CEO of Multinational Corporation

| June 14, 2016

Question
June 21, 2015
Mr. Lee Mims
CEO of Multinational Corporation (MNC) for Southeastern Regional States
5555 Washington Street
Lawton, FL 58021
Dear Mr. Mims:
This letter is a Request for a Proposal (RFP) for the establishment of a new
foreign subsidiary in the country of Japan.
Various disciplines from the branch have teamed up, thoroughly evaluated, and
provided significant information pertaining to the gross domestic product (GDP) as well
as the current economic, financial, and political environment in Japan. Provided will be a
few recommended strategies, challenges and/or opportunities involved in expanding in
that country particularly in the area of meat/meat products i.e. pork and beef for your
review and consideration. Since this proposal only presents a relatively small piece of the
puzzle that has the potential to not only fulfill the goals of the MNC, but also maximize
shareholders wealth; please do not hesitate to contact any one of the team members listed
below from the MNC Management Southeastern Regional Branch at (580) 340-9662 and
a more elaborate research can be created as necessary.
Political Policy And Environment
The Japanese government is a constitutional monarchy that is divided into three
branches; the Legislative, the Executive, and the Judicial. Their legal system is modeled
after the European civil law systems and has English-American influence, judicial review
of legislative acts in the Supreme Court, and they accept compulsory International Court
of Justice (ICJ) jurisdiction with reservations. In the Executive branch, the chief of state
is Emperor Akihito. The cabinet is appointed by the prime minister, which is Prime

Minister Naoto Kan, who is the head of government. The judicial branch has a Supreme
Court and the chief justice is appointed by the monarch and all other juices are appointed
by the cabinet (Political and legal environment of Japan).
Population
Japan is one of the top ten countries in the world with the highest population,
specifically the tenth largest. Its expected population in 2050 is 94 million which if
correct, shows a decrease in population over the years; yet, fluctuation of the population
numbers could lead to the expected number ("Ten Countries With", n.d.). Japan, the
island nation in East Asia, is a fairly sizable archipelago of 6,852 islands, although the
four largest islands (Honshu, Hokkaido, Kyushu and Shitoku) account for 97% of its
population. The last set of official figures pertaining to Japans population were released
at the time of the 2010 census and the final statistics showed there were 128,056,026
people here, which would make Japan the tenth largest country in the world. Though in
decline, it still holds that position in 2014 with an estimated 127million people ("Japan
Population", n.d.).
Japan’s population has fluctuated in numbers over the last few years with
increasing number from 2010 to 2012 then decreasing in 2013 to 2015. In 2014, there
was a decrease in population from 127.3 at end of 2013 to 127.02 at the end of 2014. The
highest number reported was 127.8 in 2011, but decreased to 127.52 at end of 2013. (See
Appendix A). The population of Japan represents 1.85% of the world’s total population
which arguably means that one person in every 55 people on the planet is a resident of
Japan (Japan population). Many factors caused the fluctuations such as the birth rate,
aging population and weather related issues.

In the coming years, Japan’s population will shrink based on government
estimates which should be reviewed and taken into considerations for firms selling
products and services targeted at a particular country. Japan’s population will shrink by a
staggering 30% by 2060, according to a new estimate by the country’s government. The
current population will shrink from current level of 128 million to 86.74 million, as the
graying nation’s aging accelerates and the birthrate continues to stay low. The country’s
average life expectancy dipped in 2011 after the March earthquake and tsunami, which
killed approximately 19,000 people (Lah, 2012).
Gross Domestic Product (GDP)
The GDP is one the primary indicators used to gauge the health of a country’s
economy. It represents the total dollar value of all goods and services produced over a
specific time period – you can think of it as the size of the economy. Usually, GDP is
expressed as a comparison to the previous quarter or year. For example, if the year-toyear GDP is up 3%, this is thought to mean that the economy has grown by 3% over the
last year ("What Is GDP", n.d).
The following statistic numbers for Japan involves the import of goods from
suppliers and trade partners whom Japan has trade agreements which all can affect its
economy. Japans economy ranks third in terms of nominal GDP while it slips to fourth
spot when comparing the GDP by purchasing-power-parity. The economy has been
facing hard times since the 2008, when it was first showed recessionary symptoms.
Though the governments stimulus packages have helped the economy recover a bit, the
massive earthquake in 2011 gave the fragile economy another jolt. Economic growth has
hovered between 0.52% in recent times. The nominal GDP of Japan is $4.77 trillion, its

