Unit 2
Asia-Pacific business systems and organizational structures
I.
Objective
1.
Discuss differences between, and drives of,
East and West business systems
2.
Outline and describe the principal business
systems operating in Asia
3.
Explore the cultural and organizational
structural links in Asia-Pacific business
4.
Differentiable between Japanese, South
Korea, Chinese family business and institutional Chinese enterprises in
Asia-Pacific business in relation to:
a. Values
systems
b. Communication
and negotiation styles
c. Leadership
and decision making styles
5.
Discuss the various competitive strategies
applied in Asia-Pacific business
6.
Evaluation the effects of Asia-Pacific
business systems in the region
II.
Contrasts
in business systems: East and West
(A) Economic agent
1. In the Anglo-American
system
a. Firms
are large, diversified companies with separate, relatively autonomous business
units controlling different functions or products.
b. Ownership and management are separate, and the goals of the
managers are to generate a return for the shareholders that have a financial,
rather than a controlling interest in the company.
c. Managers have considerable autonomy from shareholders and run the
business without interference. Ownership change fairly frequently through
merger and acquisition activity or through the selling of shares or stocks
2. The Korean Chaebol and Asian companies
a. Chaebol is different to the typical
Western firm in at least 3 respects:
(1)
Developed with the guidance and support of the state
(2)
Primary aim is to maximize sales rather than profits
(3) Shareholders are
relatively stable and are typically family members
b.
Japanese firms are common form a large, and
combined with forces
on
their suppliers, cooperative family of mutually dependent firms. The Chinese family
business is usually small and limited in resources, is specialized and links
into larger networks of firms.
3. The characteristics of Asian firms
a. Most East Asia firms are importance of family involvement in
business and management. This stems from a common Confucian heritage and
culture based on Confucian principles.
(1) Korean and Chinese
Owned
and controlled by the family
Leadership
is paternalistic and fairly authoritarian in comparison to Western firms
(2)
Japanese
Separate
ownership and management
Keiretsu
(B)
Relationship
1. Western Business
Tend to play rely on formal,
legally defined procedures to govern relationships with other firms and
employees. For example of Anglo-American industries.
(1) Short term in nature and
relatively impersonal
(2) Ability of firms to meet
certain requirements for price, quality and reliability
2. East Asian Business
a. More personal and are formed and maintained
on the basis of trust and informal agreement. In this stems from Confucian
values, the importance of collectivism and the family. Personal, reciprocal
relationships are valued over legal contractual relationships.
b. Rely on networks of contacts such as family,
friends, school, social and government connections, to a greater degree than in
West.
c. All Asian business people feel much more
comfortable dealing with people they know. Therefore, establish a personal
relationship between parties
d. Dominate role in the development and
guidance of industry and the economy. HK government has guided economic development
in Asian, such as selective intervention. Business-government relationships are
stronger in Asian economies than in most Western countries. China and Vietnam, example,
dominated by state-owned enterprises.
3. Organization and coordination of employees,
leadership, decision-making and negotiation
a. Western
societies are more individualistic
The typical features of an
individualistic society are the belief the individual is the central concern
and these are equal opportunity for all individuals.
b. Eastern societies are more
collectivistic
The collective society is belief
group takes precedence over the individual, who is just one member of a group
or many different groups.
Korean
and Chinese family firms
l
Loyalty to one’ company
Japanese
firms
l
Most enduring loyalty to their company and
offers life-long employment and security to its permanent staff
4. Power distance accepts inequality
a. Asian societies where Confucian have
influenced system
Confucian teachings have
influenced values systems, respect for hierarchy and one’s superiors or leaders
are paramount. Korea as an example, company founder would not be questioned or
challenged by lower managers or subordinates. And also, respect for authority
encourages dutiful workforce and a greater role for government in Asian
industrialization.
b. Western societies
Relationships are not
strictly bound by protocol, and one’s place in the hierarchy of society is not
fixed, nor is it predetermined. They are able to determine their own position
in society.
III.
Business
systems in East Asia
(A)
Japanese kaisha
1. The principal economic agent in Japan is Kaisha, specially corporation.
a. Play a dominant role in international
business. The business Week Global 1000 (1999) shows 135 out of top 1000 firms
are Japanese.
b. Specific competencies in a single industrial
area, Honda, which specializes in the manufacture of motor cycles and cars.
c. Production within the firm is centered on
the use of core competencies, or the areas of strength of the firm. The
production is not central to the firm’s activities is contracted out to other
local firms, which form a support network.
2.
