Mitsubishi Motors Corporation: Globalisation Impacts

Introduction

Mitsubishi Motors Corporation is the sixth largest automobile maker in Japan (Mitsubishi Corporate website 2010). It was founded in 1970 and is ranked 17th in the world motor vehicle industry by production (Mitsubishi Corporate website 2010). The company, like any other business, is affected by globalization. Globalization is a process of integration by regional economies and cultures into a global network of trade. This is the process of promoting economic integration between economies of different countries with the aim of establishing a global market (Anon 2003).

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Through economic integration, nations get a wider access to the world economy and their dependence on local resources is reduced. It can be in the form of an F.T.A. (Free Trade Agreement), whereby there is no restrictions to trade or W.T.O. (World Trade Organization) where trade is regulated by an internationally recognized body. With economic integration, good and services, labour, and capital find their way in the country where they can be put into maximum use. Maximum use on the other hand results in economic growth and development. Increase in mobility of factors of production faces some negative challenges especially because of the economic pressures in the global market (Bhagwati 2004).

Globalisations and Global Markets

Today, the global economy has increased to significant levels and all these have been facilitated by trade agreements. Several factors influence globalization, which includes socio cultural, technological, economic, and political factors. There are different factors that contribute to globalization some are deliberate and planned while others come from a need. After the Second World War, politicians and economists engaged themselves in vigorous planning aimed at breaking trade hindrances thus promoting interdependence.

The move was both economical and aimed to reduce chances of future wars. They established Bretton Woods Conference for laying down international commerce framework. They also established other international institutions with the responsibility of supervising the globalization process. Some of these institutions include international monetary fund (IMF) and the World Bank. Technology and industrialization have played a crucial role in facilitating globalization (Gills & Thompson 2006).

International trade is a key element in globalization as growth and strengths of nations rely on trade. This is facilitated by the elimination of barriers to trade such as tariffs. International trade is the exchange of goods, services or/and capital between different countries. It has been in existence many years ago although much of its significance has been recognized recently (please see appendixes (Chart 1) for international trade growth rate).

Free Trade

Free trade is a policy in trade that enables countries to transact business without government interference. Traders benefit from the trading of goods and services in accordance to their comparative or relative advantage. In a market with free trade, the price of goods and services is determined by the forces of demand and supply; this differentiates free trade from other trade policies where prices are determined by other forces such as the government. Examples of such agreements are North American Free Trade Agreement (NAFTA), European Union (EU), South Asia Free Trade Agreement (SAFTA), Union of South American Nations and European Free Trade Association (Stiglitz 2003).

International finance is a branch in economics that deals with exchange rates and foreign investment and their effect on international trade. It also looks into international capital flows, deficits in trade, and international projects. International finance can be said to be a branch in international economics that studies the currency changes and the future of international trade.

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In recent years, international financial market has been experiencing increased trade brought about by globalization. In early 1990s, the international capital flow changed from 2 to 6 % of world gross domestic product and later increased to 14.8% in 2006 According to IMF report 2008, the world trade is expected to account for 23% of the world GDP in 2015. The report also observed that China’s fast development is as a result of international trade (IMF staff 2008). (IMF staff 2008).

Foreign Direct Investments

There has been growth in foreign direct investments in third world countries by developed nations aimed at various developmental projects. They are mostly done by trading partners. There has been a drastic increase in FDI as developed countries try to uplift third world countries (see chart 2 in the appendixes).

There has been an increase in FDIs in Africa and developing countries. 2006 recorded the highest increase of FDIs when it recorded $ 1,306 billion; this was an increase by 38% from what was recorded in 2005. In 2006, African countries got 35.5 billion dollars and 35.6 billion dollars in 2007. These figures are up from $2.4 billion received in 1985. The highest beneficiary in 2007 was Morocco, which got 5.2 billion, which was a 78.6% increase. The FDIs received in 2006 were approximately equal to a fifth of the continents GDP (Economy Watch, 2010) (see appendixes 3 for FDI s in sectors).

