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1 Effective Japanese Business Practice Patricia Gercik Israel Business Conference December 12, 2010.

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Presentation on theme: "1 Effective Japanese Business Practice Patricia Gercik Israel Business Conference December 12, 2010."— Presentation transcript:

1 1 Effective Japanese Business Practice Patricia Gercik Israel Business Conference December 12, 2010

2 2 The Islands of Japan

3 Dominant Culture Japanese notion of the company as family Japanese notion of Bushido as value Japanese notion of inside/outside 3

4 Inside-Outside Tatmae/Honne Hierarchy Family + Business Obligation Empathy Nationalism/Shinto Face Japan– Core Values 4

5 Vertical Structure 5

6 6

7 Japanese History Domination of Clans 7 1467-1568 Sengoku 1568-1601 Momoyama 1601-1867 Tokugawa 1867-1912 Meiji 2500 B.C. Joemon & Yayoi 646-784 A.D. Nara 784-1185 Fujiwara 1185-1333 Kamakura (Minamoto) 1333-1465 Ashikaga

8 Meiji 8

9 9

10 Clan and the Corporate Values Individual vs. Group Bushido- Way of the sword Loyalty Obligation Self and the Group Ideal of the Family 10

11 Feudal Structure Organization of Japanese Company Enterprise Union Life-long Employment Seniority Pay Board Insiders 11

12 Inside/Outside: Roadmap to the Inside 12 TANIN Outer ENRYO Hesitation NINJO Individualization Go Giri – Obligation

13 Roadmap Inside/Outside Tanin Enryo Ninjo Continuing Networks World “hesitation” “Individualize” “other” scrutiny Uchi-inside 13 Soto-outside hesitation family no relation testing spontaneity natural amae

14 Stages of Relatonships Stage I: Know Me - Preparation Stage II: Trust Me - Scrutiny/Testing Stage III: Believe Me - Working Together Stage IV: Marry Me - Union 14

15 Preparation is the Act Stage I: Know Me What does it mean to prepare? Human Network Human Resources Go-between Nemawashi Network & use of network 15

16 What it Means to Prepare Information History of the company Assessment of situation Documentation Aisatsu ceremony Reveals preparation Rituals of commitment Gifts, cards, history, and seating 16

17 What it Means to Prepare Self-Presentation Dress Timing Etiquette Preparation for each task Degree and net worth E-mail Conference call 17

18 Preparation and Zen 18

19 Preparation 19

20 Preparation 20

21 Preparation and Information 21 1915- 2004 new drugs Medicine for the people Toru Iwadare Founder of Banyu Pharmaceuticals Chemist from University of Tokyo

22 Case of Max-- Aerospace MITI Japanese High Speed Engine Consortium Japanese companies Members of Japanese High Speed Engine Consortium Max U.S. John U.S. Bernard France Tom U.K. Ito Facilitator (on loan to MITI) Choose 2 foreign companies to participate: 22

23 Case of Max-- Aerospace I. Critique of proposal II. Demands by foreign companies 1.Intellectual property 2.Finance III. Invitation from MITI to Max to be on committee to assess proposals Side Letter Success 23

24 24 Loyalty

25 Mentoring Head Mentor A Mentee Mentor B 25

26 Ranks & Ages Division Manager (Bucho) 48 Section Manager (Kacho) 38 Group Manager (Kakaricho) 30 26

27 Training 2-6 months job rotations Case of bank employees and village 27

28 Advancement in Japanese Corporation Tests Attitude Mentor Age 28

29 Opportunities for Networking in the Lifecycle of a Japanese business person 29 High School University Incoming trainees in a company

30 30 Obligation – Human Feeling

31 Never able to be repaid Teachers Emperor Country Institution Ability to pay in kind Business Personal 31 Obligation

32 Personal Gifts reflect relationship Dress, timing, cards – reflect respect for relationship Information and knowledge – reflect respect for the relationship 32 Obligation

33 Bonding 33

34 Process in Approach to Task Prepare with: E-mail Phone Calls Video Conference Calls Involve Japanese through preparation Agenda Studies Information 34

35 Meeting Preparation Preparation is the act Circulate the agenda via e-mail E-mail as communication and off record conversation E-mail as involving people from both sides Involvement of the Japanese is critical Topics should be given on both sides Communication around topics is essential Reveal preparation and commitment on topics Show willingness to understand issues from others 35

