1.

  Misunderstood or misrepresented?

Japanese business culture is wrongly perceived as the biggest obstacle to starting business in
Japan for many foreign companies thinking of entering the Japanese market.

I am not an academic and my interest in Japanese business culture is purely in terms of how it
affects the actual mechanics (or tactics) of successfully doing business in Japan. Based on 13
years of direct sales and executive experience in the Japanese market, I will try to give an
insider's perspective of the way Japanese businesspeople think and companies make decisions, so
that you may understand what is going on on 'the other side of the table'.

Many foreign companies never do start business in Japan (or only enter the Japanese market
through a distributor) simply because of the misconception, fueled by those infamous myths of
doing business in Japan, that dealing with Japanese business culture is somehow too risky.
Fortunately, Japanese business culture is not an impenetrable barrier to successful business in
Japan, as proven by the very substantial Japanese market share enjoyed by Yahoo!, BMW,
Mercedes-Benz, Chanel, Louis Vuitton, Tiffany & Co. and many others.

Inevitably Japanese business culture is different to that of the US or Europe, but the differences
do not make it any more risky to do business in Japan than elsewhere in the world. In fact,
certain aspects of Japan's business culture, especially the very stable long-term relationships
resulting from the conservative Japanese sense of loyalty to trusted partners, can be very
beneficial for those foreign companies that understand how to swim with the cultural tide as
opposed to vainly struggling against it.

So just what is Japanese business culture and how is it different?

The differences are there from the moment you arrive at Tokyo's Narita International Airport -
the white-gloved baggage carriers carefully lining up your luggage on the conveyor, the
incredibly polite customs inspectors, the cleaner standing at the top of the escalator (if you are
going down to the Narita Express train station) making sure that the escalator hand rail is clean,
the cleaning staff quickly and silently cleaning and leaving the train, the girl on the platform who
politely bows to you as you board the train, the ticket inspector on the train who stands at the
front of the carriage, removes his hat and bows before proceeding to inspect tickets etc. It is the
same when you arrive at your hotel - when the bell-boy bows and opens the door, when the
porter shows you more information about the buttons beside your bed than you can possibly
remember, they are doing it for you the customer.

When you enter a Japanese store or even a bar, you will be greeted by shouts of 'irrashaimase'
(welcome) and when you leave there will be shouts of 'domo arigato gozaimashita' (thank you)
and you will notice that everyone, even the chef will join in the 'chorus'! The difference you
should notice is that they are all very service oriented and of course service is a pillar of Japanese
business culture. In the US and Europe, personal service has become something that people must
pay for with tips - in Japan there is no tipping, personal service is literally 'part of the service'.
Many foreigners confuse the service aspect of Japanese business culture noted above as being
simply a part of Japanese social culture, i.e. people are just being polite. Agreed Japanese society
is very polite but all of the people noted above were doing their job when you encountered them
- a big part of their job is keeping you happy and in Japan that entails good customer service.
Unfortunately many foreign company executives doing business in Japan for the first time, do
not recognize the differences noted above - primarily because when traveling they are 'off duty' -
they consider their first encounter with Japanese business culture to be when they arrive at a
Japanese customer or distributor's office for their first business meeting.

2.  business meetings in Japan

In the previous section introducing Japanese business culture, I mentioned that many executives
of foreign companies starting business in Japan, consider their first encounter with Japan's
business culture to be at their first Japanese business meeting.

If your first meeting is with a Japanese distributor used to dealing with foreign companies, or
with the trading division of one of Japan's large multinationals, then the chances are that the
employees fielded by the 'other side' will speak English, possible extremely fluent English and,
they having dealt with many hundreds or thousands of foreigners, you will soon feel pretty much
at home. If however you are dealing with a smaller domestic distributor, a smaller company or an
internal division of a major corporation (even one of Japan's multinationals), then the entire
meeting may be in Japanese with English being restricted to "Good morning/afternoon.", "Nice
to meet you.", "My name is Tanaka." etc. at the outset.

"The Japanese in English."

In the first of the above scenarios you will pretty soon forget you are in Japan and neither
Japanese business culture nor etiquette will seem to be an obstacle to your success. Very often
you will proceed quickly to a profitable business relationship but equally as often you will not.
The problem is that the conversation may be in English but the other side is thinking in Japanese
and, being polite, the Japanese side will not wish to hurt your feelings. Japanese salesmen
instinctively know when they are being politely rebuked - most foreign executives do not,
particularly if they are hugely relieved to find a prospective customer or partner that speaks
fluent English!

