Japanese Corporate Culture

With a strong task focus and ability to change direction quickly, Japanese businesses are known for their Guided Missile Project Culture.

That Japanese corporate culture often conflicts with American management styles is partially due to a basic underlying assumption of Japanese culture. Generally, Japanese companies offer lifetime employment subject to few layoffs. Layoffs are much more common in the United States. North American managers are mostly trained at theory-based business schools that employment must be subject to corporate profitability and therefore is often short-term. Japan: General Careers and Slow Promotions

Because many Japanese companies offer lifelong tenure, career paths in Japan are more general when contrasted with their much more specialized American counterparts. Also, job promotion is much slower in Japan with higher emphasis on age and seniority. Promotions for top performers in American firms are granted many times faster than in the Japanese system. A major difference between Japanese and American mindsets is that Japan focuses on the longterm while Americans frantically chase short-term goals. Japanese Corporate Decision-Making U.S. executives sent to manage an American subsidiary in Japan might suffer culture shock if they try to assign corporate decision-making powers to individual Japanese managers. Thats because Japanese businesses traditionally make decisions in groups. Responsibility for those decisions is shared collectively, unlike in America where individual managers are held accountable. Japanese Employee Controls Japanese management is much more focused on relationships with their employees than rules to ensure corporate goals are met. Therefore, Japanese performance control mechanisms are informal. Managers in Japan depend on the honour system to get work done, relying on their workers' trust and good will. These informal employee controls come down to the fact that Japanese employers are concerned for their employees interests -- both at work and home with their families. American businesses mostly focus on their employees work lives. Japans Guided Missile Project Culture Alfons Trompenaar designed an organizational model based on Japans strong emphasis on equality in the workplace and the strong Japanese task orientation.

Trompenaar used the guided missile as a metaphor for Japanese corporate culture because of the following characteristics that distinguish businesses in Japan:

Formal hierarchal considerations are given low priority. Teams and project groups are common. While individual expertise is important, all project team members are treated as equal. Japanese teams take a problem-centered approach to their tasks. The Japanese focus intently on the work with all members committed to the team goal. Japanese managers use extensive suggestion systems and quality circles to solicit employee feedback, and are always available to listen to team member concerns. Because supervisors and subordinates work closely together, changes are executed quickly.

Japan has successfully implemented its guided missile project culture around the world. For example, Japans Toyota automotive plant in Cambridge, Ontario (Canada) continuously encourages front-line workers to suggest improvements to Toyotas component-based, vehicle assembly processes. Toyotas Canadian workers suggested recycling the plastic coverings used to cover vehicle windows and mirrors during the automated painting performed by giant robotic arms. Previously the plastic coverings were discarded in the trash, but recycling now saves the Japanese corporation millions of dollars. Canadian team members were rewarded with pay and credit for both their performance and problem solving. References This article presents independent calculations and insights based on geert-hofstede.com and research from International Management, Culture, Strategy and Behavior (6th edition, HodgettsLuthans-DOH) as well as Charles Hampden-Turner and Alfons Trompenaars The Seven Cultures of Capitalism.

Keiretsu
From Wikipedia, the free encyclopedia

Keiretsu

A keiretsu (?, lit. system, series, grouping of enterprises, order of succession) is a set of companies with interlocking business relationships andshareholdings. It is a type of informal business group. The keiretsu maintained dominance over the Japanese economy for the greater half of the 20th [1] century, but are beginning to lose their grip. The member companies own small portions of the shares in each other's companies, centered on a core bank; this system helps insulate each company from stock market fluctuations and takeover attempts, thus enabling long-term planning in innovative projects. It is a key element of the automotive industry in Japan.

Contents
[hide]

1 History

1.1 Collapse of the zaibatsu

2 Types of keiretsu

o o

2.1 Horizontal keiretsu 2.2 Vertical keiretsu

3 Nature of the keiretsu

o o

3.1 In Japan 3.2 Outside Japan

4 See also 5 References 6 Additional reading

[edit]History The corporate governance of Japan dates back to the 19th century, much of which was propelled by the formation of the Meiji Restoration in 1866 by the Japanese government, the same time when the world [2] entered the Industrial Revolution. These formations were termed zaibatsu. Prior to the war, Japan remained dominated by four major zaibatsu:Mitsubishi, Sumitomo, Yasuda and Mitsui. They focused on steel, banking, international trading and various other key sectors in the economy, all of which was controlled by aholding company. Apart from this, they remained in close connection to influential [3] banks that provided funding to their various projects. The prototypical keiretsu appeared in Japan during the "economic miracle" following World War II. Before Japan's surrender, Japanese industry was controlled by large family-controlled vertical monopolies called zaibatsu. Under this system, large industrial corporations paved the way for banks and trading companies to sit on top of the organizational pyramid controlling all financial operations and distribution of goods.