The definition of the family in Japanese
a. The concept of family is very broad and
importance of a broad relative is not distinguished from that of an ‘adopted’
family member into the business, such as Loyal employee.
b. Qualified and experienced manger lead the
group rather than a less suitably qualified blood relative. Management of the
Kaisha internally through the Kaisha they joined after leaving college and who
thereby became ‘part of the family’. Individual’s ability to run the business
and a broad definition of family member enables more suitably qualified
managers to be appointed.
c. Japanese business culture fostered a long
team approach to investment in Kaisha and enabled them to expend into high-risk
developing markets
3. Market relations in Japanese business
system
a. Interdependent firms (Keiretsu)
Separate firms rather than
predominantly within the firm itself and it is typically have low levels of
vertical integration. The cross shareholding, dependent on central financial
institutions, and also buying and selling between the firms cement the
relationships within Keiretsu.
b. The ownership of the Keiretsu is shared
among members of the group, so an interlocking ownership pattern is apparent. Stock
holding among member companies maintains the stability of the group through
support for members and protection from takeovers.
c. The Keiretsu are direct descendants of
earlier integrated groups of firms known as Zaibatsu. Comprised a central
holding company, dominated by the family, significant ownership of large group
of core companies, including a bank, trading company and a trust and insurance
company. Markets for capital, labour and technology were internalized within
the Zaibatsu.
d. Networks of Japanese firms
Vertical
Keiretsu
(1) Incorporates a large
number of small and medium sized firms
(2) Contribute to the
production value chain in certain industry, Toyota
Horizontal Keiretsu
(1) Kigyo shudan
Coordinates
activities among groups of firms over different industries or markets
(2) Providing low-cost
capital to members
Mitsubishi
e.
Business in Japan
Including everything from
vehicles, electronics and construction to financial services and international
trade. Those are independent, these is a sense of common purpose in the pursuit
of goals. The sharing of personal, financial support and even directors between
the member companies strengthens the relationships within the group.
f.
The relationships formed between the Kaisha
and the smaller subcontracting firms
Those are enduring and long
team in nature, and are based on trust and mutual co-operation, sharing
information, and expertise and joint shareholding.
(B)
South Korean chaebol
1.
Growing chaebol or ‘financial cliaues’
dominated the South Korean business system
a.
Highly
diversified conglomerates that operate in number of business sectors, such as Heavy
manufacturing, chemicals, oil, electronics, motor vehicles, distribution,
insurance and financial services.
b.
19 firms
being ranked among the top 200 emerging-market companies in 1999. The top 100
chaebol the average is of eight companies. The chaebol dominate the local
Korean market, its exporting activity and the total economic output of Korean.
In 1994, top ten Chaebol accounted for 58% of Korea’s GNP and top 30 Chaebol
for 83%.
2.
Chaebol
gained competitive advantage in labor intensive manufacturing exports:
(1)
Government sponsorship and
favorable policies to encourage industrialization;
(2)
Engineering talent and managerial
entrepreneurs; and
(3)
Hard working, low-cost labor force
available in Korean
a. Chaebol
expanded through vertical integration by producing ‘in-house’ or expending the
value chain of production internally
b.
In international markets, the chaebol have employed
their own brand names and marketing
c.
The chaebol meant that resources were
spread too thinly for them to remain internationally competitive in all areas.
d.
Tried to rationalize their activities and
devote their resources to concentrating on their core competencies and main
areas of activity.
3.
Chaebol
conglomerates still largely rests with their founding families:
a.
The sole ownership structure where
the founder or his family own
all the chaebol affiliated companies, for example, the Hanjin group.
b.
Involves family ownership of a
holding company, owns or
partially owns the affiliated companies. Daewoo is an example, although the
family accounts for less than 2% of the group’s shares in total.
c.
There is mutual
interlocking ownership. The founding
family owns the holding company and/or some type of foundation organization that
owns the affiliated companies. Samsung of ownership structure.
4.
Described
as a hybrid of Confucian values and Japanese group loyalty.
a.
Influences on the management structure of
the chaebol. The feudal family network, where the Chairman or Whoe-Jang of the
group is either its original founder or his direct descendant. Succession of ownership and control is strictly based on
‘blood ties’
b.
Management
is highly centralized around the Whoe-Jang, who extends his beliefs and
prescriptions for the direction of the firm as well for the behavior and values
of his employees. Is directly influenced by a single
leader who is usually the owner. His family occupies the key position-Below the
Chairman.
c.
The chairman office control center
in charge of administration and planning for the whole group of companies.
d.