I have seen distributors and prospective customers shower abundant praise on a foreign
executive, his/her company and his/her product/service and yet all the while have absolutely no
intention of ever doing a deal. I have seen second meetings, third meetings, expensive dinner
meetings (including one that was hosted by the Japanese side and probably cost more than
$2,000) but still the Japanese side never had any intention of doing a deal - they were simply
being polite and waiting for the foreigners to lose interest. I have seen foreign company
executives after such meetings who were convinced they were on the verge of multi-million
dollar deals - the problem being that they assumed that because the Japanese side was talking
fluent English, the differences in business culture were irrelevant. Never calculate your
probability of success with a Japanese using the same metrics that you might use in the US or
Europe - the metrics are different.
Politeness and meeting manners are a key aspect of Japanese business culture and, as noted
above, one which can mislead foreign executives. I have often noticed that many Japanese
businessmen show a heightened sense of politeness when speaking in English with foreign
company executives. The same man speaking in Japanese will be more direct, saying what he
really means, or rather, he will say "No" in a way that while polite will leave a Japanese
salesperson in no doubt of his meaning. Why are they so polite in the first instance but more
direct in the second? I will leave that one for the academics.

"The Japanese in Japanese."

In the second of the above first meeting scenarios, the differences in business culture will be
emphasized by language differences and that (depending upon the character and quality of your
interpreter) can be either very enlightening or very frustrating. In a Japanese language meeting,
the Japanese side are likely to be very polite, show a substantial amount of formality and reserve
and you will be concerned that they are not 'opening up' and that the meeting is not going well.
Very often the pattern is as follows:

 you are greeting by your initial contact upon arrival and taken to a meeting room,
 the Japanese team troop into the meeting room and politely exchange business cards with you,
 they politely sit through your presentation and take copious notes,
 ask some questions, bow politely then all troop out leaving you with your initial contact!

Such polite, reserved and well-mannered meetings are typical of Japanese business but are often
especially frustrating for US company executives because, in the US (and to a lesser degree in
Europe), business is very informal and businessmen meeting for the very first time can often
seem to have been lifelong friends within minutes of first shaking hands. Do not be disheartened
though - just because the Japanese side is not talking about yesterday's ball game does not mean
they are not interested in your product/service. I once did over half a million dollars of business
with a Japanese customer who just 2 or 3 weeks before had had a very 'chilly' meeting with the
then Chairman of the company I was representing!

In this second scenario, a good businessperson will use his/her interpreter to probe and test the
Japanese sides impressions and reactions. They will often be more forthcoming because they are
talking to your interpreter (and in a sense rejecting him/her rather than you) and your interpreter
will be able to advise you accordingly. If the Japanese side is genuinely interested in your
product or service then they will want to meet again irrespective of language differences. If they
are not interested then you saved a lot of time, energy and can move on to more profitable
prospects.

3.  the Japanese company in Japan's culture

In the previous section on Japanese business culture, we briefly looked at one of its obvious
aspects; politeness and manners. Now lets take a look at the core pillar of Japan's business
culture - the company
Webster's Dictionary defines 'business culture' as "..the shared attributes, goals and practices that
characterizes a company or corporation.." and 'the company' occupies a uniquely important place
in both in Japanese business culture and society.

To a great extent a Japanese man and his family are socially ranked by the reputation of the
company he works for and the position and prospects he has there. In the US and Europe, the
success of entrepreneurial economies has to an extent supplanted social casting by employment,
but in Japan, entrepreneurs are not accepted so readily and are often seen as eccentrics or misfits.
In 2004 Japan is as much as ever a nation of 'the company man', in colloquial Japanese called 'the
salaryman'. One of the reasons why Japanese so ritually proffer and accept business cards at
meetings, is the sense of pride in belonging to his company that a Japanese salaryman has.
Business cards are a very necessary part of any first Japanese business (or social) meeting and
this is the reason most likely to be given by your Japanese company President when strongly
(and wrongly) suggesting that you must incorporate as a kabushiki kaisha if you want to succeed
doing business in Japan.

