Japanese Management

What Can We Learn from JapaneseManagement?

Parissa Haghirian

Japan and Japanese management have produced a lot of internationalinterest over the past decades. After an unprecedented economic mir-acle, catapulting Japan from being one of the poorest countries afterWorld War II to become the second most important global economicplayer, Japanese management practices were seen not only as exoticbut also superior to Western management practices until the end ofthe 1980s.

However, a decade of economic stagnation followed, in whichthe very same management practices which were responsible forJapan’s success were suddenly named as the influence factors forslow recovery. Japanese companies were forced to restructure andinternationalize. Their traditional strength — manufacturing — wasnot able to compete with cheaper Asian competitors. Successfulstrategies of the past such as lifetime employment and seniority sys-tem were suddenly becoming burdens which hindered flexibility andslowed the way out of the recession. At the same time, Japan’sneighbors, China and India, became the new economic superstarsand are expected to challenge Japan’s economic power andsupremacy in Asia.

Japanese companies took the challenge and did change. Manychanges were not prominently covered in Western media or byWestern researchers; they happened in a Japanese “kaizen” oriented

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way, step-by-step. Even after restructuring, Japanese companies stillface many challenges to keep up with the challenges of globalizationand international business. They have been famous for adaptingextremely quickly to all their customers’ wishes and yet find it diffi-cult to abandon their traditional management styles. They still show atoo rigid process orientation, but still manage to develop successfuland innovative products which excite consumers all over the world.They are caught between traditional management practices, whichhave been successful for many decades and the wish to change andkeep their dominant role in an increasingly globalized business world.Their decision-making processes need to become faster and many ofthem lack assertive leaders. At the same time, Japan is still the world’ssecond largest consumer market and a highly profitable place forinternational investment.

The catastrophe of March 2011 has shown how differentJapanese people manage crisis and uncertainty, how dedicated andloyal they are to their peers and how different their view on the worldis from ours. For all these reasons, Japan is still a very interesting andinspiring place to study and research management. Despite the inter-esting economic history and changes in the Japanese economy, thereis still little coverage about Japan’s business world today. Particularlyteaching material on the topic is often old and outdated; the numberof contemporary case studies on the topic is scant.

This book presents case studies on Western and Japanese com-panies operating in today’s Japanese market. All cases present atypical situation in which the company faces challenges dealingwith Japanese clients, developing a strategy to succeed in thesophisticated Japanese market and also discuss critical situations inwhich some Japanese companies have recently found themselves.We cover a wide array of topics starting from market entry into theJapanese market to strategic issues. Marketing aspects are also cov-ered as well as the question of how Western and Japanese playersdeal with crisis. We further present three mini-cases which discusscross-cultural challenges when dealing with Japanese firms. Indoing so, we hope that we can provide a vivid picture on howdiverse the Japanese business environment is today. The number of

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foreign investors has increased over the past years despite difficul-ties they may face when entering the market. Japanese consumersand the enormous size of the market still provide business oppor-tunities and the possibility to discover new marketing and producttrends. At the same time, we can learn from the struggles Japanesecompanies face when dealing with an increasingly globalizedworld.

“Case Studies in Japanese Management” starts with a topic whichchallenges most Western companies in Japan: entering the Japanesemarket. In the first case, Aaron Toussaint discusses the entry of Wal-Mart in Japan. The company, whose business model is based on thedistribution of cheap products, found very idiosyncratic and not alwayseasy to deal with customers in Japan. Although Wal-mart entered themarket with an established partner, Seiyu, their business procedureswere influenced mainly by cross-cultural misunderstandings and falsejudgments. The case presents the history of the company in Japan andprovides an insight into the Japanese consumer market and how it dif-fers from consumers in other industrialized markets.

The second case deals with another American giant and the chal-lenges of the Japanese market. Julie Lafage shows how eBay foundJapan out of the markets in which it could not get a strong foothold.The reasons for this are not only found in particularities of Japaneseconsumer behavior, but also in the strong Japanese competition.Ebay retired after an unsuccessful first attempt and abandoned themarket, but decided to give the Japanese market another chance.The case discusses Ebay’s history in Japan, how the first attemptsfailed and which market situation the company found when trying tore-enter.

The second part of this book discusses strategic managementchallenges when managing in Japan. The first case in this sectionwas written by Greg Taylor and investigates the return of Nintendo,a leading software firm, which was synonymous with video games inthe 1990s. Yet, by 2000, it was Sony’s “Playstation” that held thathonor. This case covers the strategic changes made at Nintendo toreclaim its former market-leader position. By innovating the gameexperience and developing products to expand the market (by

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reaching out to “non-traditional” gamers), Nintendo was able todisprove its skeptics and rebuild its gaming empire. The case showshow the company developed over the past two decades and how itsstrategy catapulted it back to the top in its industry.

Kaoru Kusuma presents another Japanese giant in her case“NTT DoCoMo — Beyond i-mode and FOMA”. NTT DoCoMo isJapan’s leading mobile phone carrier. Over the years, NTTDoCoMo has emerged as the market leader in Japan after its suc-cessful launch of the mobile internet i-mode. i-mode, the firstmobile internet in the world, made internet available on the phonewithout the need to dial-up. Following i-mode’s success, NTTDoCoMo began establishing a foothold in overseas mobile phonemarkets by investing in foreign mobile phone carriers such asHutchison Telecom, AT&T Wireless, KPN and KTF. However, thecompany’s global expansion drive showed minimal success. At thesame time, technical problems with NTT DoCoMo’s 3G networksand the 3G service were not as well-received as was expected to be.As the competition among the mobile phone operators intensified,it remained to be seen how NTT DoCoMo reacts to sustain itsmarket leader position.