Managers are recruited both within
the ‘blood’ family and from outside, but the most important positions are still
reserved for family members. For example, Samsung’ executives are
family members.
5.
Market
relations between the Chaebol and other firms are fewer and less enduring than
are those of Japanese firms.
a.
The chaebol are able to maintain
control over most of key activities in production and services by integrating
them internally into the conglomerate structure. The chaebol diversified and
perform more activities ‘in-house’
b.
Developed in response to government
targeting of entrepreneurs and potential growth industries, and access to
resources. Such as funding,
managerial talent and low-cost labour.
c.
The chaebol to move into new and
diversified areas of business quickly and to minimize risk. That encourahing
rapid growth and internationalization of Korea’s firm, has also had a negative
impact in several areas.
6.
The adversarial relationships between the
chaebol in Korea.
a.
The Chaebol to pursue sales and market share rather than profits, and
discouraged them from using retained profits rather than state credit to fund
growth.
b.
The
government’s industrial policy is to limit the number of industry-wide trade
associations or other cooperative organizations. Growth of smaller firms in
Korea has been restricted by the dominance of the chaebol.
(C)
Chinese
family business (CFB)
1.
The
principal organizational form used by the Overseas Chinese in Asia
a.
The
tendency for each family to run own small business rather than working for a
larger firm. There are small enterprises even though some of these do expand to
become large international players over time. CFBs concentrate on a limited
number of activities in either production, sales ore service.
b.
Ownership
and management of the CFB are strongly centered on the family. The family holds
ownership and key managerial positions. The majority of the wealth generated by
the business stays within the family.
c.
The
structure of the CFB is centered on the founder or entrepreneurial patriarch
that family holding the most important executive positions. The ‘inner circle’
of the conglomerate and is strictly the domain of close family members. All
decision making is centralized around the founder of the business and tight
control s kept over information by keeping in family circle
d.
Employees
are rewarded on the basis of their loyalty to the
patriarch and their performance in achieving his goal. The use of informal
management structures and constant monitoring of the business’s activities and
external events enable the firm to respond quickly to problems and opportunities
that arise.
2.
Culture,
tradition and Confucian principles influence the structure, organization and
management of the CFB.
a.
The
patriarchal.
(1)
Rely on close relationships between
family members in order to do business. As ‘Inner circle’ of managers and founders he struggle to cope with
the extra burden.
(2)
The
professional managers are recruited, loyalty and
trust are much more difficult to engender in non-family members.
(3)
Delegation to non-family managers
threatens the integrated unit of the business, whereas too much nepotism and centralization strain top management
b.
Direction
and decision making provided by leader tends to repress the creativity and
ability of middle managers
(1)
Less able to make autonomous
decisions and to develop their own management skills.
(2)
The loyalty of employees to new
leader cannot be guaranteed. The fragmentation of the business over time and a
lack of clear unified direction.
(3)
The tend to encourage the CFB to
remain small and specialized or to adopt some Western style management and
recruiting practices.
3.
Market
relations of the CFB are typical based on family or social connections with
others in CFBs or government
a.
CFBs are
unique in Asia because the location of their activities is determined
by the spread of the Overseas Chinese community. Includes ethnic Chinese living in Taiwan and HK.
b.
The
Overseas Chinese share common cultural heritage and homeland. The Chinese fled
poverty and poitical unrest during the Manchu Empire in the 19th
century.
c.
Continued
anti-Chinese sentiment, heightened the Chinese sense of insecurity and their
desire to maintain easily transferable or liquid assets.
d.
Many wealthier Chinese immigrants
with business acumen became ‘middlemen’ for the colonial powers, acting as
go-betweens for the colonial traders and the local primary sectors.
4. The overseas
Chinese can be associated with:
(1)
Being
immigrants and settling in foreign countries
(2)
Being an
ethnic minority in countries
(3)
Have
unresolved relationships with the mother country-China
a.
The tradition of network building
based on family connections and personal relationships has fostered cooperation
between Overseas Chinese communities.
5. Development of their business and
forging business alliances
a.
The principal source of additional
finance, information about products, markets and inputs, personnel and business
introductions.
b.
Dependent on external networks of
firms for partnerships, subcontracting and financing.
c.
Rely on these networks for
different inputs to the value chain such as raw materials, components,
distribution and marketing.
d.
Flexible
relationships with suppliers readily encourage a quick response to changes in the marketplace.
6. Larger family-run or clan enterprises firms
a.
