International Marketing, 5th Edition

Based on consumer perceptions, Japan is able to produce better and less expensive cars than the United States can. At present, this cost efficiency is moderated by the exchange rate — a strong yen. Based on economic criteria, cars should be produced in Japan so that American consumers will benefit from Japan's comparative advantage.

From the political standpoint, allowing cars to be made only in Japan is extremely unlikely to happen. American autoworkers will definitely protest any further losses of employment. Other American workers will also echo the same sentiment, fearing that their jobs may be next to go. U.S. lawmakers, even those who advocate free trade, are unlikely to let it happen. Protectionist measures will be adopted or at least proposed.

As far as Japan is concerned, it has to be sensitive to the employment issue and will never try to have all cars produced in Japan. To do so would invite a backlash — economically and politically. This explains why Honda and Toyota need to have manufacturing plants in the United States regardless of whether the jobs can be done more efficiently in Japan. It is understandable why Honda wants to export some cars made in the United States to Japan as a gesture of goodwill. Also to defuse the political issue, Japanese automakers have to agree to the adoption of voluntary quota.

A host country is unlikely to welcome foreign firms' investment in local production facilities without considering the economic and political impact. The reasons include distrust and resentment, excessive profit, ignorance of social customs, exploitation of natural resources, and loyalty to a foreign government. If a foreign firm is the sole owner, any benefit of local employment is offset by the loss of pride as well as the expatriation of profit. A charge of exploitation may have strong political implications.

At the present time, Japanese firms and investors have bought land and buildings throughout the United States. Some negative sentiment is developing. Several bills are being considered by Congress to make such acquisitions more difficult and to require prompt disclosure. Thus Japanese multinationals need to keep a low profile and to act local.

The improvement in relationship between the United States and China is due to a realistic reassessment of each other. Economically, each stands to gain a great deal from each other because of the United States' comparative advantage in the areas of capital and technology and China's comparative advantage in the area of labor. Thus each has what the other party wants.

Politically, China wanted to improve its status in the eye of the world by being recognized by the United States. It could also gain technology and upgrade its weapon systems to be better equipped to cope with the threat of the Soviet Union. The United States likewise recognized that China was too big and powerful to ignore. Also the dispute between China and the Soviet Union, the two largest communist nations, kept both preoccupied with each other. The United States thus gained by making sure that China was enough of a threat that the Soviet Union had to deploy troops at the Asian border and have less troops available at the European front.

It is remote that either 100-percent capitalism or 100-percent communism will ever become a reality. Both China and Russia now realize that communism comes at great cost to efficiency and that the countries cannot become modernized without opening up their societies. As a result, both have experimented with and have adopted some degree of capitalism.

On the other hand, it is not possible for a country, the United States included, to be 100-percent capitalistic. Some kind of order and equitable distribution of wealth must be maintained. That is why the United States has numerous welfare programs and also laws which require the U.S. government to give preferential treatment to U.S. firms.

Related to the above question, capitalism is not always ideal — economically and socially — for all countries. For countries like China, unfettered capitalism would allow wealth to be concentrated in the hands of a few people and subsequently leave the majority poor and hungry. Market action does not always serve the nation's best interests, particularly in areas of social need. Efficiency may be derived at the expense of jobs for the people, and the profit motive may intensify the inflation problem. In 1988, China had to place restrictions on the capitalistic movement because prices were rising too rapidly. In 2008, because the inflation rate was running well above the targeted rate, China repeatedly took a number of measures to cool its economy.

Indonesia's type of government should be considered to be a dominated one-party system since President Suharto made it clear that he would not allow any kind of political opposition. As a result, he made it extremely difficult for anyone to try to form a political party to challenge his authority.

Suharto justified his hard-line approach by stating that the fractious country needed social order. To his credit, he was able to maintain stability in a land where Islam, Christianity, and Hinduism coexist. Another social problem has to do with the fact that the income gap between the wealthy ethnic Chinese, who make up 3 percent of the population, and the remaining 190 million is quite large and growing. Without law and order, the income gap could foster a dangerous situation, and the violence that was carried out against the Chinese in the 1960s could return.

The problem with this style of government is that it keeps dissent and social grievances bottled up. So when the leader dies, those troubles will surface. At the time, Suharto did not do much to assure a smooth succession. In addition, the government's actions appeared to benefit the financial interests of Suharto's children and friends.

The concept of systasy (standing together) can be used to explain Indonesia's political system. The country is in a sense a closed society so that the group can act as one. From the political standpoint, the maintenance of such a society necessitates the neutralization of an external or internal group that poses a threat. To insure its own survival, the system may have to obstruct the adoption of new ideas. A switch to democracy would encourage dissension among the various subcultural groups.

One big problem with this kind of dictatorship is that short-term peace is achieved at the expense of long-term stability. Indeed, when Suharto was forced out of power, the country was thrown into chaos. The various military, religious, and ethnic groups have been fighting to either keep or achieve their self interests.