Summary and Analysis of Japanese, Korean and Chinese Business Approaches - Assignment Example

SUMMARY AND ANALYSIS OF JANAPESE, KOREAN, AND CHINESE BUSINESS by 25 October Summary and Analysis of Japanese, Korean, and Chinese Business Lecture 2: Japanese Business System Japan, a late comer to the developed world, was able to develop and maintain a sophisticated system of business relationships and forms. Japan remains the world’s second leading economy, with motor vehicles, Transportation equipment, Industrial equipment, and electronics as its key industries. The Japanese business system relies on enterprise groups (Keiretsu Business Groups – KBGs) and is well-known for its ‘dual’ structure, where large organizations operate independently from small and medium sized corporations. Keiretsu Business Groups have no holding company and promote cooperation and independent decision-making across business units. Horizontal KGBs are either ex-Zaibatsu (Mitsubishi, Mitsui), or bank-led (Sanwa, Fuyo). Vertical KGBs are divided into supplier and distribution: the former supply parts and components, whereas the latter operate as a distribution channel. There are also general trading companies (sogo shosha), which specialize in exports and imports and serve relevant intermediaries for foreign trade. Lecture 3: Japanese Management Style Japanese enterprises exhibit and rely on unique management styles. Lifetime employment, seniority wages, and no lay-offs during recession are fairly regarded as the main and most advantageous features of the Japanese management style. Keiretsu companies can easily relocate their workforce from one unit to another, whereas bonuses play a cultural and historical role in profit sharing. As a result, Japan enjoys flexibility of labor compensation and has everything needed to reduce unemployment. Most Japanese enterprises start at the very bottom of the business ladder, gradually expand to become medium and large corporations and, eventually, win the world. Low prices and domestic markets are the two management priorities for start-ups. Management efficiency, technological improvements, huge R&D investments and managerial efficiency are the main drivers of business development in Japan. Lean production systems, division of labor, JIT philosophies, and economies of scale are all important sources of competitiveness. Kaizen is the basic system of quality control in Japan, which works through series of small improvements. Total Quality Control implies that employee participate in quality management. The success of Japanese firms is in (a) cost advantage; (b) long-term planning; (c) financial strategies; and (d) continuous striving to achieve high quality at a low cost. Lecture 4: Internationalization Strategies and Japanese Management Until the beginning of the 1950s, the system and drivers of Foreign Direct Investments in Japan had been inward-looking and isolated. During and after Second World War, Japan imposed additional restrictions on FDI, to let its trading companies explore and develop new markets. The period between the 1960s and 1970s witnessed a rapid increase in domestic wages, accompanied by the growing appreciation of the yen and significant trade surplus. Yet, it was not before the 1980s that the scale of FDI inflows to Japan increased. The current FDI strategy in Japan is built on Incremental Sequential Investment, which means that businesses initially enter the Japanese market with lines of business of core competence and then, through motivation shifts, gradually move to path dependency. The main challenges affecting FDI in Japan include: (a) traditional reliance on Japanese expatriates; (b) a decline in supply of qualified experts; and (c) heavy use of locals for senior positions, which limits Japan’s global growth prospects. Differences between the Japanese and Western models of business should also be considered: Western businesses rely on shareholders, whereas the Japanese believe that employees are business owners, too. The dilemma of profitability versus employment continues to affect Japanese FDI. In the meantime, Japanese enterprises face serious difficulties, trying to transfer their management style overseas. Lecture 5: Korean Management System and Business Strategy From one of the poorest countries in the world, Korea was able to become the 15th largest economy in 2010. It is no wonder that the management system in Korea is closely linked to its cultural, socio-economic, and political peculiarities. Confucianism, Japanese and American influences, as well as industrialization and globalization predetermine the direction and essence of management practices in Korea. Korea has a well-developed system of work values, which dates back to the beginning of the 1960s and builds on foreign labor dependence, weak psychological bonds between employees and companies, and group orientation. Chaebol is the building block of Korean business system. Korean businesses usually have one of the three main types of ownership structures: direct ownership, holding company structure, or mutual ownership structure. Key managerial characteristics of Korean firms are founders’ management philosophy, owner-management relations, top-down decision-making, and the dominance of government. Recruitment and selection are usually based on yon-go and Confucianism, whereas education and training play an important role in Korean HR