Within the last decades, a tendency for massive internationalization and globalization of economic activity has been developing in modern business circles. Economic globalization and international expansion bring new ample opportunities for world’s business structures, open the doors for foreign trade and commerce, and benefit economic growth and social welfare. That is why the number of multinational corporations and associations is rapidly growing. Within the scope of this tendency, it is hard to imagine a motivated manufacturing or commercial institution which does not seek expansion of its economic perspectives and does not look for an occasion to raise its commercial ambitions to much higher levels.
If a business organization or structure plans to expand its activities and break into international business environment, it is absolutely essential for its management to be aware about all various cross-cultural backgrounds and communicational challenges, which can be faced when establishing business contacts with overseas partners. Before starting doing business abroad, it is necessary to study thoroughly all possible issues related to cultural and historical traditions, customs, etiquette, the key values of foreign business culture, approaches and expectations, as well as social attitudes and standards. This report summarizes the findings about social and business culture of contemporary Japanese society and provides several recommendations for those, who intend to start doing business in Japan.
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Basic Facts about Business Environment in Japan
The Japanese market is very well-developed and mature. Its capacity is about 127 million people with relatively high incomes. The economy of the country has already recovered after the crisis of the beginning of the 1990s, and currently Japan has the world’s 2nd largest economic system. In 2004 the country’s GDP totaled $ 4.67 trillion, but GDP growth remains quite moderate: 2.6% (Enterprise Ireland, 2005).
On a global scale, Japan was one of the last countries to start adopting international industrialization and opening its industrial sectors for overseas investors, businessmen and foreign producers. Within the last decade, the country’s imports have been steadily increasing, coming up to 18.8% in 2004 (Enterprise Ireland, 2005). The Japanese government actively supports and promotes foreign investors giving them extremely favorable opportunities to develop their business.
Japan is governed by the Emperor and bicameral Parliament called Kokkai. Modern service sectors of the Japanese economy (especially banking and insurance segments) are thriving, but industrial development has been slightly slowed down by heavy dependence on foreign fuel and raw materials, as well as by a certain tax pressure. Recently, the Japanese government initiated a series of reformative programs directed on extensive privatization, economic reorganization, restructure of the existing tax system, and so on. Monetary unit in Japan is the Japanese Yen (¥) (Japan Guide, n.d.)
The country’s transportation, IT and communication infrastructures are, probably, the most advanced in the world, therefore, there will never be a problem of getting around and getting in touch with anyone. The same can be said about the accommodation: there is an abundance of comfortable first-class business hotels throughout the country. Finally, Japan is a very safe country from the point of health, business, personal and other risks. Crime rates are very low, medical care is excellent and always available, there are almost no risks of hard diseases, and the only possible threat is connected with frequent earth-quakes.
For those who intend to break into the Japanese market, it is always necessary to keep in mind that the country’s industrial sectors are very advanced and innovative. Therefore, the Japanese customer is very sophisticated and demanding, because he can enjoy the advantages of the first-class quality products. That is why it is necessary to come up with an interesting original effective concept or idea and be able to offer a high-standard product; otherwise, the attempts to enter the Japanese market will definitely fail.
Business Culture of Japan
Traditional Views on Business in Japanese Society
Some specialists suppose that traditional perception of business in Japan is heavily influenced by certain old-fashioned values preserved from the late feudal epochs. In his book Japan: Doing Business in a Unique Culture (2005), Kevin Bucknall points on several factors related to ancient feudal culture, including domination of men, respect to hierarchy and veneration of the old, prevalence of mercantilist viewpoints, life-long devotion to the job, etc. Bucknall resumes that “..the process of moving towards values more appropriate to a modern nation [has begun], but there is still a way to go” (Bucknall, 2005, p.5).
Another important tendency, which impacts traditional perception of business in modern Japanese society, takes source from a common social concept of defining a person according to his belonging to a certain group. From this point of view, business becomes an important footing for group development, offering great opportunities both for collective and individual achievements. Nevertheless, some observers consider that such emphasis on domination of social groups over individuals affects common understanding of business and entrepreneurship in Japan (Enterprise Ireland, 2005).
Main Values of Business Culture in Japan
Hierarchy. This value is originated from Confucianism and helps to define a position and status of an individual in a social group. A hierarchical system classifies the employees as the members of the groups of higher, middle and lower levels, according to their expertise, competence, qualification, experience, background, etc. Hierarchy is a core issue of Japanese organizational culture, which must be always taken into account when building relationships.
