The late seventies, the eighties and the nineties all were dominated by the Japanese manufacturers. Even in the 21st century this dominance is not only visible but disturbingly complex with geographical concentration shifting in directions that defy economic sense and reinforce the multinationals' perception of competition.
The automobile industry has some peculiar characteristics when it comes to the question of concentration. There is a common tendency for every industry to be agglomerated geographically. However the automobile industry has a typical tendency for such geographical agglomeration. For instance within the frontiers of a country, a regional concentration would mean many manufacturers of an industry concentrating their output in a particularly advantageous geographical region such as Detroit in America. The same region would act as a focal point for international companies, thus completing an international cycle of geographic attraction.
The automobile industry has some peculiarities in shifting the geographic epicenter of activity away from the initial centers of development to newer more demand-centric market-oriented regions in the globe. During the last three decades manufacturing centers have been shifted from low-cost, skilled-labour, market-centric regions to still low-cost, skilled-labour, market-centric regions elsewhere, e.g. ...
Nissan Motor Company and Honda Motor Company, all of Japan first entered the European Union (EU) to make use of tariff-free entry into the then flourishing market for automobiles. Next they entered the North American enclave. Finally they are making entry into the Latin American and East European markets. The Japanese management and labour practices are rather revolutionary and Europe and North America had much to learn from them (Deyo, 1996, p.68).
According to Nobel laureate Krugman (1992), industries agglomerate in geographical regions where access to markets and raw materials coupled with the availability of skilled labour and a network of accessory producing machine shops, is easier. Though the theory sounds little old-fashioned it goes with the oligopoly industry which typically characterizes the automobile industry throughout the world. Oligopoly market structure provides the automotive industry with all that's necessary to lead and follow. Japan leads and others still follow though reluctantly. Hybrid technology advantage along with strategic non-cooperation helps Japan to overcome competition.
Theories on the geographical concentration of manufacturing industries vary from agglomeration theories based on external scale economies to structural theories based on the industrial structure. For instance following Michael Porter's publication of the book The Competitive advantage of Nations (1990), the term industry cluster was popularized. It was followed by Paul Krugman's Geography and Trade (1992). Cluster models have increasingly been accepted as greatly influencing the theories of geographical agglomeration ever since the concept was discussed by Porter. A cluster can be divided into four as follows:
(a). Geographical cluster