Japanese Business System - Financial, Human and Social Capital - Case Study Example

Name Tutor Course Institution Date Japanese Business System: Financial; Human and Social Capital Introduction The Japanese business system has endeavoured to remain greatly coordinated and employee-centric regardless of the minor changes in the institutions in the recent past. The Japanese business system can be best understood by looking at culture, the institutional background of organizations as well as the rules of management within and among firms. The main aim of Institutions in Japan is to serve the society as well as their employees. The Confucian values that were introduced in Japan during the Tokugawa period serve to justify business activities in the society. Universal male employment in Japan is seen as the recipe for achieving economic growth and development1. This paper will discuss in details the institutional context of organizations in Japan by describing the guidelines governing the capacity of players to draw on financial, human and social capital. For the Financial capital, this paper will look into how Japanese firms obtain their finance and on what terms. For the human capital, it will concentrate on the handiness of skills and labour unions. Lastly, this paper will examine the social capital of Japanese business system by discussing interpersonal and institutional trust. Financial Capital To analyse the institutional system of Japanese financial capital, the critical features that need to be considered include sources of finance, terms of lending and lending decisions. The main feature of Japanese financial structure was its reliance on indirect funding whereby organizations acquired much of their finance from banks instead of depending on capital markets. The banks played a crucial role as intermediaries for the implementation of industrial policy. Although the bad loans crisis of the 1990s led to weakening of banks, about two-third of the companies in Japan still depend on banks loans2. Literature shows that the claim of the end of indirect funding in Japan is hyperbolic. The loan crisis only led to temporary decline in indirect finance as it caused banks to have inadequate capital to lend to new firms, resulting in a credit crunch. Hence, the recession can only be said to have reduced the ability and need to obtain loans for new investments. The reliance on bank loans regained lost grounds immediately the banks in Japan disposed of their troubled loans. The financial system in Japan is still bank-led regardless of the weakening of the indirect funding in the 1990s3. Lending decisions entails a mixt of market criteria including credit worthiness, government instructions and strength of the prevailing business relationship. The exact combination has changed substantially with time. The government role in determining the lending decisions of the banks has considerably declined while that of market criteria has significantly improved4. In Japan, most of the loans acquired by companies are often long term. Contrary to Western banks, banks in Japan usually do not evoke loans from companies in trouble rather they give new loans to aid them endure such difficult moments. This serves to prevent bankruptcies so as to maintain employment and hence Japanese banks can be said to have a sense of collective responsibility. Human Capital The human capital involves three distinct areas: education; the labour market and unions. The education system in Japan has gone through several structural changes since 1990. These reforms have led to making the education system more flexible as well as decentralized. Specifically, they have contributed to introduction of secondary education schools. Enrolment rates at the college have continued to increase with time. Decentralization has resulted in autonomous individual schools. The education system in Japan remains very competitive globally. Japanese have continued to lead internationally in mathematics and science performance5. The education system in Japan has some shortcomings despite its good results. The education system bases its values on Confucianism that lay emphasis on memorizing facts rather than on critical and creative thinking. Moreover, education seems to be the main factor determining the prospects of one’s career and hence many people have deemed it crucial to take their children to best schools in the country. In schools, students are just taught how to pass exams and hence the spend most of the time cramming learning materials rather than understanding them6. The education system in japan is mainly weak in the areas of college learning and vocational training. In Japan, the major requirement to gain entry at the tertiary level is just to pass entry examination and hence students adequately prepare for these tests. This qualification directly qualifies one to graduate at the college level and this gain employment due to the good reputation of the school. As a result, students tend to be lowly motivated to learn at the university level of their education. Vocational training mostly takes place in the organization. Research shows that on-the-job as well as off-the-job training is largely organized by the organization. Many employees consider skill formation an organizational responsibility and it appears that training will continue to remain a firm responsibility7. The major vehicle of Japanese labour organization has been labour unions, primarily at the organizational level. This has made it rather difficult to access the strength of such organizations unions as their interests tend to be linked to those of the organization. Thus, the