n c o r p o r a t e s

EC D i r e c t i v e s .

amendments

to

The

39 e x i s t i n g

the new

laws,

to

t h e commercial

law,

the

stock corporation

law,

the

limited

company

liability

the cooperative the p u b l i c i t y the

associations

law, law,

law,

ordinance

for

the

public

accounting

profes-

sion. The

following

the

applicability

the

new

schedule of

accounting

wick/Mitchell,

p.

9).

(see t a b l e the and

1)

shows t h e

EC D i r e c t i v e s reporting

contents

adopted law

(see

as

part

and of

Peat/Mar-

120

Table

1:

C o n t e n t s and A p p l i c a b i l i t y

o f t h e EC

Directives P a s s e d by t h e Council of the EC

4th Directive: Accounting directive

Stock corporations, joint s t o c k companies, private limited l i a b i l i t y companies

1978

7th Directive: Group D i r e c t i v e on accounting group f i n a n c i a l statements

Group companies

1983

8th Directive: D i r e c t i v e of p u b l i c accountants

Admission c r i t e r i a for ind i v i d u a l s who are authorized t o perform obligatory audits of annual f i n a n c i a l statements of corporate entities

Stock corporations, joint s t o c k companies, private limited l i a b i l i t y companies

1984

The

of

provisions

transmitted was

the

limit set

Presentation, valuation, a u d i t and publication requirements for annual financial statements

for

for

into

case the

could within

avoid a

31,

law

in

of

the

to

years 1986,

Directive 1980,

p.

vear p.

have

been

earlier

than

6-7) .

however,

simultaneously

reorganize 7-9).

should

The

time

7 t h a n d 8 t h EC D i r e c t i v e s

fundamentally (see

five

1986,

I n Germany,

incorporated

having

Küting/Weber,

EC

1987.

companies

few

4th

Küting/Weber,

adoption

were

1 9 8 5 so t h a t

German

(see

December

Directives

the

affected their

at

these the

end

b y t h e new

accounting

Peat/Marwick/Mitchell,

was

three of law

twice p.

9;

121

2.

C o n c e p t o f t h e new l a w

The

most

third All

pertinent

essential

provisions

now i n c o r p o r a t e d 23). -

changes

were

affected

book t o t h e German c o m m e r c i a l

into

In particular,

previously

limited

into

accounting

commercial

adding

a

new

law

and

reporting

are

(see

Coenenberg,

t h e a c c o u n t i n g and r e p o r t i n g

included

liability

mitted

for

by

law.

in

stock

company

commercial

corporation

law

law

-

have

(see

8-

regulations

law

now

p.

been

and

private

also

trans-

Peat/Marwick/Mitchell,

p.

11). The

new

third

central

law

Germany,

book

for

with

regulations nearly

as

specific

the

first

a

p.

"lex

also

prepare

5).

(§§

law

associations.

companies.

changed

today are

is

not

also

to

and

degree

well.

One

of i.e.

the

KG

(see

those

group

topics for

liable p.

need t o

on to

com-

book

of

concerning

and

corporations, liability

applicable

1986,

this

how

accounting

partnerships

the

covers -

to

(partnerships)

main

Küting/Weber,

4 t h EC D i r e c t i v e ,

of

new t h i r d

regulations

those

the (see

only?

limited

companies

of

8)

i.e.

stock

regulations

in

provisions

the

private

new s t r o n g e r to

the

p e r s o n as t h e p e r s o n a l l y

the

p.

regulations

substance

private

applicable

GmbH & Co.

preamble

the

lower

the

have a n a t u r a l the

in

and

as

that

264-289)

all

statements of

the

covering

corporations

specific

companies

To a

(§§

§§ 2 9 0 - 3 1 5 )

law concern c o r p o r a t i o n s .

stock

proprietorships been

to

as

enterprises

(Coenenberg,

336-339)

covers

changes

reporting

238-263)

business

financial

part

cooperative

joint

(in

serves

regulations

("Konzernrechnugnslegung") ,

The l a s t

main

now

The s e c o n d p a r t

commercial

The

law

reporting (§§

all

applicable

consolidated

panies.

part to

includes

accounting

and

specialis"

regulations

second p a r t group

commercial

applicable

Göllert/Ringling, -

of

accounting

of

sole have

criticism

corporations w h i c h do partner, 34).

not i.e.

"In

the

harmonize

the

122

publication justified

rules by

enumerated

in

shareholders, net

assets.

annual

annual

fact

the

that

the

trade-off

against

(Peat/Marwick/Mitchell, ( a s done f o r

the a

first

falling

under

this

rates

of

Essential the

27).

time

corporation;

highest

3.

the

legal

changes

in

transformation

in

This

is

of

why

the

on t h e German

reason are

the

for

the

as

a

European government

to treat being

their

liability"

t h e GmbH &

that

those w i t h

companies one o f

the

Germany.

a c c o u n t i n g and r e p o r t i n g , of

their

considered

limitation

category

insolvency

form

to

requirements be

i n May 1 9 8 6 ) the

was

legal

security

to

a p p l y heavy pressure

Co.

KG l i k e

p.

are

the

o n l y b y means o f

publication

statements

statements

in

provide

and o u t s i d e r s

Therefore,

Community w i l l

financial

companies

Directive

creditors

financial

necessary

for

the

4 t h EC D i r e c t i v e

caused

into

by

German

law 3 . 1 New s i z e

criteria

In

the

§

2 67

divided table

into

corporate

entities

new German c o m m e r c i a l

small,

medium-sized

and

law

corporations

large

entities

are (see

2).

Table 2:

Size

of

for

Size c r i t e r i a

category

for

corporate

Balance sheet t o t a l DM m i l

Small

below or equal

3,9

Medium-sized

above

3,9 to

Large

above

15,5

entities

Sales DM m i l 8

15,5

8 to

Number o f employees 50

32 32

51 t o 2 50

250

123

Two

of

these

three

succeeding balance (whose

shares

terms

of

sheet dates.

are

dealt

on

are

a l w a y s deemed t o b e l a r g e

In

the

furture

corporation company, various

3.2

is

it

will

ranked

as

because

small

requirements

stock

very

small,

in the

for

must

be

quoted

met

on

two

corporations

exchange),

however,

corporations.

and

simplifications

Eased

the

be a

size

Publicly

important

whether

medium-sized,

medium-sized

a

or

large

companies

enjoy

regualtions.

corporate

entities,

depending

on

size The

following

requirements of the

for

company.

schedule corporate

(see

table

entities,

3)

shows

depending

the on t h e

eased size

124

Table 3:

Summary o f e a s e d r e q u i r e m e n t s d e p e n d i n g on s i z e

for

corporate

entities,

Large

Medium-sized

Small

Due d a t e f o r t h e preparation of annual f i n a n c i a l statements

3 months

3 months

6 months i n course of normal b u s i ness, o t h e r wise 3 months ( i . e . i n case of liquidation, etc. )

Presentation of balance sheet

Full presentation

Full presentation

Presentation of those captions assigned l e t t e r s or Roman numbers suffices

Presentation statement of earnings

Full presentation

Statement can start with gross p r o f i t

Statement can s t a r t w i t h gross profit

Disclosures in notes t o financial statements

Full disclosure

Various simplifications

Various simplifications

Valuation

No simplifications

No simplifications

No simplifications

Audit requirements

Obligatory audit

Obligatory audit

No ry

Publication after balance sheet date

9 months

9 months

12 months

of

rules

( c o n t i n u e d on t h e

following

page)

obligatoaudit

125 (Table

3

continued) Publication i n the Feder a l Gazette (publication of the e n t i r e financial statements i n cluding notes to financial statements and r e p o r t on e c o n o m i c development and p o s i t i o n , in the Federal Gazette)

Scope o f publication

Source:

3.3 The

presentation

earnings

must

depending

on

on of

presentation the

follow the

size

n e e d e d t o be

4b)

follows,

in

stock corporations, be r e g a r d e d , the

several of

for

expansion of

sheet

new

the

and

formats

company,

the balance

general, several

in particular

expenses

balance

in

statement which

the

of

differ,

degreee

of

presented.

A l t h o u g h t h e new f o r m a t and

Restricted trade register publication (fil i n g of balance sheet, abbreviated notes to f i nancial statements, a n d comment on a p p r o p r i a t i o n of i n come w i t h the trade register? note in the F e d e r a l Gazette that t h e documents have been f i l e d with the trade register)

P e a t , M a r w i c k , M i t c h e l l & Co. ( H r s g . ) " E x e c u t i v e O v e r v i e w New German A c c o u n t i n g and R e p o r t i n g L e g i s l a t i o n " , München 1 9 8 6 , p . 3 1

New r e g u l a t i o n s

detail

Full trade register publication (filing) of basic financial statements , r e p o r t on e c o n o m i c d e v e l o p m e n t and p o s i t i o n , and comment on appropriation o f income w i t h the trade register? note in the Federal Gazette that t h e documents have been f i l e d with the trade r e g i s t e r . The b a l a n c e be f i l e d i n an a b b r e v i a t e d format. )

incurred the

that

sheet

presently

(see t a b l e s prescribed

changes i n t h e p r e s e n t a t i o n according in

for must

to

connection with

business,

4a

the

set-up

or

126

the

intangible

patents, other the

etc.

equity,

(see Coenenberg,

licenses, and

trade

good

marks,

will

on

the

p.

which

must

now

be

divided

reserve,

reserve

35):

reserve,

earnings

reserves

treasury

(grouped

stock,

earnings

reserves),

retained

earnings

from t h e p r i o r income /

Furthermore,

fixed

accumulated

requirement

Table 4a:

as

hand,

capital,

capital

net

(such one

hand),

into

and

the

shareholders'

share

for

assets on

of

/

into

statutory

legal

reserves

accumulated d e f i c i t

year,

and

loss of

the

assets

and

brought

other forward

year.

must

depreciation,

simply presenting

be as

shown w i t h opposed

n e t book

original

to

the

values.

