Localization and product feature differentiation for a Japanese electronic and electric parts manufacturer: Case study of company a in Shanghai

Abstract

265— — This paper is a case study of a sales subsidiary that handles intermediate goods for Company A, a large Japanese electronics and electric parts manufacturer in Shanghai, PR China. In the study, we researched how vertically disintegrated business transactions affected customer makeup, localization of human resources, and the relationship between the Japanese head office and local subsidiaries. Recently, Japanese electronics and electric parts manufacturers have often undertaken the sale of intermediate goods. They have combined sales to both foreign manufacturers, such as Chinese makers, and to Japanese manufacturers, including companies within their own business groups. In this paper, we looked at three sales departments that handled intermediate goods for Company A. We focused on how to develop a market strategy and concomitant human resource strategy to respond to vertical disintegration, which has been expanding recently, as well as to conventional vertical integration. We concluded that among the three sales departments, the first sales department had a high percentage of sales to Chinese corporations and was promoting the most Chinese staff to management positions. We also found that by accepting proposals from local subsidiaries it was developing and selling products that met the needs of the Chinese market. On the other hand, the second and third sales departments had a low percentage of sales to Chinese corporations, were promoting few Chinese staff to management positions, and were developing almost no specialized products for the Chinese market. In the third sales department in particular, sales to group companies and other Japanese corporations accounted for almost all of total sales, and this department had made no progress in promoting local staff to management positions. The reason is that this department sells vertically integrated products, which are customized parts jointly developed with the customers from the design and development stage to meet the customers’ needs. Therefore a high level of technological capability is required from the customer as well. For this reason, the Japanese head office makes the selections and decisions regarding customers, sales prices, and quantities, and local subsidiaries simply do backup work. On the other hand, the second sales department sells low-priced products and must increase sales to Chinese companies. In the