[edit]Collapse

of the zaibatsu

Seizure of the zaibatsu families assets, 1946

The zaibatsu had been viewed with some ambivalence by the Japanese military, which nationalized a significant portion of their production capability during World War II. Remaining assets were also highly damaged by the destruction of the war. Under the American occupation after the surrender of Japan, a partially successful attempt was made to dissolve the zaibatsu. Many of the economic advisors accompanying the SCAP administration had experience with the New Deal program under PresidentFranklin Delano Roosevelt, and were highly suspicious of monopolies and restrictive business practices, which they felt to be both inefficient, and to be a form of corporativism (and thus inherently antidemocratic). During the occupation of Japan, 16 zaibatsu were targeted for complete dissolution, and 26 more for reorganization after dissolution. Among the zaibatsu targeted for dissolution in 1947 were Asano, Furukawa, Nakajima, Nissan, Nomura, and Okura. Their controlling families' assets were seized, holding companies eliminated, and interlocking directorships, essential to the old system of intercompany coordination, were outlawed. Matsushita (which later took the name Panasonic), while not a zaibatsu, was originally also targeted for dissolution, but was saved by a petition signed by 15,000 of [4] its unionized workers and their families. However, complete dissolution of the zaibatsu was never achieved, mostly because the United States government rescinded the orders in an effort to reindustrialize Japan as a bulwark against Communism in [5] Asia. Zaibatsu as a whole were widely considered to be beneficial to the Japanese economy and government, and the opinions of the Japanese public, the zaibatsu workers and management, and the entrenched bureaucracy regarding plans for zaibatsu dissolution ranged from unenthusiastic to disapproving. Additionally, the changing politics of the Occupation during the reverse course served as a crippling, if not terminal, roadblock to zaibatsu elimination. Even until today, banks and trading companies have been at the top of the pyramid, having access and control over a portion of each company's part of the keiretsu. Shareholders succeeded over the family

control of the cartel. This was made possible with relaxing of Japanese laws whereby holding companies could become stockholding companies. [edit]Types

of keiretsu

Cartels and groupings of various kinds are common in Japan. The two types of keiretsu, horizontal and vertical, can be further categorized as: Kigy shdan ( "horizontally diversified business groups"?) Seisan keiretsu ( "vertical manufacturing networks"?) Ryts keiretsu ( "vertical distribution networks"?)

[edit]Horizontal

keiretsu

The primary aspect of a horizontal keiretsu (also known as financial keiretsu) is that it is set up around a Japanese bank. The bank assists these companies with a range of financial services. The leading horizontal Japanese keiretsu, also referred to as the Big Six, include: Fuyo, Sanwa, Sumitomo, Mitsubishi, Mitsui, and Dai-Ichi Kangyo bank groups. Horizontal keiretsu may also have vertical relationships, called branches. The linkage of these corporate groups through ownership of long-term equity and production activities, [6] leads to emergence of vertical keiretsu. [edit]Vertical

keiretsu

Vertical keiretsu (also known as industrial keiretsu) are used to link suppliers, manufacturers, and distributors of one industry. One or more subcompanies are created to benefit the parent company (for example, Toyota or Honda). Banks have less influence on distribution keiretsu. This vertical model is further divided into levels called tiers. The second tier constitutes major suppliers, followed by smaller manufacturers, who make up the third and fourth tiers. The lower the tier, the greater the risk of economic [7] disruption; moreover, due to low position in the keiretsu hierarchy, profit margins are low. [edit]Nature

