Transcript Document

Slide 17.1
Chapter 17
Japan
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.2
Japan
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Objectives
Introduction
Political, social and cultural characteristics
Economic characteristics
Business characteristics
Japanese corporations
A changing nation
Restructuring corporations.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.3
Objectives
• Examine the underlying factors - economic,
political, social and cultural - that underlie the
distinctiveness of Japan, its business practices
and its corporations.
• Understand why Japan is a difficult but rewarding
market for foreign firms to enter.
• Identify key strengths and weaknesses of
Japanese firms.
• Explore the ongoing changes in Japan and the
implications for Japanese firms, their
collaborators and competitors.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.4
Introduction
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.5
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.6
Political, social and cultural
characteristics
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.7
Political and legal system
• The branches of the Japanese government are
very similar to those in the United States:
legislative, executive and judicial.
• Legislative power is vested in the Diet, which
consists of a popularly elected House of
Representatives and House of Councilors.
• Executive power rests with the Cabinet that is
organized and headed by the prime minister, who
is elected by the Diet.
• The judicial power is vested in the Supreme
Court. In addition, there are eight high courts and
a host of district courts throughout the country.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.8
Ministry of International
Trade and Industry (MITI)
•
•
MITI served as the coordinating body of the country’s powerful
commercial machinery between the 1950s and early 2000s.
MITI encouraged Japanese companies to pursue targeted
opportunities.
– Computer technology, high-tech industrial and agricultural
machinery, optical electronics and world-class auto manufacturing.
•
When MITI identified an area where it would like to expand
business efforts, it was able to gain support for three reasons.
– Financial incentives: these are made available to companies that
were prepared to commit resources.
– Personal relationship: most MITI ministers attended the major
universities, and so they have school ties to the captains of
industry.
– Location: MITI offices and those of most corporate and financial
giants were located in the same area of Tokyo.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.9
Ministry of Economy,
Trade and Industry (METI)
• In 2001, MITI was replaced by METI (the Ministry
for Economy, Trade and Industry).
• The practice of ‘amakudari,’ involved the regular
movement of senior politicians and civil servants
from the public sector into private sector
companies, often as highly paid consultants.
• The early 1990s saw the start of a series of
restructurings in Japanese politics to decrease
government influence of the economy. Arguably,
Government in Japan continues to plays a more
important role in the economy than in other
OECD countries.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.10
Social and cultural
characteristics
• Collectivism rather than individualism, dominates many
aspects of Japanese life.
• Within companies certain characteristics have strong
religious roots, including honour, respect, sincerity, loyalty
(chu), duty, obligation or responsibility (giri), ritual and
hierarchy.
• Parent–child relationships characterise the hierarchical
nature of inter-organizational and interpersonal links, such
as government–industry, large firm–small firm, manager–
employee, etc.
• Respect for elders, ritualistic (highly-complex) language
forms and behaviour, group activities and consensus
decision making are all important elements.
• These contrast individualism and meritocratic forms of
organization and tend overall to unify the Japanese in their
response to gaijin (or outsiders).
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.11
Hai ≠ Yes
• Hai can mean one of at least four levels of yes:
– recognition, but not necessarily understanding;
– understanding, but not necessarily acceptance and
agreement;
– responsibility, understanding, but must consult with
others and secure their agreement before
acceptance; and
– agreement, which means understanding,
agreement and acceptance.
• The non-verbal signals from the speaker have to
be understood to determine, which yes is being
meant.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.12
Economic characteristics
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.13
Japanese economy
• Japan’s economy, combined with its productivity
and the average wealth of its population, make it
the second largest economy in the world after the
USA.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.14
Rapid growth in the early years
• Japan’s rapid growth in the early years stemmed
from factors such as:
– the traditional relationship between government
and business;
– its unique capital markets (national finance and
investment systems);
– its traditionally strong ‘keiretsu’ groupings of firms;
 Keiretsu: a business group consisting of a host of
companies and banks linked through ownership
and/or joint ventures.