P r e s e n t a t i o n of t h e Balance Sheet - Assets (Assets and 1 l a b i l i t i e s / s h a r e h o l d e r s * e q u i t y p r e s e n t e d s i d e by s i d e )

M e d i u m - s i z e d and l a r g e c o r p o r a t i o n s ( f u l l presentation to the extent applicable)

e

page)

to

be

Small Corporations (only captions i d e n t i f i e d by l e t t e r s and Roman numbers)

ASSETS U n p a i d C a p i t a l , t h e r e o f c a l l e d up Expenses i n c u r r e d i n c o n n e c t i o n w i t h t h e s t a r t - u p or expansion of the business A· F i x e d A s s e t s I . I n t a n g i b l e Assets 1 . L i c e n s e s , t r a d e marks and p a t e n t s , e t c . as w e l l as l i c e n c e s t o such r i g h t s and assets 2. Goodwill 3 . A d v a n c e s p a i d on i n t a n g i b l e a s s e t s

( c o n t i n u e d on

cost

present

χ χ χ χ

127

(Table

4a

continued)

II·

B.

Tangible Assets 1 . L a n d , r i g h t s s i m i l a r t o l a n d , and b u i l d i n g s , i n c l u d i n g b u i l d i n g s on p r o p e r t y owned by others 2 . T e c h n i c a l e q u i p m e n t and m a c h i n e r y 3 . O t h e r e q u i p m e n t , o f f i c e f u r n i t u r e and equipment 4 . A d v a n c e s p a i d on f i x e d a s s e t s , and a s s e t s under c o n s t r u c t i o n I I I · F i n a n c i a l Assets 1. Shares i n group companies 2 . Loans t o g r o u p c o m p a n i e s 3 . P a r t i c i p a t i n g i n t e r e s t s o f 2 5 % o r more 4 . Loans t o e n t i t i e s w i t h w h i c h t h e e n t e r p r i s e i s l i n k e d by v i r t u e o f p a r t i c i p a t i n g i n t e r e s t s o f 25 % o r more 5. Other investments - long term 6. Other loans Current Assets I · Inventories 1 . Raw m a t e r i a l s and s u p p l i e s 2 . Work i n p r o g r e s s ; i n c o m p l e t e d p r o j e c t s 3 . F i n i s h e d goods and goods f o r r e s a l e 4 . Advance p a y m e n t s on s t o c k s I I . R e c e i v a b l e s and o t h e r c u r r e n t a s s e t s * 1. Trade r e c e i v a b l e s 2 . Amounts due f r o m g r o u p c o m p a n i e s 3 . R e c e i v a b l e s from e n t i t i e s w i t h w h i c h t h e e n t e r p r i s e i s l i n k e d by v i r t u e o f p a r t i c i p a t i n g i n t e r e s t s o f 25 % o r more 4. Other current assets III.

Securities 1. Shares i n group companies 2. Treasury stock 3. Other s e c u r i t i e s I V . C h e c k s , C a s h , D e p o s i t s w i t h F e d e r a l Bank a n d w i t h Bank o f F e d e r a l P o s t a l S y s t e m , D e p o s i t s w i t h commercial banks C. P r e p a i d Expenses Excess o f L i a b i l i t i e s o v e r Assets t o t h e e x t e n t n o t c o v e r e d by S h a r e h o l d e r s * E q u i t y *

f o r each c a p t i o n w i t h d i s c l o s u r e one y e a r

of

amounts due a f t e r

χ

χ

χ χ

χ

χ

χ χ χ more

than

128

Table

4b:

Presentation Shareholders'

of the Equity

Balance

( A s s e t s and l i a b i l i t i e s / s h a r e h o l d e r s ' by s i d e )

Liabilities

and

e q u i t y t o be p r e s e n t e d

side

M e d i u m - s i z e d and l a r g e c o r p o r a t i o n s ( f u l l presentation to the extent applicable)

Sheet

-

Small Corporations (only captions i d e n t i f i e d by l e t t e r s and Roman numbers)

L I A B I L I T I E S AHD SHAREHOLDERS' EQUITY A. S h a r e h o l d e r s ' E q u i t y I · Share C a p i t a l I I . C a p i t a l Reserve I I I · Earnings Reserves 1. Legal r e s e r v e 2. Reserve for t r e a s u r y stock 3. S t a t u t o r y reserves 4. Other earnings reserves I V . Retained Earnings/Accumulated D e f i c i t brought foreward from p r i o r y e a r V· Net Income/Loss o f t h e y e a r S p e c i a l r e s e r v e s , t o be t a x e d i n l a t e r y e a r s Β. A c c r u a l s 1 . A c c r u a l s f o r p e n s i o n s and s i m i l a r o b l i g a t i o n s 2. Accrued t a x e s 3. Other accruals C. L i a b i l i t i e s * 1. Debenture loans thereof convertible 2 . Amounts due t o b a n k s 3. Advance payments r e c e i v e d 4. Trade payables 5. Notes payable 6 . Amounts due t o g r o u p c o m p a n i e s 7 . Amounts owed t o e n t i t i e s w i t h w h i c h t h e e n t e r p r i s e i s l i n k e d by v i r t u e o f p a r t i c i p a t i n g i n t e r e s t s o f 25 % o r more 8. Other l i a b i l i t i e s thereof taxes thereof in respect of s o c i a l s e c u r i t y D· D e f e r r e d I n c o m e *

for

each c a p t i o n w i t h d i s c l o u r s e

of

amounts due w i t h i n

χ χ χ χ

χ χ χ χ

χ

χ one

year

C o n t i n g e n c i e s a n d Commitments Discounted notes, guarantees, guarantees given on n o t e s and loans, other warranties, p l e d g e s on company a s s e t s t o secure a n o t h e r p a r t y ^ s l i a b i l i t i e s , o t h e r c o n t i n g e n c i e s and c o m m i t m e n t s Source:

P e a t , M a r w i c k , M i t c h e l l & Co. ( H r s g . ) " E x e c u t i v e O v e r v i e w New German A c c o u n t i n g a n d R e p o r t i n g L e g i s l a t i o n " , München 1 9 8 6 , S . 33 u . 35

129

There

have

statement First

of

(see

all,

table

presently to

less

not

been

several

of earning s, the

5a)

format

has

information the

company s r e s u l t s Furthermore, mentioned earnings format

one m a j o r -

the

(new,

A comparison the cost

of

Further

it

choice of layout

companies, tion

p.

Moreover,

both

be

in

-

taken cost

the

will

format

into

cost

account

elements

profit

and

above

of

of

sales

the

profit

loss

that

to

the

of

possible

format

to

a

accounts

standard

and

clear

the

sales

leads

loss

it

that

or

the

restricted

of

different

general

account

and m e d i u m - s i z e d c o r p o r a t i o n s 1

to

5

in

the

and c a p t i o n s

first

informa-

(see

1 to

Beatge/-

the

"gross

medium-sized in

differs

the

format

significantly

results"

as

are the in

the cost

as a l i n e

henceforth

(layout

from

presented

under

to

results".

profit"

corporations first

allowed

3 and 6 i n t h e

must be m e n t i o n e d t h a t with

are

format

It

format.

a

elements.

item "gross

"gross

the

informations

line

elements)

of

cost

make

even l e s s

under t h e

the

will of

178-181).

captions

and

as lead

statement

prohibited)

formats

gives

by n a t u r a l

"gross p r o f i t "

start

-

will

my o p i n i o n ,

the

sales

small

captions This

instead of

of

to

the

elements

understanding

the type of the cost of

of

small

summarize heading

now

w h i c h means a l o w e r

regarding

Fischer,

and,

a better

presentation

format

natural

comparability

28

of

175-201).

cost

captions.

future

until

layout

either

by

from

20

aquire

natural

change a l l o w s

a

between

must

the

p.

5b).

sales

than the

presentation

operations.

format in

the

reduced only

the to

of

(see t a b l e

showing

to

in

reader

x

reader

-

in

(see B a e t g e / F i s c h e r ,

been

prescribed

enable

changes

too

by

allowed

natural

"gross

the

item

cost

cost

profit" of

or

sales

130

Table 5a:

Presentat ion of the Statement of Earnings ( V e r t i c a l format - Layout by n a t u r a l c o s t elements) (full

Large Corporations presentation to the extent

applicable)

1· Sales 2 . I n c r e a s e o r d e c r e a s e o f f i n i s h e d goods a n d w o r k i n p r o g r e s s 3 . O t h e r c a p i t a l i z e d l a b o r , o v e r h e a d s and m a t e r i a l 4 . O t h e r o p e r a t i n g income 5. M a t e r i a l s a ) Raw m a t e r i a l s , s u p p l i e s and p u r c h a s e d g o o d s b) Purchased s e r v i c e s ( e . g . u t i l i t i e s , s u b c o n t r a c t i n g c o s t s , etc. ) 6. Personnel costs a ) Wages a n d s a l a r i e s b) S o c i a l s e c u r i t y and p e n s i o n c o s t s , t h e r e o f p e n s i o n s 7 . D e p r e c i a t i o n , a m o r t i z a t i o n and s p e c i a l p r o v i s i o n s a ) on i n t a n g i b l e and t a n g i b l e a s s e t s , a n d on c a p i t a l i z e d s t a r t - u p or expansion costs b ) on c u r r e n t a s s e t s t o t h e e x t e n t u s u a l p r o v i s i o n s made by c o r p o r a t i o n s a r e e x c e e d e d 8. O t h e r o p e r a t i n g expenses 9 . I n c o m e f r o m p a r t i c i p a t i n g i n t e r e s t s o f 25 % o r more t h e r e o f from group companies 1 0 . I n c o m e f r o m o t h e r s e c u r i t i e s and l o n g t e r m f i n a n c i a l i n v e s t m e n t t h e r e o f from group companies 1 1 . O t h e r i n t e r e s t and s i m i l a r income t h e r e o f from group companies 1 2 . W r i t e - d o w n o f f i n a n c i a l a s s e t s and o f s e c u r i t i e s i n c l u d e d i n current assets 1 3 . I n t e r e s t and s i m i l a r e x p e n s e s t h e r e o f t o group companies 14. Results of ordinary operations 1 5 . E x t r a o r d i n a r y income 16. E x t r a o r d i n a r y expense 17. Extraordinary, net 1 8 . T a x e s on income 19. Other t a x e s 20. Net income/loss of the year Income and expenses arising from arrangements and similar contracts separate l i n e items. Source:

profit and are to be

P e a t , M a r w i c k , M i t c h e l l & Co. ( H r s g . ) New German A c c o u n t i n g and R e p o r t i n g München 1 9 8 6 , p . 38

loss pooling presented as

" E x e c u t i v e Overview Legislation",

131

Table 5b:

