In Japan in 1918 Konosuke Matsushita founded Matsushita Electric a consumer electronics company which is known today as Panasonic. Panasonic has offices in 58 different countries and is regarded as one of the world’s largest electronics companies. (Panasonic, 2013)
Panasonic alike many other Japanese companies was established on a Confucian value system. The Confucian value system consists of three main elements; reciprocal obligations, honesty and loyalty. These elements form a majority of traditional Japanese values. (Smits, 2010) Hofstede, even though his work has been criticised, recognised some significant aspects of Japanese culture. These aspects included high uncertainty avoidance, high masculinity and a swing towards collectivism. These aspects also contribute largely to traditional Japanese values. These values were represented in such policies as lifetime employment and generous retirement bonuses. (Hofstede, 2013)
However cultures are dynamic, they change over time. The major shift in Japanese culture occurred during the 1990’s, which was mainly attributed to the change in perspective of the generation born after 1964. This change was evident in 1999 when Panasonic gave its new employees a decision between different employment packages. The first package gave the employees a large retirement bonus, subsidised housing and services and company social events. The second package gave the employees the same perks except instead of a retirement bonus a larger starting salary. The third package gave the employees an even larger still starting salary however none of the other benefits. In contradiction to traditional values 41% of new employees chose the second package. (Hill, 2011) This shows a move away from high uncertainty avoidance which was triggered by an increase in average wealth and a move towards individualism.
The primary criticism of this generation was their lack of commitment to traditional Japanese values in comparison with their parents. One of the more perceptible changes was a switch from a collectivist culture to a more individual culture. (Hill, 2011) It has been theorised that there is a correlation between economic development and a shift towards an
individualistic society. This theory correlates with the article which states that a cause for the shift is the fact that the generation born after 1964 grew up in an economically richer society. This shift also affected organisational loyalty in the form of people changing jobs with greater frequency than ever before. (Reiner, 1991)
This shift in the paradigm of Japanese cultural values has an effect on traditional values. The ‘modernised’ value system in effect is polar opposite to traditional values which were achieved by a complete cultural shift. Which in turn insinuates that the further the culture evolves the less tradition is left in the value system, if trends current stay constant. This shift in cultural dynamics changes the undercurrents of doing business in Japan. A major change is going to be retention of employees. This is due to the switch from collectivism to individualism and the decrease in personal identification based on company strata in conjunction with decreased company loyalty. The implication of this is companies are going to have to build their HR departments and find ways to lower employee turnover to reduce training costs. However if trends continue the average worker is going to have an increased understanding of a wide range of markets due to numerous career changes which allow firms access to a greater number of ideas to cope with increasingly dynamic business conditions. If companies want to optimise the new cultural principles of lowered uncertainty avoidance and the shift towards individualism they are going to have to encourage new product development and add funding to research and development. (Reid, 1999) Panasonic have already identified this and moving towards a greater number of policies in this area. Panasonic have also identified the lack of traditional aspects in the business environment and have implemented policies such as; bonuses based on performance and the new employment package plans. (Hill, 2011) If uncertainty avoidance and individualism continue to increase to Western levels there may be an increase in start-up companies which would increase competition in the market and possibly decrease the market share of existing companies. These changes could also have been influenced by a greater presence of western culture within Japanese society. However there could be the adverse effect of decreased productivity attributed to a decrease in the number of
employees having a personal identification with the company, decreased loyalty as well as a move away from reciprocal obligation and towards entitlement. This also works in the opposite direction and companies may not feel loyalty or obligation to Japanese employees and instead off-shore operations to lower wage countries in order to increase margins. (Reid, 1999)
Between 1986 and 1989 there was a rapid acceleration of asset prices in Japan. This also caused uncontrolled credit expansion and money supply in addition with overheated economic activity. Due to speculation and overconfidence of asset prices, the asset prices began to drop in 1991 and collapsed by 1992. The asset bubble collapse lasted for more than 10 years and was generally referred to as the lost decade for Japan. This also led to economic stagnation and as result of lower net income Japanese families decided to pay off debts which caused a deflation spiral. (The Economist, 2010)