– the role of the corporation in society, and the role
of the employee in the firm.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.15
Table 17.1
Economic and trade data for Japan
Sources: http://www.oecd.org/statsportal/; http://www.meti.go.jp/english/statistics/index.html; http://www.jetro.go.jp/.; IMF World Economic Outlook and EconStats; Bureau of Labor Statistics;
US Census Bureau; CIA, The World Factbook, 2007; JETRO, Trade and Investment Statistics, Japan’s International Trade in Goods, March 2007
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.16
Table 17.2
Japan’s FDI imbalance (billions of US $)
Source: UNCTAD, World Investment Report, 2006
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.17
Table 17.3
Japan’s FDI inflows and outflows by source and destination, 2005
Source: JETRO, 2006 White Paper on International Trade and Foreign Direct Investment, pp. 10, 12, http://www.jetro.go.jp/en/
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.18
Figure 17.1
Trends in Japan’s trade by country/region: exports from Japan
Source: Statistical Handbook of Japan 2008 by the Statistics Bureau of Japan
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.19
Figure 17.2
Trends in Japan’s trade by country/region: imports to Japan
Source: Statistical Handbook of Japan 2008 by the Statistics Bureau of Japan
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.20
Japan and China:
the new Asian powerhouse?
• Trade and FDI flows between Japan and China
are growing particularly quickly, raising the
potential of a powerful axis of economic growth in
Asia.
– Japan’s technological leadership, its excellence in
innovation, its large, wealthy market and its
footholds in Europe and the US.
– China’s low-cost manufacturing base and its
evolving, large but low-income market.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.21
Business characteristics
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.22
Manufacturing strengths
• A variety of attributes underlie Japanese
manufacturing competitiveness.
– attention to quality;
 quality circles (QC) and total quality management (TQM).
– strong manufacturer–component supplier linkages;
 just-in-time (JIT) and keiretsu relationships.
– ability to cut production costs;
 ‘just-in-time’ and flexible and ‘lean’ manufacturing
techniques etc.
– a high level of automation and use of robotics;
– higher degree of credibility and responsibility given to
engineers and technical expertise;
– kaizen or continuous improvement, and a focus at all
levels on incremental productivity improvement and
customer-led product development.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.23
Strong applied R&D
• Japan has traditionally spent more than most
other countries on R&D. In 2005, 3.18% of the
nation’s GDP was spent on R&D, compared to
2.68% in the US and just 1.84% in the EU27.
• Around 78% comes from industry, the highest
amongst OECD countries.
• Contrary to popular myth the Japanese
Government has always spent relatively smaller
amounts on R&D compared to other advanced
countries (this is partly related to the low level of
defence spending).
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.24
Figure 17.3
Company spending on R&D: Japan compared
Sources: M. E. Porter and C. H. M. Ketels, UK Competitiveness: Moving to the Next Stage, DTI Economics Paper No. 3, Department of Trade and Industry, UK Government and the
Economic and Social Research Council (ESCR), 2003, at http://www/.dti.gov.uk.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.25
Figure 17.4
International patenting output: Japan compared
Sources: US Patent and Trademark Office, 2002; M. E. Porter and C. H. M. Ketels, UK Competitiveness: Moving to the Next Stage, DTI Economics Paper No. 3, Department of Trade and
Industry, UK Government and the Economic and Social Research Council (ESCR), 2003, at http://www.dti.gov.uk
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.26
Keiretsu
• The renowned Japanese corporate groupings or
keiretsu, characterised by cross-shareholdings
and regular meetings between executives,
represent more or less closely tied groups of
integrated businesses.
• There are broadly two types of keiretsu, the
horizontal (kinyu) type and the vertical,
manufacturing keiretsu.