One of the reasons for the central importance and influence of the Japanese company in Japan's
social hierarchy, is that despite the recession of the 1990s, Japanese business culture is still
dominated by the concept of 'lifetime employment'. A young man, entering a large corporation
such as NEC immediately after graduating from university at age 22, anticipates that he will
retire from that same company when he reaches age 65. For the majority of employees at Japan's
major corporations, that promise of lifetime employment still holds true. Even in smaller
companies where labor liquidity is higher, good employees may well stay with one employer for
life. These long-term relationships create very strong bonds between a company and its
employees and of course between co-workers and managers.

"What many foreign companies often see as impenetrable barriers to Japanese business are
more often strong bonds of personal trust.."

In a typical Japanese office the words used to informally refer to senior and junior employees are
often the same words used to describe the hierarchy of a human family. This 'corporate family'
often stretches out to include numerous subsidiaries and even third-party suppliers. It is not
unusual for very strong ties to exist between large companies and their suppliers because the
employees doing the buying and selling may have occupied the same positions within their
respective companies for 10 years, 20 years or even longer. What many foreign companies often
see as impenetrable barriers to Japanese business are more often strong bonds of personal trust
established over long years. If you try to win business by breaking those bonds, you will
probably fail miserably - far better to swim with the tide (at least initially!) and work around or
within those bonds, for example by creating a partnership with the trusted seller. That is how
Japanese companies work together.

In Japan, the company man is the norm and the company he works for very much shapes his and
his family's social expectations. I should also note that in most Japanese industries (and certainly
within large Japanese corporations), it is presently unlikely that you will encounter a female
decision-maker. In the US and Europe, working couples are the norm and many senior manager
and executive positions are held by women - in the Japanese business culture it is still usual for
most women to marry between ages 25 - 30 and then leave their careers to tend to the home or
raise children. Most Japanese women do not return to work even though they may have excellent
skills and experience and might want to continue a career. In fact a good source of skilled and
dedicated employees for a foreign company's Japanese subsidiary company is women looking to
return to work after having left their original Japanese employer to start a family.

Based on discussions with numerous Japanese customers and counseling Japanese employees
over the past decade, here a few examples of how the company that a Japanese man works for
will affect his, and his family's, life:

 if a Japanese man wants to marry a girl from a 'nice' family (an attribute valued highly in this still
semi-feudal society), she and her family want to be assured that he has a good steady job with a
reputable company - either that or he needs to be otherwise wealthy, successful and reliable,
 when a Japanese person applies to rent an apartment in a respectable suburb, the landlord's
agent will want to know in detail which company the applicant works for, how long he/she has
worked there, how long the company has existed and what its revenues and paid-in capital are,
 if two people are competing for the same apartment, the person working for the 'better' (where
better is defined as wealthier and longer established) company will be preferred by the landlord,
 if a Japanese person changes company after renting an apartment, he/she is obligated to inform
the landlord who may decide to evict the tenant if the new company seems unreliable,
 if a Japanese couple want to buy their own apartment or house, the bank will expect that the
man is working for a reputable company that has been in existence for some time and that he
has been in continuous employment there for at least 3 years, often more if the loan is
substantial,
 when Japanese parents are competing to get their child (Japan is now dominated by 1 child
families) into a good school, even at kindergarten level, the 'quality' of the father's employer
and his length of employment with that company are key factors that will be considered.

Added to the very conservative Japanese attitude toward corporate failure and the pressure on
Japanese men to 'conform', it is easy to appreciate why a successful Japanese salaryman will be
reluctant to consider entering the small newly created Japanese subsidiary office of a foreign
company - unless he thinks it is an exceptional career opportunity (in which case you have
probably identified a rare and extremely valuable candidate) or he, or his head hunter, has
negotiated a compensation package superior to anything he would ever get from a Japanese
company.

4.  the salaryman in Japan's culture

In the previous section on the central role of the company in Japanese business culture, I noted
that Japan is the land of the company man, or to use the colloquial Japanese term the 'salaryman'.
Japan's salarymen are the people you will be doing business with and understanding them is an
essential part of understanding Japanese business culture and succeeding in the Japanese market.
In this section I will try to give you an insider view based on my experience dealing with
hundreds of salarymen during the past 13 years doing business in Japan,

The Japanese term 'salaryman' generally includes all white-collar male employees from newly
recruited freshman to general managers but does not include Japanese executives and directors.
The salarymen and their families make up a sizeable chunk of Japan's 'middle-class' and the
Japanese government and its policies is pretty much a reflection of their mood. In fact an often
quoted reason for the popularity of Japan's Prime Minister Koizumi, is that his unpretentious
background and mannerisms allows him to relate well to the concerns of the salaryman (in my
wife's words "He acts like a salaryman and talks like a salaryman in phrases that ordinary
Japanese can understand").

