The Social Context of Asian Business: Japan - Essay Example

? The Social Context of Asian Business: Japan Introduction International businesses or cross cultural businesses are growing day by day after the introduction of globalization. Even communist countries are currently doing everything possible to attract private capital from overseas countries. It should be noted that at the introductory stages of globalization, China argued that America and other capitalist countries are trying to loot the resources of other countries in the name of globalization. Surprisingly, China is the number one exploiter of globalization at present. Introduction of globalization and the subsequent increase of cross cultural business have brought huge changes in Asia, especially in South East Asia. Asian countries such as India, China, Japan and Korea are developing much more rapidly than American and European countries. Recent recession has caused huge problems in America and Europe; however, Asian countries escaped from recession problems up to certain extent. All these factors forced some people to say that global wealth is currently shifting from American and European regions to Asian region. Japan is one of the prominent countries in South East Asia at present. “In 1980, Japan’s financial system- and in particular its banking system – was the largest in the world. In terms of loan assets size, nine out of the world’ top ten banks were Japanese” (Suzuki, 2011, p.1). Even though Japanese economic growth was phenomenal until 1980, problems started to creep in from 1985 onwards. Growth started to decline in all sectors and deflation started to embrace Japan from 1985 onwards. According to Hoshi and Kashyap (2004), Japan’s Financial Crisis and Economic Stagnation may cost the “taxpayers is at least 20 percent of Japan’s GDP (p.3). In any case, it is a fact that Japanese products are still number one in the world in terms of quality even though China has an edge over Japan in terms of quantity of the products being produced. Sony, Toyota, Honda, Mitsubishi, Panasonic, etc are some of the prominent Japanese companies which keep Japan’s supremacy and reputation in global market. It should be noted that even in America like highly developed countries, Japanese products are still popular. Majority of the cars running in American and European roads are manufactured in Japan. Doing business in Japan and doing business in Western countries are extremely different things because of the huge differences in the business systems. Western business systems are (ideally/generally) based on transparency and the rule of law whereas hierarchy is prominent in Japanese business systems. Culture plays an important role in the building of business systems in different countries. Since Japan is culturally different from western countries, business systems in Japan are different from that in America or Europe. This paper compares the business systems in Japan and in Western countries Business systems: Japan vs. Western countries Rules and laws dominate western business systems whereas ethics and morality governs Japanese business systems. For example, in western countries, the salary of an employee is decided based on his current performances whereas in Japan employees get more salaries as they get older (Japanese company structure VS American company structure, n.d., p.3). In other words, experience is not a criterion for determining salaries in western countries whereas in Japan, experience helps employees to get more salaries. The major deciding factor of salary in western business systems are performance or efficiency rather than the age or experience of the employee. Westerners do not have any hesitation in cutting down the salary of a vastly experienced employee, if his performance decreases because of some reasons. On the other hand, Japanese companies respect the experience and age of an employee when they decide his salary. Because of the high respect given to the employees as they get older, Japanese employees work for the same company until their retirement. On the other hand, many of the western employees forced to seek better options, because of the reluctance of western companies in increasing their salaries based their experience. Workers are assigned various jobs within a company in Japanese business systems whereas in western business systems, workers are promoted within a department (Japanese company structure VS American company structure, n.d., p.6). In other words, Japanese companies are helping the employees to get training in all the aspects of the functioning of a company. It is quite possible for an employee in a Japanese company to change departments. In other words, it is possible for an employee in a Japanese company to change his department from production to quality, technical or sales. But in western business systems, employees forced to work in the same department even if they get promotions. Western companies are not much interested in developing different skills among employees whereas Japanese companies