• In the early 1980’s the top six keiretsu alone
directly accounted for about 5% of the Japanese
labour force and 16% of total Japanese corporate
sales.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.27
Figure 17.5
The Fuyo keiretsu group before restructuring
Source: Sir H. Cortazzi, Modern Japan: A Concise Survey (London: Macmillan, 1993), p. 132
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.28
Distribution, retailing
and customer-orientation
• Associated with the keiretsu industry groupings
are multi layered distribution and retail networks
in Japan.
• This “tied” system of distribution, bound by strong
face-to-face ties between sellers and buyers at
each level, adds substantial costs to the final
product.
• Many elements of this complex distribution
system remain in Japan today. The multi tiered
distribution hierarchy has become more
simplified, however, driven by the growth in
discount stores and cost-reduction measures.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.29
Japanese corporations
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.30
Table 17.4
The top 40 Japanese firms
Note: F/T = foreign/total; Surendar = classification (of firm). Data are for 2003. u = United Kingdom; l = Americas; z = United States; j = Japan;
D = home-region oriented; S = host-region oriented; B = bi-regional; G = global
Sources: S. Collinson and A. M. Rugman, “The Regional Nature of Japanese Multinational Business,” Journal of International Business Studies, vol. 39, no. 2 (2008), pp. 215–230
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.31
Table 17.4
The top 40 Japanese firms (Continued)
Note: F/T = foreign/total; Surendar = classification (of firm). Data are for 2003. u = United Kingdom; l = Americas; z = United States; j = Japan;
D = home-region oriented; S = host-region oriented; B = bi-regional; G = global
Sources: S. Collinson and A. M. Rugman, “The Regional Nature of Japanese Multinational Business,” Journal of International Business Studies, vol. 39, no. 2 (2008), pp. 215–230
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.32
Japanese enterprise system
• In one of the most extensive studies of the
Japanese enterprise system Fruin (1992)
highlights high productivity, functional
specialization and manufacturing adaptability as
the distinguishing hallmarks of Japanese firms.
• He identifies these attributes at three, connected
levels: the factory, the firm and the inter firm
network.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.33
Characteristics of
Japanese management
• We can distil some of the main characteristics of
the generic Japanese management style as:
– Effective communications internally and with
outside firms, and the use of cross-disciplinary,
cross-business and cross-functional workshops.
– Less separation of R&D, design, manufacturing
and marketing functions.
– Life-time employment, low labour mobility and
substantial investments in training. There is also a
strong emphasis on training on-the-job and jobrotation within the firm.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.34
Characteristics of
Japanese management (Continued)
– Managers as problem definers, not firefighters and
as educators and mentors, not disciplinarians. This
is underpinned by the weak links between
performance and pay and the low wage
differentials between workers and managers in the
age-related hierarchy.
– Strong group/team ethic, loyalty and motivation
combined with competitiveness between teams.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.35
Characteristics of
Japanese management (Continued)
– Strict formal hierarchy combined with strong
underlying informal networks and a tendency
towards consensus-based decision making
(‘horizontal promotion’ for high-fliers and a lack of
outsiders entering the firm at senior levels).
– General “long-termism” with a focus on growth and
employment stability and market share rather than
profits and shareholder dividends.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.36
Kaisha (“company”)
• Abegglen and Stalk (1985) sum up some of the
distinctive characteristics of Japan as the ‘‘3 Ms’’.
– marketing: direct links with consumers via
retailers and wholesalers and strong customer-led
product development;
– money: cross-shareholding and the lack of
outside pressure for short-term returns and stock
price improvements;
– manpower strategy: worker involvement, loyalty,
effective team-working, and devolvement of
responsibility combined with hierarchy.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.37
A changing nation
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.38
A changing nation
• Starting in the early 1990s Japan experienced its
worst economic recession in the post-war period.
• Between 1990 and 2000
–
–
–
–
unemployment grew from 2.1% to 4.7%;
GDP growth fell from 5.1% to 1.9%;
motor vehicle production fell by 25%;
the sales of large department stores slumped by
13%;
– residential land prices in Tokyo dropped by 55%.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.39
A changing nation (Continued)
• Alongside this economic slump, significant social
and cultural developments have resulted in an
unprecedented degree of tension between
traditional and modern ways of living and working.
