What Is So Distinctive about Japanese Business Structure - Case Study Example

What is so distinctive about Japanese business structure? In what ways has this structure begun to change in recent years? Japan’s progress in economic development is predominantly the outcome of private entrepreneurship. However, without the contribution of the government it would not have been made possible. The role of the government and its relations with the corporate sector have helped establish new industries, control the effects of economic depression, stabilize the living standards of its citizens and develop a strong economic infrastructure (Kaplan, 2001). The influence has been so much that the many foreign observers have termed the country as “Japan Inc.” to highlight the association between business and government interests and even today the government agencies continue to influence the economy through a proper mixture of policies. The bond between the Japanese government and the private entrepreneurship has developed on Confucianism. Both the ends have been loyal to each other and hence have developed a strong leadership rooted in authority as businesses look towards it for guidance and control (Kaplan, 2001). Working on this ideology, both ends have developed an attitude to view the entire nation as one family. The government has been allowed to freely influence the businesses and in return the business have worked extra hard to not just to make profits but betterment towards a better nation. There has been a national consensus to which all Japanese admit to sacrifice themselves for the national objective of Japan being a super economic power. Forthwith, the relationship between the government and the businesses has been seen as collaborators instead of distrustful adversaries (Kaplan, 2001). The strong helping bond of the government-business relationship has been developed through three national organizations in Japan: The Federation of economic Organizations (keidanren)- established in 1946, the Japan Committee for economic Development (Keizai Doyu Kai)- established in 1946 and the Japan Federation of Employers’ association (Nikkeiren)- established in 1948. The federation of economic organizations is considered to be most important in its role. it has seven hundred and fifty of the largest corporations and one hundred and ten manufacturers’ associations to serve as a central hub for all enterprises while working closely with the potent Ministry of International trade and Industry (MITI). However, as many major corporations have accumulated large revenues in profits the consistency of reliance on the MITI can be questioned (Kaplan, 2001). Inter-firm relations (*Zaibatsu will be done by me* and Keiretsu - Horizontal and Vertical) The reliance on the government may have declined for the large corporations in Japan but the bind between forms has grown to be stronger over the period of time. After the late 1940’s the Keiretsu emerged as each centred around a bank. The banks lent money to al member companies and bonded their interest further by holding equity positions in the corporations. Each central bank developed the role of monitoring the companies attached to it and providing emergency resources if there was a bail-out needed. One of the main reason of doing so was to keep the positive one nation approach enforced and reduce significantly any chances of a hostile takeover (Holzhausen, 2001). Moreover, as the banks could not be challenged, this lead to a strong integration within a company and between different firms as well. Two types of Keiretsu hence emerged from this development. One, all factors of production were linked together for a typical product within a firm to make a strong vertical Keiretsu. Secondly, since corporations were centred around banks or trading companies this developed a horizontal Keiretsu in Japan. The idea was developed to sustain a system in which the organizations could be centralized to achieve overall efficiency and self-sustain the complex roles in individual entities (Debroux, 2003). The Keiretsu has suffered over the period of time and especially the Japanese recession of the 1990s weakened its functionality. Several controlling banks suffered during this recession due to bad loans and were left with no option of either to merge or be shut down. This lead to make banks and corporations do what the keiretsu had been developed to counter- mergers and takeovers. For example, the Sumitomo Bank and Mitsui Bank turned into Sumitomo Mitsui Banking Corporation in 2001 (Debroux, 2003). Moreover, many companies not belonging to the keiretsu system, like Sony, started to perform better than their similar companies within the system. This gave rise to the idea that the old keiretsu system was now not a successful business model and over time many keiretsu alliances were lost. Today, the Japanese system is not as centralized as it was. Corporate acquisitions have sprung up around the economy as they cannot be provided emergency resources that easily from banks and the heads of the company are now more influenced by the independent shareholders. As the reforms took place in the Japanese economy, the exposure of allied presence in Japan took its effect on the development of controlling production methods as well. One of the many methods that have become popular even globally is kaizen- Japanese for “change for the better” (Holzhausen, 2001). This method has been more strategically used by the Toyota Production system, where every line worker is trained to halt their production in case of any aberration. Furthermore, they are expected to make suggestions for improvements as a group with their supervisor to correct the error. Kaizen is a continual search for improvements as the systems develop and has proved to set the high standards of Japanese innovation while eliminating waste. To have this process more humanized and to set the approach for the collective betterment, people at levels within an organization can participate in a kaizen form the CEO down to the shareholders. The results can be seen a cultural development as continuous improvements and benchmarks eventually make a collective improvement overall (Holzhausen, 2001). Another technique also adopted into manufacturing process was to keep just enough materials in stock and inventory which would be directly consumed or sold right away. This technique documented and known as “Just in Time’ was once again made into standard procedure at Toyota and followed by many other companies. One of the main reasons was that the Japanese industries could not afford huge warehouses and had to bear huge costs to acquire these stock warehouses- decreasing the return on investment. Initially the results of this process was a disaster in operations but the companies adapting these procedures came around with a lot of extra financial resources as they were saving on inventory costs (Holzhausen, 2001). Since assemblers did not have a choice in chosing parts and were made to use what was available in inventory, it improved total quality overall. Both these factors helped in establishing better total quality management tools in the establishment of superior products in Japan. Though in the development stages the management had been reluctant to pursue the new processes- it has been widely adapted not only in Japan today, but all over the world. The Japanese corporate culture has been the most effective in the positive growth of the businesses across Japan. The Japanese due to the strong ideological beliefs of Confucianism are not readily seen to switch jobs. A concept of life long employment within a firm to an employee is generally prevalent in the setup of the society. However, this employment trend is not just based upon Confucianism. The training and development program for employees has been dynamic and adjusting for employees and opportunities are tailored for employees. Japanese corporations ensure to maintain loyalty form their employees along with developing their role as being the company and a sense of owning them. This along with their relations among employer and employees had built a system where normally a person would retire from his/her first job (Debroux, 2003). Works Cited Debroux, P. 2003. Human Resource Management in Japan: Changes and Uncertainties : A New Human Resource Management System Fitting to the Global Economy. Ashgate Publishing. Holzhausen, A. 2001. Can Japan Globalize?: Studies on Japans Changing Political Economy and the Process of Globalization in Honour of Sung-Jo Park. Physica-Verlag Heidelberg. Kaplan, E. 2001. Japan: The Government-Business Relationship. Books for Business. Word Count: 1,367 Read More