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Guru to the Western Guru to the Western world Japanworld Japan

Week 3Week 3

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Overview – Japanese Overview – Japanese business environmentbusiness environment

Business conglomeratesBusiness conglomerates ZaibatsuZaibatsu Single family controlledSingle family controlled Central holding companyCentral holding company Pyramid structurePyramid structure In 1930’s 4 Zaibatsus controlled 25% In 1930’s 4 Zaibatsus controlled 25%

of Japanese businessof Japanese business Zaibatsus dissolved in 1947Zaibatsus dissolved in 1947

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Keiretsu – key to businessKeiretsu – key to business "Big Six" enterprise complexes (Mitsui, "Big Six" enterprise complexes (Mitsui,

Mitsubishi, Sumitomo, Fuyo, Sanwa and Dai–ichi Mitsubishi, Sumitomo, Fuyo, Sanwa and Dai–ichi Kangyo)Kangyo)

Horizontal Type – diversify in many fieldsHorizontal Type – diversify in many fields Typical structure - Typical structure -

– stable vertical cross–shareholding relationshipsstable vertical cross–shareholding relationships– horizontal affiliations reaching diverse marketshorizontal affiliations reaching diverse markets– possession of large–scale economic resourcespossession of large–scale economic resources– often close managerial tiesoften close managerial ties– executives sit on boards for several companiesexecutives sit on boards for several companies– regular presidents meetingsregular presidents meetings

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Keiretsu – key to businessKeiretsu – key to business Common trait to all “Big Six” within Common trait to all “Big Six” within

complex iscomplex is– central city bankcentral city bank– general trading companygeneral trading company– insurance companyinsurance company

In 1992 “Big Six” members In 1992 “Big Six” members represented only 0.007% of registered represented only 0.007% of registered companies but controlledcompanies but controlled– 19.29% of capital19.29% of capital– 16.56% of assets16.56% of assets– 18.37% of sales18.37% of sales

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Vertical KeiretsuVertical Keiretsu Vertical type – large manufacturing Vertical type – large manufacturing

company groups held together by company groups held together by capital ties capital ties

Typically umbrella formatTypically umbrella format Examples:Examples: MatsushitaMatsushita HitachiHitachi ToshibaToshiba Tokyo Electric PowerTokyo Electric Power ToyotaToyota

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Vertical KeiretsuVertical Keiretsu Commonly held together byCommonly held together by

– capital tiescapital ties– long–term contractslong–term contracts– financial and technological supportfinancial and technological support

Frequently spin off divisions to become Frequently spin off divisions to become separate companies linked to parentseparate companies linked to parent

1995 estimated suggested largest 30 1995 estimated suggested largest 30 groups were comprised of approximately groups were comprised of approximately 12,577 subsidiaries and affiliated entities12,577 subsidiaries and affiliated entities

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Business related KeiretsuBusiness related Keiretsu

Business related - companies Business related - companies tied to groups by business tied to groups by business relationshipsrelationships

E.g. assembler – supplier E.g. assembler – supplier relationshipsrelationships

88

Highly protectionist Highly protectionist activitiesactivities

Congressional Research Service report Congressional Research Service report (1994) raises several international trade (1994) raises several international trade issuesissues

Keiretsu tend to buy from within their Keiretsu tend to buy from within their groups and may discriminate against other groups and may discriminate against other exporters to Japanexporters to Japan

Allegedly “Big Six” made 68% of their Allegedly “Big Six” made 68% of their purchases from companies in which they purchases from companies in which they had at least a 10% equity interest and had at least a 10% equity interest and bought only 5% from foreign unrelated bought only 5% from foreign unrelated companiescompanies

Official figures are 15% inter-company Official figures are 15% inter-company purchasespurchases

99

Highly protectionist Highly protectionist activitiesactivities

Japanese transplant automakers, in Japanese transplant automakers, in particular, have relied heavily on their particular, have relied heavily on their traditional Japanese suppliers who have traditional Japanese suppliers who have followed them to their U.S. plantsfollowed them to their U.S. plants

Keiretsu ties may provide an advantage to Keiretsu ties may provide an advantage to Japanese companies in developing new Japanese companies in developing new technology or in long-term planningtechnology or in long-term planning

Keiretsu distribution systems may Keiretsu distribution systems may discriminate against foreign producers in discriminate against foreign producers in reaching the retail Japanese consumerreaching the retail Japanese consumer

Keiretsu stockholding patterns make the Keiretsu stockholding patterns make the buying and selling of Japanese companies, buying and selling of Japanese companies, let alone hostile takeovers, nearly impossiblelet alone hostile takeovers, nearly impossible

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Keiretsu – trading linksKeiretsu – trading links

All Keiretsus have the support of a All Keiretsus have the support of a Trading Company (Sogo Shosha)Trading Company (Sogo Shosha)

These provide range of goods and These provide range of goods and servicesservices

It is essentially the marketing It is essentially the marketing operation of the Keiretsuoperation of the Keiretsu