Group Orientation. The Japanese are convinced that personal identity of any employee can be evaluated only in the framework of group performance. Group orientation is based on such factors as team-work, participation, altruism and commitment, abilities to compromise and cooperate, etc. This value is one of the key concepts of Japanese business culture, and “..a Japanese will avoid doing anything that reflects badly on the group or causes embarrassment or loss of face” (Leslie, 1992, p.37).
Consensus Building (Nemawashi). Since Japanese organizations are group oriented, consensus building value is mostly related to collaboration when making decisions. Usually, business discussions in Japanese companies are put to talking about more general and important points. However, the decisions related to small details can be taken on higher hierarchical levels and submitted for general approval later on.
Achieving Harmony (Wa). This value is closely related to the previous one and can be expressed with a common tendency to avoid confrontation and disagreement. It is also based on religious dogmas of Confucianism which are calling to establishing good interpersonal relations, peace, unity and accordance. At that, the emphasis must be made on mutual trust, friendly support and cooperation, tolerance and humble attitude.
Respect. Respect is an important instrument to achieve harmony. This value can be also considered in the framework of hierarchy, which means maintaining the hierarchical relations by demonstrating respect to people of higher status. Respect can be expressed with the help of verbal and non-verbal communication, behavior or other forms of social interaction, personal achievements, devotion and loyalty to the company, and so on.
Obligation (Giri). This important value is developed in every individual through the system of education, personal experience, business and social life, etc. Obligation is closely linked to such social values as honor, dedication, duty and responsibility. Being a strictly conservative concept, Giri may include, for example, reluctance to leave a job which brings no personal satisfaction in order not to lose own reputation, and so on.
Organizational Culture in Japan
The most important aspects of the Japanese organizational culture include conservative and formal attitude, respect to higher ranking people, politeness, patriotism and loyalty to organizational traditions, hard work, modesty, honesty and conformism. Many observers also mention “..very conservative Japanese attitude toward corporate failure,” (Venture Japan, 2006). It is typical to dedicate own business life to only one company. Therefore, the concept of “life-time employment” is something usual, and the bonds between the company and its employees are extremely strong. That is why it is common to place the reputation of the company over own reputation and be proud of the progress and achievements of the company more than of own developments and success.
Typically, a classical vertical hierarchy is practiced in Japanese organizations. Such system defines the rules of organizational communication, both formal and informal. At that, the role of middle management is more significant than it is in Western companies, because the employees of middle level are the most familiar with all the aspects and details of the company’s activities. That is why top managers rely a lot on them in decision making process, and for those who want to establish business contacts with a Japanese company it is essential to find a good approach exactly to middle management.
Decision making process is quite specific in the Japanese business culture. Unlikely to Western style (from the top managers to lower managers), the Japanese prefer completely different approach: from the lowest managers to top managers. In particular, if a middle level manager wants to submit a proposal, he must do it in a written form (ringi-sho) and submit it for consideration of his lower subordinates. After some modifications and improvements are made, ringi-sho rises level by level up to the top manager, who approves the final decision.
The Japanese are very organized, very neat in their business routine, and usually they expect the same attitude from their business partners. That is why such organizational formalities as thorough planning, frequent reporting and so on, are highly appreciated. Since leadership is an important value, the Japanese like being managed and tend to minimize own initiatives. Instead, they are very obedient, hard-working, productive and easy to be managed. Finally, personal discipline is another key element of their organizational culture, and the Japanese never leave their workplaces before the working day is over: it is the best to leave the workplace after 2-3 colleagues have already left.
Strategies of Communication and Building Business Relationships
Specialists in international communication from CommunicAid Ltd came to the conclusion that building effective relationships with a Japanese counterpart has to be based on the following concepts: (1) compatibility, which means prioritizing such factors as personal relationships, company’s and social welfare, corporative success and achievements, etc.; (2) sincerity, meaning readiness to base business connections and cooperation on such values as honesty, openness, compromise, etc.; (3) trustworthiness, determining the abilities to keep own reputation high and be responsible for own deeds (Kwintessential, n.d.)
Implication and indirect factors play very important role in business culture, because Japanese businessmen tend to show respect to their partners and put informative part of business communication to minimum, assuming that the counterpart is very well-informed about the subject or matter. That is why it is necessary to be a very good listener and learn to understand the intentions or expectations of the Japanese partners. Besides, the Japanese prefer to deal with calm, well-balanced and objective people. That is why one must remain humble, quiet, modest, but at that be concerned and interested to a certain extent.