Mutually
supportive and interdependent and can form longer lasting relationships with
other firms.
b.
Networks
connected with government officials and foreign owned multinationals.
c.
Larger
CFBs also coordinate activities across national boundaries. For example,
Taiwanese companies set up production facilities in ASEAN countries to take advantage
of low cost labor.
d.
Develop
both within a country and across geographical boundaries, binding people with a
common origin together.
(D)
Chinese state enterprises (CSEs)
1.
CESs are owned and were formerly managed by
the Chinese government
a.
The majority of these state enterprises are
medium and large sized firms and some are significant players internationally
b.
Diminished power over allocation and
productive use of resources and altered the nature of ownership and control of
these companies.
c.
Control access to finance, labour and all
importing and exporting, the market played a more significant role in production,
distribution and sale of products and services.
d.
Tried to avoid the problems encountered in
other transition economies. Thousands of workers faced redundancy and economic
hardship as the new owners restructured. Avoid these problems, the Chinese
government attempted to increase the performance of the CESs while maintaining
ownership.
e.
Central purpose of the reform was to change
from a socialist economic system, in which the allocation of resources and
productive use of such resources was directed and controlled by the State.
f.
Reforms relating to the CSEs were intended
to confront a number of problems:
(1) Relating
to supply and demand. Centralized control over resources and products meant
that these did not always correspond. The problem was worsened by the poor
quality of some products. Often based on quotas or rationing rather than actual
need, aggravated the shortage problems.
(2) Poor
performance of the CSEs. Centralized model reduced incentives to work hard and
take risks and responsibility. There are no rewards and no punishments for poor
performance as any losses were absorbed by the state, and life-long employment
and support for employees were guaranteed. Less productive and become a burden
on China’s future economic development.
2.
The State
Council of the central government directed the operations of CSEs
a.
Namely
the central ministries, provincial authorities and county authorities
b.
Gave instructions on how the CSEs were to manage,
what they were to sell and at what prices. Profits were remitted to the State treasury and also covered any
losses.
c.
Direct control alternated between
the central and provincial level authorities. Central government controlled the inputs to production such as Land,
capital, plants and equipment, raw material and labor.
3.
Ownership pf the majority of CSEs remains
with the Chinese government or the State
a.
Ownership represented by the government.
That has encouraged beter use of capital and more
efficient investment. Ownership
is now officially separated from management. No longer
run in response to goals and objectives of the State
b.
Managers determine the ways that
economic goals are reached by the enterprises, not the owners
c.
Enterprise had more control over
its own decision-making and direction. Difficult for the CSEs achieve continuity and stability in their goals and
operations. Inefficiency and lack of accountability or responsibility
for decisions and actions.
d.
The enterprises were given no
autonomy in management, the CES
manager has been able to tailor production to market requirements.
4.
Major changes to market relations in the
Chinese business system
a.
The
primary function of the CES as a state production unit to an emerging
market-oriented firm. CSE more autonomy in both
purchasing and acquiring inputs and the distribution and sale of outputs.
b.
The power
to manage production has allowed the CSEs to produce marketable products. The
first surplus of supply resulting from improved productivity and
higher levels of output tailored to market requirements.
c.
Allowed CSEs to internationalize
their operations through importing and exporting activity
5.
Marketing and even the promotion of
products through advertising both has become a vital
function of the CES manager
a.
The domain of the managers as the
state-controlled wholesales channels have been removed
b.
Advertising has been used to
counter rising competition under the new market-based system
c.
CSE hire
appropriate managers and technical staff on the basis of their skills and
experience
d.
More incentives for employees to
productive and to produce quality output
6. CSE were trapped in a cycle of debt with their suppliers and
customers
a.
Profits
and taxes were still being directed to higher-level institutions and government
b.
Officials demanded and pushed for
higher returns as profits increased
c.
Government ownership which
encourages intervention and the pursuit of social objectives
d.
Inventors are able to purchase
shares in the larger state enterprises and form joint venture companies
e.
Opened up previously protected and subsidized
industries to outside investment and competition
IV.
Culture
and business systems
(A)
Value system
1.
Business
systems of Chinese, Japanese and Korean people are influenced by 3 key culture
values: Confucian beliefs, High power distance, collectivism
a.
The
importance of the family in Chinese society, which stems from the Confucian
belief of filial piety
b.
Hierarchy and the family in high
power distance society is illustrated by Korean business system
2.
Confucian
values
a.