But provides But provides Links to financiersLinks to financiers Customer and product intelligenceCustomer and product intelligence

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Management features - 1Management features - 1 Lifetime employmentLifetime employment Rigorous selectionRigorous selection Recession has caused changesRecession has caused changes Temporary workTemporary work Short-term contractsShort-term contracts Job RotationJob Rotation Increases motivationIncreases motivation Makes workers more efficientMakes workers more efficient Gives full insightGives full insight

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Management features - 2Management features - 2 Seniority based promotionSeniority based promotion Strict hierarchical relationshipsStrict hierarchical relationships Decision making process (Ringi)Decision making process (Ringi) Nemawashi – sounding out at all levelsNemawashi – sounding out at all levels Ringi Seido – deliberations at same levelRingi Seido – deliberations at same level Just in Time (JIT)Just in Time (JIT) Maximum efficiencyMaximum efficiency Cost reductionCost reduction EfficiencyEfficiency Supplier relationshipsSupplier relationships

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Management features - 3Management features - 3 Total Quality ControlTotal Quality Control Quality is built into every processQuality is built into every process Inherent not externalInherent not external Quality CirclesQuality Circles Groups of employees meet to identify and Groups of employees meet to identify and

solve work-related problemssolve work-related problems Provides –Provides – CommitmentCommitment Sense of ownershipSense of ownership Improved communicationsImproved communications MotivationMotivation

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Management features - 4Management features - 4

Kaizen – “the key to competitive Kaizen – “the key to competitive success”success”

Constant improvementConstant improvement Customer orientedCustomer oriented Suggestion systemSuggestion system US importUS import Pervades all areas of work Pervades all areas of work

environmentenvironment Not just costNot just cost

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Are there downsides to Are there downsides to Japanese management?Japanese management?

Is productivity improvement the result of Is productivity improvement the result of cost cutting?cost cutting?

Decision making processes impede Decision making processes impede creativitycreativity

Once performance improvement techniques Once performance improvement techniques are made public all companies adopt themare made public all companies adopt them

Japanese business culture is not Japanese business culture is not transferable to western organisationstransferable to western organisations

Attempts to impose some of the cultural Attempts to impose some of the cultural expectations on workers in UK plants owned expectations on workers in UK plants owned by Japanese companies can cause frictionby Japanese companies can cause friction

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The dark side of Japanese The dark side of Japanese management in the 1990smanagement in the 1990s

Christopher B Meek – 2004 Jrnl of Christopher B Meek – 2004 Jrnl of Managerial PsychologyManagerial Psychology

High commitment – low High commitment – low satisfactionsatisfaction

Increase inIncrease in KaroshiKaroshi IjimeIjime

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Incidents of Karoshi in Meek Incidents of Karoshi in Meek (2004)(2004)

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Japanese worker job Japanese worker job satisfactionsatisfaction

Whitehill & Takezawa (1968)Whitehill & Takezawa (1968) asked about how central or important asked about how central or important

their commitment to their employer their commitment to their employer and their work was in comparison to and their work was in comparison to other possible life prioritiesother possible life priorities

StatementStatement, “I think of my company as , “I think of my company as the central concern in my life and of the central concern in my life and of greater importance than my personal greater importance than my personal life,” life,”

9 percent of Japanese respondents 9 percent of Japanese respondents agreedagreed

1 percent of American respondents 1 percent of American respondents agreedagreed

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Japanese worker job Japanese worker job satisfactionsatisfaction

StatementStatement, “I think of the company as a , “I think of the company as a part of my life at least equal in part of my life at least equal in importance to my personal life,” 57 importance to my personal life,” 57 percent of Japanese respondents agreed percent of Japanese respondents agreed

22 percent of American respondents 22 percent of American respondents agreedagreed

only 8 percent of the Japanese agreed only 8 percent of the Japanese agreed that they thought of their company as that they thought of their company as strictly a place to work andstrictly a place to work and

separate from their personal life separate from their personal life compared to 23 percent of the compared to 23 percent of the AmericansAmericans

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Potential reasonsPotential reasons Ganbatte – willingness to work hard & Ganbatte – willingness to work hard &

unceasingly under extreme conditionsunceasingly under extreme conditions Family oriented dependence – one Family oriented dependence – one

looks to the family first for “comfort”looks to the family first for “comfort” Socializing effect that the outside Socializing effect that the outside

world is to be fearedworld is to be feared The importance of not appearing The importance of not appearing

foolish in front of othersfoolish in front of others Company in the role of “family” – Company in the role of “family” –

lifetime employmentlifetime employment

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Fatally Flawed Fatally Flawed Management?Management?

Did Japanese management work because Did Japanese management work because economically Japan was working?economically Japan was working?

Incidents of karoshi and ijime increased at Incidents of karoshi and ijime increased at time of Japanese economic downturntime of Japanese economic downturn

Greater pressure on management to get Greater pressure on management to get more from workersmore from workers

Workers socialisation led them to accept…Workers socialisation led them to accept… To a pointTo a point Is western thought affecting worker Is western thought affecting worker

conscience?conscience? Are attitudes changing?Are attitudes changing?