GDP (PPP) is $4.78 trillion, and its GDP (PPP) per capita is $37,683 (Bajpai, 2015).
Before firms enter the international trade market, consideration should be taken
regarding the factors that affect and influence a country’s economy. The most influential
factors are: cost of labor, inflation, national income, credit conditions, government
policies and exchange rates (Madura, 2015). Other relevant information concerning Japan
are the following:
– Japan’s currency: Yen
– Import goods: oils, food, wood, and other raw materials
– Suppliers of import goods: China, U.S., Australia, Saudi Arabia, Indonesia, and South
Korea.
– Trade partners: China, U.S., South Korea, Hong Kong, Taiwan, Singapore, Thailand
and Germany (Random facts, n.d.).
GDP Growth Rate
According to the World Bank (2015), Japans economic freedom score is set at
73.3 that rank the economy 20th in the economic freedom index of 2015. The score has
increased by 0.9 due to the recent improvements in labor freedom, business freedom and
trade freedom that outweighs the declining freedom from monetary, fiscal and corruption
aspects. Japan is ranked 6th among the 41 countries in the Asia Pacific region. In the last 5
years, Japans economic freedom has experienced a transformation due to early losses
overcome by recent gains. Most specifically, improvements in labor and trade freedom
have promoted to the overall score gains. The government has made significant reforms
relevant in improving substantial enthusiasm. Such reforms have been important in
transforming economic freedom and growth.

The Japanese government spending has been high and deficit spending has been
able to be funded by increasing sales taxes. However, the financial sector still poses some
significant difficulties for the foreign investors due to political influence. In terms of rule
of law, the direct exchange of cash for favors from the government officials is rare in
Japan. However, a web of close relationships among companies, government agencies
and other groups leads to a cooperative business climate for corruption (Tsuru, 2013).
Such relationships lead to most often government public works projects. The judiciary is
quite independent and offers secure protection of real and intellectual property.
The top specific income tax rate is 40.8% and the top corporate tax rate is 25.5%.
The Japanese government plans to increase the sales tax to 10% by 2015. The overall tax
returns currently amounts to 28.65 of the domestic output and public spending in
currently level about 42% of domestic production. Currently, the public exceeds twice the
size of the economy. Based on the regulatory efficiency, the process of incorporating a
business is relatively streamlined, but entrepreneurial growth is discouraged by
unresolved structural problems. The labor market is well functioning, but the propensity
for employment is guaranteed and the seniority base wages limits the development of
greater flexibility. Market forces generally set the prices, but the government has offered
adequate subsidies to the industries and other sectors.
Japan has a 1.2% tariff rate. Imports and foreign direct investments are relatively
low to GDP and the agricultural imports are facing significant barriers. Investment in
some economic sectors should be screened. The financial sector remains competitive, by
it is exposed to numerous political influences. The government retains a considerable
share of the banking sector, for example, it has a 100% ownership in Japan Post Holding