36 Effective Communication Empathy Context Do not personalize 36

37 Empathy 37

38 Empathy 38

39 Letters/Harmony Create Context Make the request generated by the situation Use institution to create empathy Do not personalize request 39

40 Implication of Japanese Decision Making 40 Documentation Order of Circulation Matomaru – Upper Management (Unity of thought and purpose) Middle Management Final Meeting on Division (Hanko) Division Originating Request Meeting on issues Request responsible parties Division A Division B Division C Division A Division B Division C Second guess issues

41 Implications of Obligation Company Personal Rituals in Aisatsu 41

42 42 Stage II: Trust Me Scrutiny/Testing Bonding Enablers On Giri Mentor Commitment gishin Documentation Sincerity Group Ethic Role of Etiquette

43 43 Stage III: Believe Me Working Together Understanding the Work Group Consensus Language nintai—patience ringi group (role) socializing (role) Strategies to Facilitate tatemae / honne go-between haragei—silence Amae use of human resources Mentor ningen kankei--people contact

44 Strategies for a Consensual Society: Managing and Negotiation Japanese Style Hanashiai-talk with one another Sasshiai- creation of a good atmosphere Settoku suru- persuade Nattaku- understand and accept Nintaiyoku-patience On/giri- obligation 44

45 Strategies for a Consensual Society Language: How the Japanese Say No “I’ll check on it and do whatever I can.” “I’ll do my best after I talk with my senior executive.” “I’ll think about it.” “I’ll handle it the best I can.” “It’s very difficult.” “I’ll consider it in a forward-looking manner.” “I’ll make an effort.” “I’m not sure.” 45

46 46 Implications of the Architecture of the Japanese House

47 47 Implications of Japanese Physical Office Space

48 Face and Consensus Personal Widely known Self-presentation 48

49 Face and Consensus Hierarchy Who is important? Who is talking? Praise-group ethic Blame-group ethic Wrap up of feelings around an issue Issues that are taboo How issues will be addressed 49

50 Stage IV: Marry Me - Union Contract Lawyers present Repeated understanding Keeping up networks Inclusive Consideration as part of inner groups Obligation to position 50

51 51 A Case Study: The Renault-Nissan Alliance

52 The Renault-Nissan Alliance “To steer alliance strategy and supervise common activities on a global level, while respecting the identity of each company and not interfering in its operations.” Louis Schweitzer, Renault’s chairman CEO President Carlos Ghosn vice president May 2002 Renault-NissanBV 52

53 History Renault Renault oldest national automaker Nationalized by de Gaulle 1945 Strong performance but slim profit margin 85% of cars sold in Western Europe Little participation in premium cars and light trucks 53

54 History Renault “Looking towards internationalization, but no European partners made sense and American partners made no sense because they were much larger. The Asian financial crisis created an opportunity for us.” Louis Schweitzer, Renault’s chairman CEO President 54

55 History of Renault-Nissan Alliance 1999 Renault invested 5.4 billion U.S. dollars in Nissan for 36.8% of the company 2001 Renault had confidence in Nissan Nissan profits accounted for 47% of Renaults’ profits for fiscal year 2001 Combined sales 5 million autos Alliance had 9.2% of world auto makers 55

56 History of Nissan Nissan Losing market share for 27 years Famous for bureaucratic management style Famous for engineering ability 56

57 Renault’s approach Renault sensitive to Nissan corporate culture Schweitzer “We looked into it for 6-8 months.” 57

58 Deal 1999 Schweitzer and Hanawa signed Renault and Nissan Alliance and Equity Participation Agreement Renault 36.8 stake in Nissan for 5.4 billion dollars Renault obtained warrants to purchase 540 million shares to be issued by Nissan at 400 yen per share Renault could increase its stakes up to 39.9% of Nissan up to 44.4% Nissan could purchase Renault shares under terms to be decided later 58

59 Questions to be addressed Would companies be able to realize further savings? How should Renault-NissanBV address issues across disparate corporate and national cultures? Could each company maintain their identity while working together? 59

60 Alliance: what made it work? 1999 Ghosn in Tokyo “if I didn’t have Ghosn, I could not have done this with Nissan.” 60

61 Alliance: what made it work? Why did Alliance make sense? 1.Renault’s design 2.Cash 3.Nissan engineering 4.North American access for Renault 61

