VW is a mass-market car producer and has found its competitiveness slippingaway in key markets, largely because of high costs in Germany, where it is based.It has traditionally been reluctant to use low-cost locations for components, unlikerival global carmakers. High wages and job protection in Germany have beenpriorities for the powerful trade union, IG Metall, which is influential on VW’ssupervisory board. In the US, VW’s sales slumped for several reasons: theweakness of the US dollar, the lack of appealing new models and theunwillingness of the company to use local suppliers of components for itsMexican factory. In China, where VW was a market leader, competitive pressureshave gathered strength, from both other western entrants and Chinese companies.VW has inadvertently strengthened Chinese competitors through its joint ventureswith SAIC MOTOR.

Changes in strategy have been forced on the company because of its dwindlingcompetitiveness. The management has persuaded the unions that cost savings areimperative. Wage freezes, early retirement and staff reductions through voluntaryschemes are being implemented.

Under Germany’s system of corporate governance, co-determination is thegoverning principle. It is useful to begin by highlighting its implications, namelythe strong position of the main trade union on the supervisory board. Alsoimportant in the case of VW are the share structure, the German takeover law andthe role of Porsche, the family-owned luxury carmaker. The main largeshareholders are Porsche and the government of Lower Saxony, which havediffering perspectives. The families which own Porsche see the economic benefitsfor themselves of winning control of VW, while the government and trade unionprioritize public benefits such as employment in the region. Clashes in perspectivelead to disagreement over strategy.

Question

If you were a shareholder in VW, what changes would you like to see in the way the company isrun? (150 words)

Japan

The jobs-for-life guarantee – Japan’s large companies have prided themselves ontheir employment system which guaranteed a job for life to permanent, fulltime employees. This was an important element in Japanese corporate culture,giving employees a strong sense of identity with the company, along with highlevels of loyalty. Following decades of rapid economic development, Japanwent into a period of economic downturn in the 1990s, and in the samedecade, Japan’s companies came under competitive pressures from other EastAsian economies which were catching up in terms of economic development.Although Japanese companies needed to restructure and abandon the jobsfor-life policy, they were reluctant to take drastic steps to slim downworkforces.

• Core technology and innovation capacities – Japan’s large companies were famous fortheir innovations, but in embarking on joint ventures with companies in therising economies of East Asia, lost control of some of their key innovations.Rethinking their innovation strategies, involving decisions on what to keep inhouse and where to seek cooperative strategies, was part of the strategy toregain competitiveness.

Japan’s companies have long been at the forefront of imaging technology,including LCD technology, digital cameras and flat TV panels. This gives them acompetitive lead in the fast-growing digital sector. By carefully managing thistechnology, they hope to keep their lead over rivals such as Taiwanese and SouthKorean companies. The home market is crucial for Japanese companies, and,although Japanese consumers were reluctant to spend during the period ofeconomic downturn, there is hope that consumers will regain their desire for thelatest electronic equipment. Companies such as Sony and Toshiba look forrenewed growth in their home market.

Question

Asses the impacts of changes in employment patterns on Japanese society? (150 words)