as of 2014. The liberal Democratic Party (LDP) coalition is dominated in the House of
Representative after it won the snap election held in December 2014 (Dunfee &
Nagayasu, 2013). The economic intelligence group has forecasted the economy to
recover in 2015 and 2016 in terms of an improvement in consumer sentiments and
sustained export growth. It forecasted that GDP would grow by 1.3% in 2015 and 2% in
2016.
The unemployment rate has declined from June 2014 in 3.7% to 3.3% in April
2015. This indicates the improving employment situation in the Japanese economy.
Recently, it was noted that the industrial production sector was showing a gradual
movements upwards. According to Dunfee and Nagayasu (2013), the production is
expected to increase in 2015 by 5%. The consumer prices including general prices
excluding fresh food products have been increasing gradually. In the short run, consumer
prices are expected to hold firm for the time being.
GDP Per Capita
In terms of the various economic indicators, the Japanese GDP per capita has
increased from 2012 to 2014 from $32203.43 to $37432.91. The GDP growth rate has
improved to 1% from 0.30 the last year. However, the annual GDP growth rate has
reduced by 0.90%. In 2014, the gross national product improved from $527,745.30 to $
534,253.40. This a significant increased towards providing a positive trend n the
expansion of economic and national economic growth ("The World Bank", 2015). The
GDP per capita PPP also increased from $34882.14 to $35481.11. Based on the various
economic indicators, the Japanese economy seems to be recovery in spite of past
economic decline in the past 5 five years.

Foreign Exchange Regime And Has It Strengthened Or Weakened In Past 6 Months
Japan has a free floating exchange system which means that its exchange rate
values will be determined by market forces without government intervention (Madura,
2015). As of June 12, 2015, the U.S. dollar to Japanese yen exchange rate is at a current
level of $123.23, up from $117.28 on 16 December 2014 which is roughly 6 months ago
("US Dollar To", 2015). In other words, 123.23 Japanese Yen = 1 U.S. Dollar. On
certain days, the exchange rate may rise and fall by $2.00. However, based on the rate
exchange data presented in the YCharts for Japan; there is a practically steady daily
exchange rate which ultimately increases.
Various Reasons That May Explain The Recent General Movements In Currency
Values Against The Dollar.
There are various reasons that may explain recent general movements in currency
values against the U.S. dollar. Some of which includes, but is not limited to the following
explanations: 1) According to Fisher (2015), "In the US, data was generally upbeat, but
the greenback wasnt able to take advantage as traders were hesitant to buy the USD
ahead of the Federal Reserve (Fed) statement. In Japan, GDP was unexpectedly strong,
posting its strongest gain in 4 quarters." 2) The USD/JPY exchange rate is affected by
many factors which can manipulate the strength of the each unit. That said, the interest
rate differences between the Fed and the Bank of Japan (BoJ) will have an effect on the
value of the currencies when compared to each other. Hence, the daily fluctuations
presented by the YCharts. i.e. "when the Fed intervenes in open market activities to
make the U.S. dollar stronger, the value of the USD/JPY cross could increase, due to a

strengthening of the U.S. dollar when compared to the Japanese yen" ("USD/JPY (U.S.",
n.d.).
Recommendations Of Strategies, Challenges, And Opportunities Involved In
Expanding Into Japan
Lastly, in addition to aforementioned pertinent information in which to help you
to base your decision on this proposal for the new subsidiary in Japan; here are a just a
few strategies, challenges, and/or opportunities to also consider: "The U.S. is the leading
agricultural supplier to Japan. Imports from the United States ($13.8 billion, including
shipping costs) represent almost one-fourth of Japan’s total agricultural imports; Meats
are the largest component of Japan’s agricultural imports-about 20% in recent years.
Japan imports large quantities of pork, beef, and poultry meat. Based on the value of
imports, Japan is the largest meat-importing country in the world" (Dyck, 2014).
One strategy out of many that the U.S. build upon to increase meat sales to Japan
would be to do more marketing via Japanese Television. According to Tazuko Hijikata,
the Senior Manager of Consumer Affairs, U.S. Meat Export Federation (USMEF)-Japan
(n.d.) "Television is a terrific medium for conveying the positive attributes of U.S. pork
and displaying delicious pork dishes enjoyed by families throughout the world. However,
one challenge for this specific strategy is that traditional television advertising in densely
populated markets such as Japan, is often cost-prohibitive." One way to help avert that
would be to obtain and secure the support of key industry partners" (Hijikata, n.d.).
Another strategy would be to branch out and do more presentations with
appropriate Japanese buyers to promote more U.S. red meat and provide new ideas on
how to present and market meat in retail settings ("U.S. Red Meat", 2015). Some benefits

