Download Responding to a New World Dynamics and Clinton Administration: Japan’s New Challenge

Responding to a New World Dynamics
and Clinton Administration:
Japan’s New Challenge
Partha S. Ghosh
February 20th 1993
Tokyo, Japan
Confidential
Contents
z
Point of discontinuity
z
Clinton’s agenda and the global disorder
z
Will the U.S. industry respond?
z
The Japanese challenge: Time to rethink, redefine and reform
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Expectations in the Late Eighties
Nineties have great possibilities
Beliefs
Beliefs
Reactions
Reactions // Expectations
Expectations
z
End of Cold War
z
Global peace
z
Successful coalition of Gulf War
z
International consensus process in the
making
z
Towards single market
z
Mega economic opportunities
z
New economic / business possibilities
z
“Straight line view” will continue; Japan as the
engine of global economic growth
z
Republicans will continue
z
z
“Perestroika” in Eastern Europe
Japanese boom in:
– Stock market
– Real estate
z
President Bush is successful
Golden
Golden Nineties
Nineties
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Expectations in the Late Eighties and the Realities of the Nineties
It could indeed be a decade of Transition
Beliefs
Beliefs
Expectations
Expectations
Realities
Realities
z
End of Cold War
z
Global peace
z
Multiple battles all over
z
Successful coalition
of Gulf War
z
International consensus
process
z
Emerging conflicts on Middle
East, GATT
z
Towards single market
z
Mega economic opportunities
z
z
“Perestroika” in Eastern
Europe
z
New economic and business
possibilities
Multiple conflicts within EC;
deeper recession in Europe
z
Japanese boom in
– Stock market
– Real estate
z
Engine of “economic growth”
will keep running
Ethnic tensions, chaos in
economic process
z
Japan into deepening economic,
political and readership crises
z
Democrats in power
z
z
z
Republicans will continue
President Bush is successful
Golden
Golden Nineties
Nineties
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A
A Decade
Decade
of
of “Transition”
“Transition”
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Tokyo Stock Market Index ($ Million), and Exchange Rate
Will the market valuation last?
45,000
260
40,000
240
Tokyo Stock
Market
35,000
Tokyo Stock
Market
($MM)
30,000
Exchange Rate
200
Exchange Rate
(Yen)
25,000
180
20,000
160
15,000
140
10,000
1985
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220
1986
1987
1988
1989
5
1990
1991
120
1992
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Tokyo Stock Market Index ($ Million), and Exchange Rate
Indeed the crash of 1989 has tempered future expectations
45,000
260
40,000
240
Tokyo Stock
Market
35,000
Discontinuities
220
Exchange Rate
Tokyo Stock
Market
($MM)
Exchange Rate
(Yen)
25,000
180
20,000
160
15,000
140
10,000
1985
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200
30,000
1986
1987
1988
1989
6
1990
1991
120
1992
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Projected Real GDP Growth (%)
Worldwide slow down is evident with two exceptions
3%
1992
1993
2%
1%
0%
-1%
-2%
Ireland
France
Belgium
West
Germany
Portugal
Spain
Netherlands
Denmark
Italy
Switzerland
UK
Sweden
Source: OECD and PSG&A (SP2)
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Business Insolvencies (Index)
Business insolvencies have increased
(Numbers)
500
1,400
1,300
U.S.
1,200
400
1,100
1,000
UK
900
300
800
France
700
200
Germany
Japan
100
0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Source: Natwest Review of Small Business Trends, Teikoku Data Bank, and Partha S. Ghosh & Associates (SP12)
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Annual Change in Real GDP
Fluctuations will continue
14%
10%
The Rest of the G-7
U.S., Germany, France,
Italy, UK, Canada
8%
Hong Kong, South Korea,
Singapore and Taiwan
China
12%
Japan
6%
10%
4%
8%
2%
6%
0%
4%
-2%
2%
Indonesia,
Malaysia
and Thailand
Japan
-4%
0%
'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94
'82
'83
'84
'85
'86
'87 '88
'89
'90
'91
'92
Source: OECD, U.N. World Economic Survey, and PSG&A (SPI)
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Excess Labor
Diffusion index of labor needs*; in percentage points
20
Labor Surplus
6**
10
0
-10
-20
Labor Shortage
-30
1985
-25
1986
1987
1988
1989
1990
1991
1992
1993**
* Diffusion index shows percentage of firms with labor force excess minus percentage with labor shortage
** Forecast for March 1993
Source: Bank of Japan’s Tankan Survey
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Stock Markets
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Clinton’s Agenda
At the highest level we have three dimensions..
