Japan’s Business and Economy

1. Japan’s Business and Economy • Global • Hong Kong • China • Southeast Asia

6. Business Four Stages in an Evolving Economy: Premodern, Prewar, Post-war, Post-Bubble. Two Business Challenges: Employment System Reform, Business Organization Reform

7. What happened to the economic miracle? • What foundations did Japan have for its rapid economic development? • How has the structure of the Japanese economy evolved over time? • What role has the Japanese employment system played in Japan’s growth and its present lack of growth? • What role has Japan’s style of business organization played in Japan’s growth and its present lack of growth?

8. The Blue Diode Story Shuji Nakamura beat the titans to blue LEDs and lasers, potentially revolutionizing lighting and data storage

9. Nakamura invents the blue diode at Nichia • Over the next 10 years, as he coaxed more and more light out of gallium nitride and shot far ahead of his competitors, Nakamura put together a string of achievements that for genius and sheer improbability is as impressive as any other accomplishment in the history of semiconductor research. And it is all documented in a trail of literature—essentially all of it written in secret—almost as stunning. Between 1991 and 1999, he authored or co-authored 146 technical papers, 6 books and 10 book chapters on gallium nitride semiconductors. Nakamura’s publishing exploits largely escaped the company’s notice because he published his research in fairly obscure journals. He was nevertheless caught once or twice and agreed to abide by the no-publishing rule but then continued to quietly defy it. Nichia was no victim, though: because of Nakamura’s work, the company was awarded 68 patents in Japan and 13 in the US, with many others submitted and yet to be decided. • From Scientific American

10. Nakamura leaves Japan for the US (UCSB) • Last October, having done everything he wanted to with gallium nitride and weary of a Japanese industrial R&D system that he characterizes as "communist," Nakamura decided to leave Nichia. Though his inventions had swelled Nichia’s profits from under $100 million to over $400 million, Nakamura was being paid only $100,000 a year, he says. • Asked what he wants to do now, he is blunt, if a little nonspecific: "I want to achieve the American dream," he exclaims, laughing. "That’s why I came here. I couldn’t achieve the American dream in Japan. Here, I can start a venture company—in five or 10 years, if I could invent a new device. To get funds, I’ll have to keep working on nitride devices, because I am famous for nitride devices." • From Scientific American

11. Nakamura sues for his share • On January 30, 2004, the Tokyo District Court handed down a landmark ruling ordering Nichia Corporation to pay a whopping ¥20 billion to Nakamura Shuji for an invention he made while working for the Tokushima-based company. Nakamura had sued Nichia claiming that he was entitled to a share of the profits from his breakthrough invention of the blue light-emitting diode. • The court declared that Nakamura made his invention "with his individual power, based on completely original thinking," calling it "an utterly exceptional example of a worldclass invention eagerly awaited by the industrial world" made in advance of research institutes around the globe by a man "working in a poor research environment at a small company."

12. A Japanese Scientist’s View • Nakamura’s invention built on the work of others • Company (Nichia) risked ¥500 million in Nakamura’s project and his own development--more than large firms • Others in Nichia made important discoveries--especially white LED • Nichia risked ¥2.1 billion in production and made markets • Company rewarded Nakamura ¥62 million in bonuses and rapid advance • Others had patented similar devices

14. Blue Diode Story • So what?

15. Premodern foundations of industrial development • Skills and technologies • Education and discipline • Local and national markets • Cash economy • Entrepreneurs and business organization

16. Pre-war industrial take-off • Government initiatives-institutional and industrial • Development of large corporations: the Zaibatsu • Development of the dual economy

19. Post-war shift from labor intensive to knowledge intensive development Three stages: • Rebuilding (1945-1952) • High growth (1953-1973) • Restructuring (1974-1990)

20. Rebuilding (1945-1952) • American reforms, reverse track and fiscal restraint • Capitalist-labor compromise • Korean war rescue • Catch up to the west Economically

21. High growth (1953-1973) • Income doubling plan • Government targeting of basic industries • Preferential trade and protectionism • Investments in education, equipment and R&D • Dependence on cheap oil and raw materials • The environmental cost of rapid growth

22. Restructuring (1974-1990) • The oil crises • Targeting of knowledge intensive industries and ‘sunset’ industries • Elaboration of the dual economy: Assembly industries, microelectronics, mechatronics • Shift to a service based economy • Trade friction and foreign investment • Inflation of the bubble economy

23. The Trade Balance

26. Setting Sun?

27. The post-bubble economy (1991-): stagnant growth but continued development • The bursting of the bubble • Banking and insurance problems • Deregulation of a divided economy • A graying economy • Internet economy • Cultural economy • Ecological economy

28. Real GNP Growth from 1980 to 1999

30. The Graying of the Japanese Economy

31. Growth of Cellular Phone Use

33. The Exam • Why does Togashi’s company have a marathon team? • This film shows a contest between two universal principles of Japan’s economy. Which one is winning? • Do you think there is any linkages between what is going on in the education system and the economic system? • What is an example of tatemae and honne? • How does Togashi’s company get rid of him?

