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A quiet revolution

Zafar Anjum | July 12, 2010
Indian IT company HCL, focused on 'transformational outsourcing', is trying to break the mould and shape a new destiny for itself as the brain behind new technologies, and in a seemingly historical move, is helping the ailing Japanese electronics giants to stand up on their feet once again. How is HCL doing this?

Hence the South Koreans also laid emphasis on R&D (research & development) and globalised marketing which helped them make ingrowths into newer markets faster than their Japanese counterparts. While Japanese firms stayed focused on the developed markets, South Korean firms invested in customising products for emerging markets. The rapid growth of BRIC (Brazil, Russia, India and China) nations helped South Korean companies to establish a global leadership position. Furthermore, South Korean companies jumped on to the global outsourcing bandwagon faster, which helped them to lower their costs of production.

Additionally, to some extent, analysts believe that against this background, South Korean manufacturers also enjoyed advantages of an undervalued Korean won in global trade. On the other hand, Japanese competitiveness suffered from high manufacturing costs, overcrowded markets, poor profitability and a depressed domestic economy.

Another blow came from the traditional Japanese-style consensus management which led to near-paralysis. To some extent, while the cost-cutting and restructuring of the 1990s helped improve Japanese producers' competitiveness, the key to their salvation now appears to be the rapid advance of digital consumer electronics which represents a major transformation similar to the shift from radio to TV.

Crucially, it is this technology transformation that could benefit Japanese companies in particular as they are believed to have the expertise to drive these new consumer markets, from high quality picture-making skills to digital compression technology.

The kind of experience Japanese groups have accumulated over more than half a century as leading manufacturers of TVs and audio products places them in a strong position to achieve higher standards than their competitors.

Hence, many believe the Japanese electronics industry may be on a cusp of new growth.

Interestingly, this time round, having recognised that some inherent weaknesses continue in the Japanese economy primarily as a rapidly ageing workforce and consequent shortage of skills, Japanese enterprises are increasingly willing to outsource higher-end skills to a wider cultural array of offshore service providers.

This has resulted in a larger Japanese focus on Indian service providers and to some extent on Brazilian service providers.

Some say that Japanese companies are now fighting back, trying to wrest their global position. Do you agree? How are they doing it?

As mentioned above, particularly in light of an emerging dawn of digital technology, Japanese manufacturers are working hard at fortifying R&D to better develop the technologies they are already good at.

The focus of the next generation companies is to impact end-customer behaviour. Traditional core areas that do not influence end-user business are turning into non-core areas for OEMs (original export manufacturers). Japanese companies have started engaging with their trusted partners and ensuring that all critical, non-core work moves to the outsourced partner organisations while their R&D teams focus on building technology to create next generation customer experience.

 

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