Exchange of information is actually a crucial point of business communication, and in order to establish good relationships it is necessary to provide the Japanese counterpart with comprehensive information about the product and beyond. It is prior for the Japanese to know and understand the ideas they intend to implement, so they are always ready to ask a lot of different related questions. Another important element of communication in Japanese business culture is the tendency to keep away from strict and direct expressions. This strategy is connected to the value of achieving harmony and is effectively used for avoiding confrontations and offenses.
Meeting and Greeting. In Japan, it is traditional to greet anyone with a bow which is considered to be a mark of respect. Nevertheless, it is a common practice in modern Japanese circles to greet foreign partners with a handshake and a slight nod. When meeting a Japanese businessman for the first time, it would be very good to be introduced by a third person who is well-familiar with both counterparts. One can introduce himself using full name and the name of the company he represents. The Japanese use polite form of referring to each other which includes the last name followed by “san”.
Business Card Exchange. It is a central ritual of modern Japanese business culture. Before going to Japan to establish any business contacts, it is absolutely essential to prepare a good amount of business cards which would have the reverse side translated into Japanese. Business card exchange ceremony usually takes place in the beginning of a business meeting. It is necessary to stand up facing the counterpart, to bow slightly and to hand out your business card using both hands. Correspondently, a business card must be received from the Japanese counterpart with two hands and a bow.
It would be considered offensive and impolite to place a received business card into the pocket or wallet without reading it. The information on the card has to be studied thoroughly, and if a name or position of the counterpart group member is unclear, it would be better to confirm it right away. This would signal about your genuine interest and respect. When the meeting starts, it is recommended to place the business cards received from the Japanese partners on the table and use them as a reference when addressing to the counterpart by the last name and title.
Business Meetings and Negotiations. The first meeting is very important because the Japanese businessmen consider it to be the best time to evaluate foreign counterparts and form an opinion about their trustworthiness and reliability. Usually, important meetings are scheduled between 10 a.m. and 12 p.m. and it is supposed to be a good tone to make a call 1 hour before the meeting time and confirm the arrival or reschedule it. Usually, the Japanese are very strict about the schedules and do not like wasting their time during the meetings. Therefore, it is good to plan the agenda and be equipped with proper supportive materials.
It is necessary to dress formally and arrive to the meeting 10 minutes before the time scheduled. It is recommended to greet the highest ranking person first. When entering a meeting-room, the participants of the higher status go first and sit at the head of the table. Then the attendees of lower ranks enter the room and take their sits according to the hierarchy. Foreign guests must not sit until they are shown the place and invited to sit down. The same rule applies for rising up after the meeting is over.
It is polite to bring a gift which must be handed out to the highest ranking host before the meeting starts. The best choice for the gift is a souvenir from the country of origin. When receiving a gift from the Japanese counterpart, it is polite to show gratitude with a bow, open it and demonstrate appreciation. But in case if the gift is wrapped, it is allowed not to open it right away. If some drinks are served, it is necessary to wait until the highest ranking host starts drinking. Taking notes during the meeting is usually appreciated as a sign of genuine interest, but one must remember not to write anyone’s name with the ink of red color. Finally, one must be ready for some breaks of silence during business meetings.
Social Customs and Traditions of Japanese Society
Specifics of Social Interaction in Japan
Japanese society is one of the most homogeneous in the world, because for centuries the country was isolated from the outer world, both geographically and culturally. Regional differences in culture and social life-style are minor, and 98.5% of present national population is ethnic Japanese (Buchnall, 2005). Moreover, too rapid historic development used to cause frequent social transformations and reallocations. Combined with such cultural characteristics as love to liberty and equality, antagonism against ruling classes, high social responsibility and awareness, etc., it resulted in failure to form any strong system of social classes in Japan.
Undoubtedly, social interaction in Japanese society is influenced by the same cultural factors which influence their business culture. The Japanese are very concerned about their personal reputation, so during any communication or interaction they always try to reveal only positive sides of theirs. They are very trustable and responsible people, who have an extensive range of personal concerns, staring from their own welfare and ending with some problems of a global level. In their daily interaction the Japanese are quite opened and interested, trying to be aware about everything happening around them.
