Compare and Contrast Business Systems in Japan and China - Essay Example

Compare and contrast business systems in Japan and China. Answer with reference to relevant theories and use comparative country and/or corporate examples. As identified by Gordon Redding, who serves as a professor in the management department at the University of Hong Kong, the global arena can be categorized under five major cuisines and three of these cuisines which can act as a gateway to economic prosperity are Asian – namely Japanese, Chinese and Korean (Chen 3). By effectively integrating the cultural norms, values and traditions of the land of Asia which are characterized by the presence of collectivism rather than Western individualism, the aforementioned Asian nations have been able to develop a unique and admirable model that has enabled them to address the requirements of their cultural practices (Chen 3). The key element in this scenario however, is the finesse with which Japanese, Chinese and Korean business and management systems have been able comprehend the “hierarchy-sensitive and collectivist norms of Asian culture” to unite the organization as an energetic group (Chen 3). The purpose of this paper is to compare and contrast two significant and integral Asian business systems that currently dominate the camp of collectivist capitalism. Born in the lands of Japan and China, these business systems are inherently based upon the foundations that have been established by the components, elements and fundamentals of Asian culture however, this observation does not explore the complexity of these models which is rooted in the differences rather than similarities of Japanese and Chinese business systems. The analysis which has been conducted in this paper is based upon the implementation of a comparative approach which integrates the provisions of relevant theories to critically assess the topic. The Japanese economy emerged as a leading force on an international level as a consequence of events which occurred in the nation during the post-war period. The extensive expansion and growth which was experienced by the economy precisely took place from 1955 to 1990, thereby, permitting the living standards of Japanese citizens to coincide and eventually exceed those of their Western counterparts. An examination of the business systems in Japan can only be conducted effectively once the historical background of the development of state-business relations is assessed from multiple perspectives. In this regard, the implementation of state policies in Japan before World War II and after World War II must be highlighted and their association with the present scenario identified. Towards the departure of the 19th century, the process of industrialization was initiated in Japan amidst strong state intervention in the formulation of industrial policy which was characterized by the agenda of establishing a wealthy nation with unparalleled military strength. A fundamental feature of the economy during this time was that of high concentration with the focus of the government directed towards developing industries which could be termed as strategically significant to the state. In this case, the influence of the government in the entire process meant that industrialization was promoted for the purposes of fulfilling a particular political agenda rather than maximizing the well-being of citizens. While, the influence of the state on the economic affairs of the land remained constant in the period preceding World War II, the traditional forces of Japanese culture exercised similar power over business systems. Assessing the influence of such elements on the development of Japanese business and managerial practices, Chen outlines the role of large business groups that are termed as keiretsus who have been dominating the nation’s economy to the present day (4). A defining feature of keiretsus is their relationship with the zaibztsus which comprised of individuals belonging to the same family managing large-scale financial and industrial business conglomerates. Chen claims that the differentiating feature of then known as zaibztsus and the present day keiretsus is that the former have been replaced by professionals to emerge as the latter however, the authority that these groups commanded back then and still enjoy now is identical, in addition with their empowering characteristics (4). According to Chen these characteristics are that keiretsus, like zaibztsus are “closely interlocked, self-financed, and extensively networked” and these elements have led to their emergence as key players in several industries across the globe (4). On the other hand, the Chinese conception of family-oriented business is much different than that of Japan’s zaibztsus and keiretsus because unlike these groups, the Chinese family business pursues purely the goal of achieving wealth rather than attaining global authority, dominance and power in the industry in which it operates (Chen 4). As a consequence of this factor, the Chinese family business exists only in a limited number of industries where the single owner of the organization is able to cater to the needs of a niche rather than a mass market. Chen asserts that along with the Chinese state enterprise (CSE), the Chinese family business (CFB) is an important component of the primary business systems that are operated in the nation (119). In essence, the CFB’s and CSE’s can be distinguished from one another on the basis of 1) organizational structure 2) managerial processes and systems and 3) the competitive tactics and strategies implemented in the firms. As stated previously, the zaibutsus were a distinguishing element of Japan’s pre-war industrial policies and their resolution came as a consequence of the events which succeeded World War II. At this point, the economic structure of Japan was awarded with a reinvigorated mindset which aimed to develop a long term proposal for boosting the business systems of the nation to achieve