Projected Deficit in 1997
($ Billion)
Quality
Jobs
Short-term
Economic
Stimulus
“As is”
346
Clinton
200
Deficit
Reduction
Focused
Engagements
0
Public Investments
Tax Credits for Investments
250
500
Revenues
A Delicate
Balancing Act
for “Renewal”
Expenses
Quality Jobs
“Shared Responsibility”
Energy Efficiency
Environment Friendly
Education and Health
Efficient Infrastructure
Long-term
Competitiveness
“Fair Competition”
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Average Annual Growth in Real GNP, by Presidential Term
6
5
4
?
3
2
1
0
Truman
Eisenhower
2nd Term
Eisenhower
1st Term
Kennedy,
Johnson
Johnson
Nixon, Ford
Nixon
Reagan 1st
Term
Carter
Bush
Reagan
2nd Term
Source: Partha S. Ghosh & Associates (SP13)
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Share of World Trade — 1970–1986
$ Billions
Exports
f.o.b.
100%
100% = $282.6
15%
2%
80%
7%
Imports
c.l.f.
$1,991.6
100%
11%
11%
80%
5%
100% = $297.0
$2,079.6
15%
18%
6%
3%
6%
5%
46%
(12)
(12%)
45%
(10%)
45%
(12)
(12%)
43%
(9%)
40%
40%
Japan
NICs
60%
60%
U.S.
Europe*
(Germany)
LDC
Other**
20%
22%
8%
0%
1970
20%
22%
6%
24%
7%
6%
1970
1986
0%
1986
22%
* Europe includes EEC, EFTA and all other European states
** Other comprises Canada, Australia and New Zealand
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Historical Trends in the Growth of Real GDP and Exports in Selected
Countries* — 1720–1985
12
GDP
10
9.7
Exports (%)
8
6.0
5.6
6
4.9
4.4
3.5
4
2.9
2.5
2
1.3
1.7
1.9
1.9
1.8
0.5
0
1720–1820
1820–1870
1870–1913
1913–1950
1950–1973
1973–1979
1979–1985
* Average growth rates for 6 major industrial countries: France, Germany, Italy, Japan, UK, and U.S.
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Worldwide Personal Computer Market 1992
($ Billion)
100
100% = $46.5
80
60.5
Others
3.5
5.5
6.6
Dell
NEC
Compaq
11.9
Apple
12.0
IBM
25% + ?
in 1993
Newcomers
60
$ Billion
40
20
Power of Knowledge
0
z
Speed of Unlearning
z
Speed of Learning
z
Speed of Applying
z
Speed of Influencing
z
Speed of Recycling
Source: Partha S. Ghosh & Associates (SP9)
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Small vs. Big
Annualized stock market returns, in present, during post-depression year in various
administrations
Reagan,
Bush
Carter
Nixon,
Ford
Kennedy,
Johnson
Eisenhower
Small Companies1
FDR,
Truman
0%
S&P 5002
5%
10%
15%
20%
25%
30%
35%
1
Ibbotson Small Company Stock Index
Standard & Poors 500 Stock Index
Source: Liberty Assent Management Co.
2
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Business Investment as Percent of GNP
20
France
Japan
15
U.S.
10
Britain
5
0
1970
West Germany
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
Note: Investment and GNP are measured in constant prices. Figures should be to compare trends; absolute levels are not strictly comparable
Source: Data stream
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Japan’s New Challenge
Past
Present / Future
Reactive
Reactive Diplomacy
Diplomacy
z
X
z
X
z
X
Work with clear and well
structured international issues
Provide financial support to
international crises
Work as a Loyal member of U.S.
led alliance
Proactive
Proactive Diplomacy
Diplomacy
z Work with unstructured and fuzzy
9
environment
9
– Identify issues
– Build consensus
– Define course
– Control eventual outcome
9
z Work as independent and partner
Success measured along
“one single economic dimension”
responsible global partner
“Success along multiple dimensions”
New attitudes (macro, micro)
New political and bureaucratic framework
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Japan and the World: Past and Future
New Dynamics
Past
Past
Future
Future
Cold War
U.S.