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Presentat ion of the Statement of ( V e r t i c a l format - Cost o f s a l e s

Sales Cost of s a l e s Gross p r o f i t S e l l i n g expenses G e n e r a l a d m i n i s t r a t i o n expenses O t h e r o p e r a t i n g income Other o p e r a t i n g expenses I n c o m e f r o m p a r t i c i p a t i n g i n t e r e s t s o f 25 % o r e more t h e r e o f from group companies I n c o m e f r o m o t h e r s e c u r i t i e s and l o n g t e r m l o a n s t h e r e o f from group companies O t h e r i n t e r e s t and s i m i l a r income t h e r e o f from group companies W r i t e - d o w n o f f i n a n c i a l a s s e t s and o f s e c u r i t i e s i n c l u d e d current assets I n t e r e s t and s i m i l a r e x p e n s e s t h e r e o f t o group companies Results of ordinary operations E x t r a o r d i n a r y income E x t r a o r d i n a r y expense Extraordinary, net T a x e s on income Other taxes Net income/loss of the year

Income and expenses arising from arrangements and similar contracts seperate l i n e items. Source:

3.4 The

New r e g u l a t i o n s valuation

(see H i l k e ,

assets

on

loss pooling presented as

respect

1986,

p.

applicable to

540-543

available

(licenses, acquired

eliminated;

valuation

regulations

The p r e s e n t l y been

profit and are to be

in

P e a t , M a r w i c k , M i t c h e l l & Co. ( H r s g . ) " E x e c u t i v e O v e r v i e w New German A c c o u n t i n g and R e p o r t i n g L e g i s l a t i o n " , München 1 9 8 6 , p . 4 1

been changed w i t h

1)

Earnings format)

trade

from

this

the

and H i l k e , option marks,

outside

means

to

that

corporations

following

to

1987,

the

p.

246-249):

patents)

the

have

provisions

capitalize

and of

major

intangible which

company

presently

is "may

have now be

132

capitalized"

will

henceforth

be

capitalized"

(see

Meyer,

151?

p.

changed

into

"must

be

Göllert/Ringling,

p.

8) . 2)

Until

now,

those

expenses

of

the

companies

incurred

business?

extended

were

even

in

to

only

in

connection

the

those

allowed

future

o f t h e new German c o m m e r c i a l 3)

For

all

record

corporations

a

a

tax

deferred

Steuen"). the

Deferred

profit

higher

in

than

statements

the

which

asset

assets

profit

start-up

are

will

be

incurred (see

will

be

in

§ 2 69

available

("aktivische

arise for

shown

to

the

option

law).

accounts

according

capitalize

the business

new o p t i o n

tax

the

with

this

expenses

connection w i t h the expansion of

to

in

situations

taxation

in

the

commercial

where

purposes

annual

law

(see

to

latente is

financial Siegel,

p.

137-174). 4)

Only

corporations

the

special

temporar y for 5)

decrease contrary

on

assets

for

be

special

applicable p.

110?

apply

are

made

Glade, far

not

p.

of

specific

1987,

available

p.

depreciation

years

This,

reason

no

longer

see

Meyer,

however,

and

allowances

tax

regulations

248).

carry

notes

to

wick/Mitchell,

financial p.

Only

corporations

price

increase

statements

regulations

which (see

forward

t h e amount o f t h e p o s s i b l e

tax

does

T h i s means t h a t

option to

except t h a t to

assets

the

is

("Beibehaltungswahlrecht")

due

b e made

current

allowance

119-135).

must

statements

be

a

247-248).

values

taken

the

or

only

special

following

assets,

account

1987,

against

depreciation

basis

1591? H i l k e ,

book

changed,

p.

special

presently

reduced

the

into

"Wertaufholungsgebot" ?

Treuberg,

to

law,

depreciation

on t h e

p.

the

in

fixed

can h e n c e f o r t h

(see H i l k e ,

present

if

within

take

allowances

(so-called

von

not

to

that

to

value

and

reverse d

the

in

investments

Moreover, fixed

regard

depreciation

financial

must

6)

must

has

not

write-up

disclosed

(see

so the

in

Peat/Mar-

13). will

no l o n g e r

reserve

prepared

in

according

be a l l o w e d t o

the to

statutory the

set

up a

financial

commercial

law,

133

whereas t h i s sheet 7)

In

the

1,

must b e c o v e r e d by a p p r o p r i a t e

1987 p.

But

obligations

pension

(see

to

year

to

present

which

and

three

of

set

accruals Cölbe/-

pensions

granted

be

accrued;

benefits

before

sheet

be

new

the

for

same

pensions

January

range of

1,

1987

regarding

date 1986,

option

1986,

528).

accrue

to

accrue

tax

liabilties up

for

taxation

law

also

where is

balance

example:

that

vague

remains

a (see

at

and the

67-81).

("passivische

purposes

statutory (for

such expenses

situations

or

end

conditions rather

By will

internal

operations

are p.

company

at yearxs

The

accruals

the

accruals:

the

future

by

529-535). for

set

in

caused

(see Kupsch,

Deferred

the

b a s i s must law e n l a r g e s

for

or e x i s t i n g

said

must

in

existed of

to

p.

of

company's d i s c r e t i o n

shown

material

p.

on a v o l u n t a r y

overheads

set-up

commercial

Peat/Mar-

disposed

expense e q u a l i z a t i o n

and

accounts

first

526-527).

waste

be p r o p e r l y

new German c o m m e r c i a l

incurred before

be

p.

for

(see P e a t / M a r w i c k / M i t c h e l l ,

p.

situation

decision

(see

1986, of

up

business

the

year

"Aufwandsrückstellungen 11

new

the

within

disposal

and must

year

the so-called

Küting/Weber,

set

old

provided t h e waste m a t e r i a l

expenses

allow

performed

the

(see § 249) .

the

so-called the

must t o b e

business

work performed

Furthermore,

have

accruals

Küting/Weber,

following

now b e a c c r u e d

12)

after

von

h a v e b e e n made i n

15; up,

Küting/Weber,

Guarantee

law,

the

p.

accruals

now be

balance

the

granted

Busse

from

pension

granted

actually

months

within the

the

15;

need n o t

in

should

will

Moreover, must

11)

p.

arising

1987

originally

wick/Mitchell,

15;

commitments

Ringwald).

Contrary

at

1,

increases

were

balance

196-297).

January to

repairs

10)

pension

Chmielewicz,

which

in the tax

542).

new

applies

9)

p.

Peat/Marwick/Mitchell,

prior

8)

c a n be r e f l e c t e d

1986,

future,

January (see

reserve

(see H i l k e ,

latente the

lower sheet

Steuern")

profit

in

than the

profit

according

s e t t i n g up a p r i c e

the to

increase

134 reserve

in

commercial taxes

appears

deferred apt

tax

to

tax

balance

sheet).

the

of

the

but

the

not

deferred value

(see S i e g e l ,

p.

financial

the

deferred

to

tax

of

in

of

requirement

against

informative

statements

Expansion

sheet,

Capitalization

questionable; liabilities

impair

financial

3.5

the

balance

set

off

assets

a

is

company's

137-174).

statements

of

corporate

entities Up t o

now,

report sheet In

only

stock corporation s

("Geschäftsbericht") and s t a t e m e n t

the

future,

ments

of

all

account,

a

of

corporate

a)

the

"notes t o

b)

the

"report

financial

the

earnings 264

of

three true

all

private

have t o

parts

With

respect

financial certain

to

of

p.

are

have

to

state-

be t a k e n

("Anhang")

into

and

and p o s i t i o n

the

an §§

prescribed

182-189;

sheet

of

and

of

284 for

the

FRG-

law

of

to

financial

the

corporations seems

and 285 large p.

up t o

to 70

to

present

be

almost

different

corporations 27-31).

a

and

notes to

§

these

to give the reader and t h e

that

Göllert/Ringling,

than

According

reporting

reporting,

all

extent

in

more

and s t a t e m e n t

statements.

assets,

objective

to

the

even

i n order

net

this

to

i.e.

companies

accounting

company.

According

-

financial

s t a t e m e n t s now r e q u i r e

incredible:

financial

statements

balance

of the

disclosures

disclosures Meyer,

to

German

view

income p o s i t i o n

annual balance

financial

liability

must f o r m a n u n i t y

and f a i r

the

development

corporations

limited

notes

new

will

on n o t e s t o

supplement t h e i r

with the

an

their

("Lagebericht").

In

400.000

of

statements"

economic

Expanded r e g u l a t i o n s

will

expansion entities

a)

future,

prepare to

to

on t h e

t h e company"

had t o

addition

earnings.

double

with regard

in

And

(see even

135

small

corporations

new r e p o r t i n g For

a

better

regulations the

fulfill

to

about

of

the

financial

schedules

80

percent

(see G ö l l e r t / R i n g l i n g ,

understanding

on n o t e s

following

Table 6:

must

requirements

contents

statements

(see t a b l e

of p.

of

let

these 26).

the

us

new

examine

6).

