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The ability of small businesses to make and adjust to the paradigm shift needed to benefit from the Japanese production theory has been questioned in the literature. Zangwill (1992) questioned the limits of the Japanese Production Theory (JPT) and in a subsequent paper (Zangwill, 1994) held on to his argument about the limits of the Japanese Production Theory. In this paper, the Japanese Production Theory is first discussed, followed by a discussion of the consistency between the traditional EOQ theory and the Japanese production theory, critique of the Zangwill’s argument, and issues related to the relevance of the Japanese production theory to small businesses.

To become competitive with the industrialized world, a country may follow the following strategy: (1) stabilization of the exchange rate and the economy (extension of the state control of industries for a short period may be the next best alternative to a functioning free economy). A private market could then be phased in. (2) The privatization should be started from bottom up, e.g., start with selling small parts of various industries to develop a cadre of entrepreneurs and then sell bigger units or the whole firm. (3) Agencies should be developed to help/direct the transfer of technology from abroad.