The Japanese firm as a comparative business model

Lorella Perri622347

Convergence vs. Divergence through time.

Is Japanese model converging with Western model or not?

Case study: Hitachi Ltd.

• CONVERGENCE The differences between Japanese model and

Western (Anglo-American) model are disappearing over time.

• DIVERGENCE The differences between Japanese model and

Western model are being maintained.

Convergence vs. Divergence through time

• 1950s/1960s Convergence necessary. Japanese model = an obstacle to Japanese

economic growth from a Western perspective.

Japanese firms imported technologies and management practices from the US.

Convergence vs. Divergence through time

• Late 1960s/1970s “Inverse” Convergence?

• Japanese companies outperformed Western companies.

• Western companies seeking J-firm characteristic features.

Convergence vs. Divergence through time

Japanese companies main features:

• Workplace = community of members;• Idea of harmony;• Importance of group motivation;• Lifetime employment;• Seniority-wage system;• Insider-oriented system of governance;• Cross-shareholding…

Convergence vs. Divergence through time

• 1990s~ Restructuring

Why?• Burst of the “Bubble”;• Rise of China and other Asian nations in regional

and global economy;• Change in the attitude toward Asian and overseas’

markets.

Is Japanese model converging with Western model or not?

• Lack of understanding of overseas markets;• Inability to attract and retain local talent;• Cultural barriers: - Different languages - Different working-style - Different work ethic• Lack of global mindset;

Is Japanese model converging with Western model or not?

• Need to bridge cultural gap;• Give the opportunity for professional growth;• Change HR model;• Research local preferences to win local customers;• Differentiate offerings and products;• Adopt a globally accepted management system;• Joint Ventures with domestic competitors;• Foreign ownership.

Is Japanese model converging with Western model or not?

Is Japanese model converging with Western model or not?

• J-Firms

• Horizontal Structure;• Stakeholders:

Shareholders, employees• Community of members;• Promotion by seniority;• Workers = Homogeneous

• A-Firms

• Vertical Structure;• Stakeholders:

Shareholders;• Contractual employment;• Promotion by merit;• Workers = Specialised

Is Japanese model converging with Western model or not?

• “Theory Z” by William Ouchi

Type A (American System) + Type J (Japanese System)

=

New Hybrid System

Theory Z: How American Business Can Meet the Japanese Challenge (1981)

Is Japanese model converging with Western model or not?

• The Ouchi Framework

(“Organizational Behaviour: Managing People and Organizations” Griffin, Moorhead)

Case Study:

Hitachi Ltd.

Case study: Hitachi Ltd.

• Hitachi “Global”

• 1959 Hitachi America Ltd.• 1982 Hitachi Europe Ltd.• 1988 Hitachi Asia Pte. Ltd.• 1994 Hitachi China Ltd.

Case study: Hitachi Ltd.

• 1998 Crisis• 1998 Holding company structure• 2003 “Company with committees”• 2004 to 2013 Transformation and Recovery• 2009 “In-house” company system• 2012 Reorganisation • 2013 2015 Mid-Term Management Plan

Case study: Hitachi Ltd.• 1998 Crisis• Lost 250 billion yen;• Blame on the worldwide decline in sales;• Blame on the weak demand in home market;• Slow decision making;• Excessive variety of products;

• Downgraded by Moody’s from Aa3 to A2 (1999);

(https://www.moodys.com/research/MOODYS-DOWNGRADES-HITACHI-AND-SUBSIDIARIES-TO-A2--PR_27444)

Case study: Hitachi Ltd.

• 1998

• “Commercial Code and Antimonopoly Law”

• Holding company structure;• Reform in HR management.

Case study: Hitachi Ltd.

• 2003

• “Company with committees”

1) Improving the speed of management;2) Securing more transparent management

practices;3) Improving global management.

Case study: Hitachi Ltd.

• 2004 – 2013Recovery from crisis and Transformation Plan;

• 2009: “In-house” company system;

• 2011: JV with Mitsubishi Heavy Industries;

• 2012: Reorganisation of Hitachi Group.

Case study: Hitachi Ltd.• Hitachi Group:

1) Healthcare Company,2) Power Systems Company;3) Infrastructure System Company;4) Rail Systems Company;5) Urban Planning and Development Systems

Company;6) Defense Systems Company;7) Information and Telecommunication Systems

Company.

Case study: Hitachi Ltd.• 2013

• 2015 Mid-Term Management Plan

“Innovation” - “Global” - “Transformation”

(Hitachi Ltd. Annual Report 2013)

• Is Convergence traceable only in big companies or in small companies too?

• Do companies operating in national market need to converge with the Western model?

• Are Western companies converging with the Japanese firms?

Bibliography• Jacoby, Nason, Saguchi (2005). “Corporate Organization in

Japan and the United States: Is There Evidence of Convergence?”, in Social Science Japan Journal Vol. 8, No. 1, pp. 43-67

• Vogel (2006). Japan Remodeled• Accenture (2013). How Japanese companies can succeed in

today’s diverse global markets.• Jackson (2009). “The Japanese firm and its diversity”, in

Economy and Society Vol. 38, No. 4, pp. 606-629• Griffin, Moorhead (2013) Organizational Behavior: Managing

People and Organizations • Hitachi Ltd, Annual Report 2013• Rohel (2005). Japanese firms in transition: responding to the

globalization challenge.