R e g u l a t i o n s on n o t e s t o f i n a n c i a l s t a t e m e n t s ( t o be p r e p a r e d by a l l c o r p o r a t i o n s )

Firstly, the notes t o financial statements must include all d i s c l o s u r e s w h i c h a p p e a r n e c e s s a r y t o g i v e t h e r e a d e r a t r u e and f a i r v i e w o f t h e n e t a s s e t s , f i n a n c i a l and income p o s i t i o n o f t h e company. I n p a r t i c u l a r , i f a p p l i c a b l e , t h e f o l l o w i n g f a c t s need t o be d i s c u s s e d : Change i n t h e p r e s e n t a t i o n o f t h e b a l a n c e of earnings v i s - à - v i s the p r i o r year Prior

year

numbers a r e n o t c o m p a r a b l e

Breakdown by l i n e s Details of statement of

of business

captions earnings

(if

summarized

sheet

or were

or

statement

restated

applicable) in

the

balance

sheet

or

Comments on r e c e i v a b l e s sheet date

which l e g a l l y

arise

only a f t e r

balance

Comments on l i a b i l i t i e s sheet date

which l e g a l l y

arise

only

balance

Development sheet)

of

fixed

assets

(if

not

Changes i n s h a r e h o l d e r s '

equity

Details

expenses and

of

Amount o f

extraordinary

and a l l o w a n c e s b a s e d on s p e c i a l

Contingencies

e

and

commitments

page)

in

the

balance

income

n e c e s s a r y w r i t e - u p s w a i v e d due t o t a x

Depreciation

( c o n t i n u e d on

presented

after

tax

considerations regulations

136

(Table

6

continued)

In addition, the following require discussion i n the notes t o f i n a n c i a l statements:

-

A c c o u n t i n g and v a l u a t i o n p r i n c i p l e s

-

Method o f t r a n s l a t i n g Deutsche Mark

yes

yes

yes

yes

Changes i n a c c o u n t i n g and v a l u a t i o n m e t h o d s i n comparison t o methods used i n p r i o r y e a r , and t h e r e s p e c t i v e e f f e c t on n e t a s s e t s and income

yes

yes

D i f f e r e n c e b e t w e e n book v a l u e s a n d v a l u e s a t l a t e s t s t o c k exchange o r market p r i c e s i n case of group, L i f o or F i f o v a l u a t i o n

yes

yes

I n c l u s i o n o f i n t e r e s t on b o r r o w e d f u n d s i n manufacturing cost or cost of f i x e d assets c o n s t r u c t e d by t h e company

yes

yes

T o t a l of l i a b i l i t i e s f i v e years

yes

yes

yes

yes

foreign

D e t a i l s of l i a b i l i t i e s t h a n f i v e y e a r s and o f

after

into

more t h a n

with description

r e p a y a b l e a f t e r more secured l i a b i l i t i e s

yes

no

T o t a l o f o t h e r f i n a n c i a l commitments w h i c h are not r e f l e c t e d i n the balance sheet (exc e p t f o r c o n t i n g e n c i e s and c o m m i t m e n t s ) . Commitments v i s - à - v i s g r o u p c o m p a n i e s n e e d t o be d i s c l o s e d s e p a r a t e l y

yes

no

Breakdown o f s a l e s by b u s i n e s s l i n e s a n d g e o g r a p h i c a l m a r k e t s (can be s p a r e d , i f d i s c l o s u r e w o u l d c a u s e s i g n i f i c a n t harm)

no

no

Effect purely

yes

no

on n e t income o f d e p r e c i a t i o n for tax considerations

E f f e c t o f t a x e s on r e s u l t s t i o n s a n d on e x t r a o r d i n a r y -

currencies

repayable

T o t a l of secured l i a b i l i t i e s of s e c u r i t i e s

-

A l s o t o be p r e s e n t e d by c o r p o r a t i o n s which are c l a s s i f i e d as MediumSmall Sized

A v e r a g e number o f

( c o n t i n u e d on

e

of ordinary results

e m p l o y e e s by g r o u p s

page)

taken opera-

yes

yes

yes

no

137 (Table -

6

continued)

I n case t h e cost of s a l e s p r e s e n t a t i o n i s u s e d , i n f o r m a t i o n on m a t e r i a l and p e r s o n n e l costs, according to the presentation i n the n a t u r a l cost elements p r e s e n t a t i o n

yes

F o r members o f t h e management g r o u p , t h e supervisory board or the advisory board, s e p a r a t e l y f o r each group - t o t a l remuneration for the year - t o t a l r e m u n e r a t i o n f o r f o r m e r members o f s u c h g r o u p s a s w e l l a s a c c r u a l s s e t up f o r s u c h p e r s o n s , g i v i n g a l s o t h e amounts n o t c o v e r e d by a c c r u a l s - a d v a n c e s and l o a n s g r a n t e d , p r o v i d i n g d e t a i l s on i n t e r e s t r a t e s and t e r m s , and a l s o c o n tingencies entered i n t o for the b e n e f i t of such persons -

-

yes yes

no no

yes

yes

yes

yes

Name and r e s i d e n c e o f c o m p a n i e s i n w h i c h t h e r e - y e s p o r t i n g e n t i t y h o l d s more t h a n 20 % o f s h a r e s a s w e l l a s t h e l a t e s t a v a i l a b l e n e t income o f s u c h companies ( t h i s i n f o r m a t i o n can be s p a r e d i f i m m a t e r i a l o r i f d i s c l o s u r e c o u l d mean harm t o t h e company)

yes

Major

yes

no

yes

yes

yes

yes

A l l members o f t h e management g r o u p a n d s u p e r v i s o r y body, i n d i c a t i n g chairman or chairman p o s i t i o n

items

vice

i n c l u d e d under o t h e r a c c r u a l s

Reason f o r d e p r e c i a t i n g g o o d w i l l o v e r t h e expected period of b e n e f i t r a t h e r than the g e n e r a l l y p r e s c r i b e d 25 % p . a . , s t a r t i n g i n the year a f t e r acquisition -

no as regards material

Name and r e s i d e n c e o f t h e p a r e n t company o f c o r p o r a t i o n which prepares group accounts

the

(Further, t h e r e a r e a d d i t i o n a l d i s c l o s u r e s t o be notes t o f i n a n c i a l statements under t h e p r o v i s i o n s c o r p o r a t i o n law) Source:

made i n t h e of the stock

P e a t , M a r w i c k , M i t c h e l l & Co. ( H r s g . ) " E x e c u t i v e O v e r v i e w New German A c c o u n t i n g and R e p o r t i n g L e g i s l a t i o n " , München 1 9 8 6 , p . 4 5 , 47 u . 49

138

b)

Report

on

the

economic

development

and

position

of

the

the

new

company In

addition

reporting report

to

the

notes

requirements

on

the

to

now

economic

financial include

statements,

for

development

all

and

corporations

position

of

a the

company. In this

report

the

following

Peat/Marwick/Mitchell,

p.

facts

51;

need t o be d e s c r i b e d

Küting/Weber,

1986,

(see

p.

1386-

1397) : Development of

of

the

business

t h e company so t h a t

(this

means

cost,

utilization structural

of

a true revenues,

capacity,

events a f t e r

bookings,

company.

and

to

auditing.

contrary joint

to

in

present

stock

§ law

companies,

large

not

but

corporations.

companies their

around will

business

around

2.000

statutory

order

be

date.

(including

if

(For

law

stock

private a

the

1987

limited

corporations

have

as

the Up

liability

conservative first

until

been

and

medium-sized

limited

for

comparison:

that-

corporations

first

private

in

requires

categorized

Following

audited

stock

new

only

also

300.000

life!

as

development).

the

c o m p a n i e s must now b e a u d i t e d estimation,

well

requirements

316 -

given

production, as

sheet

activities

development

is

discussed).

Expected development of t h e and

position

picture

investments,

Research

3 . 6 A u d i t i n g and p u b l i c a t i o n

In

economic

the balance

amount s p e n t on r e s e a r c h

or

the

and f a i r

changes need t o be

Significant

As

and

liability time now,

subject

in only

to

a

audit).

to

the

following

Not

only

but

also

the the

imagine

the

whole

activities

must

balance notes

sheet to

the

volume also

and

the

be

of

forthcoming

taken

statement

financial

into of

statements

audit

account: earnings, and

the

139

report

on

company

the

must

economic

be 11

schaftsprüfer

development

examined

,

the

from

now

and

on

German e q u i v a l e n t

position

(usually of

of

by

a

the

"Wirt-

a Certified

Public

Accountant). Further,

all

corporations

(even

the

small

exempt from t h e a u d i t i n g r e q u i r e m e n t s ) financial depends from

statements.

on t h e

filing

size

only

Gazette

of

scope

the

certain

to the publication Federal

The

of

documents

the entire

3.7

Effective

"The

new

commencing new

law

on o r

ends

a

stub

1987.

January as

An e a r l i e r

trade

all

1987. the

business

December

for

31,

1987,

introduced

which

application

of

the

Numerous

simplifications

have been

avoid

taxation

burdens

will

the

new

consequences. not

be

This

incurred

Provisions follows p.

avoiding

transition (see

consequences

old to the

Küting/Weber,

law

its

p.

in 15).

facilitate

in

order

a

result

to tax of

law.

taxation

from t h e

as

in and

additional

companies

the

annual

begins

to

methods

means t h a t

by

i n t r o d u c i n g t h e new a c c o u n t i n g

the

introduced

accounting

years

except

new

(Peat/Marwick/Mitchell,

to

the are

T h i s means t h a t earliest

is permissible"

transition

in

details

entirety

the

register

statements more

range

transition

to

1,

is

the

Some

for

at

of

period

required

3.

applies

applicable

statements

where in

law

after

becomes

financial cases

d a t e and p r o v i s i o n s

are their

requirements

with

("Bundesanzeiger").

accounting

publication The

financial

shown i n t h e a b o v e m e n t i o n e d t a b l e

which

have t o p u b l i s h

of

company:

ones

1986,

and

new l a w a r e p.

1937-1959?

simplifying furnished

as

Coenenberg,

19-20): It

is

permissible

undervalued but,

in

fixed

such

to

carry

assets

cases,

forward

the

book

(see G ö l l e r t / R i n g l i n g ,

the

book

value

of

value p.

of 34);

depreciable

140

assets

must

be

depreciated

over

the

remaining

d u r i n g w h i c h t h e a s s e t s a r e e x p e c t e d t o be "The

undervaluation

tained,

provided

undervaluation.

affecting

amount

of

the

write-up

increasing

set

overstated

up.

to

debiting

the

the

It

is

not

on

figures

of

is

the

9.

1938-1939).

If

the

the

net

cost

with

the

past

in

the

in the

first

accounting

not

necessary

cost

year

of

4.1

the

accounting

of

may

assts

high

cost

in

p.

group

7th

and

reporting

of

the

followed. comparative

can or

1986,

only

time

be

delay, original

23) .

accounting

EC D i r e c t i v e

by

statements

(see Küting/Weber,

fixed

be the

adopting

present

to

17).

principles to

by

numerous group

and

reporting,

Directive essential

companies

changes

("Konzern")

considered.