success. This revival was characterized by extensive cooperation and interaction between businesses and state actors, namely the Japanese Ministry of Finance, the Ministry of International Trade and Industry and the Industrial Structure Council. In the wake of World War II, the economic policies that were formulated by the state focused on promoting innovation and technological advancement through the launch of Research and Development measures as a means of providing assistance to businesses. Moreover, the government also shifted towards the adoption of protectionist policies in order to ensure the survival of its domestic industries. Another notable policy involved the launch of export subsidies to encourage the promotion of economic opportunities in the nation. The dismantling of the zaibutsu eliminated a fundamental feature of the Japanese business dynamic however; the emergence of the keiretsu soon replaced this system as the leading characteristic of the Japanese economic structure. A beneficial element of the keiretsu is that it allows for the formulation of a business in either a vertical or horizontal manner. In the horizontal keiretsu the notion of diversification is encouraged and the system operates by establishing a connection between a general trading company and a financial institution. On the contrary, the vertical formulation of the keiretsu is characterized by the presence of a parent company which operates on a large scale in a particular industry. Renowned examples of the horizontal keiretsu include Mitsubishi and Mitsui, which abide by a principle known as the one-set which signifies the presence of a firm from every fundamental industrial sector. Large scale Japanese parent companies which work under the banner of vertically organized keiretsu include Sony, Toyota and Toshiba. These parent companies amass significant influence and power in the industry and maintain ownership of critical external forces such as suppliers, affiliates and distributors that form a part of the organization’s value delivery network. For example, Toyota’s value delivery network is recognized and appreciated as one of the most effective systems that exist on a global scale. By maintaining a relationship based on loyalty, cooperation and trust with its suppliers, the company is able to enhance their dedication and also exercises effective control which is fundamental for maintaining the system. Another benefit that is obtained by a vertical keiretsu is that the company also enjoys control over its costs of transaction and inventory which enhances the cost-effectiveness of the entire system. By incorporating the component of competitive advantage and preferred competitive strategies, the business systems of Japan and China can be assessed through a multidimensional perspective in order to provide an insight into the managerial and decision-making processes which are favored in the two countries. According to Chen the competitive strategies that are valued by the business community in China are 1) maintaining a low margin or high turnover to attain significant market share and 2) valuing the principle of economy of scope instead of benefitting from the economy of scale to reap benefit from business prospects (121). The aforementioned characteristics are closely associated with the business dealings of Chinese individuals who live outside of their native land, Chen claims that in a fiercely competitive market the adoption of these policies allows overseas Chinese firms to demonstrate flexibility in their dealings with clients which is appreciated by potential customers (121). However, this criterion of managing business deals is marked by short-termism and conjecture which has the potential to yield negative consequences as much as it is governed by the possibility of leading to success. While, overseas Chinese businesses and Chinese family businesses (CFBs) have traditionally followed such tactics to reap competitive advantages, the state-owned enterprises in the nation have been introduced to strategic dimension of business in recent years (Chen 122). This observation is attributable to the inflexible and strict economic principles that have survived in the nation for a significant period thereby, leading to the implementation of policies of overprotection by the Chinese government (Chen 122). This observation highlights the environment in which state-owned enterprises have survived in the nation for several years only to be introduced to the strategic elements of business not too long ago. Chen understands that decision making in such firms has remained under governmental pressure with business executives favoring the execution of decisions to advance political agendas rather than corporate objectives (122). In this scenario, the production processes at CSEs have been restricted by the same agendas as a consequence of which their efficiency has remained low in addition with their ability of coping with competitive pressures and drastic changes in the external environment. Chen observes that recent economic reforms that have been initiated in mainland China have emerged as a ray of hope for CSEs who have never abided by the basic principles and provisions of business theory to achieve success or formulate competitive strategies to address emergent threats and risks (122). How While, the competitive strategies of Chinese business systems are characterized by short-termism and a wave of transformation and reform the same observation does not stand valid in the case of Japan. The competitive advantage of Japanese business systems is rooted in their manufacturing process and their supreme belief in the advantages and benefits of maintaining and constantly enhancing quality standards across the scope of the entire system. For example, the JIT (just in time) inventory system developed by Toyota believes in maintaining the efficiency of the system by increasing the firms’ ROI through a decline in the cost of holding and carrying