Japanese Business Structure - Case Study Example

Running Head: JAPANESE BUSINESS STRUCTURE Japanese Business Structure of the of the Japanese Business Structure Japan is sometimes referred to as a coordinated market economy, in contrast to liberal market economies such as the United States and Britain. Japan fosters more long-term cooperative associations between firms and labour, between firms and banks, and between different firms. These long-term relationships take the form of familiar institutions such as the lifetime employment system, the main bank system, and keiretsu networks. In addition, the government and industry associations play a critical role in facilitating this private sector coordination. This distinctive combination of government-industry cooperation and private sector coordination forms the core of the Japanese model. Generally, and in the past, Globalisation has aided Japan in achieving its rapid economic growth, and poses as the greatest support in the return of the Japanese economy’s strength. Real economic growth peeked in the 1960’s, with an average of 10%, 5% in the 70’s and 4% in the 80’s. Despite this, Globalisation has also negatively affected Japan’s economic growth. Growth slowed in the 1990’s due to the collapse of the “bubble economy” and consequences arising from overinvestment and contractionary domestic policies proposed to wing speculative excesses for the stock and real estate markets. Japan has suffered deflation of 0.3%, rising unemployment of 5.5%, reduced GDP (0.4% in 2001 and 0.2% during 2002) and as of 17/11/08, Japan was officially declared in a recession, with a fall of 0.4% on an annualised basis, marking the first time the economy has contracted for two successive quarters in 7 years (Japan Ministry of Economy). Hence, the Japanese economy has seesawed between stagnancy and anemic growth in the past 10 years, and we are yet to see the full effects of the World Economic Slowdown, catalysed by Globalisation, on Japan. However, the Japanese government recently pledged $107billion of spending measures into the ailing economy to stimulate it. The impact of globalisation on Japan’s trade flows and consumers have had a positive effect. The Japanese Government has been promoting trade for decades, as it saw the opportunity for economic growth and development. It provides detailed surveys, services, and policies to help businesses trade and thereby promotes it. Japan has relied on world trade and international business and has its international competitiveness to thank for its success as an economy. In addition, Globalisation has seen a shift from agricultural production in post WW2 to manufactured good. Over a long period, the Japanese governments role in the business system has been to enact formal rules which completely determine the activities of corporations in the economic field. These formal rules have enabled the Japanese government to intervene in business since the beginning of Japanese industrialization. Japan as a case in point, provides a good example of such government involvement. The development of the Japanese business system has experienced a long history of government influence. The Japanese government first began to interfere with the business system in 1868 when Japans modernization under the leadership of the Meiji government started. The Meiji government took a strong leadership role in consolidating the working efforts of population, which were otherwise scattered, in order to serve the national purpose (Sheridan, 2008, p.13). During this period, the governments themselves transplanted and promoted major modern industries, while at the same time the private sector grew with the emergence of the zaibatsu (Yuzawa, 2004, p. 2). Japanese corporations led the industrialization process, concentrating on the export of goods such as textiles and supported by abundant cheap labour (Yuzawa, 2004). After the industrial revolution ended in the late 1900s, there were considerable structural changes in the Japanese economy because the government rules changed. For example, the Japanese Ministry of International Trade and Industry (MITI) played a key role in reshaping Japanese business system. Chiu and Liu point out that even today within the state bureaucracy, a pilot agency (such as MITI in Japan) plays a key role in strategic policy formulation and implementation (2008, p. 145). During the 20th century, the number of people employed in factories increased and labour moved from the primary to the tertiary sectors. Since 1919, manufacturing industries have shifted from textile firms towards heavy industries, especially towards consumer supply industries. The top-ranking companies in 1896 were dominated by textile firms, especially spinning firms. By 1919, heavy industries had become increasingly important in the national economy, and companies in this sector were highly ranked. By 1940, the industrial structure of the Japanese economy was biased much more towards the heavy industries, particularly those in the defence sector. By 1972, the Japanese economy was changing to an industrial structure based on modern technologies, supported by high-tech industries such as cars and electronics (Yuzawa, 2004, p. 7-8). The changing structure of Japanese manufacturing was a very important turning point for the Japanese economy and these changes amply demonstrate the role of the Japanese government on the business system. If we turn to Japan, South Korea, and Taiwan, among the most dramatic and equitable cases in the history of capitalist development, industrialization in each case has been accompanied by aggressive government intervention (Chiu & Liu, 2008, p. 143). In addition, people cannot ignore another factor controlling business systems in a country that is the culture of a country. As a set of informal rules, cultural rules often play a major part in economic activities. Japan is one of the worlds most powerful economies. In the business system of Japan, cultural rules play an important role in Japanese economic activities. In Japan, social harmony has a prior claim in every circumstance. Japanese think that personnel activities should respect for fixed hierarchical relationships both during and after work. They usually do things according to the age, social position, political position, or rank at work in any situation. Order and agreement take primacy in Japanese organizations, the person’s behaviour, not only inside the organization except even outside it, is particular in enormous detail. A high level of conventionality to particular patterns of performance is usual, in