Japan has the third largest economy in the world, with a $4.9 trillion GDP and a population of 128 million. They trail behind only the U.S. ($19.5 trillion, 325 million) and China ($12.2 trillion, 1.42 billion). It would appear that Japan is a winner in the global competition, right?

Japan lags behind its global peers

But Japan’s productivity actually ranks the lowest (or close to it) among 35 developed countries, according to both the World Bank and Organization of Economic Cooperation and Development. It’s also positioned at the 89th friendliest to entrepreneurs out of 190 countries, between Niger and Senegal.

Although there is no reliable measurement to quantify the level of globalization, the KOF Index of Globalization ranks Japan at 48th. By contrast, the US is ranked 34 and Germany is ranked 27. So it appears Japan is actually lagging behind its powerful global peers. Although Japanese governmental policies are not conducive to assisting industrial growth any more, Japan Inc. cannot afford to sit tight. The power of inertia is strong; human beings don’t change until something really bad happens.

Look at the demise of Japanese consumer electronics and semiconductor industries. The world market was dominated by Sony, Panasonic, Toshiba, Fujitsu, Hitachi, Sharp and other Japanese names in 1997. In the last two decades, all of them have faced a gradual yet undeniable loss to Korean, Chinese, Taiwanese and American competitors. Although there are a number of culprits (let’s start with CEOs), are there any prominent known unknowns Japanese companies should confront, so as not to fall into the same trap? I believe one of them is globalization.

Japanese companies are vying to survive

Despite the word’s amorphous nature, many successful companies can benefit and have benefited from globalization. Specifically, companies have benefited by recruiting a global workforce, expanding customer bases and distribution channels geographically, procuring cheaper supplies and services from abroad with little to no tariffs, financing debt and equity from foreign investors, and taking advantage of preferential tax and other regulatory schemes of different jurisdictions.

Companies like these include not only American and European companies such as Apple, Microsoft, Starbucks and Volkswagen, but also many emerging companies such as Alibaba, Anbang Insurance and Tata Group. Against this backdrop, Japanese companies are trying to globalize on three major fronts: strategy, organization and management.

Strategically, many Japanese companies aggressively pursue cross-border mergers and acquisitions (M&As), which is one quick path to becoming more global. Pushed by Japan’s shrinking market and abundant free cash flow, Japan Inc.’s purchases of foreign companies hit record highs both in 2015 and 2016.

Organizational changes, on the other hand, take many different forms—from making English the official language to appointing independent board directors; from adopting a universal IT platform to encouraging venture projects within a company.

Management is about people, which is the most important yet most difficult asset to change. Yet nowadays news of first-ever female or foreign executives at major Japanese companies and banks make less and less headlines. Japanese salarymen no longer take lifetime employment for granted; more global professionals are hired in Japan, which hit a record high in 2016, almost a 20% increase from the previous year.