Confucianism is a system of ethics
and morals, which guide for
living, relationships and appropriate behavior. Resistance to change and
continued duty, loyalty, filial piety and respect for age and status in one’s
relationship. Key values of interpersonal relations, thrift, perseverance and
hard work, sense of shame and status
b.
Hsiao or filial piety is
fundamental to Chinese’ life. Stability
and direction to family activities are given by the household and dutifully
followed by all members, are obliged give their obedience, respect, trust and
support. In the family, traditions, reputation (taken very seriously), property
and family possessions are common.
c.
Family
hierarchical structure is also evidence in business, with the ‘father’ as
the boss over his subordinate children. The family is all encompassing over the
family line, or clan, relationship through marriage and even future generations.
3.
‘Guanxi’ (關係)or
relationships with others linked through a common language, village or school
a.
Face or the prestige they have
achieved within the various relationships.
b.
Mianzi is associated with person’s status,
social position and wealth
c.
Loss face is to avoided at all costs, the
person may no longer be respected by others and bring shame to theirselves and
to the family.
4.
High
power distance
a.
People accept that not everyone is
equal and defined place in society. This value encourages stability and harmony
in relationships between members of society.
b.
Asian societies have a strong
respect for authority and hierarchy. The leaders, whether they are fathers,
managers or politicians, are accorded respect by their subjects.
c.
Korean, as example, demonstrates complete loyalty to hierarchical structures in the family,
the company or the government.
d.
Strive to
protect the honour of one’s self, one’s family, one’s company and one’s country.
The ‘chain of command’ respected and honoured, the importance of harmony and
cohesion in the family
e.
Cooperation
and relationsip building between family members and family connections, and loyalty
to a central figure in family and company help to maintain group harmony.
5.
Paternalism
and authoritarianism
a.
Engendered
the values of hard work, diligence, devotion, commitment and personal sacrifice.
The traditionally been one that require the utmost dedication and adoption of
the leader’s personal beliefs and values.
b.
Between
subordinate and superior is expected to fall as new employees demand more
participatory management
6.
Collectivist
societies
a.
Loyalty
and support within the group is strong and enduring. Collectivist society is
integrated into cohesive, unified in-groups that actions and decisions must be
in the best interests of the group rather than those of a single individual
b.
Japanese, for example, belong to a
collective society that maintain harmony (wa) within the group, whether the family,
the company or in the nation.
c.
Japanese employees to their kaisha that
collectivism and the desire for harmony in the group. That approach to work
ensures the employee would rather remain faithful to his or her particular
company and will not, willingly, transfer to another.
(B)
Confucian
1.
Teachings of Confucius and offer a set of
ethical codes or rules of conduct that guide human relationships
a.
Not based
around a central god, has no after-life and no associated church, and does not
require its followers to exclude other religions or ideologies.
b.
Central
goal of Confucianism is to achieve social harmony by guiding the relationships
between individuals. Ren (仁), two people relate to each other or way in which social
interactions take place. And encourages individuals to become a yi-ren.
c.
Recognize
his or her place in a hierarchy of social relationships, to especially honour
the relarionships between ruler-subject, father-son, husband-wife, brother-brother and friend-friend.
d.
Included
strong family or ‘blood’ bonds, relationships outside of the family based on
the ancestral village, school or military. Governance by ethics is preferred
over governance by law and not use law and litigation in their business
dealings.
2.
Confucianism instills the values:
a.
Values of
thriftiness, hard work, perseverance, obedience to one’s superiors, benevolent
leadership, scholarship and harmony
b.
The pervasiveness of Confucian values, despite
considerable differences in their interpretation and implementation in
different countries that played a part in the region’s economic development
3.
Application
of Confucian
a.
Harmonious
and productive
Asian governments play a dominant part in fostering and
controlling business development. The values of
respect and trust of those in position of leadership have contributed to the
single-minded pursuit and support of economic development
b.
Stem from respect for hierarchy and loyalty
to the group
Family solidarity and unquestioning devotion to those
superior in status, age, skill and experience in organizational structure of
the firms
c.
Business
networks and connections
Rely on trust
and mutual obligation has lowered the costs of doing business in comparison to Western
companies that rely on the contracts and litigation. For example, Chinese-guanxi, Japanese-Keiretsu
d.
Education
Desire to learn and the company’s desire to develop the
skills of its life-long employees
4.
To be
inhibiting their development
Change to a modern, capitalist society and impeded economic growth and Confucianism
has never endowed technical
skills and trading profession with respect, and traditionally placed merchants at the bottom of hierarchy-below
bureaucrats and scholars.
(C)
Guanxi
1.