– an increase in the purchase of foreign goods;
– the rise of a “value for money” mentality;
– a higher reliance on equity finance for MNEs as
opposed to bank loans.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.40
Figure 17.6
Bank group consolidation in Japan
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.41
Figure 17.7
Declining cross-shareholding in Japan
Note: Average proportion of shares in a company held by companies whose shares are held by this company
Source: M. Abe and T. Hoshi, “Corporate Finance and Human Resource Management: Evidence from Changing Corporate Governance in Japan”, Dokkyo University and RIETI
presentation, 2003
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.42
Table 17.5
Shareholding at market value
Note: 1 The market value of public pension funds is not included in that of Annuity Trusts. 2 Foreigners: non-Japanese corporations and individuals. 3
The market value of own shares held by a listed company is included in a type to which such company belongs. Total market value of own shares held
by listed companies in 2007 Survey is 12,494.5 billion yen, accounting for 3.12% of total market value of all companies surveyed. 4 Figures less than the
unit are omitted, except that in the case of percentage figures and average figures, a fraction of 0.5 or more is counted as a whole number and a fraction
less than that is omitted
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.43
Figure 17.8
Cross-border M&A activity in Japan
Source: JETRO, White Paper on International Trade and Foreign Direct Investment, 2007, http://www.jetro.go.jp/en/stats/
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.44
Out–in M&As in major developed countries and value of inward FDI
(cumulative total, 1999–2003)
Table 17.6
Note: 1 The out-in M&A rate indicates the proportion of the M&A market in each country accounted for by M&As where the ultimate parent company of
the acquirer is foreign
2 Figures for inward FDI indicate the cumulative net flow on a balance of payments basis
Sources: Prepared from Thomson Financial data (as of March 18, 2004) and OECD data
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.45
Restructuring of corporations
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.46
The decline of manufacturing
and distribution keiretsu
• Despite rationalization, consolidation, and a
significant growth of M&As in key sectors,
Japanese companies are still having to
restructure their operations substantially in the
face of longer term pressures, including:
– more expensive capital;
– growing competition from low-cost Asian
producers;
– declining prices of key manufactures, particularly
electronics and autos;
– a slowing domestic economy;
– growing inroads into the domestic economy by
foreign competitors.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.47
Restructuring and reorganization
• Japan’s firms now:
– Reduce cross-shareholding.
– Avoid giving their usual suppliers a guaranteed
business, encouraging them instead to compete
with each other on price.
– Bring more inputs from abroad so a more pricedriven domestic market and freer flows of imports
has evolved.
– Decrease the use of exclusive agreements with
single distributors or sales organizations.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.48
Other changes
• The growth of outward-FDI and off-shore
manufacturing.
• The decline of life-time employment and
changing HRM practices.
• Diversification strategies.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.49
Transforming the
Japanese company
• Examining the above changes, Michael Porter
and colleagues analyzed the challenges facing
Japanese managers and came up with the
following guidelines for transforming the Japanese
company.
– Create distinctive long-term strategies – rather than
imitating close rivals break out of the consensus
and do something different.
– Expand the focus of operational effectiveness – i.e.
improve office-level productivity as well as plantlevel efficiency.
– Learn the role of industry strategy in structure –
among a number of strategic changes, firms should
avoid getting locked into price-based rivalry.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009
Slide 17.50
Transforming the
Japanese company (Continued)
– Shift the goal from growth to profitability – focusing
on market share was only possible with “patient
capital” (linked to keiretsu and traditional capital
markets), push for performance-related rewards.
– Reverse unrelated diversification – “stick to your
knitting”; pare down to your core competencies and
let other firms do the rest.
– Update the Japanese organizational model –
change internal practices, away from hierarchy and
consensus towards meritocracy and
entrepreneurship.
– Move away from incremental change – become
more flexible and responsive to suit the new
competitive environment.
Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009