For many decades, Japan’s high-technology companies, nourished by innovative products and prominent consumer electronics brands, were the envy of the global sector. But that is rapidly changing. More recently, these companies have been losing ground around the world, undermined by a reluctance to make the aggressive moves and hard choices necessary to compete in new markets and against emboldened attackers.

Recent McKinsey research shows that Japanese high-tech companies lost a decade between 2000 and 2010 (Exhibit 1) and on current trajectory could see their global market share drop by 20 percent from 2008 to 2013. That represents a cumulative loss of more than $30 billion in potential revenue. Japanese companies have a global presence and reputation, but most remain surprisingly dependent on Japan’s domestic market for revenue, while struggling to capture a reasonable share of dynamically growing emerging markets. Our analysis shows that Japanese high-tech companies, as a group, still generate more than 50 percent of their sales in the home market, growing by a mere 1 percent annually, compared with growth of 5 to 10 percent in the developing world and 2 to 3 percent in other developed markets...