of the keiretsu

At the epicenter, the "big six" keiretsu is a bank and a trading company(sogo shosha). Japanese banks are allowed to have equity in other firms with a quota of less than 5% of the total number of shares issued by the company (Anti-Monopoly Law Reform of 1977). Banks play a crucial role in the smooth functioning of this organization. They assess the investment projects and provide loans when required. The trading companies(sogo sosha) deal in imports and exports of an assorted range of commodities throughout the world. Each major company has its own "President's Club", enabling interaction of core members to [3] better help decide their strategies. The Japanese keiretsu took various preventive measures to avoid takeovers from foreign companies. One of them was "interlocking" or "cross-holding" of shares. This method was established by Article 280 of Commerce Law. By doing so, each company held a stake in the other's company. This helped reduce the pressure on management to achieve short-term goals at the expense of long-term growth. Besides that, interlocking of shares serves as a tool for monitoring and disciplining the group's firms. The level of group orientation or strength between the member companies is determined by the "interlocking shares

ratio" (the ratio of shares owned by other group firms to total shares issued) and the "intragroup loans ratio" (the ratio of loans received from financial institutions in the group to total loans received). Industries such as banking, insurance, steel, trading, manufacturing, electric, gas and chemicals are all part of the horizontal keiretsu web. The member companies follow the "One-Set Policy" whereby the groups avoid direct competition between member firms. The One-Set Policy:
[8]

Industry

Mitsui

Mitsubishi

Sumitomo

Fuyo

Sanwa

DKB

Banking

Sakura Bank

Bank of TokyoSumitomo Bank Fuji Bank Mitsubishi Bank

Sanwa Bank

Dai-Ichi Kangyo Bank

Trust Banking

Yasuda Mitsui Trust Mitsubishi Trust Sumitomo Trust Trust & & Banking & Banking & Banking Banking

Toyo Trust & Banking

Life Insurance

Mitsui Mutual Life

Sumitomo Meiji Mutual Life Mutual Life

Yasuda Mutual Life

Fukoku Mutual life, Asahi Mutual life

Marine & Fire Insurance

Mitsui Marine & Fire

Tokio Marine & Fire

Sumitomo Marine & Fire

Yasuda Marine & fire

Nissan Marine & Fire, Taisei Marine & Fire

Trading Company

Mitsui Bussan

Mitsubishi Shoji

Sumitomo Corporation

Marubeni

Nissho Iwai

Itochu

Steel

Japan Steel Mitsubishi Steel Sumitomo Works Manufacturing Metal Industries

Nakayama Steel Works, Nisshin Steel

Kawasaki Steel, Kobe Steel

Chemicals

Mitsui Toatsu Chemicals

Mitsubishi Gas Chemicals

Sumitomo Chemicals

Kureha Chemical Industries

Sekisui Chemicals

Asahi Chemical Industries

In the 1920s, government officials maintained close relations with the zaibatsu, and the roots of their influence still hold strong. The keiretsu have great influence on Japanese industrial and economic policy. The preferential buying habits of the keiretsu kept foreign investors and foreign goods out of their markets, which America criticized as "barriers to free trade". This enabled the keiretsu to enjoy monopoly privileges over the Japanese market, thus maintaining high prices for their goods, as they had full dominance over the price and distribution of products and services throughout the supply side. It is believed that due to this practice, Japan in the late 1980s imported far less than what they should have($40 billion less as per a report by the Brookings Institution). In such a work environment, the probability of an employee to remain working in the same company for his entire working life was very high. Moreover, this framework allowed rapid co-operative development [3] (sharing vital information, reduction in cost of R&D and higher quality products) of the keiretsu. [edit]In

Japan

During the occupation of Japan, under the Supreme Commander of the Allied Powers, General Douglas MacArthur, a partially successful attempt was made to dissolve the zaibatsuin the late 1940s. Sixteen zaibatsu were targeted for complete dissolution, and 26 more for reorganization after dissolution. However, the companies formed from the dismantling of the zaibatsu were later reintegrated. The dispersed corporations were reinterlinked through share purchases to form horizontally integrated alliances across many industries. Where possible, keiretsu companies would also supply one another, making the alliances vertically integrated, as well. In this period, official government policy promoted the creation of robust trade corporations that could withstand heavy pressures from intensified trade [9] competition. The major keiretsu were each centered around one bank, which lent money to the keiretsu member companies and held equity positions in the companies. Each bank had great control over the companies in the keiretsu and acted as a monitoring and emergency bail-out entity. One effect of this structure was to minimize the presence of hostile takeovers in Japan, because no entities could challenge the power of the banks. Although the divisions between them have blurred in recent years, there have been nine major [8] postwar keiretsu:

