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Issue of July 2005 

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Develop contingency plans, says Gartner

Anticipating unstable relations between China and Japan, Gartner has issued a new report encouraging enterprises to develop contingency plans for reducing dependency on products and services from northeast Asia.

The report analyses three possible scenarios with different degrees of severity: The first is when business returns to almost as usual; the second is for continued uncertainty and volatility; and the last when there is a continued escalation of tension.

By leveraging the insight provided by these scenarios, companies based in China, Japan and the rest of the world can examine possible outcomes and prepare for action in case one or more elements of a scenario become reality.

In the first scenario, Gartner believes the impact will be restricted primarily to Chinese and Japanese companies. Chinese consumers will start to favour alternative brands, whether home grown or from Korea and Taiwan, while nascent efforts by Chinese technology companies to enter the Japanese consumer market will meet even more resistance.

Gartner’s medium severity scenario foresees continued uncertainty and volatility in relations between China and Japan. This will have a broad business impact with bias against each other’s products becoming more widespread and pronounced. Moreover, Japanese investment in technology manufacturing will gradually decline because of difficulties in hiring and retaining staff. This will create an opportunity for other overseas investors. Economic growth in both China and Japan would suffer.

If tensions between the two countries were to escalate, a global recession could occur. This would certainly kill off initiatives to develop joint standards in areas such as fourth generation mobile networks, RFID, Open Source software and next-generation Internet.

Since there is a large disconnect between the business and political relations of China and Japan, commerce and trade in both countries and in many other parts of the world could be negatively affected. All IT-using and IT solution-providing enterprises globally need to reassess their business models, investments, trading partners and strategies for both Japan and China. This reassessment should be based on an understanding of the causes, current status and potential trigger points in the relationship.

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Indian Express - Business Publications Division

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