Japanese Investment in the World Economy
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Japanese Investment in the World Economy

A Study of Strategic Themes in the Internationalisation of Japanese Industry

Roger Farrell

This book examines Japanese Foreign Direct Investment (FDI) in the world economy over more than five decades. It provides a unique focus on the internationalisation experience of selected industries, such as forestry, textiles, electronics, motor vehicles, steel and services as well as case studies of individual firms. Japanese Investment in the World Economy is distinctive in that it examines overseas investment by firms in the primary, manufacturing and services sectors over the period in which the Japanese economy became the second largest in the world.
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Chapter 12: Defensive Strategies of Beverages and Tobacco

Roger Farrell


OVERVIEW The Japanese tobacco, beer and wine industries expanded internationally as part of a defensive strategy, to augment their prospects of surviving as import competition mounted in their home market. Overseas investment also allowed firms in these industries to obtain marketing networks in other countries and to access foreign proprietary knowledge of production technology and marketing techniques. This kind of ‘defensive’ foreign direct investment was initially conducted through licensing of key brands, marketing arrangements and joint ventures with leading international firms. However, over time, there was a switch to more direct ownership through a series of overseas acquisitions. In the case of the beer industry, overseas expansion has occurred partly as a rivalistic phenomenon, as domestic market competitors Asahi and Kirin entered foreign markets, acquired regional competitors and obtained control over a share of the regional market for alcoholic beverages. For the domestic wine industry, licensing and marketing joint ventures with more prestigious and competitive brands have been a route to maintaining market share in Japan without a major international presence. In the case of Japan Tobacco, a sleepy domestic monopoly was awoken by the prospects of WTO-led deregulation of its protected market and the likelihood of the successful entry of American and European tobacco companies into the Japanese market. To offset this strategic threat to its position in Japan, the newly commercialised (but still predominantly publicly owned) manufacturer and distributor of tobacco products such as Mild Seven acquired the international operations of a leading US tobacco company. Through...

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