chapter  11
Japanese direct investments in West Germany: trends, strategies and management problems
Trends, strategies, and management problems
ByB. Nino Kumar
Pages 22

As the European Economic Community’s (EC) trade deficit with Japan continues to rise ($20.1 billion in 1987 against $10.2 billion in 1983) (JETRO 1988a:1), trade relationships between the two become more and more strained. Recently there has been intensified trade friction, for instance, over automobiles, machine tools, video-recorders, televisions, etc. Under this impression, and in anticipation of the EC integration in 1992 which will create a giant common market encompassing 350 million consumers with high purchasing power, Japanese companies are increasingly considering, and pushing forward, direct investments in the EC member countries. Although Japanese direct investments in Western Europe, with a cumulative $14.47 billion (1986), still lag way behind other regions,1 the attractiveness of the single EC market is expected to influence more and more Japanese firms to change their overall (export) strategies to an emphasis on taking up local production in Europe in the future. For instance, in the electrical equipment field, the main manufacturers of video-recorders and televisions have already invested in their own production facilities in Western Europe as have other industries such as forklift and automobile producers. Nissan and Honda in the UK are perhaps two of the most notable cases in the manufacturing industries. And of course, in recent years more and more Japanese firms from the service sector (banks, transportation companies, etc.) have also invested and established subsidiaries in Europe.