Requirements ments -

Until

p.

the been

affecting

financial

c a u s e d b y t h e a d o p t i o n o f t h e 7 t h EC

in

not

general

appropriate

year

to

the

or

liabilities

without

notes

unreasonably

changes

such

recorded

b o o k v a l u e s may b e u s e d a s f i c t i t i o u s

Essential

must b e

in

considered

reserve

(see G ö l l e r t / R i n g l i n g ,

By a d o p t i n g

had

applies

Understated

preceding

original

determined

4.

in

it

main-

reserve,

(Peat/Marwick/Mitchell,

report

changes

Moreover,

in

same

amount

necessary

to

be cover

can be

earnings

which

earnings

income s t a t e m e n t "

may

regulations

the write-up an

The

accruals.

increased

assets

tax

income s t a t e m e n t b y c r e d i t i n g to

accruals

properly

current the

Otherwise,

without

new l a w

of

that

years

used.

now,

required

to

to

prepare

consolidated

financial

companies t o be c o n s o l i d a t e d and s i z e on

the

prepare

whole,

only

consolidated

stock

state-

criteria

corporations

financial

statements.

were In

141

the

future,

g r o u p a c c o u n t s must be p r e p a r e d w h e n e v e r a

i s h e a d e d by

(any k i n d of)

These group accounts the of

report

p o s i t i o n of "Generally, where

the

rights of

all the

management

dinated

In general, 19) .

In

financial

statement

statements,

economic

and

development

and

group.

company

right

to

or

the

of are

holds

appoint

the

the

majority

majority

administrative

considered

to

of

body

of

b e members

of

group

future,

accounts"

worldwide

of

voting members

the

subor-

the

group.

(Peat/Marwick/Mitchell,

financial

or

the

d o m e s t i c and f o r e i g n g r o u p c o m p a n i e s must

the

the

consolidated

c o m p a n i e s w h i c h a r e u n d e r common c o n t r o l ,

all

in

279):

sheet,

consolidated

the

company,

included

the

holding

or

(see §

balance

and t h e n o t e s t o

on

group

corporation.

include

consolidated earnings

a

a

statements

be p.

must

be

included

in

presented. Until

now,

only

such group possible

accounts;

of

the

on a v o l u n t a r y

Consolidated two

domestic

the

financial following

reporting

balance

date

§ 293) .

(see

companies inclusion

had of

to

be

foreign

companies

was

basis. statements terms

of

must

size

be

have

prepared been

met

only on

s h e e t d a t e and t h e p r e c e d i n g b a l a n c e

Balance sheet t o t a l DM m i l

Sales DM m i l

if the

sheet

Number o f employees

Before eliminations

more t h a n

46.8

96.0

500

Consolidated:

more t h a n

39.0

80.0

500

4.2

New p r i n c i p l e

of uniform

The

individual

financial

companies

which

are

to

be

valuation statements included

in

of

subordinated

the

consolidated

142

financial

statements

must

principle

of

accounting;

future, be

the

applied

uniform

unifor m valuation

(see

Heinen,

statements, of

financial

statements

the

An e x e m p t i o n permitted

if

original

19-20;

4.3 The

p.

following see Meyer,

between

the

book

acquisition assets

greatest only

as

the

provides the

other the

all

expenses, the

quota

a

principle

the

of

individual

companies.

preclude

valuation

the

is

modification vis-â-vis

Peat/Marwick/Mitchell,

p.

method"

of

to

if

the

be

(or

right,

of

the

must

difference

cost

and

is

the

be

allocated

acquired

allowed

time

company

to

to

the

p.

21);

presented

as be

from

be

of

a s a w h o l e c a n no l o n g e r

arising

to

the

at

(see P e a t / M a r w i c k / M i t c h e l l , any,

be

"purchase

the

investment

consolidated

now

consolidation

of

accounts".

hand,

the that

new joint

financial

method and

(see

to

(Peat/Marwick/Mitchell,

German ventures

statements Sigle,

liabilities,

incorporated

equal

must

T h i s means t h a t

the difference

option

equity

"Anglo-Saxon 212).

"difference

assets are

in

of

consolidated

former

equity

value

equity

consolidated

consolidation that

must

in

shareholders'

possible

Thus,

shareholders'

company

the principle

uniform

shareholders'

the p.

remainder,

presented

On

of

liabilities

extent

the

(see

a participation

and

"goodwill".

of

the

c o n s o l i d a t i o n purposes

sheet

equity, of

for

of

method";

the

the

applied

the

in

210-211).

consolidation

shareholders'

replace

regulations

New c o n s o l i d a t i o n

performed

Thus,

observed

rules

following words:

the parent

new p r i n c i p l e

tax

by

other

of the subordinated

balance

Meyer,

of

be

will

of v a l u a t i o n p r i n c i p l e s the

in

383-385).

to

valuation

on t h i s

only

p.

as

financial

prepared

principles

valuation,

dominance

be

the p.

in

the

p.

commercial may b e

321-336).

group

interest

in

21).

Thus,

well

quota

"This

means

as

income

joint

the

in

the

accounts the

now

included

following

as

law

net

only

and with

venture" assets,

143

financial

p o s i t i o n and r e s u l t s

(see S i g l e ,

4.4

p.

Intercompany p r o f i t / l o s s

First

of

all

Directive have

it

-

1987,

p.

profits

in

services

and

the

would

exemption notes

in

is

to

Equity

For of

p.

p.

their

reporting is

voting

to

p.

the

to

the

company

the

interest

in

Mitchell,

p.

intercompany

losses w i l l

have

can be w a i v e d i f

sales terms

usual market

to

profits/losses

If,

be

however,

discussed

statements"

in

this the

(Peat/Mar-

the

for

so-called

a

Such a s s o c i a t e d

a

holds

company

(see

more §

method"

companies

firms

can be

influenced

policies?

party

"equity

"associated"

significantly

financing

of

companies

(but

regarding

this

situation

than

20

311?

(see

% of

is the

Peat/Marwick/-

21). " e q u i t y method" o f

shares,

investment in

only

expense.

needs

losses

Küting/Weber,

the

"associated"

236).

if

shareholders'

of

at

and

(see

intercompany

purposes,

and

According t o the in

rule

financial

required

exist

rights

Mitchell,

tion

for

necessarily)

business

deemed

the

this

not

7 t h EC

21-23).

195 and p .

not

this

unreasonable

accounting

group

are

of

profits

intercompany

rendered

consolidated

accounting

Meyer,

an

applied,

the

wick/Mitchell,

4.5

"However,

calculation

result

b a s e d on t h e

accounting

also

w e r e made o r

-

intercompany

Furthermore,

f r o m now o n ,

t o be e l i m i n a t e d . or

for

German g r o u p

303-310).

but,

clearly

elemination

must b e m e n t i o n e d t h a t

definitions

changed

c a n b e d i s c l o s e d more

330-334).

equity are

to

in the

associated

21? M e y e r ,

the

company,

simultaneously

account

proportion the

of

accounting a l l

p.

the

books

holding company

236-242).

after

debited of

or the

company's (see

movements acquisicredited holding share

of

Peat/Marwick/-

144

4.6

Effective

date

For

business

years

1990

the

will

be

But t h e

of

those

statutory new l a w

5· The

groups

audit

main

must

be

applied

which

requirement

consequences law,

were as o f

of

the

i n my o p i n i o n ,

January

1,

and

reporting

of

annual

financial

since

January

already the

1,

subject

effective

p.

new

will

To r e a d a n d t o a n a l y s e a n n u a l more in

difficult,

the

1986 to

date

of

a the

17).

Numerous

statement

of

will

be

divided

the so-called the

in

(and

companies.

With

respect

two

to

the

numerous

corporations annual

To

subjugate

liability

or

on

notes

more

which

new will

financial

law

t a x a t i o n purposes

for

statements

less

will

informations one

hand

on

financial

some l a r g e

expensive)

different

commercial

of

the

and

and

hand.

publishing,

small

the

financial

and e v e n

into

accounting

following:

small

"BetriebsaufSpaltung"),

obligatory

facilities

be t h e

earnings

by

on t h e o t h e r

medium-sized

German

because

information-overloading statements

4)

after

Some c o n s e q u e n c e s o f t h e new l a w

given

3)

or

accounting

concerning the a u d i t

companies

become

2)

on

group

(see P e a t / M a r w i c k / M i t c h e l l ,

reporting 1)

commence for

effective. regulations

statements for

which

new r e g u l a t i o n s

companies

i n order

audit are

corporations

and

only

in

the

available

for

future

statements:

publication

(by avoid

use

publishing

to

to

requirements, prepare

one a c c o r d i n g

and a n o t h e r

one

two to for

only.

more

companies

than to

300.000

an o b l i g a t o r y

private audit

limited

f r o m now on

145

seems t o me n o t h i n g b u t a g r e a t tried

to

solve

accountants.

the

scheme b y w h i c h

lawyers

p r o b l e m on u n e m p l o y e d a t t o r n e y s

and

146 References BAETGE,

J./FISCHER,

Th.:

"Zur

und V e r l u s t r e c h n u n g für

Aussagefähigkeit

n a c h neuem R e c h t " ,

Betriebswirtschaf t.

der

in:

Gewinn-

Zeitschrift

Ergänzungsheft

1/1987,

p.

175ff. BUSSE VON CÖLBE,

W./CHMIELEWICZ,

linien-Gesetz", (1986),

p.

COENENBERG,

A.G.

al.:

Texte.

HEINEN, E . : W. :

Recht

W. :

das

des

Handelsbilanzen.

Heidelberg

12.

Auflage,

Wiesbaden

Überblick",

vergleichender (WISU). bei

den

(WISin . 5 / 1 9 8 7 ,

und

Κ./WEBER, Kommentar

Buchen

C.-P. zur

Einfüh-

(Sonderveröf-

-

p.

11/1986,

nach

(Ed.):

neuem

p.

539

1986

und in:

245

in:

dem

altem Das

ff.

Bewertungswahlrechten

durch

Das

Wirtschafts-

Neues

Bilanzieren.

ff.

