The United States and Japans International and Domestic Markets - Essay Example

?­­­­­­­­­­ ­Compare and Contrast United s and Japan’s International and Domestic Markets ­­­­­­­­­­­Compare and Contrast United States and Japan’s International and Domestic Markets This paper will present a comparison of United States and Japan’s international and domestic markets. The two markets will be discussed in relation to both the countries as they are interrelated. The relationship between these two countries has been shaped around the corresponding paradigm of specializing in products such as agriculture and manufactured goods along with their rivalry over high end technology. United States of America is the largest export partner of Japan, where as Japan is the third or forth largest trade partner of the United States depending on the criteria, if the member states of European Union, which are trade partners with the United States, are considered to be the members of one entity or more. The correlation between these two countries in their global as well domestic front has been discussed here under: DOMESTIC MARKETS: The domestic marketing policy of the United States focuses more on the businesses; it focuses on the sectors that every business covers, where as the domestic market policies of Japan focuses on the technology and innovation that can be utilized for the better product development through out the businesses. Japanese system of employment believes in sharing the benefits gained by the employees thus motivating them for better and innovative performance. Whereas, American system more likely focuses on fixed wage system and abrupt termination at will, incase of the conduct leading to a loss to the company, such approach proves to be very anti-innovative. In stable domestic markets American style will be beneficial both for the companies and the economies but when it comes to highly volatile and dynamic environment, the Japanese employment system should be preferred. That’s why it is said that the success that Japan enjoys is because of the way it compensates its employees (Dennis et al 1991). These differences lead to divergences in the labor market structure of both the countries as well. After the stock market crash in 1990, Japan suffered a set back in its economy, which took ten years for it to eventually recover, in 2004. After that Japan’s domestic marketing strategy focused on the research and development of the new technology that would be promoted in the public sector, so that all the businesses can prosper. This approach led for the recognition of its innovative techniques in all over the world. As far as the comparison for the domestic markets is concerned, United States excels in the traditional research where as Japan has a more innovative advantage over the global market. As compared to the American products, Japanese products and processes, which include semiconductors, automobiles, transistors, optical fibers, high end DVD & multimedia recorders and manufacturing systems, are more innovative and are highly demanded. Manufacturing has been the most substantial element of Japan’s economy since the World War II. Though the monetary value of United State’s manufacturing export is normally way more than Japan’s, but the proportion of the manufacturing export out of the total export is generally much lower than that of Japan. America has been focusing on its automobiles’ industries. After the stock market crashed, it bought the shares of most of the Japanese automobiles companies, which was a proof in itself that Japan had the higher end of technology in that field. Japan’s major exports still comprises of automobiles’ parts. According to an Organization of Economic Cooperation and Development (OECD), Japan holds the second position in the manufacturing sector after The United States of America. Japan had almost 470,000 manufacturing companies which was even more than that of United States (above 350,000). The United States of America’s domestic markets are a very complex paradigm, but generally they comprise of mostly chemicals, food and agricultural products, processing machines, and electronic sectors, along with automobiles (Jane et al, 2009). This was as far as the normal trade goes. Domestic markets also cover the debt markets of the individual countries. The debt markets in The United States of America have always widely covered the financing options for the U.S. businesses, where as the debt markets in Japan have been used to finance the financial institutions of the country which in turns, finance the economy and other financial institutions (Schinasi et al, 1998) Japan and U.S have the largest stock exchanges in the world, Tokyo Stock Exchange (TSE) and New York Stock Exchange (NYSE), with the largest capitalization and the highest numbers of shares listed. As their trading patterns their stock exchanges are correlated too. In case of a very efficient market, the open to close price of one exchange is equal to the open of the other stock exchange. But as the information life cycle is very short lived in the current era because of rapidly changing technology, profit earned through predicting the market at one stock exchange through observing the changes in the other, are often recovered through transaction costs when value changes hands rapidly. INTERNATIONAL MARKETS: The international relations between Japan and the United States have been fostering since, post World War II. The United States is the largest trade partner of Japan. The foreign direct investment of the United States in Japan is mostly in the finance sector, manufacturing sector, wholesale trade, professional and technical services where as Japan mostly holds interests in the transportation machine parts industry along with chemicals and agriculture. (Jane et al, 2009). Traditionally the global trade mixture between Japan and The United States has been comprised of a variety of products. According to a survey, the key portion of United States exports to Japan comprised of agriculture, food products, raw materials and oil & other fuels and chemicals, though a material portion comprises of transportation parts, machinery and non manufactured goods as well. The export of such machinery and equipment to Japan is in a way low proportion out of the total exports of these items. These raw materials and machinery acquired by Japan is used in their manufacturing businesses. Japan, in light