Japan Faces Endaka

Japan's Automakers Face Endaka: Analysis and Recommendations

International Business is a risky business. There are many obstacles and challenges to overcome, yet despite this, companies are lured into it by potential profits. One great risk for companies is the fluctuation of interest rates. Since the collapse of the Bretton Woods fixed exchange rate agreements in 1973, where global currencies were "pegged" against the dollar, most currencies were allowed to float in a supply and demand market. Two decades have passed since the breakdown of the fixed exchange rate system, and there are both critics and supporters of the current floating exchanged rate regime. Regardless of the merits of this system, whether if the floating exchange rates regime is "good" or not, it most certainly has changed the face of international business and has brought on new challenges to multinational corporations. One such challenge is fluctuations in exchange rates. Fluctuations in exchange rates between countries have dramatic impacts on international!

trade and the profit margin of multinational corporations. A firm operating with a slim profit margin can see their profits instantly vanish as exchange rates shift. An example of

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Cost cutting measures took place, firms simply tightened their belts, pressured their suppliers for cheaper rates, and reluctantly raised the sticker prices on their cars. It became a better choice to produce cars in the suddenly less expensive U.

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. " An example would be Nissan's driving is an experience commercials, or Volxwagon's "driver's wanted" commercials. Faced with mounting financial losses and plants not operating at full capacity, the Japanese auto industry yet again had to undergo changes. The first wave of endaka precipitated a move of production facilities to the U. Many companies simply let themselves "bleed," slowly losing profits than to close factories. Regardless of any cultural backlash, Japan's automakers cannot idly standby and bleed to death. With the advent of Endaka, this cost advantage of was eliminated. An example would be the Honda Civic. The auto industry is an oligopoly, and there are two critical factors for success in an oligopoly, advertising and product differentiation.

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