are trying to develop different skills among employees. In short, all-rounders are getting respect in Japanese business systems whereas specialists are getting respect in American or European business systems. In Japanese business systems, HR department is responsible for the entire recruitment and promotion functions in a company whereas in western business systems, each department of a company conducts recruitment and promotion activities (Japanese company structure VS American company structure, n.d., p.7). In other words, the power of HR department in western companies is limited compared to that in a Japanese company. Different power centers are active in western companies whereas in Japanese companies, the major power of controlling the business rests on HR department. “The essence of the business culture in Japan is the notion that the firm exists to keep people employed and that profit is perceived as a long-term goal, a notion which is supplemented by building market share rather than profit (Bensley, 2010, p.44). Majority of the prominent Japanese firms have the habit of investing a substantial portion of the profits for the diversification and expansion of business. Most of the prominent western organizations have the habit of spending less for the diversification of business. For example, Microsoft was the biggest company in the world once. However, they are far behind Exxon Mobile and Apple Inc in terms of market capitalization at present. It should be noted that Apple Inc was on the verge of destruction in 80’s and 90’s. However, diversification of business helped them not only to survive but also in becoming the second largest company in the world at present. Japanese companies look for long term goals more and more. Setbacks will never force Japanese companies in shifting their focus from long term goals to short term goals. Transparency is generally seen common in western business systems even though there are certain exceptions (For example, Apple Inc. is often accused for keeping less transparency while formulating business strategies and developing new products). However, Japanese business systems have less belief in transparency. It should be noted that Western business systems are talking too much and delivering less whereas Japanese business systems are talking less and delivering more than what the people anticipated. In Japanese business systems, the way of doing things is more important whereas in western business systems, finding a way to do things is more important (The difference between China and Japan, 2007). The above fact can be interpreted in another manner; Japan is particular about the quality of the products being produced whereas westerners are particular about the quantity of the products being produced. That is why Japanese products are comparatively heavily priced in the market. In consumer world, Japan stands as a sign of quality whereas same thing cannot be said about westerners. “Serving society and their employees as a main priority instead of maximizing shareholder value, as in many Western firms, is rooted in Japanese culture” (Bensley, 2010, p.44). Even though Japan is a capitalist economy, the interests of the society are getting prominence than the interest of the individuals. It should be noted that western companies are working mainly for maximizing their profits and delivering less to the society even though there are certain exceptions (Warren Buffet and Bill Gates like multimillionaires recently announced their decision to donate a substantial portion of their wealth to charity). Japanese companies on the other hand are keen in working for the social development rather than individual development. The commitment of Japanese businesses in the development of society is evident from the relationships between Japanese Banks and companies. It is the institutions of finance – principally the banks, the insurance companies, and the stock markets in Japan – that allow the keiretsu network of businesses to operate, which emphasizes the interconnected nature of different interlocking business relationships and shareholdings. The importance of keiretsu in the government-business relationship is manifested within the keiretsu dependence on the ‘inhouse’ bank, which is influenced by the Bank of Japan (BOJ). Through indirect financing, Japanese firms use banks to meet about two-thirds of their external funding needs (Bensley, 2010, p.45). Even public sector banks have no reluctance in providing ample loans to the private companies operating in Japan. Corporate social responsibility lies not in papers but in practice in Japanese business systems. Japanese firms have no reluctance in delivering a substantial portion of their profits to community needs. The sacred relationships between the community and business help Japanese firms to overcome many problems. When any problems occur for Japanese companies, Japanese people have no hesitation in providing a helping hand. It should be noted that labor union or trade union strikes are not in the distant horizon in