Capability-based Cost Leadership Strategy of Japanese Firms

Abstract

A strategy that uses the productive performance of a manufacturing site (or genba), noted as a strength of Japan’s manufacturing industry by Fujimoto (2003), might also be called a capability-based cost leadership strategy (CBCL strategy). In the 1990s, this strategy ceased to function due to environment changes, and the international competitiveness of Japan’s manufacturing industry declined. As a means of breaking through those circumstances, Fujimoto emphasized strengthening market performance and choosing a differentiation strategy for appealing to consumers based on high product quality. In the end, however, the performance of Japan’s manufacturing industry is restored after the environment changed to become favorable to a CBCL strategy such as rising labor costs in newly developing countries and a shift to a weaker yen. This suggests that many Japanese manufacturers could not shift to differentiation strategies based on enhanced competitiveness in the market, and CBCL strategies were left in place.