Compare and contrast business systems in Japan and China - Essay Example

? Compare and Contrast the Business Systems in Japan and China Introduction Although distinct in various ways,Japan and China have various economic similarities and differences that set them as the top growing economies of the world. The paper seeks to compare and contrast business systems in these two nations. Therefore, to explain the diversities between the business systems of Japan and China, I will first explain what business system implies. As defined by economists, business systems implies methodological processes that are employed as a delivery means for providing certain products and services to the final users or consumer in a clearly defined market environment. Compared to Eastern means of doing business, businesses in Asian Pacific are intensive affected by religious beliefs and the societal means of performing crucial roles in the business approaches. Therefore, before, the comparison and contrast of Japanese and Chinese business systems, it is crucial to explore the business culture as well as the economy of Japan and China. The discussion will establish the similarities and differences in Japanese and Chinese ways of doing business, the interaction between the government and the business market, and the way the two businesses borrow money. Discussion Japanese and Chinese systems of business have various differences and similarities as well. For instance, most of Japanese languages, art, religious beliefs, and culture are borrowed from China, and this brings some similarities in the two nations systems of business (Chen, 2004, p.34). However, over decades, Japan managed to convert these aspects into disparities that are uniquely Japanese and these diversities have a great effect on both Japanese and Chinese systems of business. Japanese and Chinese economic growth overview Whereas the growth of economy of various other nations may be stagnating, the economic growth of China is developing at an increased pace and is among the fastest expanding world economies. Some of the key factors stimulating the Chinese rapid economic growth were the 1997 Hong Kong release to China from British colonies. Similarly, the open door policy of Deng Xiao that opened allowed free Chinese free trade with global nations reformed Chinese agriculture, science, technological innovativeness, and industry transforming china into a contemporary industrial state (Broderick, 2003, p.85). The population control and the one child policy that aided to enhance the strategy towards the Chinese population feeding was also an added advantage. The rapid Japanese economic growth dates back to the WW11 and its effects in putting Japan among the few most economically advanced nations of the world. Currently, Japan is among the topmost economic powers after United States of America, China, and EU (McLeod, Ross and Garnaut, 1998). Although Japan is a increasingly small nation, it has a solid population density and most of its land does not favor agricultural production because of mountainous topography and inadequate minerals required for development of agriculture. Therefore, Japan must rely of innovation and creativity for goods production and export such goods for its economic development. Differences and similarities in the systems of business Undoubtedly, the East Asian economic development over the past over three decades can be considered as the key world surprises. As earlier mentioned the easy will concentrate on Japan and China as the main representatives in the business systems analysis, since the 1950 and 80s the economy of Japan has been a miracle due to its faster development. In the 1960s, 70s and 80s the economy increased to about 10% and 5% in average respectively, (World Bank, 1993, p. 5). Considerably later, starting late 70s the Chinese economy similarly started to show hyper-growth signs and it is currently the rapidly growing economy with about 10% growth rate in GDP average (Kim, 1998, p56). World Bank report 200, suggests that the Chinese and Japanese economic performance are increasingly advanced than that of the US and Europe. As early mentioned, to analyze the Japanese and Chinese business systems distinctions, a deep understanding of business systems is crucial. A business systems in this context, is a complex system of adaptation whereby the societal business components are analyzed against the societal context. Concerning this concept, an understanding of the social systems and cultures of Japan and China is crucial (Whitley, 1992, p.63). The two nations share various similarities courtesy of their geographical proximity, which give Japan and China similar religious and value systems similarities, which reflect their extensively wealthy culture and increased national identity senses. However, because of varied post economy polices development of the two nations, a completely different contemporary civilizations result. These disparities are distinguishable via varied business cultures and diverse economic system patterns. Additionally, during the period of transformation Chinese and Japanese systems of economy, the two governments performed a crucial