Globalization has an effect on world automotive industry. The major influence that it has is increased competition in the market. In same market, through international trade, companies making similar products compete for the market dominance. Some of the international motor companies include Toyota Motor Limited that is the leading producer and marketer followed by General Motors (Moore 2009). Others include Ford and Tata. This competition and wide market access has created the need for ingenuity and innovation in the automotive industry. As these companies try to compete for the same market, they are forced to develop better ways of producing to increase customer satisfaction. These include creating fuel-efficient vehicles and more comfortable automotives (Linda 2001).

Handling Environmental Issues

Mitsubishi Motors Corporation affects the environment negatively; all raw materials are found in nature and when production occurs, there is utilization of natural resources and sometimes polluting the environment. A large number of social corporate responsibilities are on programs that restore nature (Muscheler 2005). The benefit is felt by the larger society as it assists in developing a sustainable development production. The company has embarked on water recycling mechanisms, has also devised products that are highly fuel efficient. They include bio-diesel vehicles, EVs (electric vehicles) among others

Mitsubishi Water Policy

According to environmental report 2009, Mitsubishi has reduced its water wastage by 50%; this is through recycling and proper water usage. The recycling is seen as a move to conserve the environment in line with EU environmental rules and Kyoto protocol. US Environmental Agency has congratulated the efforts taken by Mitsubishi to conserve the environment. It is of the view that if other motor industries follow the same trend, then the world is likely to reduce emissions by half.

Pollution from Mitsubishi Motors Corporation can be controlled as a form of corporate responsibility (internal) or a company can embark on massive cleaning of the environment. This assists in developing a close collaboration between the environment and business (Faust 2008). The benefit that may accrue to the business on maintenance of environment is on pollution taxes. There are governments that use pollution taxes as a way of ensuring there is efficient production. When doing these tax audits, they allow an amount that is responsive to the efforts that a company has put in place to prevent pollution.

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The Kyoto Protocol

It is estimated that during the 1906 – 2005 period the earth’s surface temperatures rose by 0.74 ± 0.18 °C (Ernesto & Zedillo 2008). In 1998, Kyoto protocol was developed as a preventive measure to further global warming (Oberthür & Ott 1999). Kyoto protocol that was ratified in Japan, on 11 December 1997 and aimed at full implementation by 16 February 2005 is one of the measures. It was developed by United Nations Framework Convention on Climate Change and ratified by 37 industrialized countries and European community. The main aim of the protocol was to ensure that emission of green house gasses was reduced by 5% below their level in 1990 by the end of 2010. The protocol targeted the major greenhouse emitters and developed measures to be implemented (Ernesto & Zedillo 2008).

Mitsubishi Market Share

Ranked seventeenth in the world (see appendixes; Chart 4) the company produces various wastes through its (production) processes.

Mitsubishi Environmental Policy

There are those that can be recycled (by the same company or by other companies) while others cannot be recycled. To protect the environment, the recyclable ones should be recycled and those that cannot be recycled should be disposed off in the most appropriate way possible. They should be disposed in a way that will not harm the environment. Depending with the kind of waste that a company produces, the recycling method is established.

Plastics are the easiest ones to recycle since they can be moulded to other plastic materials. They can be used in the same company or as raw materials in another. Other products can be reused and should be salvaged to avoid employing other materials for the same cause (Leopold 1966). Vehicles are high emitters of green house gasses. This happens because, as they move, motor vehicles produce some smoke that gets into the air causing a great threat.

The motor vehicles produce carbon monoxide; when this goes into the air it becomes miscible and thus one may think that the air is very pure only to realize that it is highly polluted (Sheila 2004). When these particles get in the atmosphere, they remain there for a long time and when it rains, the particles are mixed with water resulting in acid rain.