L./LEUZ,

S t u t t g a r t / B a d Wörishofen

1986

1986

nach

ein

neuem

Bilanzricht-

"Bilanzierungswahlrechte

KRESSE, W·/KOTSCH-FASSHAUER,

-

nach

1986

Bilanzrichtlinien-Gesetz",

Prüfen

Jg.

Betriebs-Beraters)

"Änderungen

studium

KÜTING,

Einzelbilanz

Bilanzrichtlinien-Gesetz.

Materialien.

Wirtschaftsstudium W. :

46.

1986

Herne/Berlin

Κ./RINGLING,

fentlichung

HILKE,

Die

R e c h n u n g s l e g u n g und P r ü f u n g n a c h dem

rung.

HILKE,

Bilanzricht-

Betriebswirtschaf t.

Düsseldorf

linien-Gesetz. GÖLLERT,

Die

"Das n e u e

ff. et

Handelsrecht. GLADE, Α . :

in:

289

K. :

N.:

Bilanzrichtlinien-Gesetz.

1986 Handbuch d e r

Bilanzierung

und

Rechnungslegung

Prüfun g.

Stuttgart

147

RÜTING,

Κ./WEBER,

C.-P.:

"Einzelfragen

Zwischenergebnissen unter

besonderer

scher Aspekte",

P. :

konzernbilanzpoliti-

Zeitschrift

C.:

der

und

3.

5.

2 HGB",

Auflage, Bd.

Auflage,

PEAT/MARWICK/MITCHELL German

Bewertung

von in:

Accounting

p.

nach

II:

67

dem

Herne/Berlin Einführung

(Ed.):

and

Zeitschrift

unter Bilanz-

1986

in

das

neue

1986

Executive

Reporting

für

ff.

und S t e u e r r e c h t

Wiesbaden

& CO.

Aufwandsrück-

1/1987,

Konzernrechnungslegung

Bilanzlehre.

Bilanzrecht.

Betriebswirtschaf t.

ff.

nach H a n d e l s -

richtlinien-Gesetz. A. :

299

für

Ergänzungsheft

Bilanzierung

Einschluß

MOXTER,

p.

§ 249 A b s .

Betriebswirtschaf t. MEYER,

von

Berücksichtigung

1/1987,

nach

Eliminierung

Konzernbilanzrecht-

"Bilanzierung

stellungen

der

neuem

in:

Ergänzungsheft KUPSCH,

nach

Overview

Legislation.

New

München

1986 RINGWALD,

R. :

(WISU). SIEGEL,

"Rückstellungen",

6/1986,

Th.:

1/1987,

"Latente

SIGLE,

H.:

p.

Ergänzungsheft H.

von:

Zeitschrift

1/1987,

p.

119

nach

Betriebswirtschaf t.

§ 247 HGB",

und in:

Ergänzungsheft

ff.

in:

Zeitschrift

1/1987, "Die

p.

für ff.

321

und

Aspekte für

der

Quotenkon-

Betriebswirtschaf t.

ff.

Bedeutung

betriebswirtschaftlicher in:

Wirtschaftsstudium

Konzeptionsprobleme

Bilanzierung

"Betriebswirtschaftliche

solidierung",

TREUBERG,

Steuern:

zur

für 137

Das

Studienblatt

Anwendungsfragen Zeitschrift

in:

der

Wertauf holung

bilanzpolitischer

Betriebswirtschaf t.

aus

Sicht",

Ergänzungsheft

The F o r e i g n T r a d e S t r u c t u r e

Takashi

1.

Japan

Natsugi

Introduction

Beginning been

in

the

steadily

spring

on t h e

of

driving

factor

weakening

of

by t h e y e n ' s the

other

in

the

1983,

way t o

down a r o u n d t h e m i d d l e o f

in

of

the

U.S.

1985.

past,

are

but

slacked

economy

imports

Japanese

Exports,

it

economy

slow

which were t h e

main

in

line

further

showing

signs

with

a

decelerated

s i n c e t h e autumn o f

now

had

began t o

off

and w e r e

sharp a p p r e c i a t i o n

hand

the

recovery,

of

1985.

On

increasing

volume.

Effects

of

the

the

Japanese

the

surplus

continued quarter

and

trade the With

attempt

of to

istics

and

effects

of

will

on be

the

to

are

estimated

to

trade

to

the

for

be

gradual

in

the

in

1985.

so-called

crude

around

and

Concretely, balance

billion

same p e r i o d

attributed price

only

growing.

$14.6

% from t h e

as

a

background,

foreign

trade

explanations

changes.

One

the yen's

rise

GNP,

still

oil.

$90.0

has first This

J-curve

The billion

total for

1986.

facts give

trade

is

merchandise

declining

is

on

amounting

mainly

year

these

analysis

those

is

surplus

fiscal

Japan's up 63

the

yen

imbalance

grow,

1986,

development effect

in

to

of

stronger

trade

prices,

considered.

we

will

structure for

recent

the

of

start Japan

structural

topic

of

and

and

business

the then

character-

importance,

on t h e J a p a n e s e economy,

employment

with

the

including activities,

150

2.

The f o r e i g n t r a d e

The

Japanese

its

expansion.

economy

the

private 1980

terms of

exports a trade

we

faced

observe

at

investment 85.

From

quite

the

the

in

it

surpluses

same

to

see a

time the

and

of

in the

foreign

trade

of Japan.

growth. 1983-85

that

in

It

that But

private in

1984-

Japan,

it

is

imports

is

to

be

had been

changes

In

trade.

active and

deficits

structural

decades

cycle

recession.

60s t r a d e

In

two

after

2

also

increasing

growth.

last

was o n l y

foreign

Table was

trade

exports

period

1950s

in

equipment of

It

and Also

economic

in

period

roles.

was i n t h e y e a r s

t o t h e Japanese economic the

to

imbalance,

viewpoint

during the

growth.

much

for

components

consumption

important

with

and

exports

of

In the recession

sustained

the

on

shares

government

contributed large

country

depend

(GNE).

shock,

played

plant

normal

creasing that

in

always

formation

consumption

J a p a n was

not

1 shows p e r c e n t a g e

oil

capital

that

according t o

expenditure

first

government

did

Table

i n gross n a t i o n a l after

structure

noted

barriers

c a n be

I n the world t o t a l ,

de-

observed the

trade

s u r p l u s e s w h i c h were r e c o r d e d around 1970 were o f

reasonable

amounts.

running

deficit very

In

large

before. more

the

(see

and

in

reached

the

level

trade

average

1985

trade

of

one

frictions

b e t w e e n J a p a n and h e r

changes

statistics

developed exports

will

of

the

share

surpassed t h e recovery

was

surpluses digit have

trade

of

this

larger

partners

a

became

been

imports

change

when we s e e

according much

area area

recorded

shares are observable structural

clearer

declined

developed

level of

be

Japan

countries

to

relative the

on

But

than

debated

since

the

1980s.

Structural trade

trade

3) .

Correspondingly,

acutely

early

1970s,

Table

to in

regions. the

recovered in

the

1969 t o

foreign

Trade

1970s. markedly

overall

1971.

was m o d e r a t e .

the

In

world

essentially

attributed

the total hand

movements

in trade with the developing area.

c a n be

1985

and

On t h e o t h e r

Reverse

with

to

in The

enhanced

151

oil

prices,

Middle

because Japan imports

East.

Trade

with

crude

Africa

oil

mainly

declined

in

from

1985

the

rather

sharply. Concerning

structural

surpluses Kingdom

in

changes

in

Surpluses in

the

is

then

issue

the

with

the

the

natural Japan

surpluses, supported the

yen

shock o f

and

fall

without the

that

the

strong

developed of

surpluses with

Japan.

In

areas,

developing

Canada

products

newly

to

sharp

yen

mitigating

deficits is

do

not

inevitable

economic Relative

to

that

stages

these

from

and

shares

of

trade

were

declining,

products

have

not

must

producing

countries

1 9 7 0 s due t o t h e been

smaller

more

than

In

almost such

will

all as

first

for

Indonesia

cut

in

because half

labortrade

factor.

through to

countries of

crisis.

prices

recently.

for But

like years.

with

oil-

Arabia

has

These crude

both

the

primary

several

Trade Saudi

It

exporting.

t h e y w e r e enormous

and s e c o n d o i l

1985

go

last

and

like Japan

export

them p r i c e s oil.

trade

from

negative

in the

crude

main

have

countries

developing

into deficits?

in

they

substitution

with

severe

countries

these

nations

because

that value

are

and t h e y

a

been f a v o r a b l e

import

always been running became

in

trade

the

Australia

Japan

indicate

import

Thailand Japan

and

necessarily

in

year.

industrializing

Japan.

It

main

apprecia-

the

turn

development

1985.

policy

for

products

rate

the

increase

goods e x p o r t e d

economic

are

America.

in

Korea and T a i w a n need m a n u f a c t u r e d intensive

United

a high

became

economic

in the past

countries,

primary

of at

could have r a i s e d

US-dollar,

t h e Yen u p s u r g e

exporters

The

American

the

the

$40 b i l l i o n

The e a r l y

US d o l l a r ,

against

States

friction

U.S.A.

1985.

and

increased

nearly

country,

More r e m a r k a b l e

United

trade

the

of

to

Germany

1980s.

the U.S.A.

1970s and amounted t o quite

according

F.R.

in

with

trade

began i n t h e

Among

with

greatly

trade

in

between

tion

of

trade

increased

changes

in

the

deficits oil

exports

have and

152

imports

with

relatively Trade

oil-producing

but also

with

the

promising.

3.

P.R.

But t h e

new e c o n o m i c

large

understand

imbalance,

Exports and

main

of

First

taking

cities

are

U.S.A. by

export

are,

of

and change

the

Japanese

and i m p o r t

factors into

in

the

are

income

as

estimated

relative

can

figure

coefficients

function.

for

and

we

Japan,

Table

the

4

functions,

for for

Korea,

see for

t h e F.R.Germany.

from Korea %.

we

2.21

a proportional

is

one

and

roughly

income 1.13

the

When w o r l d by 4 . 2

increase

structural

Korea

are

in

speaking,

elastifor

relation

imports

grow from

sensitive

to

exports

to world

characteristics the

the

% and t h o s e

and t h e F.R.Germany a r e s t i m u l a t e d o n l y t o t h e

of

But

increase

that Japan,

by

Japan

for

shows

U.S.A.,

U.S.A.

the

and

consumption

Japan

of

trade

functions

a type of

logarithm,

linear

estimation

export

2.2

1985 caused a

Korea.