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Karoshi in context?Karoshi in context? 37 year old engineer died of a stroke at work 37 year old engineer died of a stroke at work in 1987 in 1987

– quoted in Meek– quoted in Meek My husband worked for an automobile company My husband worked for an automobile company

where his job was designing engines. For more than where his job was designing engines. For more than three yearsthree years. . . . . . he would leave home before 7 o’clockhe would leave home before 7 o’clock . . . . . . and not return home until about 2:00 a.m. He and not return home until about 2:00 a.m. He worked on holidays as well worked on holidays as well . . .. . .We got no workers’ We got no workers’ compensation from the company whatsoever compensation from the company whatsoever because, although he died at work, he died of stroke because, although he died at work, he died of stroke and the workers’ compensation applies only to cases and the workers’ compensation applies only to cases of loss of limb while working with machines. Lately, of loss of limb while working with machines. Lately, when I think that if he hadn’t had to work so hard he when I think that if he hadn’t had to work so hard he would still be alive today and my children would still would still be alive today and my children would still have their father, I can’t help but blame the have their father, I can’t help but blame the company.company.

Seeing our children grow up without a father is too Seeing our children grow up without a father is too much for me to bear. Our eldest son said;much for me to bear. Our eldest son said;

““Dad was stupid! He worked too hard all the time” Dad was stupid! He worked too hard all the time”

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The great management The great management myth?myth?

Is Japanese management just a Is Japanese management just a set of production techniques?set of production techniques?

Is “management” in Japan Is “management” in Japan simply an application of societal simply an application of societal norms transferred to the norms transferred to the substitute family (ie the substitute family (ie the workplace)?workplace)?

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Interview with head of Interview with head of KenwoodKenwood

Economist March 2004Economist March 2004 Mr Kawahara is quick to stress that there Mr Kawahara is quick to stress that there are some tasks at which Japanese firms are some tasks at which Japanese firms excel. excel.

Above all is a manufacturing philosophy Above all is a manufacturing philosophy that emphasises highly-trained workers, that emphasises highly-trained workers, continuous efforts to eliminate defects, and continuous efforts to eliminate defects, and lean production that minimises waste. lean production that minimises waste.

In Japan's high-growth years, this was a In Japan's high-growth years, this was a world beater, so the country's management world beater, so the country's management shortcomings did not matter much. shortcomings did not matter much.

Alas, he says, because of this success, Alas, he says, because of this success, business leaders "never needed to learn business leaders "never needed to learn how to manage".how to manage".

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The China Syndrome?The China Syndrome?

If there was a Japanese If there was a Japanese management style that could management style that could work outside Japanwork outside Japan

Where would it be?Where would it be? China?China? Increasing academic interest in Increasing academic interest in

Japanese manufacturing plants Japanese manufacturing plants in Chinain China

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Early thoughtsEarly thoughts

In “Japan’s Reluctant Multinationals” In “Japan’s Reluctant Multinationals” Trevor (1983) divided up Japanisation Trevor (1983) divided up Japanisation process into process into

hard and soft systemshard and soft systems Fukada’s (1995) study of Fukada’s (1995) study of

transferability suggests some transferability suggests some transfer of techniques taking place.transfer of techniques taking place.

This looked at Japanese plants in This looked at Japanese plants in ChinaChina

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Taylor’s work - 1Taylor’s work - 1 Taylor (1999) studied production practices Taylor (1999) studied production practices

in Japanese manufacturing plants in Chinain Japanese manufacturing plants in China Plants represent Japanese manufacturing Plants represent Japanese manufacturing

practices to reasonable high degreepractices to reasonable high degree No common management practiceNo common management practice No overall pattern in 20 casesNo overall pattern in 20 cases We cannot meaningfully speak of We cannot meaningfully speak of

JapanisationJapanisation Production methods are adapted – Production methods are adapted –

profitably - to local and parent company profitably - to local and parent company circumstancescircumstances

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Taylor’s work - 2Taylor’s work - 2 Looking at personnel practice in Japanese Looking at personnel practice in Japanese

firms in China - Taylor (2001)firms in China - Taylor (2001) The main findings wereThe main findings were despite claims of cultural similarity (!!) despite claims of cultural similarity (!!)

between China and Japan, personnel between China and Japan, personnel management practices were generally not management practices were generally not transferred from Japan to the plants in Chinatransferred from Japan to the plants in China

practices that may appear as Japanese practices that may appear as Japanese inspired were often informed by local practicesinspired were often informed by local practices

there was diversity in the forms of practices there was diversity in the forms of practices used, indicating neither sophistication nor a used, indicating neither sophistication nor a singular recipe of management methodssingular recipe of management methods

Hofstede scoresHofstede scores Individuality Ch 15 – Ja 46Individuality Ch 15 – Ja 46 Power Distance Ch 80 – Ja 54Power Distance Ch 80 – Ja 54