How Japan Does It

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have given the nation's industry the capital it has needed to keep Japanese plants modern and productive. Says James Abegglen of the Boston Consulting Group, which has conducted numerous studies on Japanese business: "The thing that has enabled Japan to get to the top and stay there is savings. Savings of all kinds—government, corporate, personal." During 1980, Japanese workers saved an estimated 20% of their individual and family incomes, more than three times as much as the Americans.

QUALITY. Two decades ago the words Made in Japan were synonymous with shoddy workmanship, and Japanese products were marketed mainly in 5¢ and 10¢ stores. Yet today firms like Sony and Datsun sell their products principally on the basis of high standards. Says Masao Kanamori, president of Mitsubishi Heavy Industries: "The existence of our company would be impossible if we failed to reassess our performance in quality, production and cost."

This change is a result of the country's preoccupation with quality control, a management concept that until quite recently had been insufficiently considered in the U.S. Yet it was American academics who helped the Japanese improve their products and change their image. One proposed device was quality-control circles, where workers and their supervisors discuss ways to improve output and standards on the job. Statistician W. Edwards Deming gave a proselytizing speech in Tokyo in 1950 on the virtues of quality control as a manufacturing technique. Since that time, Deming has been elevated in Japan to the status of industrial folk hero. The Deming quality-control award is now one of the most sought-after prizes among Japanese firms.

In Japanese plants and factories, workers are not only encouraged, but actually expected, to make quality control their top priority. At Matsushita Electric, the country's second largest electrical company (1980 sales: $13.7 billion), workers are instilled with the notion that each one of them is a quality-control inspector. If they spot a faulty item in the production process, they are encouraged to shut down the whole assembly line to fix it. Pressure to improve quality reaches beyond the shop floor and often pits entire plants of competing companies like Hitachi and Sony in furious statistical battles to produce the lowest defect rates for products.

The Japanese today look down on what they regard as the poor quality of American products. Kenichi Odawara, professor of economics at Sophia University in Tokyo, recently published a book on the problems of the U.S. economy and workmanship entitled The Great American Disease. One example of that disease is familiar to any Japanese car dealer attempting to sell an American-built automobile in Japan: the cars have to be given an additional coat of paint before they can satisfy the demanding Japanese.

COMPETITION. While Western businessmen often regard Japan as a giant cartel, competition is actually fierce. Japan's thriving domestic market is the principal battleground for most Japanese companies. The products shipped abroad have such high quality and low price in large part because they have already survived the domestic Japanese market. In 1955, for example, the leading motorcycle company in Japan was Tohatsu, while Honda was a distant No. 2. By 1964 the more competitive Honda dominated the local