practices. Wage structure is extremely complicated but systematized. Globalization leads to the rapid convergence of Korean and international HRM values. Lecture 6: Korean Business Strategy Korean approaches to business strategy are mostly similar to those in Japan. Yet, Korean businesses operate in quite different operational and market conditions, since Korea is a market much smaller than Japan and heavily depends on imported technologies. Manufacturing management strategies are focused on growth, maturation, government support, and technology transfer through apprenticeship. Product diversification strategy implies unrelated diversification, which results in the creation of supporting industries and is heavily supported by government incentives. Unlike Japan, which used sequential patterns of foreign direct investments, Korean always grew through and with internationalization, starting with countries that had similar institutions or were at the same stage of economic development. Lecture 7: Doing Business in China Since the end of the 1970s, China had been developing in the center of active economic reforms. Today, China is the country focused on delivering economic growth and heavy investments in the most important infrastructure projects. For straight fifteen years, China sought to establish itself in the World Trade Organization (WTO), which held a promise to increase the speed of economic reforms and bring increased competition, leading to better growth long-term. However, the country has failed to stop the income gap from widening and cope with the growing shortage of labor in China. As of today, after a series of organizational and economic reforms, the main economic and management challenges continue to persist. Lack of modern management, old organizational structures, leadership and governance difficulties, and poor sales mechanisms are just some of the numerous challenges China must face in the nearest future. Lecture 8: Strategy for Foreign Firms in China Investing in China is associated with and leads to ownership, location, and internalization advantages. Access and efficient use of resources, cost advantages and government support, as well as advantages by own production, are all products of investment decisions in China. However, businesses choosing to invest in China must remember, that all Chinese businesses have a government partner, which controls the pace of economic development and investment plans. Foreign enterprises can enter Chinese markets as equity joint ventures, contractual joint ventures, or wholly owned enterprises. Location, too, plays a huge role in how businesses in China operate. Eventually, businesses entering the Chinese market need to find a good joint venture partner and negotiate a profitable JV contract in China. This requires submitting a proposal to local or central government, a feasibility study, and obtaining a license. The main challenges of doing business in China are bureaucracy, human resources constraints (especially in management), unclear regulations and laws, and difficulties with intellectual property rights. It is important to remember that business context in China constantly change, and what used to be relevant a year ago may no longer be relevant today. Lecture 9: Chinese Multinationals Chinese multinationals are rapidly rising in the global platform. FDI outflow from China is becoming an essential feature of globalization and internationalization of businesses. Business contexts are changing, and Chinese MNCs are becoming extremely successful and profitable in the global markets. The main success factors of Chinese MNCs include a strong entrepreneurial orientation, strong emphasis on continuous learning, remarkable adaptability to new conditions of doing business, leadership ambitions and unprecedented opportunity recognition capabilities. Chinese MNCs expand overseas, since they (a) want to secure access to additional material resources; (b) secure access to technologies and know-how; and (c) escape home market saturation. In the meantime, Chinese businesses must remember that going overseas is associated with a number of challenges, including culture clash and limited knowledge of international markets. Only those who realize that there is no hiding place in the global economy can have a chance to succeed at a global scale. Lecture 11: Overseas Chinese Firms The history of overseas Chinese firms dates back to the mid-18th century. Complex migration patterns and domestic political and economic challenges pushed dozens of Chinese to settle their businesses overseas. Overseas Chinese firms build on a different set of management and organizational principles. Organizational structures are limited to family members, which limits complexity and fosters the use of simple Guanxi rules. Leadership is authoritarian, decision-making is rapid, and management control is closed and non-rational. The main strengths of Chinese overseas are efficiency, flexibility, and deal-making skills. Chinese overseas manage to retain their cultural and business distinctiveness, through slow integration with host countries. Chinese overseas also display a number of weaknesses, from low loyalty, repressed professional talents, to lack of transparency, limited growth, and lack of succession planning. Lack of R&D and innovativeness and brand name management pressure Chinese overseas enterprises. Read More