Once the acid rain falls, the entire emission that the motor vehicles had emitted finds its way to the water bodies. The water purity is thus reduced. The company has noted this and is constantly improving its process. This is through ensuring that it produces automotives that are high fuel consumers. The development of electric automobile is also in the project design stage and when finally effected, it is expected to reduce emission.

As the world opens up, market for goods and services follow suit and the resultant is more production by countries. Each country wants to produce those goods that it has a comparative or relative advantage over others (Wolf 2005).

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Environmental Conservation

All productions seek their raw materials from the environment, directly or indirectly. The resultant is overexploitation or misuse of the environment. When this happens, human beings suffer. For example, as Australians industries manufacture their numerous products there is waste produced. When the waste has been disposed off depending on the adopted way, it may end-up polluting air and water. When a factory produces smoke into the atmosphere, it is adding more particles to the air and reducing its level of purity.

On the other hand, some factories may dispose some of their wastes (both solid and liquid wastes) in water bodies. These are impurities added in water; some of them are soluble and thus naked eyes cannot see them, a thing that cause a lot of danger to human beings and animals since they use the water for drinking among other domestic uses. Diseases associated with pollution include Cholera and Typhoid. Despite new invention in medicine, the net effect of pollution is deteriorating health conditions (Grove 1995).

There are different companies that are putting on measures to avoid air pollution, such include, Honda Motor Company that introduced insight model to prevent high-level fuel consumption and produce less carbon dioxide. Mitsubishi is also a key player in carbon emission, it does so through:

  • Adopting fuel efficient production methods like using electricity instead of coal when heating this is estimated to reduce its factory emission by 20%
  • A project to develop electric motor vehicles is in an advanced stage
  • The company has embarked on improved technology on it vehicles to ensure that they are fuel efficient
  • The company have started making bio-diesel engine vehicles; they are seen as the breakthrough to future environmental conservation (Mitsubishi Corporate website 2010).

Effects of Carbon Emission in EU countries such as Portugal or Spain or the Netherlands

Carbon emission pollution has negative effects to people and animal health. There are certain diseases that come as a result of pollution. It is estimated that a healthy mature human being inhales approximately 20,000 litres of air each day. This is at the risk of inhaling dangerous chemicals, which can harm our health. When air is polluted, there are chemicals that are in the air that get their way in the body of human beings through breathing. Polluted air trapped in buildings leads to indoor pollution, which has a longer lasting effect than outside pollution. Portugal, Spain, and Netherlands have adopted high level of technology to ensure that their environment especially air is clean. They have well laid policies to ensure that any imports of vehicles meet the minimum standard of environmental pollution, which is 98%.

Carbon Emission

It is observed that among the major emitters of green house gasses is burning of fossil fuels. The Kyoto protocol recommends that if each country was to reduce its level of emission then global warming could be reduced. There are numerous ways that the protocol puts forward to ensure that its objectives are fulfilled One of the ways is adoption of clean technology; this is technology that does not emit (or emits minimal) green house gases. In other words, it discourages the use of fuel in production; however, it recognizes that some sectors of the economy rely on fuel, for example the transport industry.

Thus, it goes further to recommend development of efficiency in such industries. Some of the examples of clean technology available are solar energy and electricity from hydro systems. It is the role of any given company to employ measures that reduce global warming in the efforts by the government to reduce global warming: it is likely to put measures that are aimed at limiting green house emission. This includes carbon emission taxes and limiting ones business. The end results will be an increased cost of production, which is directly transferred to customers. The resultant is in-competitiveness and reduced customer base (Oerlemans 2005).

Secondly, a company benefits from its customers loyalty, customer loyalty is when customers feels that they like and appreciates a firm’s product. It builds a positive attitude toward company’s products. A positive attitude is built when processes adopted in the company are acceptable. With increased awareness, the adoption of clean technology is in the public domain and thus customers are more likely to be loyal to those companies that produce good with minimal carbon emission, thus a business is likely to benefit out of use of clean technology (Grove 1997).