Japan. If Japanese employees wanted to protest against something, they will make sure to raise such protests in a constructive manner. In western countries, labor disputes often end up in the closure of the companies for many weeks or months. In the Japanese world of business, the exchanging of "meshi" (business cards) is extremely important and is an art form. The "meshi" is to be received and given with both hands and a deep bow. The depth of the bow depends on the person's position in the business and societal hierarchy vis a vis the other person or people they are meeting for the first time. The giver's "meshi" must be looked at very carefully by each recipient to show respect and deference if the giver has a higher rank than the recipient(s). In traditional Japanese companies, if a subordinate wishes to make a business proposal they (he/she) must write a very formal "ringi-sho" (business proposal) paper and submit it to their immediate supervisor who will then stamp it with their business "hanko" (rubber stamp) and pass it on up to their superior(s) who will then approve it or disapprove it and send it back for revision by the originator of the business proposal paper (Morse, N.d.) Business is not an activity, but a religion in Japan. Japanese people consider business people as the highly status oriented people. It should be noted that in western countries business is just another activity which is needed for the sustainment of human life. Because of the increasing business scandals, many of the westerners consider business people as the most cunning people in the world. However, Japanese people respect business people very much. Business is considered as a service rather than a profit making activity in Japan. The social status of a Japanese person is determined by the reputation of the company for which he is working. “In the US and Europe, the success of entrepreneurial economies has to an extent supplanted social casting by employment, but in Japan, entrepreneurs are not accepted so readily and are often seen as eccentrics or misfits” (The Japanese company in Japan's culture, n. d.). According to Geert Hofstede (N.d.), there are five dimensions for national culture: Power Distance (PDI), Individualism versus Collectivism (IDV), Masculinity versus Femininity (MAS), Uncertainty Avoidance (UAI) and Long Term Orientation (LTI) (Hofstede, N.d.) (See Appendix for country wise break up of dimensions of national culture). All these five cultural elements affect business systems in one way or another. PDI refers to the extent of inequalities existing in the power or authority of people. PDI scores refer to the gap between the least powerful and most powerful people. In terms of business, higher PDI value means autocratic management styles and lower PDI means participatory management styles. Japan has high scores (54) compared to America (40) or United Kingdom (35) (See Appendix). In other words, management styles in western countries are more and more participatory in nature whereas that in Japan is more oriented towards autocratic management styles. With respect to business, IDV refers to individual work and team work. Higher the IDV value means the society is individualistic; lower the IDV value means the society is collectivistic. IDV of Japan UK and America are 46, 89 and 91 respectively (see appendix). In other words, Japanese society is collectivistic compared to western society. Thus team work is encouraged more in Japanese workplaces whereas individual work is encouraged more in the workplaces of Western countries. For example, Apple Inc. always encourages individual work more compared to team work. Masculinity versus Femininity (MAS) refers to the distribution of roles between genders. MAS value of Japan is 95 whereas that of America is 62 and UK is 66. These statistics clearly suggests that male-female equality is Japanese culture is less compared to that in Western culture. In other words, male domination is visible more in Japanese culture compared to America or European countries. It should be noted that females in Japan may not be able to attain higher places in the organizational ladder. But, in western countries, females can attain position in an organization. Women CEO’s are rare in Japan whereas it is common in western countries. For example, Indra Nui is the current CEO of PepsiCo. Uncertainty avoidance index or UAI of Japan is 92 whereas that of America and UK is 46 and 35 respectively. As mentioned earlier, Japanese people showed less emotions when they faced disasters whereas Americans became panic when 9/11 occurred. This is because of the fact that Japanese people know well to deal with uncertain situations whereas Americans or westerners have little ideas when they face unfamiliar or uncertain situations. These cultural trait differences are visible in business systems also. It should not be forgotten that Japanese organizations resurrected like phoenix bird many times even though unexpected disasters occurred in their country. At the same time, westerners are still