all from punctuality to replacing greetings to placing and speaking sequence. Even after work hours, employees are expected to conform to standards of public conduct consistent with their membership and position in the organization. (Durlabhji & Marks, 2003, p. 5) Another example of informal rule is etiquette. Etiquette is very important in Japanese business because Japanese are formal, conservative, and meticulous in their approach. The use of introduction cards, bowing and posture are essential parts of business etiquette. The importance of detailed rules governing a wide range of behaviour persists in modern Japan, the business world included. Not long ago a Japanese newspaper estimated corporate Japan spends $700 million a year on etiquette training (Rowland, 2003, p. 11). Under informal rules in Japan, it is very difficult for an overseas company to build business relationships with Japanese corporations. However, the relationship will be very solid as soon as the relationship is built up. Business associations are differentiated by a well-structured hierarchy and a sturdy emphasis on development individual contacts. Relationships in Japan are built up over a long period of time and often have common roots such as birthplace, school, or university. In-group social activities add further cement to the bonds. It is not surprising that looking in from outside, many overseas companies fear that the Japanese business world will be hard to break into. (Burns, 2007, p. 39-40) The Japanese Government’s role and policies have changed to a high degree due to the impact of Globalisation and in order to reap the benefits. Such strategies adopted to promote economic growth and development includes the Japanese Government deciding to pursue Free Trade Agreements with countries such as China, RSK, and Taiwan. In January 2002, the Japanese Government signed a Bilateral Agreement with Singapore removing 94% of tariffs on Singapore’s exports to Japan. However this has been met with limited success, as there has been a decrease in the amount of goods traded from ¥903 billion in 2001 to ¥861billion during 2003 in exports (Japan Economic Foundation). Also with the increase in technology, the Japanese government has been made to increase its standings on intellectual property and patents. They created the Trilateral Web Site with the US and Europe, which helps facilitate international patents. The deregulation of financial markets catalysed by Globalisation worldwide has impacted on the amount of trade within the Japanese economy beneficially allowing easier access to foreign currencies, facilitating a higher flow of goods between nation, by relaxing laws that severely prevented foreign buying of currency, and floating the yen. These drivers have helped boost Japan’s trade and recovery from its recession. Technology has allowed finances to be traded and communication to be near to instantaneous. This has increased dramatically the amount of FDI into Japan largely thanks to the numerous strategies the Japanese government has taken to promote economic growth and hence development. Finance and Foreign Direct Investment (FDI) have increased as a direct result of globalisation doubling from $63 billion in 2001 to $144 billion in 2007 (Japan Ministry of Economy). Besides price and product, Japanese corporations also pay attention to the backgrounds of an overseas company with which they would like to co-operate in the future. Japanese corporations always send representatives to visit the counterpart before they formally build up business relationships with each other. Kupfer (1988) points out that if you have a joint venture with a Japanese company, they will send 24 people . . . to learn everything you know and youll send one person to tell them everything you know (as cited in Burns, p. 39). So for overseas companies, it is always a good idea to build stronger relationships on the basis of an existing relationship when they want to form ties with Japanese companies. Furthermore, Japanese corporations still require quality communication after solid and long lasting ties are established. So it is also important to keep a steady stream of faxes, e-mails, memos, agendas, etc, going (Burns, 2007, 41). The impact of globalisation upon business and industries in Japan has been mixed redefining business operations, its structure and strategies. In particular, trade liberalisation has allowed businesses to enter and compete, forcing businesses to become more efficient. The introduction of new technologies has also meant that businesses must adopt these technologies to remain internationally competitive. Japan has for the past decade been setting the standard for world’s best practice in business strategies and operations. Japan’s trade has been boosted because of globalisation, which has helped Japan retain its dominance as the second largest economy in the world. Finance and FDI have increased due to globalisation, and whilst businesses may have to change their strategies and implement technology in the long run this will benefit the Japanese economy. Consumers have gained wider and cheaper access to goods and services, and the Government has become more aware of the implications of their policies. With strong economic policies and reform, Japan has a bright future in the global economy. The Japanese governments function in determining Japanese corporations is an essential symbol of formal rules in the Japanese business structure, while concord, etiquette and associations in the Japanese business structure demonstrate that socio-cultural control is also an imperative factor. References Burns, R. (2007). Doing business in Asia: A cultural perspective. London: Longman Group, pp 38-42. Chiu, S. W. K., & Liu, T. L. (2008). The role of the state in economic development. In G., Thompson. (Ed.). Economic dynamism in the Asia-Pacific. (pp. 137 - 161). London:         Routledge.                   Durlabhji, S., & Marks, N. E. (Eds.). (2003). Japanese business: Cultural perspectives.                   New York: State University Press. Japan Economic Foundation (JEF) http://www.jef.or.jp/en/what/index.html Japan Ministry of Economy, Trade and Industry (METI) http://www.meti.go.jp/english/index.html Rowland, D. (2003). Japanese business etiquette: a practical guide to success with the                   Japanese. Warner Books, pp11. Sheridan, K. (Ed.). (2008). Emerging economic systems in Asia. Australia: Allen and         Unwin, pp 13. Yuzawa, T. (Ed.). (2004). Japanese business success: The evolution of a strategy. New         York: Routledge , pp 1-10 Read More