Management of Technology and Innovation in Japan

126 Marian Beise
market, it is reasoned that the quality became less important for middle class consumers
compared to other product characteristics. Schonberger (1982) refers to
shorter fashion trends in the post war years that made products obsolete earlier resulting
in a “throw-away” attitude within the increasing consumerism in the US.
Statistical evidence for international different relative quality levels of demand
compared to other product features is rare. 5
Another reason for the Japanese quest for quality at low prices is that quality
improvements and cost cutting techniques are complements rather than substitutes
(Wheelwright 1981, Schonberger 1982). Cost-reduction efforts can lead to increases
in quality and vice versa. For instance, the introduction of just-in-time was
motivated by the desire to reduce inventory, yet it required a more reliable manufacturing
process with less defects. Successes to reach near perfection were ultimately
reducing costs instead of increasing costs.
The strong effort for cost-cutting in the Japanese manufacturing sector described
by management literature is more obscure though (for instance, Ohmae
1988, p. 151 talks about an “instinct to built market share”). Yet, given that the
consumer market was predominantly targeted by Japanese corporations even for
new technology as explained above, the only way to establish this mass market is
to lower the price considerably.
At first glance it seems that a specific quality-price strategy applies to all industries
equally and thus lacks the power to explain the specialization pattern of Japan.
Yet, it cannot be applied to all industries to the same degree. First, the highquality/low-price
strategy only fits the consumer sector and not always to the business
sector, and not to military and space applications. These early adopters
played a major role for new technologies in the US but not in Japan. High quality
was required of those applications while the price was not a major concern. And
the US companies were not unable to match the quality requirements for these applications.
Second, while the Japanese market on average demands high quality
for low prices, in some industries this combination is less pronounced. For instance,
food is required to be of extremely high quality but is rather expensive
compared to other countries and home appliances are cheaper but lack the quality
levels common in Europe.
Third, in many industries the unique mix of low price and high quality was feasible
in all industries. Substantial price reductions were not possible in all industries
because either economies-of-scale were low or there is a trade-off between
quality and cost. This means that the cost of production necessarily increases with
5 Empirical evidence of the attitudes of buyers towards quality is difficult to collect, since
consumers in most countries regard quality as important if asked (e.g. Barksdale et al.
1982). The success of Japanese products in the US market shows that demand in the US
prefers quality as well. Robert Cole of Haas Business School at Berkeley pointed out,
that the Japanese have educated the US market that quality is available for the same or
even a lower price (private conversation). It can therefore be reasoned that quality levels
in the US dropped below those of other countries because US manager perceived
other product characteristics as relatively more important than companies in Japan and
Europe.