Social networking in Chinese society and
business systems
a.
Translated as a ‘relationship’ or ‘connection’
between two people to enable 2-way flow of personal or social transactions. Multiple
Guanxi which based on mutually binding obligations and dependencies. Put away
in times of abundance and plenty for times of trouble and need.
b.
Renqing (仁)
(1)
Reciprocal social relationship
(2)
Humanized obligation that exchange of
favours in social sense
(3)
Establish and maintain Guanxi relationship
and lead to an economic exchange in future
(4)
More benefits one gets from Guanxi, the
more one is obligated to return Renqing
(5)
The moral dimension to guanxi is that if a
person fails to reciprocate this renqing, he or she loses ‘face’ and looks
untrustworthy
c.
Finance is given to members to facilitate
their business based on the strength and trust of the personal relationships. This
debt maybe ‘called in’ at a later stage and the receiver is expected to
reciprocate the favour.
d.
Include trade associations, surname associations,
alumni associations and secret societies to name but a few
2. Relationship
bearing trust (Xinyong, 忍讓) and human-heartedness
(Ganjing, 矜持)
a.
As network that give everyone the
flexibility to make deals and to profit from business
b.
Allowed business obligations to be settled
by the rules of the market and not by the equity and reciprocity relationships
evident in social Guanxi
c.
Allow the extension of the family firm
(1) Able
to overcome the limitations of size and spread their business widely both
economically and geographically
(2) The
strength of kinship and association relationships based on reciprocity and
mutual trust
V.
Doing
business in East Asia
(A)
Communication and negotiation styles
1.
Reputation for being shrewd and clever
negotiators
a.
Chinese negotiator first likes to establish
the areas of agreement between 2 parties
b.
Gain concession as possible from the other
party and concede as little as possible on belief of firm
c.
Exchange of concessions for demands are an
acceptable way of resolving conflicts in the negotiation process
2.
The Chineses:
a.
Preparation
(1)
Strengthen their bargaining position, the Chinese
are extremely thorough about ‘doing their homework’, finding out about the
other firm involved in the negotiations
(2)
Existing or previous partners and the
personal characteristics of the negotiating team
b.
Negotiating team
(1)
Difficult determine who the main decision
makers are within these teams
(2)
Merely serve as gatherers and deliverers of
information
(3)
Team leader who takes a hard line with
negotiations, for example, a high, fixed price and limited concessions
(4)
To fail to do so would indicate a lack of
commitment from the other firm
c.
Negotiating style
(1)
Proposed deal or contract and discuss it
fully and separately from other issues
(2)
Given an equivalent proportion of attention
(3)
Chinese custom of devoting equal time to all
issue often frustrates Western negotiators
d.
Displaying emotion and weakness
(1)
Showing pleasure, dismay, approval or
disapproval, it would communicate very clearly heir position in each issue. This
only becomes apparent over time
(2)
Communicate style dealing making process
that use humility and gain concessions on weakness
(3)
The basis of this tactic is the traditional
belief that the strong should help the weak
(4)
Negotiating partner will be obliged to give
more concessions
e.
Time
(1)
Making the correct decision is more important
as a long team commitment to deal or relationship is anticipated
(2)
Desire to form relationships with business
partners before business takes place
(3)
Having multiple decision makers or people,
such as Middle management, owners of the business, state officials, Gunaxi
network
(4)
Learning medium for those involved, an
opportunity to glean information, connections, technology or even experience
(5)
Willing to return to re-negotiate a
particular issue, able to gain a mote advantageous position or further concessions
f.
Relationships
(1)
Being vital to doing business, used for
negotiating leverage
(2)
Violates the spirit of an existing
agreement of the ‘friendship’ has been established between two parties
(3)
Maybe be demanded on the basis of past
injustices
3.
Japanese
a.
Communication and negotiation styles
(1)
Developing relationships and a long term
perspective towards the implications of business deal is evident
(2)
Due to the large negotiation teams present
and the need for enduring relationships to develop
(3)
Learn to have patience and to control their
emotions when dealing with Japanese
b.
Preparation
(1)
Thoroughly preparing for business
negotiations
(2)
Research and information gathering on other
party
(3)
Pre-negotiation meeting and social
activities. Have great know the other party and to develop personal
relationships
(4)
Objectives and boundaries be defined at
this stage
c.
Negotiating teams
(1)
Degree of cooperation and cohesiveness in
firm will be enhanced by including those who will be implementing the decision
in the decision making process
(2)
Committed business partner will send a
fairly substantial negotiating team with at least several senior or high
ranking staff
d.