management is can be inclined to perceive labour unions as associates in running the business. This may explain the prevalence of strikes in Japan as employees seek to support the wage bargaining process. Although there have been decline in labour unions over the recent years, industrial relations remain to be amicable regardless of the reform during the 1990s8. Employment remains to be long-term despite predictions of the decline of lifetime employment. Many male employees are hired for long-term although just a small number of employees, especially at big organizations, have the casual promise of long-term employment. In the Japanese business system, women tend to be employed for the short-term. Most women tend to stop working after getting married and then return to the work as soon as the children have joined schools on a part-time basis9. In the previous three decades, the number of employees on temporary contracts has continued to increase. This is an indicator of an emergence of a complementary employment system rather than of the collapse of the present employment system. The main impetus behind this emergence include a rise in the women workforce due to the recently created forms of employment, for instance, home-care; recalling retired employees back to the organization and opportunity given to students to work when still studying. Employment protection rules have improved somewhat little and the government does not display any indicators of participating in labour market policies10. Social capital The social capital in Japan is characterized by high levels of trust in society, between individuals as well as within the institutional fabric. The main source of Japanese social capital, at the individual and institutional level, lies in the presence and strength of unpaid nongovernment associations. These associations help in bringing together people and organizations across social borders and cleavages, hence enable building of collaboration and trust among them11. The concentration of business associations in Japan has remained to be very high. This generally shows that the potential for developing cooperation and trust among organisations in japan are still very high. Interpersonal and institutional trust has continued to grow over the recent years. Most people in Japan express interpersonal trust among themselves as well as view institutions as being fair in their dealings. Institutions view talent and effort as the foundation of success in society. Moreover, the majority of people in Japan have confidence in the Japanese legal system. Studies show improvement in the perception of corruption in the society. As a result, written employment agreements are rare in Japan. Typically, the punishment for breach of trust entails social sanctions including isolation from the group12. Strong trust allow for excellent social interaction. The density of business associations in Japan is very high than in German and even in United States. As a result, firms in Japan routinely share information, coordinate and collaborate with several actors including organizational and governmental agencies. Business groups forms the main type of network. A large number of organizations, around 30-40, from diverse industries tend to come together and maintain close relations with each other in areas of information sharing, cross-shareholding, intragroup purchasing and interlocking directorates. Most manufacturing firms in Japan tend to maintain strong relations with distributors and suppliers, referred to as Keiretsu13. The automotive industry has viewed these networks as critical to maintaining their competitive position. Conclusion The Japanese business system is characterised by a highly advanced industrial economy founded on unique culture and exceptional combination of features. The institutions in japan form a critical structure in the business system of the country. Deeply rooted in the Japanese culture, the financial, the government, the education, labour as well as social capital institutions enable the Japanese business system to function in an exceptional and dynamic way. The Japanese business system has the capacity to deal with very complex industry given its reliable sources of finance, its employees’ high skills level and its high level of trust. References Chen, Min (2004), Asian Management Systems, London: Thomson Learning Blomström, Gangnes & La Croix eds. (2001). Japan’s New Economy: continuity and change in the twenty-first century. Oxford University Press. Flath, David (2005). The Japanese Economy. Oxford University Press. Harukiyo Hasegawa and Carlos Noronha (2014), “Asian Business and Management: Theory, Practice and Perspectives” Miwa, Yoshiro & Mark. J. Ramseyer (2006). The fable of the keiretsu: urban legends of the Japanese economy. University of Chicago Press. Nakamura, Masao ed. (2004). Changing Japanese business, economy and society: globalization of post-bubble Japan. Palgrave Macmillan. Michael A. Witt. 2006. “Changing Japanese Capitalism: Societal Coordination and Institutional Adjustment. ” Cambridge, UK: Cambridge University Press. http://www.cambridge.org/uk/catalogue/catalogue.asp?isbn=9780521868600 Michael A. Witt, & Gordon Redding (Eds.) (2014). “The Oxford Handbook of Asian Business Systems. ” Oxford, UK: Oxford University Press http://ukcatalogue.oup.com/product/9780199654925.do#.UaBNsZWv0k8 Rebick, Marcus (2005). The Japanese Employment System: adapting to a new economic environment. Oxford University Press Tegan Bensley. 2010. “Nissan: The Japanese Business System in a Globalised World” https://eview.anu.edu.au/cross-sections/vol6/pdf/ch04.pdf Read More