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CULTURAL APPROACH to DEALING with JAPANESE BUSINESS in JAPAN: DIFFERENCES BETWEEN Smes and LARGE COMPANIES

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CULTURAL APPROACH to DEALING with JAPANESE BUSINESS in JAPAN: DIFFERENCES BETWEEN Smes and LARGE COMPANIES www.EUbusinessinJapan.eu CULTURAL APPROACH TO DEALING WITH JAPANESE BUSINESS IN JAPAN: DIFFERENCES BETWEEN SMEs AND LARGE COMPANIES March – 2016 Gloría Garcia, Ph.D. EU-JAPAN CENTRE FOR INDUSTRIAL COOPERATION - Head office in Japan EU-JAPAN CENTRE FOR INDUSTRIAL COOPERATION - OFFICE in the EU Shirokane-Takanawa Station bldg 4F Rue Marie de Bourgogne, 52/2 1-27-6 Shirokane, Minato-ku, Tokyo 108-0072, JAPAN B-1000 Brussels, BELGIUM Tel: +81 3 6408 0281 - Fax: +81 3 6408 0283 - [email protected] Tel : +32 2 282 0040 –Fax : +32 2 282 0045 - [email protected] http://www.eu-japan.eu / http://www.EUbusinessinJapan.eu / http://www.een-japan.eu www.EUbusinessinJapan.eu Table of Contents Executive Summary ......................................................................................................................................................3 1. Framework ................................................................................................................................................................4 2. Understanding Japanese cultural values to interpret Japanese actions in business ...............................................6 2.1. The importance of Japanese cultural values in business in Japan ....................................................................7 2.2. Identified situations in business in Japan where misunderstandings arise.......................................................8 2.3. Obstacles arising from misinterpreting meanings and intentions in Japanese business ..................................9 3. Business with Japanese companies in Japan and abroad...................................................................................... 11 3.1. Five essential aspects for doing business with Japanese companies ............................................................. 11 3.2. International Business in Japan and Business with Japanese companies ...................................................... 13 4. The real and growing significance of the Japanese SMEs ..................................................................................... 14 4.1. Traditional importance and present situation of the Japanese SMEs ............................................................ 14 4.2. Japanese SMEs are internationalizing ............................................................................................................ 15 4.3. Instances of internationalized Japanese SMEs ............................................................................................... 18 5. Differences between dealing with Japanese large companies and Japanese SMEs ............................................. 20 6. Conclusions ............................................................................................................................................................ 22 7. Recommendations ................................................................................................................................................. 23 Bibliographical references ......................................................................................................................................... 24 Web links ................................................................................................................................................................... 25 EU-Japan Centre for Industrial Cooperation 2 www.EUbusinessinJapan.eu Executive Summary Business relationships between the European Union (EU) and Japan have improved in recent years. However, Japan continues to be a country where doing business is often a formidable undertaking. The cultural values and traits of the Japanese people still guide the way in which most of adult people act and speak in public. Dealing effectively with Japanese business people requires a thorough understanding of the meaning of certain acts that reflect their underlying cultural values and social customs. In the case of the EU Small and Medium Enterprises (SMEs), they usually do not do business with third countries, and expansion to Asian markets can be regarded as both an opportunity and an inconvenience. Japan is an important country in Asia and Japanese SMEs are transforming from being subcontracted suppliers to producing and marketing to customers, even in foreign countries and with foreign enterprises. This work is based on broader research conducted by the author in Japan as a Visiting Researcher at the Institute of Social Sciences, University of Tokyo. It has two main aims. The first is to present the cultural values in Japanese business that result in certain ways of speaking and acting, and to emphasize why these aspects should be understood in depth for developing business relationships in Japan. The second is to show the real importance of the Japanese SMEs, and to show the differences between doing business with Japanese large enterprises (LE) and with SMEs. Thus, after presenting the identified cultural values in Japanese business, the author describes some situations where misunderstandings arise and the obstacles that result from misinterpreting meanings and intentions. Then, she highlights the five essential aspects for doing business with Japanese companies, and shows the differences between doing business in Japan and with Japanese enterprises. She expounds the real and growing significance of the Japanese SMEs giving some illustrative instances of Japanese SMEs internationalization and how they worked with foreign companies. After showing the importance of doing business with Japanese SMEs, the variations between dealing with Japanese LEs and SMEs are revealed. Finally, she draws some conclusions and gives some practical recommendations such as that it is essential to take enough time to cultivate the necessary interpersonal relationship, that knowing the history of the particular Japanese company and showing respect and consideration help to create trust, that formal meetings are not the place for discussing and take decisions because they are public situations, or that European SMEs should better begin business with Japanese SMEs. EU-Japan Centre for Industrial Cooperation 3 www.EUbusinessinJapan.eu 1. Framework Japan continues to be a country where doing business is often a formidable undertaking because the traditional values and traits of the Japanese people still guide the way in which most of adult people act and speak in public. Strategy preparation, market knowledge and cultural understanding are necessary elements for success in international business. Culture is, perhaps, the most difficult because it is not just a matter of reading, analysing or memorizing but of understanding and feeling. This is why this report stresses the real significance of culture in business. Some people think that cultural differences do not prevent from doing international business, and the expert agrees that cultural differences themselves do not hinder intercultural business. However, their ignorance produces misunderstandings that can cause it. Business with other cultures can fail because of lack of information, insufficient understanding, bad communication, and needless conflicts. In the case of business in Japan, unique products and high quality service are essential, and mere Japanese business protocol knowledge does not replace them. However, ignoring cultural differences can lead to business relations being broken off. Specific cultural values allow people of each society to know what is appropriate in every situation. Thus, they represent the implicitly or explicitly shared ideas and beliefs about what is good, right, and desirable in the community. These accepted ways of doing things determine the norms about how people should conduct themselves and act towards others. Different cultural backgrounds can cause business people to make wrong judgments about the intention, sincerity, words and actions of others. In this work, culture is understood as the values, norms, beliefs, attitudes, and behaviours learned and shared by a group of people that allow them to see the world in the same way. Values are the deepest level of culture and the most external level are directly observable things such as the way of doing things. Acting and speaking can be noticed but not the underlying cultural values, and thus they may remain unchanged although are expressed in different ways of acting and speaking. Business relations between the European Union (EU) and Japan have improved in recent years. However, dealing effectively with Japanese business people requires a thoroughly understanding of the meaning of certain acts reflecting their underlying cultural values and social customs. In the case of the EU Small and Medium-sized Enterprises (SMEs), they usually do not do business with third countries, and expansion to Asian markets can be regarded as both an opportunity and an inconvenience. Japan is an important country in Asia and Japanese SMEs are transforming from being subcontracted suppliers to produce and market to customers, even in foreign countries and with foreign enterprises. SMEs are the backbone of any economy and, according to the EU definition, 99 per cent of EU enterprises are SMEs. There are over 20 million SMEs in the 28 EU countries1 and 70 per cent are located in the six largest EU economies, i.e. France, Germany, Italy, Poland, Spain and the United Kingdom (UK) 2 . Many EU SMEs try hard to going international but only a small part of them are involved in international business inside or outside the
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