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General |
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Generally, the basic focus of Japanese companies is to supply merchandises of excellent quality to global market at internationally competitive prices.
Japan imports significant percentages of the resources it consumes: approximately 90 percent of the country’s energy resources, such as oil, natural gas and coal, and nearly 60 percent of its foods come from overseas. Because it depends heavily on imports for resources essential to daily life and industrial activities, it is crucial for Japan to manufacture and export products of excellent quality, so as to sustain its economy. In 1973, when an energy crisis occurred due to the Yom Kippur War, Japanese businesses keenly realized their vulnerability to unstable resource supplies. Since then, energy-saving has been a major focus for Japanese manufacturers in designing almost all of their products, and energy-saving philosophy has been escalated and penetrated continuously in every business activity and life style of Japanese people. Such efforts have led to greater energy-efficiency in Japanese industries, which are now resilient to drastic changes in oil prices, which rose from US$3 to US$12 per barrel in the 1970s and recently skyrocketed to over US$110 per barrel. Despite the sharp increases seen in the oil price in recent months, there has been no serious public confusion or disruption, as occurred in the 1970s. In terms of staple crops, nearly half of the flour consumed in Japan is imported from overseas. Due to recent sharp rises in the wheat price, bakeries and noodle shops have been forced to raise their prices. Furthermore, incidents involving severe safety problems have been reported relating to imported processed foods, severely undermining public trust in food safety and significantly impacting related industries and consumers.
Although generating profit is supreme mission for private companies, since the 1990s businesses in Japan and elsewhere have been increasingly required to fulfill their corporate social responsibilities (CSR). CSR is based on the idea that a company is responsible for the wellbeing of all stakeholders, and in all business activities should work to ensure compliance with laws and regulations, including employment and environmental issues. In Japan there have been many company scandals, resulting in punitive or voluntary suspensions of business operations. We have seen the top management of such companies apologizing and bowing deeply at press conferences. Compliance has now become a keyword in business activities, and is one of the most important topics at shareholders’ meetings. Thus, Japanese businesses must strictly control their activities so as to ensure compliance, while making every effort to make profits.
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Japan has unique climate conditions, as reflected in the remarkable weather differences between seasons. For example, it is extremely hot and humid in summer, but very cold and dry in winter, with only short periods of comfortable weather in between. Geographically, the land of Japan stretches approximately 3,000 kilometers from north to south, resulting in highly varied climate conditions across the nation. These factors seem to significantly influence business in Japan. For example:
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Since weather and temperatures differ greatly from season to season, people have to buy different kinds of clothes to deal with the climate change, which generates business opportunities for the textile and garment industry. Regarding the relationship between climate and clothing, in Japan, until recently it was common for male sales reps and office workers to wear suits during work, even during the hot and humid summers. In 2005, the government began campaign to encourage male office workers to stop wearing ties and jackets and wear short-sleeved shirts instead, so as to reduce the use of air conditioning. This casual style for summer, called “cool biz,” has been increasingly accepted by office workers, but not by sales reps, since it is still considered inappropriate for sales reps to visit customers without wearing a tie and jacket. When the government began its campaign to promote the “cool biz” style, necktie manufacturers responded negatively, since they were anxious about decline in demand, while business shirt manufacturers, expecting increased sales of fashionable short-sleeved shirts, welcomed the campaign. |
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Households and offices use air-conditioners and dehumidifiers to cope with the humidity and heat of summer, and heaters and humidifiers in winter, when it is very cold and dry. Sales of air-conditioners in early summer, along with sales of beer, are always reported in the news as key indicators of Japanese summer business performance. In terms of buildings, such features as highly effective heat insulation are also required to cope with the heat and cold. |
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For Japanese national and local governments, and most major companies, the fiscal year begins on April 1 and ends on March 31. Though most businesses in Japan follow this fiscal calendar, many small and midsized enterprises follow different fiscal calendars.
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Production |
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Quality, cost and on-time delivery are key focuses for most Japanese manufacturers. The high quality of Japanese products is proved by the fact that Japanese cars, construction machinery, medical equipments and other products, both new and used, are highly popular worldwide. Japanese manufacturers adapted basic quality control methods from American companies in the US and customized them to meet their own requirements. While many manufacturers in the US employ a “top-down” approach to quality control, Japanese manufacturers generally conduct quality management based on a “bottom-up” concept. The Japanese term kaizen (improvement) is now widely known worldwide as a key business term; in fact, it has been used by a major Japanese automobile manufacturer as a keyword in operation activities. The term represents a typical Japanese approach to quality control: workers on the production frontline play proactive roles in activities to improve operation performance, safety and quality.
In terms of cost cutting, here is another example from the automobile industry, which has implemented thorough operation-streamlining activities. Their approaches in this endeavor are sometimes called “squeezing water out of a dry towel.” One such approach is the kanban method, which is now also well known worldwide. This method is based on the concept of minimizing the inventory and the storage period. In English, this idea is called the “just-in-time delivery” system. Excess parts inventory at a factory can result in inefficient use of financial resources, additional workload and increased inventory space requirement. The kanban method is used to minimize inventory, while maximizing production and financial efficiency.