Negotiating style
(1)
Preservation of harmony in the process
(2)
Politeness, conflict avoidance and
refraining from showing emotion and personal feelings are the norm
(3)
Equally, aggressive behavior, impatience
and an overly negative reaction to a proposal
(4)
Disagreement during negotiations will met
with silence or smile
(5)
Persistence and inflexibility in
negotiation
e.
Contracts
(1)
On-going and the contract as an indication
of commitment and cooperation
(2)
Prefer to base a business deal on sincerity
and goodwill and a strong, enduring relationship between both parties
(3)
Establish bonds of trust and commitment,
will fully honour the contracts they have made
(4)
Flexibility the contract is designed to improve
both parties or resolve difficulties, rather than being used to go back on the
agreement
4.
Korean
a.
Negotiating styles
Attributed to the shared,
Confucian roots of society and how they have influenced cultural
characteristics
b.
Personal relationships
(1)
No relationships between the two parties
and therefore the person maybe accepted the equal contributor to the process
(2)
Korean person values the personal relationships
in business, get to know the person he (or she) is dealing with
(3)
Well-established and accepted way doing
business with Korean, particularly for the foreign business and gained the
trust of fostered a relationship
(4)
Protocol to relationships and rank and
formality in using language and observing customary politeness are required in
negotiation process
c.
Bargaining
(1)
Set an initial price much higher than their
acceptable final price, bargained down to what is considered to be ‘reasonable’
(2)
Each side is expected to make concessions
until a final price is agreed upon
d.
Authority
(1)
Higher rank will expect to control the
negotiating process and will not be receptive to someone of lower rank trying
to persuade their argument
(2)
Protocol and respect is shown in
negotiations by those considered to be lower in rank
(3)
Harmony must be maintained and like Japanese,
outward are fusels or rejections of ideas or proposals should be avoided
(B)
Leadership and design making styles
1.
Chinese and Korean companies typically take
top-down authoritarian approach
a.
Leadership comes for the Head of company
b.
Decision making is centralized at top
management level and decisions are channeled down through company
c.
Family head in the CFB and founder or
chairman (Whoe-Jang) in the Chaebol
d.
Employees do not question the decisions
made by their superiors
e.
Leadership style is strongly rooted in the
extended family structure of the company
2.
Centralized decision making in the CFB
a.
Response to the hostility of the external
environment, such as the strategy or plan of action of the firm, the deals it
engaged in or the contacts it established, need to be kept secret from
competitors
b.
Entrusted to the owners of the business,
and/or the secretariat in a larger firm and Often reactive rather than
proactive, and planning for the future is often perceived to be of limited
value
c.
Opportunities can be sized when they arise,
and changes can be implemented very quickly
d.
Consensus-style decision making has
perpetuated a long team view and incremental, slower decision making
3.
Korean leadership style
a.
long team orientation, loyalty to one’s company,
harmony and strong feelings of nationalism
b.
Authority is given to the chairman and his
top directors and managers, and approval for decision also comes from this
group. Hiring career managers from outside the family is common practice.
c.
Responsibility of the head of the company
to care for his employees. Kaisha provide security for the permanent employee
by offering life-long employment in exchange for total loyalty
d.
Harmony and challenge are central to
Chaebol leadership style, employees are encouraged to fulfill the aspirations
of the company. Having unified progress through employee cooperation and
centralized decision making than to have agreement from everyone and less
cohesion to the stratey
e.
Korean stress harmony between unequal in
the group, Samsung as example. Desire to keep the business within the family
network if possible
f.
Adapt and respond to changes in the
business environment. These include: Mounting pressures to modernize business
practices, rising influence of managers who are educated in Western
universities and deteriorating influence over the Chaebol by the
founder/chairman.
g.
Decision making in the more successful
chaebol is becoming less centralized and management hierarchies less absolute
and less authoritarian
4.
Japanese managers encourage group harmony
and group sprit
a.
Engenders a strong incentive to follow the
direction of the group and managers facilitate this cohesiveness by allowing
all employees to see their role in long term vision of the firm
b.
Mutual commitment to these company
objectives and strategies could only be achieved through fostering a strong
group spirit and desire by all to achieve success for company
c.
Ringi system of decision making, employees
involved in suggesting and implementing changes to improve production process
or product and to reduce wastage and defects
d.
Nemawashi by higher level managers seeks employees’
opinions and ideas about a proposed project or course of action before it is
implemented
e.