of the bilateral trade between it and the United States, mostly exports manufactured goods, along with transportation equipment. It is more focused on developing a specialized trade. According to a survey almost 70% of the total exports of Japan comprises of the automobile parts and manufactured goods and the remaining comprised of fuel and chemicals (Institute for International Economics, 2000). All the United States’ companies that are established in Japan are following the approach of being Japanese, to maintain a strong foothold in the international market of Japan. Their goal is to join trade associations, hire local human resources as soon as possible. Their ultimate game is to make themselves the part of the community so that they could be viewed as insiders. So that better results could be achieved from the surrounding environment. Many companies like Gleason Asla Co Ltd and Harley Davidson believes that to succeed in Japan it is necessary to combine the Japanese innovation and mind power with the spirit and strength of America and the success formula for Japan is ready. There are a lot of companies in Japan which have controlling interests of America that are returning good margins to the economy of the United States of America. OPPORTUNITIES: Japan and The United State of America has been working in collaboration to expand new markets for further investment. There are a lot of opportunities in Japan that The United States can make use of, so that both countries could benefit from them. Currently the options where their partnership is foreseen are much diversified. Some will be discussed here: Early partnership between the academic minds of both the countries is anticipated. This will lead to breakthroughs in the research and development sector. It has been expected that with the combined efforts of the professors and engineers of both the countries, new technologies and products will be created that will benefit the processes and economies of both the countries. Secondly Japan feels that the curriculum that is being taught in its universities is not compatible with the actual developments in the industries. For that U.S. can help Japan, close the gap between its academic approach and practical applications in the industry. Japan wants to lower the regulations that govern the life sciences research so that it can be promoted and secondly it wants to be a leader in nanotechnology. These both are the scientific areas that anticipate negative outcomes as well as opposition from the government or other political forces from all over the world. In this case U.S can help Japan arrange the funding for its research; also it can help attain the intellectual property that will be required to carry out the research at. Secondly it can help set the rules which will conform to the International Organization of Standardization, so that no ethical or financial problems would have to be faced. Japan has a shrinking work force because of low birth rate and high aging population. U.S. can establish immigration reforms to open the gates of Japan to foreign human resources. The declining population and aging workforce will create a huge problem in future and it has to be accounted for at the earliest. Secondly because of the high rate of aging population there is a high demand of medical facilities and expertise in Japan. By upgrading the medical facilities and as mentioned before, combining the academic resources, demand for U.S. human power and medical products will be increased, leading to higher and diversified trade margins. Japan is using American software at most of its manufacturing bases, especially at the larger companies. Only a few companies in Japan are designing new software. U.S. can provide its technology. And with such partnership the next generation of super computers can be created. In Japan, the regulatory barriers are so high that market access is almost impossible. U.S. can help harmonizing those trade barriers. But for that, first of all U.S. has to have a better understanding of Japan’s labor policies and other trade regulations, so that rights to the interests that U.S. holds in the companies in Japan can stay protected. Japan is looking forward to analyzing the impacts its technology has on the environment. The United States is already a leader in this field. By providing these services, United States of America will create a huge market and it will grow rapidly in Japan, because of their high demand and low availability of local resources. Japan is facing varying global standards on its automobile industry. U.S. because of holding a strong foot hold in this industry can harmonize new fuel efficiency regulations between itself, Japan and European Union. This will help U.S. improve its competitiveness all around the world (Jane et al, 2009). CONCLUSION: Once these future opportunities start developing both these countries will have a competitive edge over the other big fish in the trade market like China and European Union. Global economy will expectedly, eventually start showing good results. And these effects will be reflected in both the countries stock exchange listings. With these future opportunities and innovations that are anticipated, it can be easily said that huge market is about to be developed, of innovative products. References Dennis P. Quinn, Pietra Rivoli, (1991) The Effects of American and Japanese Style Employment And Compensation Practices of Innovation. Organization Science, Vol.2, No.4, Nov 1991, Printed in U.S.A. School of Business Administration, Georgetown University, Washington D.C. 20057. http://faculty.msb.edu/quinnd/papers/orgsci91.pdf Jane Corwin and Rebecca Puckett (2009), Japan’s Manufacturing Competitiveness Strategy: Challenges for Japan Opportunities for The United States. Published April 2009 by the US Department of Commerce, International trade Administration. http://trade.gov/mas/ian/build/groups/public/@tg_ian/documents/webcontent/tg_ian_002085.pdf Schinasi, G. J, Smith, R.T. & International Monetary Fund. (1998). Fixed-income markets in the United States, Europe, and Japan: Some lessons for emerging markets. Washington, D.C.: International Monetary Fund, Research Department. http://www.imf.org/external/pubs/ft/wp/wp98173.pdf Institute for International economics (1999), The Economics of Japan-United States Trade and Investment (Chapter 4). http://www.piie.com/publications/chapters_preview/105/4iie2865.pdf Read More