Restructuring of Items within a Product Line: A Case Study of Japanese Multinational Enterprises in the Electric Machinery Industry

Abstract

Through an examination of the intrafirm division of labour between the parent companies of Japanese multinational enterprises (MNEs) and their Asian affiliates in the electric machinery industry, it is illustrated that the restructuring of items within product lines has been the dominant pattern of restructuring behaviour. There are three characteristics to this pattern: (1) vertical restructuring, that is, upgraded items are continually innovated by Japanese parents; (2) horizontal restructuring, that is, the production of each item is transferred to Asian affiliates after a certain time lag; (3) the time lag in the transfer of the production of an item to Asian affiliates has been shortened, and Asian affiliates have achieved product upgrading at a faster pace than have the Japanese parents. These characteristics will be described in detail for two product lines: video cassette recorders and capacitors. Then some supporting evidence is presented for the third characteristic of this pattern of restructuring. Further, this third trend is explained in association with the change in cost conditions which have arisen from recent high-growth performance in the region. In other words, in the recent dynamism in the Asia-Pacific Basin, the horizontal restructuring of Japanese MNEs has tended to become faster in terms of production transfer.