Effective Japanese Business Practice
Patricia Gercik
Israel Business Conference
December 12, 2010
1
The Islands of Japan
2
Dominant Culture

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Japanese notion
of the company
as family
Japanese notion
of Bushido as
value
Japanese notion
of inside/outside
3
Japan– Core Values
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Inside-Outside
Tatmae/Honne
Hierarchy
Family + Business
Obligation
Empathy
Nationalism/Shinto
Face
4
Vertical Structure
5
6
Japanese History
Domination of Clans
2500 B.C.
Joemon & Yayoi
1467-1568
Sengoku
646-784 A.D.
Nara
1568-1601
Momoyama
784-1185
Fujiwara
1601-1867
Tokugawa
1185-1333
Kamakura (Minamoto)
1867-1912
Meiji
1333-1465
Ashikaga
7
Meiji
8
Meiji
9
Clan and the Corporate Values
Individual vs. Group

Bushido- Way of the sword
• Loyalty
• Obligation
• Self and the Group
• Ideal of the Family
10
Feudal Structure
Organization of Japanese Company

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Enterprise Union
Life-long Employment
Seniority Pay
Board Insiders
11
Inside/Outside: Roadmap to the Inside
NINJO
Individualization
ENRYO
Hesitation
TANIN
Outer
12
Roadmap
Inside/Outside
Tanin
World
“other”
Enryo
“hesitation”
scrutiny
Ninjo
Continuing
Networks
“Individualize”
Uchi-inside
Soto-outside
hesitation
family
no relation
testing
spontaneity
natural amae
13
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
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
What it Means to Prepare
•Information
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History of the company
Assessment of situation
Documentation
Aisatsu ceremony
Reveals preparation
Rituals of commitment
Gifts, cards, history, and seating
16
What it Means to Prepare
•Self-Presentation

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Dress
Timing
Etiquette
•Preparation for each task

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Degree and net worth
E-mail
Conference call
17
Preparation and Zen
18
Preparation
19
Preparation
20
Preparation and Information
1915- 2004 new drugs
Medicine for the people
Toru Iwadare
Founder of Banyu
Pharmaceuticals
Chemist from University of Tokyo
21
Case of Max-- Aerospace
MITI
Japanese High Speed
Engine Consortium
Japanese companies
Members of Japanese High Speed Engine
Consortium
Ito
Facilitator
(on loan to
MITI)
Choose 2 foreign companies to participate:
Max
U.S.
John
U.S.
Bernard
France
Tom
U.K.
22
Case of Max-- Aerospace
I. Critique of
proposal
II. Demands by
foreign companies
1. Intellectual
property
2. Finance
Side
Letter
III. Invitation from MITI
to Max to be on
committee to assess
proposals
Success
23
Loyalty
24
Mentoring
Head
Mentor A
Mentor
B
Mentee
Mentor
B
Mentee
Mentor A
Mentor
B
Mentee
Mentor
B
Mentee
Mentor
B
Mentee
Mentor
B
Mentee
25
Ranks & Ages

Division Manager (Bucho) 48

Section Manager (Kacho) 38

Group Manager (Kakaricho) 30
26
Training

2-6 months job rotations

Case of bank employees and village
27
Advancement in Japanese
Corporation

Tests

Attitude

Mentor

Age
28
Opportunities for Networking in the Lifecycle
of a Japanese business person
High
School
University
Incoming
trainees
in a
company
29
Obligation – Human Feeling
30
Obligation

Never able to be repaid
• Teachers
• Emperor
• Country
• Institution

Ability to pay in kind
• Business
• Personal
31
Obligation

Personal
• Gifts reflect relationship
• Dress, timing, cards – reflect respect for
relationship
• Information and knowledge – reflect
respect for the relationship
32
Bonding
33
Process in Approach to Task

Prepare with:
• E-mail
• Phone Calls
• Video Conference Calls

Involve Japanese through preparation
• Agenda
• Studies
• Information
34
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
Effective Communication
Empathy
Context
Do not personalize
36
Empathy
37
Empathy
38
Letters/Harmony
Create Context
Make the request generated by the
situation
Use institution to create empathy
Do not personalize request
39
Implication of Japanese
Decision Making
Documentation Order of Circulation
Matomaru – Upper Management
(Unity of thought and purpose)
Second guess issues
Middle Management
Meeting on issues
Final Meeting on Division
(Hanko)
Division Originating Request
Division A
Division B
Request
responsible
parties
Division C
40
Implications of Obligation

Company

Personal

Rituals in Aisatsu
41
Stage II: Trust Me
Scrutiny/Testing
Bonding Enablers
On
Giri
Mentor
Commitment
gishin
Documentation
Sincerity
Group Ethic
Role of Etiquette
42
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
43
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
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
Implications of the Architecture
of the Japanese House
46
Implications of Japanese
Physical Office Space
47
Face and Consensus
Personal
Widely known
Self-presentation
48
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
Stage IV: Marry Me - Union

Contract
• Lawyers present
• Repeated understanding
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Keeping up networks
Inclusive
Consideration as part of inner groups
Obligation to position
50
A Case Study:
The Renault-Nissan Alliance
51
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
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
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
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
History of Nissan

Nissan
• Losing market share for 27 years
• Famous for bureaucratic management
style
• Famous for engineering ability
56
Renault’s approach

Renault sensitive to Nissan
corporate culture
• Schweitzer “We looked into it for 6-8
months.”
57
Deal
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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
Questions to be addressed

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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
Alliance: what made it work?

1999 Ghosn in Tokyo “if I didn’t
have Ghosn, I could not have done
this with Nissan.”
60
Alliance: what made it work?

Why did Alliance make sense?
1.
2.
3.
4.
Renault’s design
Cash
Nissan engineering
North American access for Renault
61
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
What was the conflict between
Renault and Nissan?
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Renault wanted joint ventures
Nissan wanted to explore
management and business issues
without involvement from lawyers
63
What was the new approach?
Suppliers
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“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
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
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
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Sub-teams of 500 address particular
issues
All reports were turned down
66
Value added?
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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
Human Resources
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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
A Case Study:
Toyota
69
Aishin Fire and Toyota Group

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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
Aishin Seikin’s Role as
Sole Supplier

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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
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
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
Aishin Fire and the Toyota Group
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Feb. 1 Fire in Aishin Seiki factory
destroying Toyota’s sole source of PValve 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
What Were the Hurdles?
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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
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
Basis for Coordination and Initiative
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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
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