4.21

and 0 . 9 8

appears

functions

respectively,

data

this

1 %, e x p o r t s

only

internationally.

elasticities

and

not

and

in

characteristics

estimate

variables

results

growing

recorded

and i m p o r t

explanatory

and p r i c e

F.R.Germany,

surpluses

state

Transforming

income

been

present

results

explanatory the

the

and i m p o r t s

their

price.

declined

China.

export

we w i l l

compare t h e

has

structural

3 . 1 Estimation of To

China

issue with

Explanation of

countries

absolutely.

that

from

the

extent

imports. exports

expansion

of

It from

world

trade. Price Korea,

elasticity but

it

is

of

exports

less

than

i s e s t i m a t e d t o be v e r y h i g h unity

in

the

U.S.A.,

Japan

for and

153

the

F.R.Germany.

rather

price

Taking

the

import

elasticity less

of

than

the more

we

and

is

to

be n o t e d

functions

imports

unity

difference

imports,

It

in

is

income on

the

easily

suffers

is

the contrary,

which such

means as

high

tion,

that

crude

situation A

elasticity

price

exports fiscal

to of

of

case

Figure

trade

1982.

year

since

1985

export

the

Even

remained

Though i m p o r t s

solely

dollar

imports

balance a f t e r

3.2 This

fact

They

export

Japanese

very

of

small,

necessities The

German

currency

apprecia-

tend

to

second as

on t h e did

was

in

the

fall

in

the

export

first

half

base

were

increase

observed in the

of

and

quantity

not

Japanese

half

increasing

cause

signi-

the

of

trade

1985.

effect

the

J-curve.

by t a k i n g The

into

Economic

consideration

Planning

to estimate the J-curve effects estimated

price

considered the

improvement

can be e x p l a i n e d of

Japan t r i e d way.

valued

is

would

the

same l e v e l

t h e yen began t o r i s e

The J - c u r v e

effects

set

no

and

was

FY

so

and

Korean.

foodstuffs.

yen,

in

value

quantity

increasing,

and

import

base

1 shows t h e t e n d e n c y o f

in

ficantly,

to

The

is

From

exports

growth

consist

exports

the

it

Japan.

of

in

at

that

of

imports

and

of

1985.

are

income

Japan.

tends

deficits.

Japan

to that

recent

but

and so i s t h e

ores

t o decrease.

foreign

trade

the

and

US-economy balanced

mineral

elasticity

the

that

Korea

Japanese

imports

oil,

is nearer

like

from

of

find

elasticities

the

situation price

German e x p o r t s

in the U.S.A.,

that

less

just

we

F.R.Germany,

state

export

high

the

between

can

next,

therefore

The

that

inelastic.

an

function

export

separately.

i n both functions.

standard

case

quantity

for

The

in the function

exchange

To o b t a i n J - c u r v e

the

Oct.-Dec.

Agency

of

following and rate

effects

quarter,

the

in

an is they

which

154

actual

values

are

Fixed

values,

later

periods,

the

as

the

while

Oct.-Dec.

the

applied of

they

quarter.

Oct.-Dec. are

applied

results

are

depicted

imports

due

to

We

and

observe

three

one

that

crude o i l

3.3

If

In

price

explained

J-curve

the

yen

the

by

the

case up

until

as

the

last

Here

crude

through

This

import

effects

Japanese

the trade

in

trade, the

industry

product

develops

substitution

can

be

coefficient

the

between

difference

cients

and

import.

since

& steel. metal

developing

for

which

processing are

appear

for

in

is

also

cycle

for

more

the

drop

of

the

additively.

cycle the

theory

long-run,

theory.

may

This

stage of

exportation,

be

theory

infancy,

then

verified

and

is

have

of

finally

import

been

and

and

using

of

to

of

competitive

the

sum

competitive

semi-conductor.

and c l o t h i n g a r e a l r e a d y

coeffi-

3.1-3.3. in

automobiles

business

the

as t h e r a t i o

shown i n F i g u r e s

become

machine

by

competitiveness

e x a m p l e TV s e t ,

computer

least

correspondingly

which i s d e f i n e d

export

have

at

continues are

from t h e

and

Development

products 1960,

Those

hand f u r n i t u r e

decrease

decline.

according to sectors

Japanese

market

for

estimated

price

case,

in

statistically

competitiveness export

the

imbalance

viewed

t o the stage of

process

of The

oil

appreciation

present

applying

that

via maturity

the

applied

effects

J-curve

effects

change

formulates

are

the

to

comparative

periods.

2.

quarter.

applied

are

E x p l a n a t i o n by means o f t h e p r o d u c t

Structural

Many

are

values

later

of

July-Sept,

the

Figure

drop

the

period,

accumulated.

up

values

fixed

the

in

the

depicted.

periods.

than

set

and

to

the

to

quarter,

Actual

quarter

quarter

calculated

up

last

in

the and the

machine. On

declining.

the

world iron 1970s Newly other

155

In

the

United

States

competitiveness and

clothing

have

automobile

industry

processing

machine

Aircraft Taking

clothing,

the

for

iron As

of

and

for

Iron

steel

According

to

predict

that

future.

Even

the

necessary

4. As

is

seen it

give on

will

Japanese

yen

value.

take

economy

profits

competitive

several

are

however,

in

in

the

little What

to near

to

is

structural

quarters there

are

do

truly

policies

for

of

the

J-curve

the

yen

revalua-

are

several

attributable

in

economy

on e x p o r t s .

the

I n t h e case of

price

import

difficult

have

state.

analysis

effects

decreasing

oriented. both

of

cooperation.

quantitative

which

will

on t h e Japanese

to visible

position.

stage

quite

effective

economic

But

recently

it.

is

present

1960s. and

best

disappear

measures the

promote

the

rise

have been e x p o r t are

of

The

1960s.

competitiveness.

the

the

4).

and

the

its

in

it

will

of

1973,

following

friction

exports,

the

Firstly,

to

in

effect, effects

is

of the yen*s r i s e

tion

to

through

protectionist

is

Effects

gone

as

a picture

(Figure

in

in

lately.

industries

1950s

in

The

position.

the

decline

the steel Metal

decline

we g e t

prosper

presently

in

and

1970s.

& steel

exports

observations

international

iron

is

and a u t o m o b i l e

improvement

sharp

in

to

has begun t o

trade

a

the

i n a good

mostly

started

these

in

comparison,

surpassed

has

Iron

competitiveness.

time

and

obvious

i n the world market

clothing

steel

substitution

through

automobile,

clothing

their

hard

still

leadership

Korea, and

with

are

industries

imports

a

are

products.

experiened

leadership

took

Japanese

lost

had has

slopes

many

an i n t e r n a t i o n a l

changing

U.S.A.

of

long

and p l a s t i c s

typical

negative

tendency

to

Apart

symptoms

in

the

of

rise

enterprises, commodities,

and q u a l i t y ,

price

from

which which

imputation

156 is

partly

successful

but

E v e n T o y o t a M o t o r Co. by

24.6

%

previous trying them

to

is

the

new

abroad

in

first

target

to

sales

fashion

and

and

market.

These

due

situation

in

(see

Fig.

5) .

level

of

to job

other

2.9

to

% in

western

offers 0.68

to

to

yen

revaluation,

in the

1986,

longer term,

does n o t

increase

if

and

to

the

management

are

sales.

market is

to

promote

One

by

invest

more

expected

contribute

of

intro-

production

are

to

exports is

though i t

searches the

to

and

to

in to the

was

getting

reached

remains

More

profits,

gradually

unemployment

countries.

still

concretely, 1.0

in

the low

the

April

of

an a d d i t i o n a l

effective

demand,

new

the worse record

compared ratio

1986,

In addition to the effects

introduction

should r a i s e

compared

surpluses.

of

i n June 1986.

profits

their

strategies

market

rate

job

fell

technologies

labor

The

in current

small

The o t h e r

declining

the

extent.

domestic

and

industries

a certain

1986,

and

the

design.

lessening of Japan's trade Secondly,

to

maintain

in

equipment

Japanese

of

large

strategies

plant

limited

half

Both

promote

reorganize

is

recorded a decrease

year.

find

to

ducing the

in

half

it

of

but of

it the

microelectronic

unemployment domestic or

i n o r d e r t o absorb redundant work

problem abroad, forces.

157

Eefeyenççs ECONOMIC

PLANNING

1986.

Japan.

ICHIMURA,

S·

Link.

and

C.:

KOSAI,

Y.

MITI

and

the

Economic

Econometric Tokyo,

White

Models

Berlin,

Japanese

Policy.

Paper

of

Asian

Heidelberg

and

Y.:

London The

and S t r u c t u r e .

Miracle.

1925-1975.

The

Stanford

Growth

of

University

1982

a n d OGINO,

T.:

M. :

Verlag,

Stanford

MacMillan, NAKAMURA,

The

1985

Industrial Press,

(EPA):

1986

EZAKI,

Springer

New Y o r k , JOHNSON,

AGENCY Tokyo

The C o n t e m p o r a r y

Japanese

Economy.

1984

Postwar

Japanese

University

Economy:

Its

o f Tokyo P r e s s ,

Development

Tokyo

1981

158

Table 1 : 1980)

Percentage D i s t r i b u t i o n o f G K

Fiscal Year

GNE

Rate o f Grcwth o f GNE ( r e a l )

Private Consumption

Ocopcnents

( a t constant p r i c e s as o f

P r i v . Cap. Form.

Government Consum.