Another important characteristic of social interaction and co-existence in Japan is a common tendency to peaceful conflict resolution and social harmony. That is why there are no public scandals or misunderstandings, not to mention any possible acts of humiliation or discrimination. The Japanese are very sensitive to the concept of public shame. Undoubtedly, it seriously impacts public order and, together with traditional obedience to laws, makes public safety very high. The same can be said about general criminal situation in the country, which is controlled not only by public security services, but also by highly developed individual sense of community.
Impact of Religion and Ancient Cultural Traditions on Modern Social Life
Japan is famous for its ancient unique cultural customs and traditions which are still very well preserved due to geographical isolation of the country from continental influences. The Japanese cherish their traditions and rituals, such as ancient tea ceremony, ceremonies of sharing meals, or the ritual of wearing their traditional clothing, kimono, and many others. They are used to combining old traditions and modern styles in their social culture.
The Japanese like spending free time in cinemas, restaurants with karaoke, bowling clubs or special game centers, where they play shogi or go. Though they are supposed to be one of the most workaholic nations in the world, people spend a lot of time watching TV, listening to music or reading comics, trying to relax and have rest from fast rhythm of their life.
Generally, the Japanese are less religious than American or European people are, and the religions dominating in the country (Confucianism and Shinto) have principally different impact on social life of the nation. In Western countries we draw our strength from God and praying. In Japan, religion serves social purpose in a different way, impacting personal development of every individual through learning how to become an exemplary and valuable member of the society. Thus, according to Bucknall, “The Confucian approach … involves much rote learning, discipline, and emphasis on conformity” (Bucknall, 2005, p.21).
Cultural Nuances of Informal Social Interaction
The Japanese consider a good manner to get together and socialize after work, but not always the idea to spend time together in non-working hours will be followed by a real invitation to a dinner or cup of tea. Actually, the Japanese do not prefer inviting their business partners to home: they usually arrange business lunches or dinners in the resultants, and such meetings often continue in coffee shops or little cafes. As a rule, the hosts of such “out-of-the-office” meetings cover all the expenses, but it is very polite at least to offer paying.
Good manners play a central role in Japanese social culture. When receiving meals from someone it is necessary to say "itadakimasu" ("I am grateful to receive”) and after eating one must say “gochisosama (deshita)” ("Thank you for your meal"). In traditional Japanese restaurants tables are very low and people sit around the table on the floor or on a special carpet, tatami. At that, men must sit cross-legged and women must sit on the knees laying their legs to the left or to the right. Usually, the most honorable guests are placed farthest from the door. It is essential to learn eating with chopsticks before going to Japan.
One must not blow the nose on public, especially at the table. Chopsticks must not be abused and one must avoid playing with them or pointing somebody/something. It is necessary to avoid sticking the chopsticks into the meals, which is usually done in the funeral. Men are supposed to serve alcoholic drinks to women sitting next to them. It is good to carry own paper handkerchiefs and napkins as they are not always provided in public washing rooms and toilets.
In those rare cases when overseas business partners are invited to a Japanese home, it can be a sign of deep respect and friendly attitude. It is preferable to bring a small present for the hosts. However, it must not consist of four items since number four is considered to be unlucky, as well as whistling indoors and cutting nails at night. One must remember to remove the shoes before entering a Japanese house or apartment.
When the meals are served, it is polite to try at list a bit of everything and demonstrate appreciation of the cooking. The Japanese like drinking alcohol and usually they are quite insistent when offering alcoholic drinks. That is why for those who do not drink it is better to find a serious excuse to refuse drinking and be prepared to retell this excuse many times. It is quite a sensitive matter, and in order not to offend the hosts the best way would be trying a little bit of the drinks offered (Japan Guide, n.d.).
Conclusion: Recommendations on Developing
Effective Cross Cultural Competence When Doing Business in Japan
The importance of developing an effective cross cultural competence when staring business abroad is unarguable. After thorough analysis and study of the materials available, as well as taking into account the recommendations received by the author during his personal communication with Hidetoshi Kumamoto, a Sales Supervisor of Kawasaki GTA West (see Appendix), the following stages of the strategy aimed on breaking into the Japanese market were created for the consideration of general public.
The initial stage has to include the following measures: developing a first-quality product (preferably using some innovative idea or technology), studying possible opportunities and challenges connected with the Japanese market, attracting powerful investors for the project, and looking for some prospective Japanese business partners, keeping in mind that “…the first step in starting a business relationship is to approach the Japanese company at the appropriate management level” (Leslie, 1992, p.40).