Understanding what motivates the typical Japanese salaryman is critical if you want to really
succeed at doing business in Japan, because it will help you in just about every decision you need
to make, from deciding your Japanese office location to who to recruit as your subsidiary
company President. To understand the salaryman, how he influences Japanese business culture
and doing business in Japan, we will study Tanaka-san, a 35 year-old 'rising star' salaryman who
is a departmental manager at a large Japanese corporation. Tanaka-san is a real living salaryman
and a business acquaintance of mine (although I have changed his name for this section).

"Tanaka-san the salaryman.."

In a sense, Tanaka-san's business life started when he was just 2 or 3 years old. He is an only-
child - his parents knew that if he was to become a respectable salaryman working for a secure
and respectable Japanese company, he would be recruited by that company only after graduating
from a top university. Tanaka-san's father is a general manager at a Japanese multinational
consumer electronics company and earns a good salary, but to put 2 children through a top
university would have been beyond his father's salary, so Tanaka-san is an only-child.

Tanaka-san's mother investigated which kindergarten, which junior school, which middle school
and which high-school would best enhance his chances of entering a top university. His father
approved the decisions, but it was Tanaka-san's mother that made them. By the time his father
returned home to Tama City, after a 1½ hour commute from the east side of Tokyo, he was too
tired to do anything but sleep. On Saturdays he would be at his office and so the only time
Tanaka-san ever really spent time with his father was on Sundays, when his father would do his
'family service'. So his mother researched the decisions and his father approved them.

From age 8, Tanaka-san attended cram schools and throughout his middle and high-school years,
he studied 12 hours a day, 6 or 7 days a week, to ensure his entry to that top university. After
years of dedication, hard work, detailed study and not breaking the rules, Tanaka-san graduated
from Tokyo University on March 31, 1990. In the previous October he had competed strongly at
the career fair organized by the university and had proudly accepted an offer from a major
Japanese company. On April 1, 1990, the very day after he graduated, Tanaka-san proudly joined
the mass of daily commuters in his new blue suit and white shirt - he was now a freshman
salaryman.

When Tanaka-san first entered the company, he had no idea (and neither had the company) what
position he would eventually occupy. Together with the other new employees, he entered the 3
month induction course and upon completion was assigned to a junior position in one of the
company's offices. He made a lot of friends during induction training and even though those
friends were dispatched to different offices, he will stay in contact with them throughout his
working life. During the next 3 years, Tanaka-san was rotated through 4 or 5 different
departments - 6 months in accounts, 6 months in patents and intellectual property, 6 months in
production, 6 months in purchasing etc., until eventually he was assigned to a longer-term
opening in the IT division. He again made many new friends during those rotations and they also
will remain his friends throughout his working life, even though they too may be working in
other departments in other offices. Even at just 25 years old, Tanaka-san has already begun to
build a strong web of intra-company relationships - a network which will be important to him as
he ascends the corporate ladder.

5.  company harmony, salaryman networks and Japanese business

In the previous section on the role of the salaryman in Japanese business culture, we left our
typical salaryman, Tanaka-san, as he took up his first post-rotation position in the IT department
of a major Japanese consumer electronics company. Now we will skip ahead a decade to today,
April 5, 2004.

In the intervening years, Tanaka-san has been noted by his seniors for working hard, staying late,
ensuring procedures are followed and avoiding unnecessary risks. They have noted that he is
liked by his managers and peers and that while intent and determined, he is not argumentative or
headstrong. They also recognized that he could organize support for his managers' decisions and
policies at the customary department-level committee meetings ('ringi') used by Japanese
companies to ratify such decisions and policies. At age 27 he was made a section manager, at age
31 he was promoted to junior department manager and then at age 35 he has just (in the annual
April 1 reorganization) been promoted to department manager. His superiors have high hopes for
him and have told him that if he continues this way and does not make a mistake, he will be
divisional general manager before he is 45. That's a long wait - but not nearly so long as all those
years at cram school felt.

