Japan: Facing the cultural challenges of Japan and their keiretsu

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Japan: Facing the cultural challenges of Japan and their keiretsu

1. Introduction

The aim of this report is to provide an in-depth analysis on Japan’s macro environment and to assist a company, such as Experian, in evaluating whether or not to enter the Japanese market.

When exploring the possibility of entering a foreign market, country risk analysis is usually carried out.  This “examines the chances of non-market events (political, social, and economic) causing financial, strategic, or personnel losses to a firm” following investment. (Rugman, A. and Collinson, S. 2006, p.373)  One of the common tools used in evaluating a particular environment is the PESTLE framework.  This incorporates political, economic, social, technological, legal and environmental factors to assess the environment.  One can understand that these factors can be inter-linked, for example, the political and economic issues, however, it is a convenient tool for analysts.

I believe that the most important factors for a firm to consider when entering Japan in particular are the social and cultural elements.  As a result, I will investigate these factors further in this report, for example, by looking at the works of Geert Hofstede and Fons Trompenaars.  I will also examine the role of keiretsu in Japan and the possible impacts that they could have on foreign investors.

2. Does the Japanese culture matter?

This is a question that many investors ask themselves when considering entering a new market and the most common reply is that it is probably the greatest obstacle to success.  However, a difficulty arises in defining the term ‘culture’.  “It can be, perhaps, be best understood as the shared beliefs of a group.” (Dawes, B. 1995, p.58)  When analyzing a new environment, firms need to identify the cultures in the chosen market, as such knowledge is necessary for success.

Culture analysts have developed models to characterise cultures such as Hofsted and Trompenaars.  Hofstede suggested four dimensions of culture (Appendix 1).  From his study, Hofstede found the Japanese culture to be heavily reliant on group affiliations and loyalty, and described it as collective.  Javidan, M. and House, R. J. (2001, p.292) explain that an important reason why this is, is due to its harsh environment and being unsupportive for the survival of its population.  For example, it takes at least 20 people to successfully maintain a rice paddy.  This is the opposite of what is generally found in the UK, where managers tend to encourage entrepreneurship and individual responsibility.  As a result, prospective managers in Japan need to be aware of this cooperative issue.  Also, due to strong uncertainty avoidance, members of Japanese culture prefer rules and structure.  Furthermore, the Japanese culture is one that is masculine.  For example, they value competitiveness and are assertive than their counterparts.  These are all factors that managers need to consider when entering Japan.

Building on Hofstede’s work, Trompenaars focussed more on the implications on management from cultural differences.  His research concluded with seven dimensions of culture (Appendix 2) and for each one, he positioned each country relative to each other.  From this study, he found the same conclusion as that from Hofstede, in that Japan is a collective society.  In addition, it is a neutral culture in that they show less emotion in the workplace compared to others.  Furthermore, the relationships developed in the workplace are diffused and extended into the whole society.  Consequently, this provides an insight into possible conflicts that prospective managers may face.  As a result, a possible solution could be to promote social events outside the workplace, as well as encouraging team-building exercises.

As with any study, the models of Hofstede and Trompenaars can be criticised.  Generalisations can be difficult to make due to the nature of national cultures; there are various definitions and they can be interpreted differently by various groups.  “Trompenaars, for example, have been criticised for failing to match their model satisfactorily to the actual responses of managers and basing some of their conclusions on differing, more subjective assumptions and observations.” (Dawes, B. 1995, p.61)  Even though such models have limitations, this model provides a framework and a foundation to research and develop further.

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The Japanese business environment is generally viewed as very traditional due to the very rigid labour laws and the general expectation of lifetime employment with the same employer.  Consequently, in a survey of US companies with operations in Japan, “about 62 per cent said difficulties in recruiting skilled staff were a factor.” (Leadbeater, C. 1991, p.6)  This system includes on-the-job training whereby employees are trained within the firm and partake in a long term programme.  Also, with the prospect of rotations within the firm, employees have the opportunity to develop their professional abilities.  Consequently, prospective investors should consider the ...

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