Japan’s Automakers Face Endaka Case Study Solution

Case Brief

In the April 1995, the currency of Japan hit the post world war two against the United States dollar. The relentless ascent of yen affected the company on both sides of the pacific, but fell hard on the big four automakers of the Japan. The case sets out to investigate the different rounds of the yen appreciation against the US dollar during the period of 1985 to 1995, and its influence on the entire US and Japan based industrial landscape, particularly on the automobile industry along with the number of strategies which have been employed by Japanese automakers with core consideration of dealing with the yen appreciation. The overall automobileindustry of the Japan is composed of leading and renowned manufacturers including Mazda, Honda, Nissan and Toyota. These market competitors has been generating high profit returns by focusing on low end market segment in the Europe, US and Japan. The case verdict on how the high yen or endaka – changes the competitive environment for the company and how they would respond to the changes is still out.

Additionally the reports evaluates and assess the price competiveness of Japan and United cars after the Endaka and the Super Endaka. Furthermore, the reports deals with the response of the automobile manufacturing companies of Japan to the Super Endaka and recommends number of effective and useful measures taken by the companies in the current situation.

What happened to Japan’s Big Four automakers in 1985, and then again in 1994-95? Why did these changes occur?

Since the World War II end, the economic strategy of the Japan for growth was entirely based on the exports that have allowed the country to develop the powerful industrial sector. During the 1980s when high yen hit, the automakers in Japan, in particular has been enjoying the largely unexpected as well as unprecedented period of the growth and the prosperity. They have effectively and successfully managed to establish the domestic automobile industry and start selling the product in the international markers. The automobile manufacturer intended to manufacture the cars with respect to their international competitor, due to the technical efficiencies (lighter and fuel efficient cars), labor differences and better designs, the automakers in Japan started generating high profit returns. In addition to this, the big four automakers had to expand their market by shifting from low end market to the high end market, while making the effective use of the marketing at the same time. As a result, by the early 1990s, most of the automakers had offering in the mid-range and top of the luxury market. Finally, the bog four firms had to increase their prices by forty percent. Even through, the yen appreciation already led to the little increase in price for the Japanese based automobiles sold in the United States (10% in year 1986), this was not enough to preserve the margins. All of these preventive measures allowed the firms in Japan to survive to the significant increase in the Japanese yen against the US dollar, but also to increase their market share and sales in the highly competitive and lucrative market of US.

There were many effects of the high yen on the automakers in Japan as with the significant increase in the dollar price of their cars led to the reduction in their competitiveness. Significantly, with the high yen or Endaka advent still being evident that was a possibility that these competitors were eliminated in the international competition because of the cost advantage.

How well did the Japanese’s firms respond to the changes of 1985? What will they have to do differently in 1995?

As per the information provided in the case study, when the first Endaka hit in the fiscal year 1985, the automobile sector of Japan confronted with the major changes in its history. The automobile sector of the Japan was heavily depending on the exports with almost 58 percent of the total production was based on the exports. The cost advantage of around $1500-$200 before Endaka was the major competitive advantage of theJapan based automobile providers over the US manufacturers. However, the yen appreciation against the US dollar had increased the Japanese car prices as compared to the US cars, hence eliminating the cost advantage……………………………

 

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