Housing

Government Plant&Eq. C a p i t a l Formation

1970 71 72 73 74 75 76 77 78 79

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

7.6 5.0 9.2 4.5 -0.4 3.9 4.6 5.3 5.2 5.3

57.7 58.3 58.8 59.8 60.8 60.6 60.3 59.6 60.2 60.2

9.7 9.7 9.4 9.4 9.9 10.1 10.1 10.0 10.0 9.9

7.8 7.8 8.6 9.1 7.6 8.2 8.0 7.8 7.6 7.2

18.8 17.1 16.7 18.1 16.5 15.3 14.8 14.1 14.6 15.3

9.0 10.5 10.9 9.8 9.7 9.7 9.3 10.1 10.9 10.1

80 81 82 83 84 85

100.0 100.0 100.0 100.0 100.0 100.0

4.0 3.3 3.2 3.7 5.0 4.2

58.4 57.7 58.2 57.9 56.6 55.8

9.8 9.9 9.7 9.7 9.5 9.3

6.2 5.9 5.8 5.1 4.9 4.8

15.8 16.0 15.8 15.9 16.8 18.2

9.6 9.3 9.0 8.5 7.9 7.0

(continued on

e

page)

159

(Table 1 continued) Fiscal Year

Exports

Iniports

Exports Imports (To compare a t current prices)

Surpluses/ Deficits i n Trade

1970 71 72 73 74 75 76 77 78 79

8.9 9.5 9.2 9.3 11.6 11.3 12.7 13.2 12.1 12.5

14.6 14.2 14.9 17.6 17.3 15.5 15.9 15.6 16.2 16.2

11.0 11.5 10.4 10.5 14.0

9.6 8.7 8.5 11.4 14.2

1.4 2.8 1.9 -0.9 -0.2

13.6 12.8 10.6 12.4

12.7 10.9 9.5 13.7

0.9 1.9 1.1 -1.3

80 81 82 83 84 85

14.0 15.3 14.7 15.8 17.3 17.0

14.5 14.5 13.6 13.4 13.9 13.0

13.7 15.1 14.3 14.2 15.2 13.9

14.1 14.2 13.4 12.2 12.3 10.1

-0.4 0.9 0.9 2.0 2.9 3.8

12.8

12.6

0.2

Source: Economic Planning Agency: Annual Report on National Accounts, Tokyo, 1986

160

Table 2 : Contribution t o Percent Change i n GME Crcm Previous Year (At constant prices)

Fiscal Year

GNE

Private Consump.

Gov't Consump.

P r i v . Cap. Form. Housing

Gov't Exports Imports Capital Plant&Eg. Formation

1970 71 72 73 74 75 76 77 78 79

7.6 5.0 9.2 4.5 -0.4 3.9 4.6 5.3 5.2 5.3

3.7 3.5 6.0 3.6 0.8 2.2 2.4 2.5 3.7 3.2

0.6 0.5 0.5 0.5 0.4 0.6 0.4 0.5 0.5 0.4

0.7 0.4 1.5 1.0 -1.6 0.9 0.2 0.2 0.2 -0.0

2.2 -0.8 1.0 2.3 -1.7 -0.6 0.1 0.1 1.3 1.4

1.2 2.0 1.4 -0.7 -0.2 0.4 0.0 1.4 1.4 -0.3

1.5 1.2 0.7 0.7 2.3 0.1 1.9 1.2 -0.4 1.5

-2.8 -0.3 -2.1 -3.7 0.1 1.3 -1.1 -0.4 -1.4 -1.3

80 81 82 83 84 85

4.0 3.3 3.2 3.7 5.0 4.2

0.5 1.2 2.4 1.8 1.5 1.5

0.3 0.4 0.1 0.3 0.2 0.3

-0.7 -0.1 0.1 -0.5 0.0 0.2

1.2 0.7 0.3 0.8 1.7 2.1

-0.1 0.1 0.0 -0.2 -0.3 -0.5

2.1 2.3 0.1 1.4 2.7 0.4

0.9 -1.1 0.4 0.1 -1.5 0.3

Source: See Table 1.

161 Table 3 : S t r u c t u r e o f Japanese Exports and Imports according t o Area and Country.

Area/Country

1969-71

1974-76

1979-81

1985

128,290 131,497 -3,207

175,638 129,539 46,099

47.70 36.38 13,367

58.34 41.01 49,349

World T o t a l

Ex($) Im($) Surpl.

19,776 17,872 1,906

59,505 61,591 -2,086

Developed Area

Ex(%) Im(%) Surpl.

53.60 53.38 1,059

45.64 40.98 1,916

Developing Area

Ex(%) Im(%) Surpl.

41.38 41.62 744

46.91 54.14 -5,429

45.53 58.60 -18,657

32.44 52.44 -10,958

S.E.Asia

Ex(%) Im(%) Surpl.

25.48 16.41 2,105

22.01 19.75 930

23.73 22.78 529

18.93 23.36 2,984

Middle East

Ex(%) Im(%) Surpl.

3.51 13.69 -1,751

9.54 27.68 -11,370

11.13 29.54 -24,574

6.93 23.11 -17,766

Latin America

Ex(%) Im(%) Surpl.

6.28 7.22 -50

8.32 4.17 2,381

6.75 4.28 3,034

4.83 4.82 2,244

Africa

Ex(%) lm(%) Surpl.

5.62 3.58 473

6.73 1.99 2,781

3.58 1.56 2,541

1.43 0.81 1,467

Ex(%) Im(%) Surpl.

4.99 5.00 93

7.44 4.87 1,432

6.77 5.02 2,089

9.22 6.55 7,710

Ex(%) Im(%) Surpl.

2.70 3.11 -22

3.03 2.07 527

4.15 1.91 2,825

3.95 2.26 4,010

U.K.

Ex(%) Im(%) Surpl.

2.36 2.13 86

3.03 1.37 624

3.03 1.60 1,779

2.69 1.40 2,906

France

Ex(%) Im(%) Surpl.

0.74 1.00 -32

1.34 0.88 256

1.46 0.90 694

1.19 1.02 759

Communist Bloc (by country) F.R.Germany

(Continued on next page)

162

(Table 3 continued) ^rea/Country

1969-71

1974-76

1979-81

1985

(EC)

Ex(%) Im(%) Surpl.

6.58 5.74 277

10.57 5.94 2,633

12.53 6.08 9,998

11.40 6.87 13,151

U.S.A.

Ex(%) Im(%) Surpl.

31.00 27.28 1,255

22.20 19.54 1,180

25.04 17.78 8,747

37.17 19.91 39,485

Canada

Ex(%) Im(%) Surpl.

3.24 4.85 -227

2.40 4.27 -1,200

1.97 3.37 -1,906

2.57 3.68 -253

Australia

Ex(%) Im(%) Surpl.

3.01 8.40 -906

3.39 7.33 -2,499

2.80 5.25 -3,308

3.06 7.57 -2,073

Korea

Ex(%) lm(%) Surpl.

4.12 1.19 602

4.33 2.59 978

4.49 2.47 2,510

4.04 3.16 3,005

Taiwan

Ex(%) lm(%) Surpl.

3.76 1.34 504

3.42 1.60 1,051

3.88 1.85 2,542

2.86 2.61 1,639

Thailand

Ex(%) Im(%) Surpl.

2.24 1.10 247

1.67 1.22 240

1.53 0.85 845

1.16 0.79 1,003

Indonesia

Ex(%) Im(%) Surpl.

1.69 3.52 -294

2.77 6.54 -2,385

2.52 9.70 -9,520

1.24 7.81 -7,947

Saudi Arabia

Ex(%) Im(%) Surpl.

0.50 2.70 -383

2.19 10.39 -5,093

3.78 13.47 -12,871

2.21 7.91 -6,355

P.R.China

Ex(%) Im(%) Surpl.

2.59 1.52 242

3.31 2.28 567

3.60 3.19 434

7.10 5.00 5,994

U.S.S.R.

Ex(%) Im(%) Surpl.

1.66 2.69 -151

2.79 2.03 406

2.21 1.47 1,365

1.57 1.10 1,648

Source: M i n i s t r y o f Finance: Foreign Trade Survey.

163 Table 4 : Ocnparison o f Estimated Exports and Inaports Functions on Quantity Base.

Export Constant terms

Incomes factor

Relative price factor

Japan

-12.683 (-8.4112)

2.2099 (12.397)

-0.84424 4 (-5.1993)

0.88637

0.,83255

U.S.A.

-3.1187

1.1333

0.83223

1.,3868

(-2.9994)

(9.0322)

-0.91826 ο ζ (-12.425)

-1.9702

0.97639

-0.34240

0.95257

1.,3534

(-7.2142) -1.7316

0.74804

0.,59263

W. Germany

Korea

(-2.6775)

(11.1118)

-31597

4.2071

(-7.9989)

(Continued on next page)

(9.0104)

A Η

Λ

(-3.0238)

164 (Table 4 continued) Import Constant terms Japan

-5.8122

U.S.A.

W. Germany

Korea

Incomes factor

Relative price factor

0.72464

-0.28052 4 (-24.540)

0.70096

0.84343

-16.390

1.6870

0.91242

0.83747

(-8.2541)

(11.454)

-0.87100 4 (-5.2446)

-4.0583

0.80319

-0.51377

0.75120

0.70169

(-3.6276)

(9.1375)

(-4.6289)

-3.2066

0.74621

0.81931

0.71252

(-1.4434)

(10.740)

-0.77740 4 (-11.370)

Export

World import excluding t h a t o f respective country

Export p r i c e o f t h e country concerned/ world export p r i c e ( e x c l . ) t h e country concerned

Import

Aggregated r e a l demands o f respective country

Import p r i c e o f t h e country concerned/ wholesale p r i c e o f t h e country

Source: EPA, o p . c i t . , Table 2 - 6 .

165

Figure 1

Gaps between Exports and Imports in Value and in Quantity on Customs Clearance Base Bfliion dollars Gap in

Export in value I Gap between exports and imports on value base (billion dollar) 60

Import on Gap on I—ι " quantitative base quantitative base FY 1982

FY1983

F Y198 A

1st half of FY1985

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Note: 1 Basis : Ministry of Finance. "Trade Statistics" 2.Gap on quantitative base is calculated based on the FY 1982 prices 3. Value for FY 1985 is seasonally adjusted value of yearly base. Source:EPA:The Economic White Paper 1986, Japan,Fig. 1-8.

166

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Influences of the Yen Rate Increase and the Declining Crude Oil Price on the Japanese Trade Balance Aggregated J-curve for respective quarter of year

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Note : 1. Basis : Ministry of Finance, "Trade Statistics" 2. Values were calculated based on import-export quantity function and export prices function. Source.EPA, op. cit., Fig. 1-9.

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