Japanese Culture and Guanxi as Sources of Competitive Advantage - Case Study Example

Japanese Culture and Guanxi as Sources of Competitive Advantage Name Institution Course Date Question 2 Japanese Culture and Guanxi as Sources of Competitive advantage A country’s competitive advantage may be derived from factors such as natural resources, infrastructure, human capital development and events of history among others (Miwar and Nihon, 2002). However, one main source of competitive advantage for the Japanese is its cultural traits. The Japan’s concepts of Wa which means peace and harmony is considered a characteristic that have assisted many Japanese companies attain competitive advantage. Wa is a primary concept that makes up the Japan’s moral system. The spirit of wa has been pursued by many citizens in the country (Miwar and Nihon, 2002). Japanese culture is generally different from the western culture. The country is considered a small island with minimal technological fibre that has still emerged an industrial and business giant due to its culture. In addition, the concept of Guanxi which is practiced by many Asian countries is considered by many literatures as a source of competitive advantage (Gong-min and Zhao, 2008). Guanxi is a notion that describes the interpersonal relationships with both the social and cultural paradigm that mirrors the Confucian tradition. In business, Guanxi can be termed as the process of solving problems and acquiring resources via personal relationships. Wang (2007) believes that Guanxi network is required in order for any business to be successful in China. This paper will highlight the role of Japanese culture traits in creating competitive advantage for Japanese companies.in addition, the essay will validate the extent to which Guanxi is considered a source of competitive advantage. Japanese culture and its reliance to the concept of Wa has brought about business success in the country (Schallar, 2004). The concept of peace and harmony came about during the Japan’s agricultural past. The collaboration and cooperation between farmers was necessary so as to maintain the irrigation systems. Since the country had few natural resources and minimal land to live and farm, citizens were obligated to work together in order to survive (Schallar, 2004). The same spirit has been carried on and is being practised even in the business world. The concept of Wa is considered a distinct feature that has led to the accomplishment of many Japanese companies (Schallar, 2004). Many literatures and scholars believe that the impacts of the concept of Wa in business cannot be underestimated. The traits such as harmony, friendly and trust that is linked to Wa have led to companies’ success as it has offered a unique style of decision making (Miwar and Nihon, 2002). Hummels (2007) has indicated that Japanese culture has influenced the workability of team processes. The theoretical decision making method provides a chance of empowering people involved in teamwork. The communal consciousness practice in the country accentuates group decision making in companies and is better compared to individual decision making practice in other countries (Whiting, 2004). The emphasis in group decision making has enhanced management performance in companies as it has led to the achievement of high quality production and customer satisfaction (Schallar, 2004). Japanese companies have implemented strategies such as lifetime employment, consensual decision making as well as participatory management. These strategies have been enabled by their cultural traits and the concept of Wa (CNN Money, 2011). The business culture of Japanese people emphasizes on teamwork and collectivism which is different from western countries that stresses on individualism (Nayab, 2011). The influence of Wa culture has led to the popularity of teamwork which has brought about best management practices in companies (Nayab, 2011). Japanese companies ensure that there is teamwork in their business based on the concept of group harmony which is more important than value for individual needs (Nayab, 2011). The management in most Japanese companies require a collaborative approach to decision making, solving problems or in all the facet of their business. The Japanese companies apply the philosophy of Wa with employees allying their opinions, ideas and personal wants to those of the management and employer. This concept has ensured individual-organisational fit and homogenous working team (Nayab, 2011). Companies are faced with very strong competition which tends to create many challenges (Frey and Osterloh, 2002). There is a need for continuous enhancement of company’s competitive advantage that will enable the business to survive. In order for this to happen, every organisation must exploit the full potential of the employees. Japanese companies do this by creating a harmonious working environment where every employee has the freedom to express their opinions and ideas. Employees in these companies work as a team in accomplishing all the required tasks (Frey and Osterloh, 2002). Decisions are made by the management but the employees are included in the decision making process. This fosters commitment and engagement and exploits the full potential of the employees. This is why Japanese companies are said to be growing at a very fast rate. The culture of the country has shaped people and more importantly has shaped how companies operate (Frey and Osterloh, 2002). Therefore, the concept of Wa as well as Japanese culture traits have acted as sources of competitive advantage. In addition, Japanese believe that the concept of organisation involves a collective membership rather than property right (Nayab, 2011). Thus, employees and managers or organisational leaders are regarded as partners with similar interest in organisational success. The structure of companies in Japan is constructed from a culture of peace, harmony, teamwork and collectivism. Instead of being regarded as single corporate entities, organisations in Japan are more of a conglomerate (Nayab, 2011). Organizations believe that the success of their business is founded upon the ability of every employee and manager to mutually work together for beneficial goal (Nayab, 2011). Generally, due to the concept of wa and culture traits of people, companies in Japan tend to value employees more compared to companies in the western culture. Companies ensure that the needs of employees are met and all the factors that motivate them are implemented. In doing this, employees tend to perform well in their tasks and this creates competitive advantage (Nayab, 2011). Conventionally, natural, human and physical capitals lead to sustainable competitive advantage. However, many research studies have concluded that one essential aspect of competitive advantage is social capital (Acquaah, 2007). Social capital involves network of connections and relationships. According to social capital theory, network of