Policies to Reduce Pollution by Mitsubishi

To reduce emission, Mitsubishi Company has embarked on various exercises. When designing the production procedure to use then a business is supposed to consider the consequence that such a production will have in the society. When the costs are large that they outweigh the benefits derived then such projects should not be taken in the first place. When it comes to social corporate responsibility, when making a decision on the kind of a system that a company should use, there is need to have an analysis of the number of populace that it will affect and the damage or extent of the problem that a company want to solve (Purse 2005).

If for example, a company is in the business of producing packing materials, which results in high emission of carbon gases, and it chooses to sponsor education of some students as its corporate responsibility, then it is not likely to succeed. This is because the cause of their pollution is wide spread and chances are people would not even recognize such a move. In such a case, it can embark on planting trees, which will benefit an entire society. The theory acts to advise management when making a decision on the kind of strategy they will implement (Grove 1992)

Company’s Response to these Hydrocarbon Emissions

Mitsubishi is approaching the need to reduce carbon emission in two angles. Firstly is looking at its internal processes and secondly it aims at producing motor vehicles which are responsive to the environment. Internally the company has embarked on massive recycling processes. Some of the products that it recycles include plastic, water, and scrap metal (Schulte 2000). These are done in line with adopting technology that emits minimal pollutants to the environment.

For example, instead of using coal the company has embarked on using electric power produced from water energy. Secondly, the company is aiming at producing vehicles, which consume fuels effectively. There are vehicles whose fuel consumption is minimal and efficient. This reduces green house gasses emissions. As part of the company’s corporate social responsibility, the company has embarked on tree planting practices where it involves its staffs and the society in general to undertake this noble function (Glacken 1967)

The idea of having cars that emit minimal gasses have greatly benefited the company. Profit is the individual company’s goal and financial objective whereas the people and planet is the outside world that the business operates. As a result, it has become more important for firms to integrate corporate social responsibility in their strategic positions and organizational structure. No company can succeed in today’s fiercely competitive business environment without building strong social responsibility programs into its strategy. This notion has assisted Mitsubishi in its efforts to venture in United States market. Residents of United Nations are willing to buy vehicles, which are fuel-efficient and have minimum effect to the environment (Moore 2009).

In response to global health issues, the company has three policies in place they are; Diesel powered motor cars, Hybrid motors cars, and Bio fuel policy (these are policies that are set to ensure that the vehicles produced by the company have high fuel consumption capacity). The gasses that they emit to the environment are minimal (Odagiri 1996).

In 2005, the company had targeted to reduce carbon emission from each car it produces by 20%. This was attained. It also intends, after there is a full production of Electronic vehicles (EVs), to further reduce emission by 50%. This is expected to be attained through reduction of fossil fuel engine production. Currently, the company is producing flexible-fuel vehicle and bio-ethanol cars, which have increased the perception that customers hold on its products. The company is now enjoying an increased customer base. Conservation of water is another move that the company has embarked on. According to the 2009 social corporate report, the company had managed to conserve and recycle 50% of the water it uses in its production (Mitsubishi Corporate website 2010).

Bio fuel policy influence the company’s sales in its European markets such as France or the United Kingdom

In October 2000 it came up with ELV recycling, since then Mitsubishi Motors Europe (MME) and its subsidiaries are leaders in implementing the set strategies. According to the ELV recycling strategy, companies could only be licensed to work in the larger European country if they complied with the set levels. Before a new model is registered for sale in either United Kingdom or France, it requires having at least 95% recyclable level.

Conclusion and Recommendations

Mitsubishi Motor Company is one of the renowned vehicle manufacturers in the world. It has been in operation since 1970. The motor vehicle industry is one economic sector that has been blamed with environmental pollution. This is through the products they produce, that is, motor cars that emit green house gasses. On the other hand, industries produce a lot in terms of waste. Internal processes also emit green house gasses and there is massive water pollution.

