P3-3. Given Japan’s culture, will the introduction of performance-

based compensation schemes create any problems for Nissan in Japan? If so, what is the nature of these problems? Do you have any suggestions for overcoming these problems? During the 1980s it was hard to pick up a copy of Businessweek, Fortune, or Forbes that did not feature some article extolling the virtues of Japanese management techniques and the Japanese way of doing business. Many Western commentators urged U.S. and European firms to adopt such Japanese corporate policies as lifetime employment, group-oriented compensation, and reliance on tight customer-

supplier networks like those found in the keiretsu system. Among the most admired of these firms were Japan’s premier automakers—

Toyota, Nissan, and Honda.

The 1990s, however, were disastrous for many Japanese firms. The collapse of Japan’s so-called bubble economy at the end of the 1980s condemned Japan to a decade of slow growth, stagnant stock markets, and loss of confidence.

Among Japan’s corporate elite, Nissan perhaps suffered the greatest fall of all. Although Nissan had prospered during the 1980s, the 1990s were far less kind. Expansion of its domestic auto-making capacity during the 1980s left Nissan with far too many factories and workers, and it was forced to battle for market share in the crowded Japanese domestic market by keeping its prices low. (Japan has more major domestic automobile manufacturers than any other country.)

The company suffered from excess capacity in its European operations as well. And the high value of the yen during the first half of the 1990s made it difficult for the company to export its way out of its difficulties. The Asian currency crisis of 1997–1998 dried up that region’s demand for the company’s products in the waning years of the twentieth century.

Confronted with these diverse challenges, the company eked out a small profit in 1991 but lost money in 1992 and 1993.