After work, in the bar at the rail-station where he starts his daily 1 hour commute home, his
friends Suzuki-san and Yamaguchi-san (two of the many friends he made during his induction
course when he first joined the company), a few of his closest juniors and his immediate
manager, laugh and tell him how he is the golden boy and wonder whether he might not make
divisional general manager at 40? Tanaka-san smiles and says that he will try - although inside
he knows that his wife wants him at home more and is already saying that his salary is enough
and he should spend more time with the family and less at the office. Tanaka-san married one of
the girls in the purchasing department at his company 5 years ago, although she left the company
soon after and is now at home (they live at his parents home after having rebuilt it to suit 2
families) looking after their baby. Tanaka-san married one of the girls in the purchasing
department at his company 5 years ago. She left the company soon after and is now at home
(they live at his parents home after having rebuilt it to suit 2 families) looking after their baby.

As with most salarymen over age 30, his friends Suzuki-san and Yamaguchi-san pretty much
know how their careers are set. Suzuki-san did not get promoted to section manager until 30 and
has been passed over by younger men for the more senior positions - he hopes that by continuing
to work hard and making no mistakes, he may be promoted to department manager at age 45 or
50 based on seniority. Unfortunately for Yamaguchi-san, when he was 27 he was made
responsible for a project that went massively over budget and was late - he is still just a senior
clerk but now gets given more responsible assignments because of his age. Fortunately his close
relationship with Tanaka-san ensures that he is respected amongst his co-workers and he hopes
that in time, maybe age 40 to 45, he will be considered for a junior management position based
on seniority (and assuming his past mistakes are forgotten).

"..Tanaka-san understands and respects the very strong Japanese corporate hierarchy - he
never opposes his managers.."

Tanaka-san has worked hard to ensure that as he has risen he has not broken the bonds with the
network of colleagues he made when he first entered the company and which he has constantly
added to since. He knows that in the future, when finally he has sufficient authority to start
implementing radical changes that he has quietly considered (but never spoken of even to his
closest friends!) and which he feels are necessary for the company's future well-being, that he
will need the support of his internal network. As with all successful salarymen at large Japanese
companies, Tanaka-san understands and respects the very strong Japanese corporate hierarchy -
he never opposes his managers and always does his best to support and justify their decisions -
even if at heart he might disagree. He also knows that if he earns a bad reputation amongst his
coworkers, it will be seen as a potential risk by his seniors, so he strives to be a fair and good-
natured manager while insisting on accuracy and timeliness.

When Tanaka-san was graduating from Tokyo University, his professor (who even now Tanaka-
san refers to when making certain business decisions), told him of the importance of adhering to
corporate policies, of being patient and of waiting for the right opportunities. Even as a young
salaryman, Tanaka-san recognized that if he was not promoted to junior manager by age 28 he
probably never would be. He saw from the experience of others that if he did not make
departmental manager by 35 - 40 he probably never would. His next objective is to become
divisional general manager and he knows that he must make that position by 50 if he is to have a
hope of making an executive position before he retires. He is glad that he has always followed
the safe path, glad that he has always followed the strict procedures laid down by the company -
glad to be on the path up as opposed to many of his friends who have few fresh challenges left to
look forward to.

__________

All over Japan, in Japanese companies large and small, you will meet salarymen like Tanaka-
san, Suzuki-san and Yamaguchi-san. Their collective attitude is what defines today's Japanese
business culture and to succeed doing business in Japan, you need to understand their motivation,
especially the way they perceive risk, so that you can apply your foreign business culture in a
way that is sensitive to theirs. Most of Japan's salarymen exhibit a similar set of qualities that
will affect the way you do business with them:

 they are loyal and dedicated to their company,

 if faced with a conflict between company duty and family duty, 99% will do their company duty
first
 they are consistent,
  they never criticize their company, coworkers or managers,
 they are reliable,
 they are obsessed with detail,
 they evaluate all options,
 they are conservative,
 they make their decisions in committees ('ringi'),
 if necessary and for the good of their company, they will move mountains to help you,
 they conform

Respect those qualities and work with them in a way that enables them and you to win while not
placing them in a position of unnecessary risk, and you will forge some of the strongest, most
profitable and most enduring relationships that you have anywhere you do business.

I will also add that it has been the greatest privilege of my life to spend the last 13 years living
amongst them and doing business with them.