The company has embarked on environmental conservation measures, which include recycling, technology adoption, and use of social corporate tools like tree planting to device measures that conserve the environment. Global warming is the increase in earth surface temperature, which results in increased global sea level. The major cause of global warming is human activities especially in this era of industrialization. After recognizing global warming effects, United Nations Framework Convention on Climate Change developed Kyoto protocol in December 1998.

However, the protocol has faced numerous challenges that have hindered the realization of its objectives. Mitsubishi Motor Company is trying hard to ensure that they comply with provision of the protocol. The company has realized that one reason that can lead to a business loss of competitiveness is producing of goods that are not accepted in the public domain. These may be goods that are produced alongside high carbon emission.

If the public is sensitive to environmental conservation, it is likely to boycott buying goods that are from companies, which do not respect the environment. The end loser is the business concerned. Loss of business will mean that the business will be compelled to adopt measures that reverse the trend; this is an expensive endeavour. This has made it produce products, which are responsive to the need of the environment. Vehicles produced by the company are fuel-efficient and they are on the move to produce electric motor vehicles. Bio diesel cars have been a success in the company and they have given the company an upper hand against its competitors.

When the company is producing goods, it should use a consequentiality approach. This is where the company weighs the effects that an action has on the people that it is undertaken. If the effects will be negative to the environment, then it should not undertake it since the effect would be negative. Negative affects leads to negative response from customers. To ensure production methods are in line with the expectations of the society, then Mitsubishi need to have a robust research and development team which can advice the company on the expectation that the society have over then.

After understanding the expectations, technology to that effect should be developed. Of late, there has been the development to using green supply chain management. This supply chain is responsive to the environment where before goods are bought, the company vets the seller and the products. Such products are both machineries and raw materials. Other than products coming to the company, the production mechanisms adopted by suppliers is also vetted to ensure they are conserving the environment.

Reference List

Anon. 2003. From Remarks at a U.N.C.T.A.D Conference in February 2000, In Johan Norberg, In Defence of Global Capitalism. Washington, Cato Institute.

Bhagwati, J. N., 2004. In Defence Of Globalization A Council On Foreign Relations Book Series. Oxford, Oxford University Press.

Economy Watch, 2010. “Foreign Direct Investment in Africa” Web.

Ernesto, Z. and Zedillo, E. 2008. Global Warming: Looking Beyond Kyoto. Washington, Brookings Institution Press.

Faust, R., 2008. Global Warming: Greenhouse Gases and the Ozone Layer. New York, the Rosen Publishing Group.

Gills, B. and Thompson, W. R., 2006. Globalization and Global History. New York, Routledge.

Glacken, C.J., 1967. Traces on the Rhodian Shore. Berkeley, University of California Press.

Grove, R.H., 1995. Green Imperialism: Colonial Expansion, Tropical Island Edens, and the Origins of Environmentalism, 1600-1860. New York, Cambridge University Press.

Grove, R.H., 1997. Ecology, Climate and Empire: Colonialism and Global Environmental History 1400-1940. Cambridge, Whitehorse Press.

Grove, R.H., 1992. Origins of Western Environmentalism. Scientific American 267(1): 22-27.

IMF staff, 2008. Globalization: A Brief Overview [Online]. Web.

Leopold, A., 1966. A Sand County Almanac. New York, Oxford University Press

Linda, L., 2001. The Globalization Debate: Issues and Challenges. Geneva, International Labour Organization.

Mitsubishi Corporate Website. 2010. The Company’s Official Website [Online]. Web.

Moore, M., 2009. Saving Globalization: Why Globalization and Democracy Offer the Best Hope for Progress, Peace and Development. New York, John Wiley and Sons.

Muscheler, et al., 2005. Climate: How unusual is today’s solar activity”(PDF). Nature 436 (7012): 1084–1087.

Oberthür, S. and Ott, H. 1999. The Kyoto Protocol: International Climate Policy for the 21st Century. New York, Springer.