function in helping the growth and sustainability of local companies and institutions, even though, such transformations happened at varied periods by varied policies. The cultural communication of the two nation’s dates back to many decades and the typical East Asian behavior is evident in the two nations, like harmonious living with other nations, never turning down peer proposals and never showing disrespect or insult to other nation’s proposals. Increasingly conservation compared to Westerners, Japanese and the Confucianism increasingly determines Chinese behaviors. However, because of the diverse experiences in current Japanese and Chinese histories, the two different contemporary cultures gain shape. Similarly, their innovative enterprises have distinct cultures if the business. Irrespective of the firm US influence, various characteristics of the business culture of Japan still exists in the contemporary systems of the Japanese business (Redding and Witt, 2001, p.56). Economists claim that Japan prefers maintaining silence instead of expressing their thoughts because they consider their sweat increasingly precious compared to that of others. Japanese hold that it is to keep their secrets in revealed, because the short-spoken and hardworking person is more popular in the Japanese society. Additionally, Japanese believe that a increasingly self-disciplined character in business situation is a crucial principle for evaluation especially in cases of contradictions between personal and corporate benefits (Blustein, 2005, p.20). Further, an implicit comprehension is crucial in business relationships with other nations in Japanese culture. Most business people in Japan believe that frank communication is crucial than expressive communication. On the contrary, Chinese are increasingly direct than Japan business people in oral expression. For instance, if a Chinese employee saw that he was given an inequitable treatment, he many directly communicate with his boss and demand for an explanation for that, which is increasingly plausible to occur in both nations. Contrary, if workers always keep quiet in his duties, the supervisor may think that he is not confident and qualified for the work. Whereas modesty is regarded as a crucial merit for a well-manned employee, modest character is an indispensable communication form in business (Lasserre and Schutte, 1999, p. 80). Moreover, diverse information exchange methods of the two nations resulted to diverse criteria of employees’ performance benchmarking. For instance, in Chinese companies, a better performance is anchored on employee’s tasks positive outcomes, irrespective of his input. In Japan, the result of hard work is the successful performance; thus, for a person to get an optimistic personal evaluation, hard work is increasingly required. Guanxi – a personal relationship with material achievement in mind- or English connection is a unique and essential Chinese business culture nation. Chinese businessperson prefers to utilize Guanxi in business transactions instead of the systems of law. Under Quanxi business condition, foreign businesspersons can maintain beneficial personal connections with other business partners and officers in the government. In managerial styles, the two nations are distinctively different, for instance, Japanese have successfully differentiated themselves from the Chinese styles of management with the implementation of bottom-up system of decision-making. Japanese emphasize on information flow and initiative from bottom-up approach, having the top managers as facilitators and not authority source; they also believe that such as system can enrich the pool of the information of the higher managers, giving them deep views in market and product details (Redding and Witt, 2001, p.56). In contrast, the Chinese society is hierarchical – implying that in the Chinese business culture, the internal organizational decision making is top-bottom, with the topmost managers involved in the process of making decisions. The supervisory control of different Chinese business control tends to be increasingly strict because of the mistrust challenges between employees. Economists agree that education background, formal position, and age are critical dimensions of measuring an individual’s status, for instance, a person who does not belong to the group has on power to make critical decisions and must be answerable to manager who gives instructions. Because of the influence of diverse cultures of the two nations, the Japanese and Chinese economic institutions found diverse methods of relieving crises when the two discovered that they had fallen into challenging situations that caused diverse effects. After the WW11, the government of Japan dismantled the Zaibastu power that controlled main significant Japanese industries sectors and trade under American occupation forces pressure (Broderick, 2003, p. 96). Following the Zaibastu dissolution, a different Japanese Unique corporate systems form – Keiretsu – a group of various firms interlocking board of directors with stakeholders was formed. Keiretsu people share common business interests and together with Zaibastu firmly influence