Land of rising competition

Lisa Napoli Nov 10, 2006

KAI RYSSDAL: Now that Detroit’s finally doing better about its quality-control hole, Japanese companies are discovering problems of their own. Toyota, for example, has had to recall almost a million cars in the past couple of months. Sony suffered huge losses when it was forced to recall millions of computer batteries that were fire hazards. And only now is the company getting around to releasing its long-delayed Playstation 3 video game console. Marketplace’s Lisa Napoli looked into what went wrong.

LISA NAPOLI: Let’s not forget that Japan hasn’t always been synonymous with top-quality:

C. WHAN PARK: A lousy product. I mean, when you talk about the late ’50s, ’60s, that’s what the Japanese brand was.

That’s C. Whan Park at USC’s Marshall School of Business. Of course, once Japan turned around, it turned around big and became renowned for making durable, long-lasting products.

Park says today the country’s facing the same problems as everyone else — especially the pressure to increase the bottom line by reducing costs:

PARK:“To compete with others on a global level, they have to really pay attention to this cost and then that creates many other different issues.”

Restructurings are taking their toll, and diminished head count at major companies means fewer eyes to backstop production troubles. And a trend toward outsourcing puts control of the product out of Japanese hands.

Claes Fornell of the Business School at the University of Michigan says it all leads to diminished quality:

CLAES FORNELL: At some point you will have cut costs in the wrong area or you will have cut too much and it has negative implications for the quality of the products that you produce.

Then there’s the problem of competition. Korean companies Samsung and LG have put themselves through a very Japanese-like reincarnation — recasting themselves from makers of low-quality goods to rivals of Sony. So says Yukari Iwatani of the Wall Street Journal:

YUKARI IWATANI:“It does hurt the Japanese that there are strong rival brands emerging. You know, they didn’t have that kind of competition let’s say 10 years ago.”

John Quelch of the Harvard Business School says the competitive pressure may be growing, but he isn’t worried about the long-term future of the brand of Japan.

JOHN QUELCH:“I think we have the same number of, if not many more, recalls going on in the U.S. every day of the week, and we don’t get into a lather about the image of America being diminished.”

Besides, says Quelch, the Japanese are so image-conscious and so attentive to detail that they’re likely to take their recent blunders as a call to get back on track.

In Los Angeles, I’m Lisa Napoli for Marketplace.

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