Odagiri, H., 1996. Technology and Industrial Development in Japan. Oxford, Oxford University Press.

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Purse, et al., 2005. “Climate change and the recent emergence of bluetongue in Europe” (abstract). Nature Reviews Microbiology 3 (2): 171–181.

Schulte, J. A., 2000. Globalization: A Critical Introduction. London, Palgrave Macmillan.

Sheila, L. C., 2004. Globalization and Belonging: The Politics of Identity In A Changing World. London, Rowman & Littlefield.

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Appendices

Chart 1: Volume of world merchandise exports, 1965-2009

Volume of world merchandise exports, 1965-2009

Source: WTO Secretarial. (Annual % change).

Chart 2: The chart below shows the trend of FDIs since 18986 to 2007

Annual growth of PDI Inflows
(Economy Watch, 2010)

Chart 3: The chart below shows totals of FDIs by sector from 1990 to December 2005

Ranks Sector Amount of FDI inflows % age of total inflows
1 Electrical Equipments(Including computer software & electronics) 4,885.88 16.5
2 Transportation Industry 3,143.09 10.34
3 Services Sector 2,971.66 9.64
4 Telecommunications 2,890.12 9.58
5 Fuel (Power & Oil Refinery) 2,521.49 8.41
6 Chemicals (Other than Fertilizers) 1,889.51 5.86
7 Food Processing Industries 1,173.18 3.67
8 Drugs and Pharmaceuticals 948.54 3.18
9 Cement and Gypsum Products 746.79 2.54
10 Metallurgical Industries 627.32 2.12
11 Consultancy Services 444.48 1.59
12 Miscellaneous Mechanical & Engineering 491.45 1.51
13 Textiles (Include Dyed, Printed) 430.07 1.32
14 Trading 374.23 1.16
15 Paper and Pulp including paper product 363.46 1.1
16 Hotel Goods 308.51 1.04
17 Glass 255.59 0.81
18 Rubber Goods 233.3 0.77
19 Commercial, Office & Household Equipment 231.67 0.66
20 Industrial Machinery 204.84 0.65
21 Machine Tools 155.43 0.52
22 Agricultural Machinery 135.5 0.43
23 Timber Products 107.12 0.37
24 Medical and Surgical Appliances 101.68 0.35
25 Soap, Cosmetics and Toilet Preparations 88.74 0.31
26 Ceramics 89.7 0.27
27 Earth-moving Machinery 73.91 0.26
28 Fertilizers 78.22 0.26
29 Fermentation Industries 76.52 0.25
30 Leather, Leather Goods and Pickers 51.84 0.15
31 Glue and Gelatine 36.04 0.12
32 Vegetable Oils and Vanaspati 35.14 0.11
33 Prime movers other than Electrical 30.61 0.08
34 Industrial Instruments 21.7 0.06
35 Sugar 17.27 0.06
36 Scientific Instruments 14.85 0.05
37 Photographic Raw Film and Paper 15.25 0.05
38 Dye-stuffs 16.01 0.05
39 Boilers and Steam Generating Plants 5.01 0.01
40 Mathematical, Surveying and Drawing 0 0
41 Miscellaneous Industries 4,166.86 13.79
Total 30,452.58 100
42 Advance of Inflows (from 1999 to 2004) 2,178.72

(Economy Watch, 2010)

Chart 4: Top 23 motor vehicle manufacturing companies by volume 2009

  1. Toyota
  2. GM
  3. Volkswagen
  4. Ford
  5. Hyundai Kia
  6. PSA
  7. Honda
  8. Nissan
  9. Fiat
  10. Suzuki
  11. Renault
  12. Daimler AG
  13. China Automobile
  14. BMW
  15. Mazda
  16. Chrysler
  17. Mitsubishi
  18. Beijing Automotive
  19. Tata
  20. Dongfeng Motor
  21. FAW
  22. Chery
  23. Fuji
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