Ringi seido is a formal procedure used in
consensus decision making. Decision making is more decentralized, with decision
being passed up through the ranks of management and being approved by everyone
before being implemented
f.
The major advantages of the ringi system
that approval and consensus is gained before a decision is implemented, reducing
resistance and encouraging group cohesion and direction
g.
The major disadvantages of the ringi system
that slow the process of decision making and threaten the firm’s ability to
respond quickly to opportunities or competitive pressure
5.
Heavily in the training and education to
their workforce
a.
Life-long employment practices and
reciprocal loyalty from the employee make investment into training and skill
development
b.
Highly skilled employees also facilitated
the changes to competitive strategy taken by Japanese firms over their history
c.
Forced employees to use their skills to
work more vigorously in pursuits of company goal. And keep research and
development spending high and tried to avoid redundancies
d.
Long team commitment to the employee and to
the goal of the Kaisha-Ichiban-being number one
(C)
Sun Tse Bing Fa and other battle tactics
1. Sun
Tze Bing Fa (孫子兵法)
a.
Recognized as a genius of military strategy
and business
b.
The battles for territory or market share
waged by the enemy and competitor and leadership provided by the general or the
manager
c.
The former is an act of construction, the
latter an act of destruction
2.
6 basic elements of a successful army
described by Sun Tze can be applied to the modern business setting
a.
Moral cause
(1) General
must present the morality or righteousness of going to battle
(2) Common
purpose and unity of direction are also features of a successful company
(3) Strong
loyalty from employees to the founder of the business is usual in Chinese and
Korean business
b.
Capability of the general in charge of the
army
(1) Able
to judge business trends and be decisive when opportunities or threats arise
(2) Trust
and discipline are necessary to run in business
(3) Manager
to delegate some responsibility to others lower in the hierarchy
(4) Accepted
as being more important than technical or academic qualification
c.
Climate and terrain-the weather and the
features of the battlefield
(1) The
successful general learns how to use uncontrollable factors, such as the
weather
(2) Choosing
where to fight that choose the best location for the business and alter
products and prices to suit the condition s in the marketplace
d.
Strength
(1) Determines
the victor in battle. A small or medium sized business can compete against a
larger business by remaining flexible, having quick responses and concentrating
on small, specialized areas of the market
(2) Impossible
to obtain adequate information and insight about an adversary
(3) Conceal
the strengths and strategies of the firm and to know those of your competitors.
The firm may also try to turn the strengths of its competitors into weaknesses
or take advantage of an adversary’s misfortune
e.
Doctrine and training, and discipline
(1) Organization
needs a clear doctrine of rules and regulations and a ranking of individuals
which ensures allocation of responsibilities to appropriate people
(2) Discipline
need to maintain order and cohesion. Training allows the employee to respond
correctly to signals and to be able to cope with delegation of responsibilities
(3) Rewards
and punishments are required to support the organizational systems and the
discipline of the group
3.
other battle classic stress the importance
of these strategies
a.
The Book of Five Rings
(1) Understand
the problem or situation from multiple perspectives and to be flexible
(2) Diversion
or divide and conquer’ strategies would take advantage of the enemy’s weakness
if used at the right time
b.
The Three Kingdoms (三國演義)
(1) About
strategies, plots and intrigues of the three fiefdoms’ leaders and advisors in
their struggle after Han dynasty (漢朝)
(2) Importance
of kinship in guiding action in battle
c.
The thirty-six Stratagems (三十六計)
(1) 36
strategies matching suitable strategy to each different situation
(2) Mixed
and matched to the problem at hand on business or personal relationship problem
(3) “Lure
the tiger out of the mountain” (調虎離山計)
(4) The
offensive strategy that bewildered and less able to fight
VI.
Impacts
of East Asian business on the regional economies
1.
Regional
investment (Japan)
a.
Management
practices and other skills accompany this investment. The workforce of these
countries has the opportunity to increase their skills and competencies.
b.
The introduction
of modern practices, marketing and distribution channels,
heightened technology has heightened the ability of these countries to compete
in the international marketplace.
c.
Suppliers
and contractors have also shifted production offshore and mini-Keiretsu. Government
require for local and participation have assisted firms to integrate
with the local economies through local partners or appointing local managers.
2.
Regional
interdependence and integration
a.
Mutual
development strategies employed by both government-and privately owned firms.
They are encouraged participation by the larger Asian firms and considerably
advanced the economic progress of the poorer nations.
b.
Asian
markets that were serviced by export from other countries in the region are now
less attractive and spending power has fallen.
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