Good-Bye Japan? Market Withdrawals 1999-2005. Reasons, Barriers, and Company-Specific Factors

The research project at the University of Duisburg was initiated to
investigate market withdrawal in a mature economy of which Japan is a
prime example.  The project aims to answer three main
questions:

• What are the reasons for withdrawal, and to what extent was
  it influenced by Japan being a mature economy?
• Were there any barriers to market withdrawal and what role
  did these barriers play?
• What influence did company specific factors like activities
  along the value chain, partner involvement and size, have on the
  reasons to withdrawal?

Since 1999, there were on average around 170 cases of company exits
from Japan.  Between 1999 and 2004 the number of exit cases
grew by about 14% yearly.  Based on projections for 2005, this
trend continued last year.  Putting withdrawal into
perspective, it is a sizeable phenomenon: the number of withdrawals
from foreign affiliated companies (FACs) in recent years was about as
high as the number of new establishments of FACs.  

The focus of this exploratory research project is on production
industries in which more than 400 exit cases were identified for the
period between 1999 and early 2005.  Additional interviews
with top management of companies still present in Japan have enhanced
the findings of the project.  Results of the study suggest
that weak performance and a poor future outlook were significant
influences in the decision to withdraw.  Furthermore, low
growth in Japan during the period of withdrawal cases included in the
survey added additional pressure on the FACs in Japan. 
Nevertheless, most companies have not left Japan completely, but have
instead switched to a mode of lower market involvement or restructured
their presence.  Other reasons for withdrawal and barriers to
withdrawal had a significant influence on the choice made by
international companies of whether to withdraw the former
affiliate’s activities completely from the Japanese market,
to continue by restructuring, keeping a stake in the affiliate, or to
change the mode of market involvement to importing. 
Furthermore, the results of the study suggest that there are
significant difference in the importance of withdrawal factors
depending on the specifics of the affiliate and the parent company.
 

Short CV:
Steffen David is Doctoral Student at the Institute for East Asian
Studies, University of Duisburg-Essen. He is currently on leave of
absence from McKinsey&Company where he has consulted clients in
the automotive and telecommunication industries in Europe and Asia.