Since these events the Japanese economy has struggled to recover. Even though recent decisions by the Japanese government has caused the Nikkei to recover slightly it is currently roughly a third of the value it was in 1990. Currently the cash rate in Japan is 0% which means that changing monetary policy cannot increase GDP. This means that for Japan to obtain a substantial increase in GDP it has to increase its goods market. Japan has a debt to GDP ratio of 214% which is the highest in the world. (US CIA, 2013) Therefore an increase in consumption, investment or net exports is needed to advance Japans economy. Panasonic as well as a number of other companies have realised this and has moved to encourage individualism. Individualism encourages entrepreneurship which currently could boost the Japanese economy if successful new product development takes place. (Saito, 2000)
The traditional Japanese culture was a benefit to Panasonic during the period of 1950 to 1980. A group orientated culture assisted with strong teamwork between employees allowing greater productivity within the workplace. Due to the element of reciprocal obligation in the Confucian value system policies such as lifetime employment and cheap housing were seen as gifts and in reciprocation of these gifts employees worked harder. Loyalty played a large
part in building strong business performance, this is because employees would stay in a business for the entirety of their career so they were able it learn all aspects of the business and better manage it. This amongst other factors also lead to identification with the business by employees, instead of saying “I am a web developer” they would say “I am from Panasonic”. This identification encouraged employees to work harder so that their company would succeed. A high uncertainty avoidance allowed managers to only take a calculated risk when the needed to, which reduced the companies liabilities. (Strath, 1996)
However even though the traditional Japanese culture was a benefit to Panasonic in the period of 1950 to 1980 it was a liability post 1989. Even though Confucian values encourage team work and other positive attributes it discourages individualism. During this time period due to the economic crisis in Japan Panasonic would if benefited more from an entrepreneurial drive towards new product development. A high uncertainty avoidance also meant that managers were not willing to take risks unless they knew what the outcome was going to be, due to the economic pressures and heightened pace of change within the business community managers were less likely to change things in an environment where the only way to survive is change. During this time period business was becoming more dynamic due to globalisation and increased competitors which meant that Panasonic needed to change its strategy, however managers did not know how to do this because they had only ever worked in the one company and only knew one way of doing things. Panasonic alike other Japanese companies eventually had to lay people off and cut benefits due to economic conditions. These acts were seen as a dismissing employee’s loyalty and to a point betrayal due to the strong identification with the company which caused productivity changes. (Huffman, 1997)
In the last financial year Panasonic recorded a loss of 754 billion dollars and forecasts a loss of 765 billion dollars next financial year. Even though there is no best culture for a business environment, Japanese companies including Panasonic are move towards integrating the current cultural changes into their practices in order to achieve greater efficiency and
productivity. The question is will Japanese culture continue along its current trends or do an about face? (Panasonic, 2013)
Hill, Challes. 2011. Gobal Business Today. 7th Edition. McGraw-Hill. Pp 125-128 Hofstede, Greet. 2013. Japan – Geert Hofstede. [ONLINE] Available at: http://geert-hofstede.com/japan.html. [Accessed 24 August 2013]. Huffman, James. 1997. Modern Japan: An Encyclopedia of History, Culture, and Nationalism (Garland Reference Library of the Humanities). Edition. Routledge. The Economist (US). 2010. Japan syndrome, the future of Japan. ISSN 0013-0613 Volume 397, Issue 8709, p. 18 Reiner, Thomas. 1991. Legacies and Ambiguities: Postwar Fiction and Culture in West Germany and Japan. 1 Edition. Woodrow Wilson Center Press. Panasonic. 2013. Annual Report. [ONLINE] Available at: http://panasonic.net/ir/annual/. [Accessed 26 August 2013]. Panasonic. 2013. Global Network – Panasonic. [ONLINE] Available at: http://www.panasonic.com/global/global-network.html. [Accessed 22 August 2013]. Reid, David. 1999. Changes in Japan’s Post-Bubble Business Environment: Implications for Foreign-Afflilated Companies. Journal of International Marketing, Vol. 7, No. 3, pp. 38-63 Saito, Mitsuo. 2000. The Japanese Economy (Economic Ideas Leading to the 21st Century). Edition. World Scientific Pub Co Inc. Smits, Gregory. 2010. Economic Thought in Early Modern Japan (Monies, Markets, and Finance in East Asia, 1600-1900). Edition. Brill Academic Pub. Strath, Bo. 1996. The Organization of Labour Markets: Modernity, Culture and Governance in Germany, Sweden, Britain and Japan (Routledge Explorations in Economic History). annotated edition Edition. Routledge. United States Central Intelligence Agency. 2013. The World Factbook, Public Debt. [ONLINE] Available at: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html. [Accessed 22 August 2013].