Japan Country Review and Business Environment

Caroline Reinhardt & He Jianhui

IMBA 2012, Chongqing University

JAPAN: Country Review and Business Environment

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TABLE OF CONTENTS

Abstract 2

Introduction 3

Chapter I: Development Planning 5

Chapter II: Transition from Leading a Flock of Geese to being a sitting Duck 6

Chapter III: Review the Japanese Business Model and Challenges the country faces 8

Chapter IV: Impact of Globalization 12 Chapter V: Renault – Nissan Alliance: Breaking the mold 15 Conclusion 18 Bibliography 19

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ABSTRACT:

All organizations within an economy operate in an environment. It is of critical importance to assess the economies evolving exposure to country specific operational and business risks as well as understand the markets comparative strengths and weaknesses, target strategic opportunities in high growth industries and compare their growth pattern. This paper is an attempt to identify and understand the factors that constrain as well as provide opportunities that effect the business environment in Japan.

To better understand the Japanese business environment, we have structured our assignment by reviewing the country of Japan – by providing key demographic and geographic information. Government and political information is provided to get an overview of the organization of the various branches of the government and a list of current leaders. Economic data is provided by means of graphs and statistical table's retrieved from reliable sources such as the websites of JETRO and doingbusiness.org

The business environment is outlined by first understanding the history and journey through which the economic development of Japan has been molded. This is covered in the first chapter – Development planning. The topics covered in this chapter include the Meiji restoration which laid the roots to modern Japan and the post-world war II impact.

Chapter two explains Japan as a miracle wherein it was considered to be leading the flock of geese and the journey it has endured through recession and the real estate economic bubble. In chapter three, Description of the typical traits of traditional Japanese business model - isolationism, high context culture, long term employment contracts, collectivism, discrimination against female employees, and power of corporate management, keiretsu relationships and the role of the government are highlighted.

Chapter four discusses Fundamental changes due to the impact of globalization – changes in the composition of the corporate management, keiretsu relationships, foreign investment (FDI & External) and the changing role of the government.

In chapter five, describing how Japan is making attempt to turn its embedded structure and evolve to meet the change is elaborated on. Looking into companies such as Nissan, who has broken the mold by getting into a joint venture with the French automobile company Renault, will give us an insight of the reevaluation of the Japanese business model.

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Economic Overview: Region: OECD High Income Income Category: High Income Population: 127,380,000 GNI per capita (US$): 42,150.00

Source: doingbusiness.org

INTRODUCTION:

The opening page of the Lonely planet book describes Japan as "World apart – A cultural Galapagos where a unique civilization blossomed, and thrives today in delicious contrasts of traditional and modern". The Japanese spirit is strong, warm and incredibly welcoming. Japan's style of business etiquette, as other Asian cultures, is based on their high-context communication. The culture in Japan as well as the environment within which it operates is made up of many layers, which are old and new, foreign and native. The willingness of Japanese business to collaborate with their government is not because they are exceptionally patriotic or culturally devoted. Rather, it is because they have known through their experience that such collaborations can bring material benefit. Close government relationships with priority industries and related big businesses are also quite commonly seen elsewhere in the world. For many developing countries, these phenomena are more sources of trouble than of strength. This is because they contribute to widespread favoritism, corruption and the suffocation of competition. Nevertheless, in Japan, the result seems to be quite remarkable and the channel seems to be having been fairly effective. (Chen 2004)

Japan has been at the apex of economic development for a very long time. Even today it is the 3rd largest economy among the world's top markets. Japan has been able to establish itself following the principle of collectivism through endurance and hard work. Today, along with South Korea, it is the only other Asia country to be part of the OECD, which is also considered as the rich countries club.

A few facts in relation to the country are as follows:

Official Language: Japanese

Currency: The currency used in Japan is the YEN. Coins are available in denominations of 1, 5, 10, 50, 100 and 500 yen. Notes are available in denominations of 1000, 2000, 5000 and 10,000

Four Major Islands of Japan:

Hokkaido (Northern Island) 83,000 sq. km

Honshu (Main Island) 231,000 sq. km

Shikoko (Smallest Island) 19,000 sq. km

Kyushu (Southern Island) 42,000 sq. km

Climate: June through August is the months of summer. The initial 3-4 weeks of summer consists of rains, but from July until the end of summer is roughly hot and humid. Autumn months are September to November with a cool temperature and a light breeze. Winter arrives in December and lasts until February with dry and sunny weather in the plains on the Pacific coast and mild and pleasant weather in the southern parts of Japan. Spring is through March until May with pleasant weather. (Wikipedia 2012)

Government of Japan: Government of Japan (GOJ) is a constitutional monarchy that oversees the overall well-being and development of the nation and its citizens. The government is divided into three branches, namely, Legislative, Executive and Judicial. The legislative branch is known as Diet, which is a bicameral legislator and is composed of two houses, namely, lower house, also referred to as the House of Representatives and the upper house, referred to as the House of Councilors. The Executive branch includes the cabinet office and all the ministries including ministry of internal affairs and communication; ministry of justice; ministry of foreign affairs; ministry of finance; ministry of education, culture, sports, science and technology; ministry of

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health, labor and welfare; ministry of agriculture, forestry and fisheries; ministry of economy trade and industry; ministry of land, infrastructure and transportation; ministry of the environment; ministry of defense and board of audit. The Judiciary branch operates through the Supreme Court of Japan, which is the final adjudicator of all legal disputes, including those due to administrative issues between the state and citizens. GOJ is headquartered in Chiyoda-ku, Tokyo, Japan. (Data 2011) The Prime minister of Japan is the head of the government and the head of the cabinet that directs the executive branch. The Constitution of Japan defines the emperor to be "the symbol of the state and of the unity of the people." He performs ceremonial duties and holds no real power, not even emergency reserve powers. Political power is held mainly by the Prime Minister and other elected members of the Diet. The present prime minister of Japan is Yoshihiko Noda

Infrastructure: Japan has a fully developed physical infrastructure of roads, highways, railroads, subways, airports, harbors, warehouses and telecommunications for distribution of all types of goods and services. Toll roads, however, are expensive. Japan's airports are also among the most expensive in the world. Landing fees at the Narita and Haneda airports in Tokyo are approximately 50 percent higher than New York's JFK airport. (Business.org 2011)

Major Economic Indicators:

2008

2009

2010

2011

Population (million)

128.1

128.0

128.1

127.7

GDP (US$ billion)

4,850

5,037

5,489

N/A

Real GDP growth (%)

-1

-5.5

4.4

-0.9

GDP per capita (US$)