the Japanese inter-corporate relations, for instance, the Japanese automobile industry. Companies in Japan mainly hold between 60 and 70% of other companies in comparison with the topmost for automakers in America who purchase 30-40% of their parts. Two main aspects differentiate Japanese inter-corporate relations, for instance the companies typically choose to trade with a certain trading partners rather that outsourcing from other firms. Similarly, a fix long-term trading Partners Corporation ensures product costs, that is a crucially significant classical theory factor turns out to be limiting factor compared to trading partner. For instance, Toyota refine management of supply chain by choosing specific supplier as the main suppliers of certain components led to the intimate collaboration among the company and its long-term partners, therefore, in this sense, the condition will affect small and medium-sized enterprises development. It will also prevent them in entering the entire system of business and compete with well-established and stable companies that have stable connections with some business partners. The State Owned Enterprise of China is the main characteristic difference among the business systems of Japan and other western nation’s capitalistic systems because of the Chinese socialism concept. Similarly, after ZeDong Mao’s death, the slow reform of State Owned Enterprise occurred in 1978, October. However, the massive enterprises had taken over the entire Chinese industrial production for over 50 years. After the introduction of the first set of State Owned Enterprise policy reforms by the government of China, mainly after the socialist market policy of economy by Deng Xiao, the increased GDP growth rates during the last few years have been linked to policy. The implementation of these essential policies of economy such as the responsibility profit ad losses systems and various proposals put forward such as shareholding system inclusion, contracts systems, assets responsibility among others like leasing and bankruptcy and State Owned Enterprise have achieved fundamental improvement from competition in the market to the contemporary capacity management. Compared with large enterprises in Japan that are internally integrated and updated with current technological advancements, enterprise in China re segmented and lack independent creativity. During the 1990s and 00s, some of the reformed State Owned Enterprise have been freed from state owned, private and became public, however they are still massive, capital and labor intensive and equally at an increased efficiency standards (Lasserre and Schutte, 1999, p. 85). Chinese State Owned Assets statistics indicates that one hundred and seventeen State Owned Enterprise are nationalized, for instance Chinese State Shipbuilding Corporation, Chinese Nuclear Engineering Corporation Group and Motor Corporation among others. These local corporations, small and medium size enterprises contributions account for about eighty percent of the Chinese economy. Additionally, the foreign direct investment increasingly boost the Chinese economic growth since the 1980s and by the start of 2006, Chinese had attracted about 622.5 billion dollars in foreign investment (Redding and Witt, 2001, p.56). Literature shows that capital that trickled into Chinese businesses in two months is increasingly higher than that trickles annually to Sub-Saharan Africa. Similarly, foreign investors can achieve high capital efficiency in main Chinese markets because of the cost of cheap labor and reduced cost of transactions, friendly export policies, and political stability. As a business strategy, foreign companies that want to venture in business in Chinese environment should form joint venture with domestic companies in China instead of forming fully owned subsidiaries. Even though, the requirements of joining markets in China are influenced by various available technologies in companies of China, various large foreign investors are unfamiliar with the high technological imports. Therefore, the Chinese government should first handle the technological issues in imports. Despite the differences, there are also similarities in the Japanese and Chinese business systems, for instance, during the post war growing periods of the economy, the two nations’ governments played a crucial roles in promoting economic booms. Since its history, the government of Japan was not a capitalist regulatory nation like the US administration. Resultantly, the Japanese topmost priority was to encourage development of economy instead of emphasizing on consumer protection of competition sustainability (Broderick, 2003, p.102). To attains such objectives, the International Trade and Industry Ministry was increasingly influential in establishment of Japanese post war economy. The ministry’s responsibility was in imports, exports, and inclusion of the areas traditionally uncovered by other ministries like plant, equipment investment, and control of pollution, energy and other factors of assistance of foreign economic. The ministry also provided administrative direction to local and international industries and acted as an industrial