Many Japanese manufacturers focus on seiri (sorting out and disposing), seiton (arranging neatly), seiketsu (hygiene) and seiso (cleaning-up) as four key factors in their production management, collectively called “4S.” The 4S emphasize the importance of ensuring order and efficiency at production sites, where a large number of people work using various machines and tools. Some factories use “5S,” including the additional factor of shitsuke (discipline and training) because they feel that the workers at production sites are actually responsible for implementing the 4S, so it is most important to train them properly.
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Environmental issues have now become serious challenges for the international community. In this regard, manufacturers are also required to implement appropriate environmental protection measures at their factories. Such measures include reduction of gas emissions, appropriate handling of toxic substances, proper treatment of wastewater, minimizing noise generated by business activities and ensuring safety for employees and local communities.
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Successful Japanese manufacturers always seek to thoroughly follow specifications given by customers, even regarding such details as slight differences in size and color. Indeed, Japanese companies are sometimes so strict about specifications that overseas suppliers may consider the Japanese to be too picky, too fond of making complaints. This applies not only to products themselves, but also to accessories such as labels, packages and instruction manuals. Japanese manufacturers consider these accessories to be a part of their products. In the Japanese market, businesses cannot surpass their competition if they focus on products only, lessening the importance of the quality of packaging and other accessories.
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Labor costs in Japan are higher than many other countries. In addition, the workforce is expected to decline due to the aging population. Companies are therefore promoting automation of production processes to deal with the workforce shortage.
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Sales |
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In Japan, it is often said that customers should be treated as if they are a king or a god. The words “king” and “god” may not sound well, but in fact this kind of expression suggests that many Japanese companies place top emphasis on customer satisfaction. Unlike oil producers, who enjoy an advantageous market position, most commodity suppliers must compete strongly with one another in the market to attract customers. Many businesses therefore understand that only those who develop and market quality products that achieve higher customer satisfaction can survive fierce market competition.
Japanese consumers seem to have somewhat contradictory tendencies: they buy an quality products even at expensive prices if they found them attractive, while they seek to purchase quality goods at as low a price as possible. It is crucial for market researchers to identify which product features and qualities customers find attractive.
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It is widely said that, although discounting is a handy option to boost sales, once prices have been lowered, it is almost impossible to raise it again. Therefore, retailers and service providers in different industries often compete with one another by offering various promotional programs other than discounts, such as a shopping point system. As manufacturers focus on training employees at production sites, retailers also place significant emphasis on the training of sales reps. Regarding commodities such as real estate, and financial products, which significantly impact customers’ life plans, it is also necessary to offer consultant services when customers purchase such offerings. In such cases, sales reps must be highly specialized and knowledgeable, so as to provide customers with appropriate information and suggestion regarding the risks and benefits relating to the products on offer. This is also an effective sales promotion method that does not involve discounting.
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Handling customer complaints is an important activity of sales. Dealing with customer complaints in a sincere and appropriate manner may generate future business opportunities. Businesses can also learn from customer complaints about how to improve their products and services. To benefit optimally from customer complaints, defective products such as machines and equipment, instead of being scrapped immediately, are sometimes returned to the manufacturers for close examination and the identification of problems and defects for improvement.
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Sales make profit actually only when its account receivable is collected. In many companies in the US and elsewhere, the financial department is usually responsible —to some extent —for assessing a customer’s financial condition, as well as credit control. In most Japanese companies on the other hand, it is generally the sales management department that is responsible for credit control and payment collection.
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Japanese companies usually review their business results on a monthly basis, in a detailed manner, in comparison to scheduled budget. When there are gaps between scheduled budget and actual results, measures are quickly designed and implemented to minimize the gap.
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Human resources |
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Not long ago, at most Japanese companies it has been common practice to base promotions, pay raises, bonuses and other judgments on employee age and length of service. However, after the collapse of the bubble economy (late 1980s ~ early 1990s), companies increasingly began to implement the so-called pay-by-merit system, based on subjective standards and criteria, in which employees are evaluated and compensated in accordance with the level of their contribution to the company’s business performance.
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Although it was general practice in Japan for employees to stay with their first employers until mandatory retirement age 60 (55, a generation ago), this has changed. Increasing numbers of workers now change their jobs or move to other companies. There seem to be several factors behind this trend, which differ between younger and senior generations. Many young people change jobs because they have more diverse values and more options based on abundant information, less loyalty to employers, and greater ambition to achieve their own goals. On the other hand, many senior people retire before mandatory retirement age because they are offered additional retirement allowance. Companies —particularly those of certain industries —that suffer from economic slumps and unsuccessful business performances have implemented such early retirement programs to reduce personnel costs. On the other hand, to promote the effective use of senior human resources, a recent law requires businesses to extend the mandatory retirement age beyond 60 or re-employ workers who have retired at age 60.
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Also worthy of note is that the percentage of female managers or directors is quite small in Japanese companies.
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These key factors are involved in labor force issues in Japan: aging society, declining birth rate and mass-retirement of baby boomers. Today, the average life expectancy of the Japanese is 79 years for men and 85 years for women —much longer than in other countries. On the other hand, Japan’s birth rate is 1.32, which is lower than many other industrialized countries. These factors have resulted in the following problems:
1) The number of young workers has declined, increasing younger generations’ financial burden in supporting social welfare programs.
2) Many skilled and experienced workers are retiring.
3) Entrepreneurs of small and medium sized companies are having difficulty in looking for their successors. |
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