The case study “Xbox in the land of the rising sun” describes thestruggles that Microsoft had to face when selling its product in Japan.Ali AL Dhamen describes how Microsoft launched its Xbox videogame system very successfully save for one market: Japan. HereMicrosoft faced a particular harsh competition and was even trumpedby competitors who could not succeed outside Japan. The case dis-cusses how Microsoft struggled with the Japanese market over thepast decade and which factors were responsible for these problems. Itraises the question of whether the software can turn around its busi-ness in the land of the rising sun.

Paul Gaspari in his case study “Big Gulps and Big Business: SevenEleven Japan and the New Keiretsu” presents another main player inthe Japanese market as well as in many other markets, includingSeven Eleven Japan. Starting as an idea imported from the UnitedStates by the company, Ito-Yokado, convenience stores in Japanbecame an instant success and a standard sight in every Japanese city.

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The company grew so successful that it did not only take over SevenEleven in the United States, but also built a keiretsu of its own stylein Japan. The case discusses the rise of Seven Eleven in Japan and theinternationalization of the convenience store concept as well as thenew keiretsu, which was formed out of importing an American ideasuccessfully to Japan.

The last case in the strategic section deals with another softwarecompany, Sony, and its product, Playstation 3. In this case, VincentAgulhon shows how the company, after being very successful withearlier versions of the famous Playstation, is dealing with the massivechange and severe sales shrinkages in the Japanese video game marketand the fact that their hit product, Playstation 3, did not live up toexpectations. The case further discusses the otaku phenomenon,which is a major influence on the software and gaming industry inJapan.

The third part of the book investigates marketing issues in Japan.Marketing in Japan is a topic which was fairly neglected in Westernmanagement research. In her case, “The Rise and Fall of the JapaneseLuxury Market”, Ekaterina Ignatova describes the latest developmentsin the Japanese luxury brand retail market. The Japanese market haslong been considered the only luxury mass market with millions ofconsumers spending enormous amounts of money on branded fash-ion products especially from Europe. Since the year 2008, however,this development has stopped and Japanese consumers have started tobecome more careful on how they spend and which items they spendon. Buying cheaper fashion items became more socially acceptablewithin Japanese society and leaves Western luxury retailers with thequestion of whether the Japanese luxury market is only showing signsof fatigue or whether this is going to be a worldwide trend.

Another luxury product, which is not perceived as a luxury prod-uct in its home country, is the center of attention in Nathan Echols’case “Toyota Lexus: Number One Overseas but Struggling at Home”.Since many Japanese consumers perceive Western products as moreluxurious than Japanese, the Lexus-even if well, perceived in othermarkets, struggles to sell luxury cars in Japan. The case describes howthe brand was developed and how it is perceived in Japan.


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The fourth part of the book deals with companies which gaineda lot of media attention recently. Both companies were “dealingwith crisis” and had to endure often very negative media coveragein both Japan and the West. The first case deals with Swiss manufac-turer, Schindler Elevators, and its biggest crisis in Japan. Schindler,being world market leader in the elevator and escalator business innumerous markets all over the world, has struggled to enter theJapanese market which is dominated by powerful Japanese for awhile. The company faced a major crisis when a lethal accidentinvolved one of their elevators in a Tokyo building. Reacting in avery European way, the company did not only upset the Japanesepublic, but also made serious mistakes in dealing with a PublicRelation crisis. The case describes the accident and how the com-pany reacted. Both Japanese and European point of view arepresented and support the discussion of cross-cultural differenceswhen dealing with crisis.

Elena Neufeld in her case, “Lost in Translation? Toyota and theRecall Scandal”, portrays the biggest scandal a Japanese companyfaced in the past years. She describes the case history of Toyota and itsbiggest scandal that was covered in most media and how differently itwas perceived from Japanese and American perspective.

In the fifth section of the book, we discuss cross-culturalchallenges when working or studying in Japan or with the Japanese.Christina Wright describes how a Japanese fashion editor isshocked by “too” relaxed American work processes when workingfor the first time in the United States. Chenming Bi shows that beingpolite can take very complex forms in Japan and Roy Martinezdescribes his experience as an American in a Japanese universityarchery club.

The final section of the book deals with future technologiesand how they are being promoted by Japanese firms. Here NathanMichael Echols provides an overview on how the three major Japanesecar makers, Toyota, Nissan and Honda, have very different strategiesand assumption on which technology will dominate the future of theautomotive industry. The book closes with a note on the contributors.

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This book is supposed to help students of international manage-ment as well as managers working in Japan understand the Japanesemarket and the current changes in Japanese management. Each casecomes with a teaching PPT presentation which are available for edu-cators in the World Scientific Publishing Homepage.

With this book we hope to increase the understanding ofJapanese management practices and the current Japanese economyand help students all over the world to get a better idea about howbusiness should be done in one of the biggest and most powerfuleconomies of the world.


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Japanese Management

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