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Good-Bye Japan? Market Withdrawals 1999-2005. Reasons, Barriers, and Company-Specific Factors

15.05.2006 | 18:30

Steffen David, Doctoral Student, Institute for East Asian Studies, University of Duisburg-Essen

Abriss

The research project at the University of Duisburg was initiated to investigate market withdrawal in a mature economy of which Japan is a prime example.  The project aims to answer three main questions:
  • What are the reasons for withdrawal, and to what extent was it influenced by Japan being a mature economy?
  • Were there any barriers to market withdrawal and what role did these barriers play?
  • What influence did company specific factors like activities along the value chain, partner involvement and size, have on the reasons to withdrawal?
Since 1999, there were on average around 170 cases of company exits from Japan.  Between 1999 and 2004 the number of exit cases grew by about 14% yearly.  Based on projections for 2005, this trend continued last year.  Putting withdrawal into perspective, it is a sizeable phenomenon: the number of withdrawals from foreign affiliated companies (FACs) in recent years was about as high as the number of new establishments of FACs.  

The focus of this exploratory research project is on production industries in which more than 400 exit cases were identified for the period between 1999 and early 2005.  Additional interviews with top management of companies still present in Japan have enhanced the findings of the project.  Results of the study suggest that weak performance and a poor future outlook were significant influences in the decision to withdraw.  Furthermore, low growth in Japan during the period of withdrawal cases included in the survey added additional pressure on the FACs in Japan.  Nevertheless, most companies have not left Japan completely, but have instead switched to a mode of lower market involvement or restructured their presence.  Other reasons for withdrawal and barriers to withdrawal had a significant influence on the choice made by international companies of whether to withdraw the former affiliate’s activities completely from the Japanese market, to continue by restructuring, keeping a stake in the affiliate, or to change the mode of market involvement to importing.  Furthermore, the results of the study suggest that there are significant difference in the importance of withdrawal factors depending on the specifics of the affiliate and the parent company.  

Short CV:
Steffen David is Doctoral Student at the Institute for East Asian Studies, University of Duisburg-Essen. He is currently on leave of absence from McKinsey&Company where he has consulted clients in the automotive and telecommunication industries in Europe and Asia.

Koordination: Andreas Moerke

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