struggling to overcome the recession problems. LTO of Japan is 80 whereas that of America is 29 and UK is 25 (See Appendix). In business, LTO refers to long term goals and short term goals. Japanese business systems are particular about the long term goals whereas American or European business systems are particular about the short term goals. American people have the habit of spending more than what they earn whereas Japanese people have the habit of spending less even if they earn more. Americans are conducting a lavish life style whereas Japanese people are not so. All these cultural elements affect the business systems also in these countries. Conclusions Business systems in Japan and western countries are extremely different because of the huge differences in culture in these countries. Japanese business systems give more importance to long term goals whereas western business systems give more importance to short term goals. Japanese business systems have superior abilities in dealing with unfamiliar business climates. Male domination is visible in Japanese business whereas in western business, both males and females enjoy almost equality. Nonverbal communication means are prominent in Japanese business whereas in western countries, verbal communication has importance. Team work is encouraged more in Japan whereas in western countries, individual work is encouraged more. Business is an activity in western countries whereas in Japan it is just like a religion. In short, Western business systems are based on transparency and the rule of law whereas Japanese business systems are more and more hierarchical in nature. References Aimai - Ambiguity in Japanese Culture. 2009. [Online] Available at:http://www.hanamiweb.com/aimai_ambiguity_in_japanese.html[Accessed 26 March 2013] Bensley, T. 2010. Nissan: The Japanese Business System in a Globalized World Cross-sections. Volume VI 2010 Hoshi, T and Kashyap A K. 2004. Japan’s Financial Crisis and Economic Stagnation. Journal of Economic Perspectives—Volume 18, Number 1—Winter 2004. Japanese company structure VS American company structure, N.d. [Online] Available at: http://www.google.co.in/url?sa=t&rct=j&q=business%20system%20in%20japan%20and%20america&source=web&cd=2&ved=0CDcQFjAB&url=http%3A%2F%2Fstudents.washington.edu%2Fcisbmail%2Fdoc%2FJapanese_company_structure_1__1_.ppt&ei=RkRdUdq-Co_NrQfGzoD4Ag&usg=AFQjCNE064JpRDMWx-usnCMTTnR5GOJH1Q&bvm=bv.44770516,d.bmk [Accessed 4 April 2013] Making Sense of Cross Cultural Communication. 2012. [Online] Available at: http://www.clearlycultural.com/geert-hofstede-cultural-dimensions/masculinity/[Accessed 26 March 2013] Morse DS. N.d. Five Factors that Strongly Influence Japanese Business Practices, [Online] Available at: http://www.bestthinking.com/articles/business_and_finance/international_business/asian_and_pacific_rim_business/five-factors-that-strongly-influence-japanese-business- practices[Accessed 26 March 2013] Suzuki, Y. 2011. Japan's Financial Slump: Collapse of the Monitoring System under Institutional and Transition Failures. Hound mills, Basingstoke, Hampshire: Palgrave Macmillan, 2011. The difference between China and Japan. 2007. [Online] Available at: http://www.spectator.co.uk/clivedavis/373526/the-difference-between-china-and-japan.thtml[Accessed 26 March 2013] The Japanese company in Japan's culture, N.d. [Online] Available at:http://www.venturejapan.com/japan-business-culture-company.htm[Accessed 26 March 2013] Appendix Uncertainty Avoidance Index 1-20 21-40 41-60 61-80 81-100 101-120 Country PDI IDV MAS UAI LTO Greece 60 35 57 112 Portugal 63 27 31 104 Guatemala 95 6 37 101 Uruguay 61 36 38 100 Belgium 65 75 54 94 El Salvador 66 19 40 94 Poland 68 60 64 93 Japan 54 46 95 92 80 Peru 64 16 42 87 Argentina 49 46 56 86 Chile 63 23 28 86 Costa Rica 35 15 21 86 France 68 71 43 86 Panama 95 11 44 86 Spain 57 51 42 86 South Korea 60 18 39 85 75 Turkey 66 37 45 85 Hungary 46 55 88 82 Mexico 81 30 69 82 Israel 13 54 47 81 Colombia 67 13 64 80 Brazil 69 38 49 76 65 Venezuela 81 12 73 76 Italy 50 76 70 75 Czech Republic 57 58 57 74 Austria 11 55 79 70 Pakistan 55 14 50 70 Taiwan 58 17 45 69 87 Egypt 80 38 52 68 Iraq 80 38 52 68 Kuwait 80 38 52 68 Lebanon 80 38 52 68 Libya 80 38 52 68 Saudi Arabia 80 38 52 68 United Arab Emirates 80 38 52 68 Ecuador 78 8 63 67 Germany 35 67 66 65 31 Thailand 64 20 34 64 56 Finland 33 63 26 59 Iran 58 41 43 59 Switzerland 34 68 70 58 Ghana 77 20 46 54 16 Nigeria 77 20 46 54 16 Sierra Leone 77 20 46 54 16 Netherlands 38 80 14 53 44 Ethiopia 64 27 41 52 25 Kenya 64 27 41 52 25 Tanzania 64 27 41 52 25 Zambia 64 27 41 52 25 Australia 36 90 61 51 31 Norway 31 69 8 50 20 New Zealand 22 79 58 49 30 South Africa 49 65 63 49 Indonesia 78 14 46 48 United States 40 91 62 46 29 Philippines 94 32 64 44 19 China 80 20 66 40 118 India 77 48 56 40 61 Malaysia 104 26 50 36 Ireland 28 70 68 35 United Kingdom 35 89 66 35 25 Hong Kong 68 25 57 29 96 Sweden 31 71 5 29 33 Denmark 18 74 16 23 Jamaica 45 39 68 13 Singapore 74 20 48 8 48 (Making Sense of Cross Cultural Communication, 2009) Read More