International Comparative Management Course 2015-2016 Chapters

International Comparative Management Course
2015-2016
INTERNATIONAL COMPARATIVE
MANAGEMENT COURSE

2015-2016
Table of contents
CHAPTER 1 FUNDAMENTALS OF INTERNATIONAL COMPARATIVE MANAGEMENT 3
1.1. Comparative management concept .............................................................................................. 3
1.1.1. International comparative management definition................................................................ 3
1.1.2. Necessity of international comparative management............................................................ 4
1.1.3. Brief history of international comparative management ....................................................... 5
1.2. Main international comparative management schools ................................................................. 6
1.2.1. International comparative management schools typology .................................................... 6
1.2.2. Ragu Naths approach ........................................................................................................... 7
1.3. International transfer of managerial knowledge, essence of international comparative
management ...................................................................................................................................... 12
CHAPTER 2 INTERNATIONAL COMPARATIVE MANAGEMENT METHODOLOGY ..... 16
2.1. Features of international comparative management researches ................................................. 16
2.2. Stages of a complex comparative management study................................................................ 17
2.2.1. Setting up goals stage.......................................................................................................... 17
2.2.2. Specify topic stage .............................................................................................................. 18
2.2.3. Sampling stage .................................................................................................................... 19
2.2.4. Translation stage ................................................................................................................. 20
2.2.5. Measurement stage .............................................................................................................. 20
2.2.6. Research administration stage ............................................................................................. 22
2.2.7. Information analysis stage .................................................................................................. 22
2.2.8. Conclusions and dissemination stage .................................................................................. 23
2.3. Typology of comparative management studies.......................................................................... 24
2.3.1. Parochial studies ................................................................................................................. 24
2.3.2. Ethnocentric studies ............................................................................................................ 24
2.3.3. Polycentric studies .............................................................................................................. 26
2.3.4. Comparative studies ............................................................................................................ 27
2.3.5. Geocentric studies ............................................................................................................... 28
2.5.6. Synergistic studies............................................................................................................... 29
CHAPTER 3 MANAGEMENT IN JAPANESE COMPANIES ..................................................... 31
3.1. General features of Japanese culture .......................................................................................... 31
3.2. Economic and social features of Japanese context .................................................................... 32
3.3. IAMBAS defining features ........................................................................................................ 33
3.3.1. Specific vision on organization ........................................................................................... 34
3.3.2. Structure of large industrial groups - ZAIBATSU .............................................................. 35
3.3.3. Decision-making by consensus ........................................................................................... 36
3.3.4. Inter and intra groups communication ............................................................................... 37
3.3.5. Organizational structures ................................................................................................... 38
3.3.6. Lifetime employment ........................................................................................................... 38
3.3.7. Management - trade unions relationship ............................................................................ 40
3.3.8. Wage system based on seniority and education .................................................................. 41

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CHAPTER 1 FUNDAMENTALS OF INTERNATIONAL

COMPARATIVE MANAGEMENT
1.1. Comparative management concept
A defining feature of the period after 1960 is represented on almost all human
sciences by the vast expansion of comparative approaches. Areas - such as comparative law
or comparative literature, has gained reputation, and proved their scientific potential and
practical viability. Along with this approaches comparative management emerges, even
though later than others sciences. Today, in almost every economic or management faculty in
developed countries, comparative management is part of the curriculum. Dozens of
international scientific events in this area are held every year. This wide proliferation is
explained by the specificity and high scientific level of comparative management, pragmatic
usefulness, and large diversity of national, cultural and managerial issues which has to be
known, understood and considered in terms of internationalization of economic, social,
cultural and scientific activities. Moreover, mankind is - as Peter Ferdinand Drucker argues in a transitional period in which science is gradually replacing capital as a basic resource of
economic development, and adaptation to this transition requires new tools and approaches.
In this context, comparative management theory and practice are at the forefront of scientific
and socio-economic change.
1.1.1. International comparative management definition

Like any young science, comparative management does not present a generally
accepted definition. For instance, William Newman, one of the best specialists in thus field,
argues that "comparative management deals with similarities and differences in local
management practices in different countries. A step forward is, in our opinion, Raghu
Naths approach, who considers that "in general, comparative management focuses on
comparing the similarities and differences between management systems and economic
contexts. Although, comparing with Newman definition Naths one extend comparative
management beyond management practice, we note that, regarding the nature and location
system that is being compared is quite inaccurate and even too comprehensive. There is no
requirement to take into account different national and cultural contexts and, in addition to
managerial system, includes economic ones, which is a mistake in our opinion.
Those limits are transcended by Edwin Miller, who proposes a more comprehensive
and accurate definition of comparative management than the previous ones. Thus, he