relationships offer a lot of value to parties by enabling them tap into resources available in the network for their own benefits. Social capital facilitates resource sharing and enhances innovation (Robert et al., 2010). The concept of social capital in China constitutes a phenomenon referred to as Guanxi. According to Zhang and Fung (2006), Guanxi is just like social capital as it entails the concept of social networks and networking. Guanxi is a special relationship between two parties and is rooted into the Chinese culture (Patrick et al., 2007). Guanxi has become a sensational building block of Chinese society. In the business context, Guanxi entails looking for solutions through the use of connections and relationships (Knight and Yueh, 2008). For instance, an organisation leader can use Guanxi through the use of personal, social as well as economic relationships for the benefit of the organisation. In Chinese society, managers often cultivate two types of relationships (Knight and Yueh, 2008). The first relationship is created with the top executives of other companies including competitors and suppliers. These relationships are meant to reduce the transaction costs. Another type of tie or relationship is created by executive in China with the government officials (Knight and Yueh, 2008). China’s economy is growing at a faster rate without political openness. Companies are faced with an environment whereby the government have a strong influence on the economy. Therefore, many companies in the country are aiming to maintain a greater tie with the government officials (Knight and Yueh, 2008). Many companies in China use their connections with the government in order to get access to the scarce resources and get special treatment when it comes to laws and regulations. According to Zhang and Fung (2006), Guanxi can assist an organisation get access to information such as market trends and government policies that will enable it succeed. Guanxi network in China has been linked to improved efficiency through the reduction of transaction costs and other operation costs. One major success factor for companies operating in China is Guanxi network. Gu, Hung and Tse (2008) believes that Guanxi acts as a source of sustainable competitive advantage given that it brings about many benefits to the organisation. However, Knight and Yueh (2008) believe that Guanxi cannot be the source of competitive advantage as it acts as a personal asset. Beside, maintaining Guanxi network is very costly and time consuming and can result to a drift from important issues (Knight and Yueh, 2008). The four major criteria for creating sustainable competitive advantage include valuable, rare, costly to imitate and non-substitutable (Christos, 2009). It is very important to assess the value of strategic capabilities or resources. It is essential to emphasize that if a firm need to create sustainable competitive advantage it should possess resources that can add value to the company (Christos, 2009). Resources should also be rare in order to create competitive advantage. In addition, sustainable competitive advantage may be grounded on rare competencies and resources. Inimitable strategic capabilities and resources also create competitive advantage (Christos, 2009). Competitive advantage can easily be determined by how resources are arrayed to develop competences in the firm’s activities (Christos, 2009). A resource or capability should be non-substitutable in order to create competitive advantage. Generally, managers should take into account whether their companies have strategic capabilities and resources that are rare, valuable, inimitable as well as non-substitutable. It is questionable whether Guanxi networks are rare, valuable, inimitable and non-substitutable (Wang, 2007). Guanxi cannot be considered a source of competitive advantage due to a number of reasons (Wang, 2007). First, Guanxi network has the tendency to become worthless or a liability. When one party, especially the government losses power, the Guanxi network becomes ineffective (Wang, 2007). Second, although Guanxi network brings a number of benefits to the parties involved, these benefits are far from being strategic due to their tactical and temporary nature. In addition Guanxi networks are not exclusive since they can be imitated. They are not rare and can be substituted with other resources (Wang, 2007). Zhang and Fung (2006) reports that, Guanxi leads to company’s growth in relation to market expansion and profit generation. Guanxi is more important in creating external relations than in enhancing internal operations. In a transition economy with few legal restrictions on market competition such as China, Guanxi enhances market share by cultivating competitive positioning (Wang, 2007). It has influences the customer loyalty positively and increase sales. In addition, Guanxi network with the suppliers assist organisations receive good services and products and prompt delivery. Also, Guanxi networking with the competitors enables inter-organisation collaboration that enhances resource sharing and minimizes competitive costs (Acquaah, 2007). The competitive edge of a company entails how well the company attains its tasks using the available scarce resources. There are substitutable factors that can create competitive advantage such as unique employee cooperation, and effective management etc. Therefore, although Guanxi brings about many benefits to companies, it cannot lead to sustainable competitive advantage. Guanxi is only a concept that enhances organisation profitability (Acquaah, 2007). In conclusion, Japanese culture has created sustainable competitive advantage for Japanese firms. Japanese culture has influenced the workability of team processes. The communal consciousness practice in the country accentuates group decision making in companies which enhances good relationships between employees and the employers. The wa concept advocates for peace and harmony among people. This has enhanced management practices in companies. The management in companies require a collaborative approach to decision making and problem solving. In addition, the concept of Guanxi in China involves the creation of relationships and ties for the purpose of yielding benefits. Guanxi is a source of information, financial and technical support; it reduces business risks and transaction costs and has a positive impact on the performance of firms. Guanxi is very necessary in enhancing performance but is not enough to ensure that companies survive in the business world. References Acquaah, M 2007, Managerial social capital, strategic orientation, and organizational performance in an emerging economy, Strategic Management Journal, vol. 28, no. 12, pp. 1235-1255. Christos, N 2009, The Sustainable Competitive Advantage and Catching-up of Nations: FDI, Clusters and the Liability (Asset) of Smallness, Management International Review, 49(1), 95-119. 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