62 Alliance: what made it work? What was the financial reception? “Alliance of the weak” Nissan’s point of view “please teach us how to make a profit” 62

63 What was the conflict between Renault and Nissan? Renault wanted joint ventures Nissan wanted to explore management and business issues without involvement from lawyers 63

64 What was the new approach? Suppliers “When we say common suppliers, it means common standards. We can only choose the supplier together if we agree on everything-including quality” Renault executive Eliminate those who could not meet target price Suppliers eliminated with repeated bad parts Cut equity in supplier companies 64

65 What did Ghosn do? Nothing for a year: “If I had listened to consultants on Japanese culture and business, I would have gone back to France.” 65

66 What did Ghosn do? 11 Cross Functional Teams CFT CFT 10 members middle managers 2 pilot member from Exec. Committee Reports due in 3 months to Exec Committee Sub-teams of 500 address particular issues All reports were turned down 66

67 Value added? Nissan taught Renault manufacturing Entry into Mexico through Nissan Joint distribution in Japan and Europe Joint information systems Joint learning of standard car platforms 20% in 3 years cost reduction Cost engineering, trust, act right away Sold stakes in all but 4 supplier companies If goals were not met Ghosn and Executive Committee would resign 67

68 Human Resources Plant closing but job saved if employee would move (18%) Personnel Removed seniority pay Abolished life long employment Bonus based on target objective results Board reduced from 43 to 9 68

69 69 A Case Study: Toyota

70 Aishin Fire and Toyota Group Aishin sole supplier to Toyota Group for P-Valves critical in brakes (small well machined component) ‏ Aishin Just in Time (JIT) Aishin had 2-3 weeks supply Toyota in full production in anticipation of sales prior to the 2% consumer tax All Toyota production halted with the fire 70

71 Aishin Seikin’s Role as Sole Supplier Spun out of Toyota in 1949, 20% owned by Toyota, major supplier to Mitsubishi Motors and Toyota Group (65% to Toyota) ‏ Specialist in brake components, sole supplier of P-valves Aishin’s competitive advantage high volume, high quality production using self designed machinery and well trained workforce 71

72 Aishin’s response: Supplier response Feb 1 4:18 am Sat. morning fire 5:30 am Aishin forms Emergency Response Unit (ERU) ‏ 6:30 ERU forms 4 subunits (production, materials handling, customer interface, general affairs) ‏ Day long efforts to identify and contact substitute producers Feb. 2 Aishin begins faxing designs for valves and production equipment to substitute suppliers 72

73 Who were the Substitute Suppliers? 62 firms 22 Aishin suppliers Toyota 36 Toyota suppliers 4 outside companies (not regular suppliers) ‏ Supported by 70 machine tool makers and 80 additional suppliers 73

74 Aishin Fire and the Toyota Group Feb. 1 Fire in Aishin Seiki factory destroying Toyota’s sole source of P- Valve Production Feb. 3 Toyota Announces next day shutdown of 20 of 30 assembly plants Feb. 4 Volume of P-Valve production begins on temporary lines at an Anshin supplier 62 firms involved Feb. 6 Toyota plants reopen Feb 10 All Toyota plants back to normal Feb 17 All Toyota plants to full capacity 74

75 What Were the Hurdles? Firms had little information//Toyota and suppliers sent 500 people to Aishin Fragile and damaged equipment//handled with care and solicited equipment Communication poor//installed 500 lines cell and land Coordination with suppliers//suppliers set up special teams Technical problems//Aishin organized meetings 75

76 Why and How did the Network Respond? Why did the network respond? No official pressure (why?) ‏ No negotiations over cost and intellectual property Rapid transfer of expertise Rapid problem solving for alternatives to Aishin’s process 76

77 Basis for Coordination and Initiative Toyota Supplier Association: regular meetings, problem solving workshops Transfers of people across network Flows of people across network Shared culture and language (JIT) ‏ Trust and “social capital” established through system 77

78 Outcome Aishin reimbursed direct costs of production of P-Valves to 62 participating companies Toyota gave bonus of 1% of first quarter sales to every supplier in the Toyota network (not just those who stepped up to the plate) ‏ 78

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