USSR
GATT
Issues
NATO
EC
Reconfigure
U.S.
Japan
?
EC
Asia
Single Market
Politics
Uncertainties
Japan
Asia?
ROW?
“New and
Independent
Identity”
ROW
Bond by Cold
War Forces of Alliances
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Deconstruction of Past
Geopolitical Architecture
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U.S. Perceptions on Japan: Gallup Surveys 1991–1992
Uneven Playing Field
92%
Japan as a Threat
77%
Trade with Japan
Important Issue
67%
Trade Restrictions
on Japan
?
43%
Japan Is Not
Dependable
39%
Image of Japan
0%
12%
29%
20%
Unfavorable
41%
40%
Very Unfavorable
60%
80%
100%
Percent of Respondents
Source: U.S. Gallop Poll Results
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Percent Share of Global GNP
(Japan and U.S.)
A common purpose
100
U.S.
Japan
Common Purpose
Share of Global Population
75
Focus on Global
Economic and
Ecological Balance
50
Case 1
3
6
16
Same Balance as Today
Case 2 New Balance
25
34
Japan
30
23
9.6
8.6
7.0
1960
1970
1990
0
U.S.
6.0
2010
Source: Partha S. Ghosh & Associates (SP11)
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The Asian Challenge
Incremental GDP ($ Billion)
1993–1995
GDP Growth (%)
161
China
Japan’s Challenge:
“Making It Happen”
10
Malaysia
20
Thailand
36
191
Taiwan
227
Indonesia
22
14
249
Hong Kong
263
South Korea
Singapore
India
48
311
5
316
40
1992 Estimate
0%
356
1993 Forecast
Philippines
2%
4%
6%
8%
10%
12%
14%
2
Australia, Brazil, Spain
Source: Merrill Lynch, and Partha S. Ghosh & Associates (SP6)
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Asia Pacific Nation will need different kind of supports
Trade Deficit / Surplus
(Quarterly Basis, $ / Capita)
Asia’s International Reserves
($ / Capita) — 1992
-
India (Nov.) 5.56
(+1.77 Aug.–Oct.)
China (Sept.) 40
Resource
Mobilization
Indonesia (Sept.) 58
(+9.89 Jun.–Aug.)
(+21.85 Sept.–Nov.)
Philippines (Sept.) 61
Thailand (Nov.)
349
(-41 Jul.–Sept.)
South Korea (Nov.)
386
(+10.8 Oct.–Dec.)
Japan (Nov.)
573
(+245 Sept.–Nov.)
Australia (Nov.)
638
(-13 Sept.–Nov.)
(+103 Oct.–Dec.)
4,217
Taiwan (Nov.)
(+17.24 Sept.–Nov.)
4,982
Hong Kong (Dec.)
Help
Create
Pull
(+40.55 Aug.–Oct.)
885
Malaysia (Nov.)
+
(-1.73 Jun.–Aug.)
12,854
Singapore (Sept.)
(-735 Sept.–Nov.)
0
5,000
10,000
15,000
Source: Partha S. Ghosh & Associates (SP7)
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Life Cycle of Economies and Japan’s Roles
Developed
Economies
Stage of Development
Switch: Increase Share
Developing
Economies
Trying to Take Off
Strike Balance
Identify
Synergies
Cultivate Potential
(Hidden Opportunities)
Japan’s Corporate
Focus Needs Reorientation
Time
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Japanese Corporation’s Globalization
Organizations will require multiple windows to manage globalizations
Current
Current Approach
Approach
New
New Scheme
Scheme
Single
Global
Window
Multiple
Windows
International
Division
Domestic
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Key Words: Towards 21st Century
Along multiple dimensions fundamental shifts will be required
z Balance of Trust and “Trade-offs”
9
Xz Balance of Trade
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9z Network / Fluidity
9z Heterogeneous Perspective
Xz Hierarchy
Xz “Single View”
9z Share
9z Involve
9z Catalyze Ideas
Xz Check
Xz React
Xz Control Share
9z Multi-form
9z Extremization
Xz Uniform
Xz Optimization
9z Unsettle
9z Frontier
Xz Stable
Xz Conventional
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