of strategies shows positive results for U.S businesses such as in the cases of Costco,
which partnered with USMEF to conduct pork tasting demonstrations and has provided
continuous exposure to thick-cut U.S. pork. It saw its sales of the product jump 280% on
the day of the promotion. Universe achieved a sales increase of 54%, while Max Valu
and York Benimaru reported gains of 35% and 27%, respectively (Hijikata, n.d.).
Sincerely,
//signed//
Rob Amante, Triphinia Bain, & Stephanie Bolden
MNC Management Southeastern Regional Branch

References
Bajpai, P. (2015). The world’s top 10 economies. Retrieved from
www.investopedia.com/articles/investing/022415/worlds-top-10economies.asp#ixzz3dNkjYen4
Dunfee, T. W., & Nagayasu, Y. (2013). Business ethics: Japan and the global economy
(Vol. 5). New York, NY: Springer Science & Business Media.
Dyck, J. (2014). Trade. Retrieved from http://www.ers.usda.gov/topics/internationalmarkets-trade/countries-regions/japan/trade.aspx
Fisher, K. (2015). USD/JPY Forecast June 15-19. Retrieved from

USD/JPY Forecast June 15-19

Hijikata, T. (n.d.). Innovative media strategy brings U.S. pork to Japanese tv. Retrieved
from https://www.usmef.org/innovative-media-strategy-brings-u-s-pork-tojapanese-tv/
Investopedia.com. (2015). USD/JPY (U.S. Dollar/Japanese Yen). Retrieved from
http://www.investopedia.com/terms/forex/u/usd-jpy-us-dollar-japanese-yencurrency-pair.asp
Japan population. (n.d.). Retrieved from
http://worldpopulationreview.com/countries/japan-population/
Japan population. (2012). Retrieved from
http://www.tradingeconomics.com/japan/population
Lah, K. (2012). Japan’s population faces dramatic decline. Retrieved from
www.cnn.com/2012/01/30/world/asia/japan-population-decline/
Madura, J. (2015). International financial management. (12th Ed.). Stamford, CT:
Cengage Learning.
Political and legal environment of China. (n.d.). Retrieved from
https://sites.google.com/a/pgcps.org/aboutjapan/family-map
Random facts. (n.d.). Japan. Retrieved from
https://sites.google.com/a/pgcps.org/aboutjapan/family-map
Ten countries with the highest population in the world. (n.d.). Retrieved from
www.internetworldstats.com/stats8.htm
The World Bank. (2015). Japan Economy. The World Bank.Org. Retrieved from
http://data.worldbank.org/country/japan.

Tsuru, S. (2013). The political economy of the environment: the case of Japan. New
York, NY: A&C Black.
U.S. Meat Export Federation. (2015). U.S. red meat promoted during Japanese teams
visit to retail, processing facilities. Retrieved from

Japan


What is GDP and why is it so important economist and investors. (n.d.). Retrieved
from http://www.investopedia.com/ask/answers/199.asp#ixzz3dNkjYen4
YCharts. (2015). US dollar to Japanese yen exchange rate: 123.23 JPY/1 USD for Jun 12
2015. Retrieved from https://ycharts.com/indicators/japanese_yen_exchange_rate

Appendix A
Japan Population 1950-2015 | Data | Chart | Calendar | Forecast | News
The total population in Japan was last recorded at 127.0 million people in 2014 from 83.2 million in 1950, changing
53% during the last 50 years. Population in Japan averaged 112.90 million from 1950 until 2014, reaching an all time
high of 127.80 million in 2011 and a record low of 83.20 Million in 1950.

Actual
127.02

Previous
127.30

Highest /Lowest
127.80/ 83.20

Dates
1950 – 2014

Unit
Million

Frequency
Yearly

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