inventory. As stipulated by the principles of the vertical keiretsu the effective implementation of this technique requires the establishment of a relationship of trust and cooperation with suppliers who are an integral part of the firm’s value delivery network. Under a similar manufacturing system of lean production, the Japanese competitive advantage allows for the elimination of risks so as to allow the entire system to operate under a continuous flow which is maintained through the system. The Japanese business systems are also the embodiment of intricate quality control mechanisms that are placed throughout the model to reduce and eventually eliminate risks of producing a faulty product that could adversely impact the performance of the entire production line. These frameworks include Total Quality Control (TQM) and Kaizen which are based on enhancing the quality of the entire system to achieve ideal results. As implied by its name, the Total Quality Control (TQM) approach ensures that each and every component of the production process complies with the quality standards that have outlined and specified by the production department. Once this process is put into place, assemblers are assured of the fact that their assembly line is operating under desired standards and any margin of error that could require the manufacturing process to start from the beginning is eliminated. Kaizen on the other hand, is an approach which transcends the production and manufacturing process of an organization and demands for the initiation of measures that can enhance the functions and operations of the company. In Japanese business systems, the improvement techniques that are proposed under Kaizen are linked with numerous activities which encompass manufacturing, production, managerial decision making, employee participation and human resource practices, the development of which can enable the performance of the entire system to reach the maximum level that is desired by the business. Moreover, the concept of quality as a competitive advantage in Japanese organizations is also linked with human resource practices involving employee motivation, recruitment, training and development and participative management. This observation is linked to the cultural dimension of Japan which favors collectivism over individualism and believes in the power of teamwork and cooperation. By introducing Kaizen into human resource practices business executives explore ways of improving the well-being of employees who are a fundamental component of the organization. Moreover, employee participation in matters of quality management and production processes is also encouraged under the provisions of Kaizen which allows workers to give feedback on issues they may be facing in the production process. As employees are closely linked with the procedure itself, worker participation can help managers to identify issues that need to be addressed on an immediate basis. The managerial processes in Japanese and Chinese business systems are different even though, the Asian connection in this case does contribute towards an integration of the systems; the managerial processes in Japan strongly impact employment practices and also shape them at the same time. For example, in Chinese family businesses, the presence of strong family ties amongst the senior management and owners of the business imply that employees and lower level managers are isolated from the decision making process and the internal financial information is never revealed to an individual who is an outsider such that he/she is not a member of the family (Chen 121). This observation implicates that the leadership style in Chinese family businesses and Chinese state owned enterprises is largely authoritarian, with the presence of centralized decision making and minimal delegation (Chen 121). The resolution of zaibutsus in Japanese business systems has completely transformed the dynamics and the widespread influence of family owned businesses. After being replaced by professionals, the transformation of zaibutsus into keiretsus has allowed business systems in the nation to retain certain positive elements of the zaibutsus while, developing newer and better suited employment practices to accommodate a new generation of workers. For example, based on the seniority and experience of the employee, Japanese corporations value the wisdom of older workers and identify them as a core component of the organization. At the same time, core workers of the firm are selected after the implementation of a strict recruitment process which also includes a specified period of induction training to allow the worker to familiarize himself with the environment. Moreover, the Japanese business model believes in a fair and just reward system which is backed by the presence rigorous worker expectations involving the achievement of targets, performance measures, goals and specific objectives. The businesses that operate in the nation expect workers to be able to meet these targets because employees are equipped with unparalleled and sophisticated training measures to prepare them for the task ahead. At the same time, teamwork, training, employee participation, worker involvement and feedback are encouraged to identify and resolve problems. According to Chen, the dominant Asian business and management systems that have emerged in Japan, China and Korea are heavily influenced by Confucian principles (1). Moreover, Chinese and Japanese business systems also share the elements of Asian culture that are characterized by collectivism and endurance. However, a comprehensive analysis into the tenets of these systems suggests that they are based on the economic structure of the nations that dates back to the historical development of these frameworks which has aided the progress of state policies and business operations. Work Cited Chen, Min. Asian management systems: Chinese, Japanese and Korean styles of business. CengageBrain. com, 2004. Read More