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August 8, 2006
Reflections on Transitions in Japanese Business Practices from the Bubble Era to Today (Part I)
[Editor's note: "Even an idiot can make money in easy times," said a Taiwanese business friend, once one of the largest garment manufacturers on the island and long since retired. "But the test of your commercial ability comes when times are tough. Try staying afloat then."
During the 1980s, this editor worked for Japanese corporations in Japan during the so-called semiconductor wars with the United States. Japanese had become mighty competitors, reducing venerable American brands to so much rubble. How had they done it? Americans wanted to know the secrets of Japanese success.
But then came China, and, oh, how the mighty have fallen! Or have they? What about those famed Japanese business practices? Have the Japanese adapted to changing commercial circumstances, and, if so, how?
Shawn Beifuss of Asia Logistics Wrap, discusses these issues in a series of posts beginning today. We are grateful to Shawn for his insight and permission to post on Asia Business Intelligence.]
Part I: Overestimating Japan in its Rise, Western Business Underestimated Japan in its Descent
During Japan’s bubble years throughout the mid- to late-1980’s, there were many books and articles written for the Western business community that advocated the “Japanese way,” and warning the Western business community to either adopt Japanese practices or lose out in head-on competition. A widely read book that exemplifies this period is titled “Kaisha: The Japanese Corporation,” and is reviewed at Amazon as follows:
“Much of the literature on the legendary success of the Japanese corporation has rested on the premise that the Japanese possess certain cultural traits, not easily transferable to the West, that provide them with inherent advantages in executing corporate strategy (see, for example, William Ouchi's Theory Z). Abegglen and Stalk, however, maintain that the successful strategies of the best Japanese “kaisha” (corporations) are more imitable than not. They discuss such learnable, competitive fundamentals as debt financing, high retained earnings, a short-run concern for building market share, and a partnership with labor. While the preoccupation with the Japanese managerial style can become tiresome, Kaisha offers a different interpretation and is recommended.”
I was assigned to read this book during my first visit to Japan as an exchange student at Waseda University in 1996, already about five years into the post-bubble era. By that time, the vulnerabilities of Japanese firms were regularly appearing in domestic newspapers in the form of high profile scandal, bankruptcy and financial mismanagement that extended to large contracts private firms held with the Japanese government. The aura of the Japanese firm’s prowess seemed to be crumbling and looked to give way to the West regaining its sense of superiority as the leader in global business practices. This background context while reading and dissecting Kaisha provided insight into both the origins of Japanese firms’ perceived unrivaled ascension and the sources of their increasingly publicized failures in managing business realities.
One more trip to Japan from January to March of 1998 to complete my senior thesis helped solidify the feeling that Japan was entrenched, at least domestically, in a downward trajectory in terms of its business climate. During those three months I stayed with a good Japanese friend from a wealthy family, and even their household had become quite conscious of their spending, pessimistic about the Japanese economy’s future. Interestingly, my friend’s father, who was president of a large film developing chain, directed most of his criticisms towards the knowledge and education of his sons, and by extension the younger population of Japan. His concerns then about the learning and progress of Japanese youth seem very prescient today, but as I will illustrate in my second post, any wholesale dismissal during this period by Western firms regarding the state of Japanese competitiveness would have been mistaken.
[Part II may be found here.]
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