Research on Structure and Management of Inter-firm Network for Japanese-Manufacturing Firms to Improve Product Development Competitiveness

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The purpose of this research project has been to find out the optimal strategy of the Japanese manufacturing firms with respect to inter-firm network and product architecture. We conducted both qualitative and quantitative research. We have done qualitative research by interviewing company executives and engineers more than 100 times, and have implemented quantitative research by using questionnaire survey data and by analyzing POS (Point of Sales) data regarding product prices. We have found that if Japanese firms can both maintain differentiation in their products and can also create premium customer values that compensate for the additional costs of the integral design, they should stick to integral product architecture and closed inter-firm network (i.e. vertical integration). However, on the other hand, if Japanese firms cannot maintain their differentiation, or cannot charge premium price for the differentiation, they need to pursue open-network and modular design. In the latter case, Japanese manufacturing firms have to think about dynamic nature of the modular products. Modular products change their design frequently because changes are easier and less costly in modular design than with integral design The Japanese firms are good at implementing coordination that is necessitated by the frequent changes in modular products.In order to maintain differentiation, firms need to accumulate knowledge through learning by doing for a long time such as fifteen of twenty years. Most knowledge is accumulated internally in each engineer, and this learning process takes long time. On the other hand, firms need to think about both functional and non-functional values to create premium customer values. Providing solutions to customers are typical non-functional values in the case of industrial goods. Non-functional values have to be created in between manufacturing firms and customers