Additionally, relocating the production facilities helped avoid any protectionist practices that the U.S. government might have applied in the case of Japanese car producers and exporters.
On the other hand, relocation was doubled by strong austerity measures back home. This included improving the companies' productivity and efficiency and cutting the cost of production, but also market diversification. The latter implied the fact that the Japanese carmakers attacked market sectors that had been out of reach before: higher margin segments and the luxury car segment. Prices gradually rose to counterbalance the appreciating yen.
The 1994-1995 enkada proved an even harder to deal with problem, as the rates reached 80 yen for a dollar and, additionally, the competitive environment was much tougher than in the 1980s, with new companies in the market, like those from South Korea (Daewoo), with highly competitive price advantage.
In this case, there are several solutions that can be adopted. In my opinion, relocation to the U.S. is not enough any more. As we have seen from the case study as well, even companies with large cash reserves and the capacity to commit to cost reductions would not have been able to sustain the second endaka on these measures alone.
Relocation to Asia was the most important answer that the Japanese car manufacturers gave to the new currency challenges. This workforce market offered qualified people at much lower salaries than otherwise practiced in Japan. Needles to say that administrative and maintenance costs were also much lower. On the other hand, such a solution came in strong dissonance with Japan's perception on loyalty and lifetime employment, while the pressure from the internal market was extremely high. The price increase, somewhat successfully applied during the first endaka, was also an applicable solution, but only to certain market segments, more notably those where the demand was inelastic as...
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