34. Employment System Reform • The second most important group • Foundations of Japanese management • Benefits of Japanese management • Costs of Japanese management • Reforms

35. The second most important group • Group orientation: business efficiency and culture • Individual expression: opportunities and security • Universal principles: market discipline • Hierarchy: consensus formation within and between corporate levels

36. Foundations of Japanese management • Lifetime employment • Seniority system • Enterprise unions

37. Benefits of Japanese management • Mutual commitment • Job rotation and training • Openness to change and participation

38. Ringi Seido--Consensus Management • Bottom up system where lower ranking managers/employees initiate changes • New initiative moves up each level of organization where it is reviewed and stamped for approval/disapproval • Approval must be gained by all departments affected by change • Acts as corporate record and maintains order of the system

39. Advantages 1. Encourages horizontal communications. 2. Diffuses responsibility, thereby avoiding loss of face. 3. Allows fresh ideas to rise up the organization from lower levels of management. 4. Allows capable lower-level managers to demonstrate their abilities. 5. Allows more information to be brought to bear on decisions. 6. It reduces risk and internal conflict. Disadvantages 1. Process is extremely slow. 2. In some systems little review of the proposal is allowed. 3. Political deals can have impact. 4. Alternative strategies may not be discussed. 5. Diffusion of responsibility may result in avoidance of responsibility and scrutiny of proposals. Ringi Seido--Consensus Management

40. Costs of Japanese management • Long working hours and Karoshi (death by overworking) • Tanshin funin (assignment away from home) • Assignment to subsidiary firms • Frustration and inefficiency due to less weight put on merit based advance • Madokiwazoku (window tribe), Katatataki (tapping on the shoulder)

41. Osaka crash is just the latest in a series of industrial accidents • Experts saw Monday's train crash as part of a rising trend of industrial accidents in Japan. • A spate of accidents - including leaks at nuclear power plants and fires at oil refineries - prompted the Ministry of Economy, Trade and Industry to set up an accidents panel last year to look for ways to put a stop to the trend. • Reasons it has given for the incidents include poor supervision of staff and inexperienced workers being given complicated tasks. • Experienced staff, being higher-paid, older and more experienced, have been among the first to be "restructured" - the euphemism for laid off - as companies try to reduce their wage bills. • Their jobs are now being done by younger people who have had less time to pick up the skills required of them.

42. Osaka crash is just the latest in a series of industrial accidents • The driver of the train involved in Monday's crash in Amagasaki was 23 years old and had only been driving trains for 11 months. • The JR West driver had been reprimanded twice, once for over-shooting a platform by 100 metres and the second time for appearing to be very tired while driving. At the last stop before Monday's accident, he had again overshot the platform by 40 metres. • Mr Itazaki said Japanese industry was increasingly aware of the need to have older workers share their knowledge with new recruits. JR West recently introduced a system in which retiring drivers instruct their replacements.

43. Reforms • Greater concentration of core work force • More emphasis on merit based advance • More emphasis on specialization • Greater allowance for job hopping

44. Kobayashi Yotaro: CEO Fuji Xerox, Chairman Keizai Doyoukai • It may be true that downsizing is required to meet the market's short-term expectations, but we mustn't let visions of rising stock prices triggered by such restructuring hypnotize us. We must discern between downsizing moves that are urgently required and those that aren't. As managers we may be able to deal with our firms' surplus employment through retraining instead of layoffs. And we shouldn't just say that the market will never listen to our message if we take this approach. This is the kind of leadership the rank and file want to see. There's a world of difference between employees who live in constant dread of getting terminated unexpectedly and those who know that, though the market environment is harsh, their company's top executives are handling the situation with them in mind.

45. Kobayashi Yotaro: CEO Fuji Xerox, Chairman Keizai Doyoukai • I'd say that if you want to keep corporate employees and civil servants motivated, if you want to sustain their vitality and keep them interested in what they're doing, you need to take proper care of family ties. The organization has to be family-friendly. Somewhere along the line the corporation clearly began to neglect this. Workers need to be able to spend time with their families. Attention must be paid to relationships between husbands and wives, between parents and children. Some may say we'll never win out in competition with China if we let such niceties distract us. But is the way to deal with the Chinese challenge really to heed the old cry of "work longer, work harder"? One of the keys here is precisely the issue of knowledge. Giving workers time off won't automatically cause them to accumulate knowledge, of course, but that's one of the things you can do to sustain the motivation that leads to knowledge acquisition. And I think it's very important to keep young people from developing a standoffish attitude toward jobs.

46. Matsushita’s Three Principles of Management • Management by all: role of team leader is to run at the head of the group, pull everyone along, and to encourage slower members to pick up new skills that will help them run faster. • Meritocracy: depends on everyone having opportunity to learn new skills • Respect for human dignity: instilling in employees a goal oriented attitude that allows them financial and creative rewards

47. Examples of Matsushita Changes • 21st Century project teams: dominated by twenty and thirty year olds because they will inherit the company • Panasonic Spin-Up Fund: ¥10 billion fund to encourage employees to set up on subsidiary companies

48. Toyota’s Evolutionary (and organizational) Learning Capabilities • Change: incremental and emergent (messy) • Selection: how will change help customers, improve competitiveness, reduce costs, improve quality, shorten delivery time? • Preservation: diffusion and internalization of changes throughout the company by use of rules and standards

49. How typical is Japanese management? • A full reality for the large firm and government employed minority • A model for small and medium sized businesses • The excluded temporary and female workforce • Potential and risks in the original family model of a business

50. Business Organization Reform • Ownership and governance • What has happened to Japan Inc.? • Resilience and changes to group ties