policy architect, managing industrial issues. At different points, the ministry ensures effective and smooth communication among state and enterprises – the success of Japanese economy. The communist government attempts to trigger the development of the financial system after the WW11. During the 1970s economic reforms a prominent economic policy – Special Economic Zone was launched and established in Guangdong and Fujian coast, whereby the main benefit of Special Economic Zone for international investors is critical tax concession in the initial project life, patents protection, and unique laws on contracts with the aim of overseas capital investment in development of China. The Open Door Policy fostered the entire social increased by a higher FDI percentage. However, despite the policy effectiveness, it caused a large growing disparity among the coastal and inland provinces that is a problem in the current Chinese government. In addition, Japan and China equally realize the significance of technological advancement and production of knowledge in the business systems. In Japan, the government highlighted crucial industries that emphasized on technological advancement after the Second World War to foster industrial booming (El Kahal, 2001, p.74). Japanese government supported research and development firms play a critical function in Japanese technological catch up in 1970s and 80s and in new knowledge creation. Research institutions and universities in Japan have firm relationships with companies through the government aids, and under such syndicate, fresh research graduates can obtain training in such companies. Consequently, they offer latest technologies to the companies in Japan that lack technology because to lifetime systems of employment. Whereas the Chinese government also creates various plans to enrich technological level, for instance, the 863 plan designed to boost innovation talent in the high technology sectors. The plan strives to achieve successes in significant technological sectors associated with national economic success, security and help the nation gain global foothold. The Torch Program on the other hand, stress on the increase of achievements transformation in new and high-tech by Hatchers development. It forces in commercialization technology development under the market-based environment (Blustein, 2005, p.23). After implementation of such plans, the government of China took crucial decisions to contribute progress in technology to growth of economy. In relation to this, the government sported science and technology progress for the subsequent years and proposed that research in science and technology to be closely linked to market and business systems. These actions taken by both nations established a crucial basis in aiding them attain remarkable development in economy for several years. Conclusion From the above discussion, the two nations share similar aspects like strong government influence in economic development and maintain focus in technology and education. Nevertheless, their disparities occupy various aspects of their systems of business. The two share similar historical cultures like the Confucius Philosophy belief, however, they form different contemporary cultures that manifest in different business cultures. Concerning the business culture, the Japanese firm business relations and cross-shareholding among groups of businesses formed a critical networks in business, although, such business connections tends to weaken the small business enterprises competitive advantage because of capital mobility. In the business systems of China, the SOE mainly play a crucial function in local industries like materials production supply of power and energy and transport. After State Owned Enterprise reformation, the market share is lower than the private sectors. Therefore, the business systems in both nations have some similarities and disparities and play a crucial part in global economy. Bibliography Broderick, T. (2003) What Is a Keiretsu?. [online] Available at: http://www.wisegeek.com/what-is-a-keiretsu.htm [Accessed: 11 Jul 2013]. Blustein, P. (2005) China Passes U.S. In Trade With Japan. [online] Available at: [Accessed: 24 Jul 2013]. Chen, M. (2004) Asian Management Systems: Chinese, Japanese and Korean Styles of Business, Thomson. ISBN: 1861529414. El Kahal, S. (2001) Business in Asia Pacific, Texts and Cases. Oxford, Oxford University Press.  Kim, E. M. (ed) (1998) The Four Asian Tigers: Economic Development and the Global Political Economy. London, Academic Press.  Lasserre, P. and Schutte, H. (1999) Strategies for Asia Pacific: Beyond the Crisis. London, Macmillan.  McLeod, Ross H. and Garnaut, R. (eds) (1998) East Asia in Crisis: From Being a Miracle to Needing One? London, Routledge. 338.95 EAS. Redding, G. and Witt, M. (2008) China's Business System and its Future Trajectory. [e-book] INSEAD. pp. 21-22. Available through: Insead.edu [Accessed: 10 July 2013]. Whitley, R. (1992) Business Systems in East Asia: Firms, Markets and Societies. London, Sage.  World Bank (1993) The East Asian Miracle: Economic Growth and Public Policy. Oxford, Oxford University Press. 338.95 EAS Read More