The second stage must include the following important steps: spending efforts on studying the specifics and principal aspects of Japanese business culture and social traditions, finalizing all necessary formal preparations for starting business in Japan, initiating the activities directed on promoting the product in the market and earning good reputation (publicity, participating international events, etc.), etc.
Finally, the third stage of the strategy includes starting active negotiations with the Japanese partners and building good relations with the most influential market players, selecting the best distribution channels, overcoming all inter-cultural challenges and, finally, launching manufacturing capacities on a small scale. The next stages will include market and capacity expansion, receiving bigger profits, improving the product, more intensive marketing, and other measures.
Personal communication with Hidetoshi Kumamoto, a Sales Supervisor of Kawasaki GTA West (firstname.lastname@example.org), January 23, 2007.
Mr. Kumamoto, how long did it take you to get adapted and more or less used to social traditions and life-style in the United States?
H.K. Actually, not as long as it may seem. The point is: modern Japanese society is very flexible and adaptive to the changes which are coming from other cultures. Though, certainly, we remain very conservative. I was assigned to work in the United States more than 3 years ago, and before coming here I was expecting to face more considerable differences between social lives of our two cultures. Americans are more liberal, opened, they do not hide their emotions and it is much easier to understand what they really think about you.
In your opinion, what are the most important and defining values of Japanese business culture?
In business we value, first of all, personal relations and personal identity of every single individual. We are always very concerned about our reputation and reputation of our organization, and everyone understands that success or achievements of a group depend entirely on individual success of every member. Besides, we base our business relations on infinite respect, commitment and loyalty to our business. No Japanese company owner would keep the employees who show no respect or interest in the job they do.
Mr. Kumamoto, what differences between the traditions of doing business in Japan and the ones in the US you could observe?
Oh, there are a lot of them. American businessmen are more liberal and relaxed in everything, starting from the way they organize the first negotiations and ending with their attitude toward contractual obligations. Even if the stocks are running out, sometimes they do not write a line. We try to calm down our customers and somehow solve the problem, but our American partners can not be reached! Such things would not happen in Japan. I do not want to say that you are not reliable or trustable: you just must be always reminded about what you need to do in terms of business and how you need to do this.
What type of communication strategy you would recommend in order to built good relationships and trust with Japanese business partners?
To my mind, one just must be sincere and honest. It is necessary to show that you are a man of your word and also that you are not chasing immediate profits. The main thing is to set up a good contact on personal level and arrive at an understanding. Besides, any foreign businessman must remember that it usually takes more time to receive some positive feedback from people of my culture, so their coldness must not be misinterpreted.
What are the first steps you would recommend to an overseas entrepreneur who wants to start doing business in Japan?
Undoubtedly, to find good local business partners and do everything possible in order to win a good reputation. It is very important not to be pushy and start as a small company with the opportunities of future development and enlargement. Besides, one must have a very precise approach to creating a proper product or service to come up with. Our customer is used to high-quality goods, and even a well-developed or well-promoted product can be rejected by the market. Finally, before coming to Japan it is essential to study some materials about our business culture, otherwise it would be almost impossible to build trust and good relationships with the Japanese business society.
Finally, what about the main differences in social life between Japan and the US?
Again, I have to underline that you are freer in your behavior and your life-style than my fellow nationals are. Our social culture is heavily influenced by ancient cultural traditions and conservatism, and we hold back to our historical backgrounds very strongly.
Bucknall, K. B. (2005). Japan: Doing Business in a Unique Culture. Boston: Boston Books.Doing Business in Japan. (n.d.) Kwintessential. CommunicAid Group Ltd. Retrieved January 25, 2008, from <http://www.kwintessential.co.uk/etiquette/doing-business-japan.html>.Enterprise Ireland. (2005). Doing Business in Japan. [Brochure]. Turner Print Group, Ireland: Fuji Chimera Research Institute Inc. & Enterprise Ireland.Japan A-Z. (n.d.). Japan Guide. Retrieved January 25, 2008, from: <http://www.japan-guide.com/e/e691.html.>Japanese Business Culture. (2006). Venture Japan. Venture Group Plc. Retrieved January 25, 2008, from <http://www.venturejapan.com/japanese-business-culture.htm>.Leslie, E. (1992, February 10). Some Observations on Doing Business in Japan. Business America, 123(2), 36-41.
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