Toyota woes highlight Japan's cash or 'kaisha' dilemma

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Toyota Motor Corp's mass recall crisis may seem peculiarly its own, but the top carmaker's woes are a cautionary tale for other Japanese companies needing to expand abroad and drive earnings growth.

Critics say Toyota, haemorrhaging its reputation for reliability as it recalls millions of cars over a sometimes fatal accelerator defect, failed to balance a traditionally tight management style that ensured quality with the changing demands of globalisation.

Stefan Lippert, a business professor at Temple University in Japan, calls it the "kaisha dilemma", using the Japanese word for "company".

"The incredible success of the Japanese economy is based on the 'kaisha'. It's based on this specific management model," he said, referring to Japan's rapid economic growth before stalling in the 1990s. "However, times have changed."

Panasonic Corp, Lippert says, is another company that has been unable to evolve enough from its traditional roots to fully exploit opportunities overseas. Despite dealing in global products, Panasonic still gets half its sales in Japan.

Spokesman Akira Kadota said Panasonic has four regional headquarters in New Jersey, Beijing, Singapore and near Frankfurt and they make as many decisions as they can for their respective regions.

If Japanese companies can't break the mould, they risk losing further ground to South Korean and Chinese rivals that are more proactive in grooming local talent who know their markets best and can play a key role in product innovation.

Korea's Samsung Electronics Co has pushed aside the Japanese to become the world's top maker of LCD TVs.

"Toyota is part and parcel of what's bothering Japan right now," said Darrel Whitten, managing director of consultancy Investor Networks Inc.

"They have to come to terms with globalisation ... I don't think it's a situation any more where you can run everything from headquarters."

Also, losing veteran executive Jim Press -- the first non-Japanese elected to Toyota's board -- to Chrysler in 2007 was symptomatic of an inability, shared by many Japanese firms, to attract and keep top-notch local staff.