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Firm Strategy, Structure, and Rivalry

  • The increase in the LED demand and the urgency of the situation have attracted LED light producers
  • Japan's lighting market is concentrated
  • Price war among LED light producers in Japan

Chance

Thank You!

Government

Conclusion

  • Fukushima nuclear disaster in 2011 impacted energy requirements in Japan

- Most nuclear power plants shut down (covered 30% of energy production)

  • Nation-wide efforts to reduce energy consumption
  • Banning production of incandescent light bulb production
  • Supply side - more focus on renewable energy and other sources of energy
  • Demand side - preference towards energy-efficient products
  • Launched awareness-rising campaign to promote the elimination of inefficient lamps
  • High rivalry among firms; well-established and well-known companies in Japan: Panasonic, Philips, Toshiba, etc.
  • Price war among producers driving prices down and pressure on costs
  • Access to highly developed technology and skilled labor available
  • Increasing demand for LED lighting supported by government initiatives
  • Low interest rates
  • Resistance towards mergers and acquisitions; cultural barriers

Recommendation

Strategic alliance in order to take advantage of each-other's core strengths

Macroeconomic Analysis

Demand Conditions

Porter's Diamond

Factor Conditions

  • Japanese consumers are sophisticated and very demanding and they prefer energy-saving products
  • The market for LED lighting is expected to grow at CAGR of 18% over the period of 2014-2019

Land: Nationwide land prices fell for the seventh consecutive year in 35 prefectures out of 47

Labor: Japan is experiencing 'demographic' labor shortages because of the decreasing population; it has the highest average skill level compared to other OECD countries

Capital: Japan has a liquid capital market; extremely low interest rates

Technology: Highly developed technology; LED light manufacturing is capital intensive

Country-Specific Developments, Opportunities, and Risks

Actual and projected LED average price for 40 watt and 60 watt equivalents

  • 3rd largest economy in the world
  • Japan's economy is recovering after the "lost decade"
  • FDI as a percentage of GDP = 3.4%
  • Government has eliminated most formal restrictions on FDI
  • Foreign exchange transactions are freely permitted
  • No expropriation risks
  • Stable political environment
  • World Peace Index - Japan 8th place out of 162 countries
  • Japan has traditionally been resistant to mergers and acquisitions
  • Japan corporate tax rate = 37% (U.S. = 39%)
  • Cultural and linguistic barriers
  • Electrical power cuts in northeast Japan

Related and Supported Industry

Agenda

Currency Valuation

  • Construction
  • Mobile phone
  • OLED
  • Manufacturing of silicon chips

Parity Conditions

- Forward exchange rate

- Interest rate parity

- Big Mac Index

  • Introduction
  • Macroeconomic Analysis

- Porter's Diamond

  • Currency Valuation
  • Country-Specific Developments, Opportunities, and Risks
  • Conclusion and Recommendation

Determinants of Future Exchange Rate

Spot Exchange Rate

Asset Approach

Balance of Payments

- Relative real interest rates

- Prospects for economic growth

- Supply and demand for assets

- Speculation and liquidity

- Political risks and controls

Currency Prediction

- Current account balances

- Portfolio investment

- FDI

- Exchange rate regimes

- Official monetary reserves

  • Spot rate USDJPY = 123.10
  • Big Mac Index - Yen is undervalued by 38%versus the U.S. dollar
  • Relative PPP - Yen should appreciate against the U.S. dollar

LED Light Bulb Manufacturing in Japan

Shqiponje Bislimi

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