Courage to Change Japanese-style Business in Crisis (1992)
"Price Differentials Resulting from Different Business Philosophies"
During the post-war recovery period, the instructions from GHQ to democratize labor practices, and the resultant lifetime employment system, marked a transformation in the way business was done in Japan.
Because of this, a sense of common destiny was forged between management and workers. Wage differentials were significantly less and a promotion by seniority system lead to a Japanese-style egalitarianism in the workplace. A new kind of business culture was born, distinct from the West, spurred on by a unified workforce that sought to catch up to and pass the West through improved technology, increased production efficiency and better quality.
In addition to this, the effect of the government’s business promotion policy led to a dog-eat-dog field of fiercely competing enterprises across all markets. Because of this, companies were forced, out of necessity, to reinvest all of their resources back into the company in order to stay competitive. Specifically, if a company’s results were good, most of the profits were put back into research, development and manufacturing facilities in order to increase competitive strength, as well as held in reserve against an economic downturn. This style of operating was very useful for strengthening an organization but hides the fact that there is also a reduction in profits shared with employee, shareholders or local society. Emphasizing improved competitiveness also tended to ask the impossible of partner organizations that provided support, with a result that profits and operating policies between these related organizations become very different from the West.
Firstly, in the relationship with employees, a significant gap developed between Japan and the West regarding wage levels and the number of hours worked by employees. a comparison of working hours for 1989 shows a large difference of 2,159 hours worked in Japan compared to 1,957 hours in America, 1,638 hours in West Germany and 1,646 hours in France.
Comparing the labor distribution levels over a 5 year period from 1980 to 1984, a gap can be seen opening between Japan’s 77.8% compared to 80.3 percent in America, with a clear difference seen with the West in profit sharing among the workforce.
In relation to shareholders, a comparison of Japan and the West shows extremely low dividend payouts by Japanese companies. This gap is evident when comparing Japan’s 30 percent, with 54 percent in America, 66 percent in England and 50 percent in West Germany.
In relation to partner organizations, using television set makers and parts suppliers as an example, the relationship between the two in the West is equal. In Japan however, where stable and long-term relationships are forged, there are clear advantages for the set makers over trade terms, such as the conditions for delivery times and costs.
Finally, with regard to investing in local society, it would be hard to say that Japanese industries contribute much, compared to the United States. Recent figures show a huge gap between Japan’s contribution of 0.33 percent of pre-tax profit to America’s 1.55 percent, and a clear difference in attitude can be seen.
This difference in business philosophy, therefore, allowed Japan’s business to produce a pricing structure in the final product that was be impossible for Western companies to match, leading to an outcry that “Japan is unfair” and “trying to choke us”.
(Continued in Volume 8)
( Extract from"Nijuisseki e" (Towards the 21st Century), published by WAC)