Name

Bank

Major group companies

Mitsubishi

Mitsubishi Bank (until 1996) Bank of TokyoMitsubishi (1996 2005) Bank of TokyoMitsubishi UFJ(2006 ) Mitsubishi Trust and

Financial: Mitsubishi Corporation, Tokio Marine and Fire Insurance, Mitsubishi Estate, Meiji Mutual Fund Construction: Pacific Consultants International Food: Kirin Brewery Electronics: Mitsubishi Electric, Mitsubishi Precision Trading and Commerce: Mitsubishi Shoji Cars: Mitsubishi Motors, Mitsubishi Heavy Industries, Mitsubishi Fuso Truck and Bus Corporation Petroleum: Nippon Oil, Mitsubishi Oil, Mitsubishi Nuclear Fuel

Banking

Precision Machinery: Nikon Chemicals: Mitsubishi Chemical, Mitsubishi Gas Chemical, Mitsubishi Rayon Co., Ltd., Mitsubishi Materials Corp., Mitsubishi Plastics Industries, Asahi Glass, Nippon Synthetic Chemical Industries (Nippon Gosei) Paper: Mitsubishi Paper Mills Ltd. Iron and Steel: Mitsubishi Steel Shipping: Nippon Yusen

Mitsui

Mitsui Bank (until 1990) Sakura Bank (1990 2001) Sumitomo Mitsui Bank (2001 ) Sony Financial, Sony Bank

Financial: Mitsui Real Estate, Mitsukoshi, Mitsui Mutual Life, Mitsui Marine & Fire Food: Nippon Flour Mills, Mitsui Sugar, Suntory Chemicals: Fuji Photo Film, Mitsui Toatsu Chemicals, Mitsui Petrochemical Industries, Toagosei Chemical Industries, Denki Kagaku Kogyo, Daicel Chemical Industries, Mitsui Pharmaceuticals, Mitsui Toatsu Fertilizers, Mitsui Toatsu Dyes, Toray Trading and Commerce: Mitsui Bussan Petroleum: General Sekiyu, Kyokuto Petroleum Industries Electronics: Sony Corporation, Yaussa Corporation, Ibiden Company, Toshiba Iron and Steel: Japan Steel Works Gaming: Sony Computer Entertainment Entertainment: Sony Pictures Entertainment, Sony Music Entertainment other Sony subsidiaries, and Media Nusantara Citra

Sumitomo

Financial: Sumitomo Trust & Banking, Sumitomo Mutual Life Food: Asahi Breweries Sumitomo Bank (until Rail: Hanshin Railway, Keihan Railway, Nankai Railway 2001) Trading and Commerce: Sumitomo Corporation Sumitomo Mitsui Cars: Mazda Bank (2001 Electronics: NEC ),Sumitomo Trust and Iron and Steel: Sumitomo Metals Banking Financial: Sumitomo Real Estate Chemicals: Sumitomo Chemicals Infrastructure: Nippon Koei

Fuyo

Fuji Bank (until 2000) Financial: Yasuda Mutual Life, Yasuda Marine & Fire Mizuho Bank (2000 ) Food: Nisshin Flour Milling, Sapporo Breweries Yasuda Trust and Precision Machinery: Canon, Hitachi, Ricoh

Banking Yamaichi Securities

Trading and Commerce: Marubeni Chemicals: Showa Denko, NOF Corporation, Kureha Chemical Industries, Nippon Sanso, Hitachi Chemical, Asahi Kasei Rail: Tobu Railway Vehicles: Yamaha, Nissan Retail: Matsuya

Dai-Ichi Kangyo(DKB)

Financial: Fukoku Mutual Life, Asahi Mutual Life, Nissan Marine & Fire, Taisei Marine & Fire Electronics: Fujitsu, Hitachi, Fuji Electric, Yaskawa Electric, Nippon Columbia Cars: Isuzu, Kawasaki Heavy Industries Dai-Ichi Kangyo Power Generation: Tokyo Electric Power Bank (until 2000) Petroleum: Showa Shell Sekiyu Mizuho Bank (2000 ) Precision Machinery: Asahi Optical Kankaku Securities Trading and Commerce: Seibu, Itochu, Orient Group Iron and Steel: Kawasaki Steel, Japan Metals Steel: Kobe Steel, Kawasaki Steel Chemicals: Denki Kagaku Kogyo-Mitsui Group, Nippon Zeon, Asahi Denka Kogyo, Sankyo Co., Lion Corporation, Kyowa Hakko Kogyo, Asahi Chemical Industries

Food: Itoham Foods, Suntory Rail: Hankyu Railway, Keisei Railway Steel: Kobe Steel, Nakayama Steel Works, Nisshin Steel Precision Machinery: Konica Minolta, Hoya Corporation Sanwa Bank (until Petroleum: Cosmo Oil 2002) Electronics: Hitachi, Iwatsu Electric, Sharp Corporation, Nitto UFJ Bank (2002 Denko, Kyocera 2006) Trading and Commerce: Takashiama, Orix, Nissho Iwai Sanwa("Midorikai") Bank of TokyoChemicals: Ube Industries, Tokuyama Corp, Hitachi Mitsubishi UFJ(2006 Chemical, Sekisui Chemical, Kansai Paint, Tanabe ) Seiyaku, Fujisawa Pharmaceutical, Daiso Co., Teijin, Unitika Toyo Trust and Fukusure Banking Cars: Hitachi Zosen Corporation Retail: Takashimaya Cinema: Toho Shin-Maywa

Tokai

Tokai Bank

Food: Kagome

(Toyota Group)

Chuo Trust

Cars: Daihatsu, Suzuki Motor, Toyota Steel: Daido Steel Precision Machinery: Ricoh Petroleum: Idemitsu Kosan Electronics: Ushio Industries Trading and Commerce: Matsuzakaya

IBJ

Industrial Bank of Japan, New Japan Securities Wako Securities IBJ Securities

Cars: Fuji Heavy Industries Precision Machinery: Ikegai, Riken Chemicals: Nippon Soda, Chisso Corporation, Nissan Chemical, Tosoh Corporation, Hodogaya Chemical, PlasTech, Taihei Chemical, Japan Organo, Kuraray
[10]

Toyota is considered the biggest of the vertically integrated keiretsu groups. The banks at the top are not as large as normally required, so it is actually considered to be more horizontally integrated than other keiretsu. The Japanese recession in the 1990s had profound effects on the keiretsu. Many of the largest banks were hit hard by bad loan portfolios and forced to merge or go out of business. This had the effect of blurring the lines between the individual keiretsu: Sumitomo Bank and Mitsui Bank, for instance, became Sumitomo Mitsui Banking Corporation in 2001, whileSanwa Bank (the banker for the HankyuToho Group) became part of Bank of Tokyo-Mitsubishi UFJ. Generally, these causes gave rise to a strong notion in the business community that the old keiretsu system was not an effective business model, and led to an overall loosening ofkeiretsu alliances. While they still exist, they are not as centralized or integrated as they were before the 1990s. This, in turn, has led to a growing corporate acquisition industry in Japan, as companies are no longer able to be easily "bailed out" by their banks, as well as rising derivative litigation by more independent shareholders. [edit]Outside

Japan
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The keiretsu model has not appeared outside Japan, but many non-Japanese businesses are described as keiretsu, such as the Virgin Group (UK) and Tata Group (India). Airline alliances, such as Oneworld and the Star Alliance, have also been described as keiretsu. Generally, these groups exhibit more top-down management, centralized control or (in the case of airline alliances) looser equity ownership connections than do "true" keiretsu. Banks cited as being central to keiretsu-like systems include Deutsche Bank and the early years of JP Morgan and Mellon Financial/Mellon family in the United States. One economic group, the Colombian Grupo Empresarial Antioqueo, is often described as such.

A form of keiretsu can also be found in the cross-shareholdings of the largest U.S. media companies see Columbia Journalism Review's "Who Owns What" website or They Rule. South Korean conglomerates, called chaebol, are often compared to keiretsu, but the chaebol conglomerations are much more similar to a Western conglomerate likeGeneral Electric than pre-World War II zaibatsu. [edit]See

also

Corporate law Economy of Japan Horizontal integration Monopoly UK company law Vertical integration Zaibatsu

[edit]References