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considers that "comparative management concerns studying managerial process on a

multinational basis focusing on detection, identification, classification, measurement and
interpretation of similarities and differences relating to factors such as managerial
processes, concepts and techniques".
In our opinion, embedding the above definitions, we consider that comparative
management can be defined as: the science that studies managerial processes of
organizations operating in various national cultural contexts, focusing on identifying and
analyzing managerial similarities and differences in order to promote the international
transfer of managerial know-how and increasing organizational functionality, efficiency
and effectiveness.
1.1.2. Necessity of international comparative management

As with any new scientific field, it is essential to substantiate the necessity of it. In a
developing country, and especially in Romania, which communist era has been virtually cut
off from scientific developments and international management, the need is much stronger.
To answer this issue, we offered reasons by one of the most significant experts in the
field, Raghu Nath:
a) The comparative approach is unavoidable, in general. Man, by nature, evaluate
and compare permanently. The assessment is explicitly or implicitly, by reference to an ideal,
a standard or a known situation. International business development processes causes the
comparison to gain importance, which is reflected in emergence of comparative management.
b) Mankind is experiencing a strong international interdependence in all areas of
activity, especially concerning economic activities. In 1990, 40% of world economic output around 20,000 billion - was achieved through international economic activities, mostly in the
multinational corporations while today it exceeds 50%. Logical requirement that emerges
from this is to focus on managerial process and approaches in order to ensure a superior
information base to conduct international economic processes.
c) Comparative study of the realities of different countries "sharpens" managers
understanding rather than understanding only the realities of their own country.
d) Consideration of managerial and cultural phenomena in a country by
companies management widens the variables considered in managerial process. This
contributes to the broadening of basic management understanding, with multiple
consequences on the accuracy of theoretical and pragmatic solutions available.

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e) On individual level, comparative management is likely to develop people's ability

to assess accurately and completely what is happening in other countries. On this basis,
their contribution to economic activities increases substantially.
1.1.3. Brief history of international comparative management

a) Emergence
Comparative management theory emerged in the 60s in United States. During this
period the first theoretical investigations of management on a multicultural basis were set up.
b) First boom
After initial difficulties, inherent to any start, in the next decade a feverish period of
scientific research was recorded, during 1965-1972, the period called the first "boom" of
comparative management. Research effort was significant, materialized in over 11,000
published studies and articles. Comparative management prestige was growing rapidly and as
a result, a considerable part of North American universities were introducing this discipline in
the curricula, as well as some of the best universities in Western Europe and Japan.
c) Stagnation
After 1972 a relative stagnation was recorded, both in theoretical research and
empirical investigations, which extended to the early 80s. While continuing to develop and
publish a significant number of papers, academic interest for this area was somewhat reduced
and the number studies did not met previous years records. Explanations provided by
specialists are two: 1. in this period the number of North American "business school" has
greatly increased in numbers, academic leadership focusing on compulsory disciplines, no
longer having time and resources to pay equal attention to optional disciplines as comparative
management 2. a number of foundations - like Ford Foundation - which have had a major
role in financing scientific research, have reduced the amounts allocated for comparative
management studies. During this period of stagnation qualitative dimension of comparative
approaches improved, its outcome laying the foundation for the next period.
d) Second boom
1980-1990 period saw a new boom in the comparative management development.
Comparative management saw wide international proliferation, both scientific and
educational. Significant efforts are made to improve scientific systematization and synthesis
of scientific knowledge. During this stage major papers are published, marking maturity of
this new science, like Advances in International Comparative Management - volume I
(1984), vol II (1986), vol III (1988), edited by Richard Farmer and Elton Mc Goaun,

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Comparative Management, edited by Raghu Nath, Managing Cultural Differences, by Philip

R. Harris and Robert T. Moreni, Les Differences culturelles dans le management, edited by
Daniel Bollinger and Geert Hofstede.
By highlighting the progress in the last decades should not conclude that all issues and
dilemmas are resolved settled. It is estimated that the main issues that have not found an
adequate solution are:
Unresolved semantic problem, a major in any new science. As a result, currently, the
same terms have different national understandings or contents. For example, the word culture
is used in the sense of national framework, the specific mentality of the population from a
country, or the mechanism and structure of national economy. Under these circumstances,
accurate and effective communication approaches may be significantly affected;
Neglecting to a certain extent organizational effectiveness, which is finally one of
the main goals for comparative management. Hence insufficient practical purpose a
significant proportion of knowledge and methodologies;
There is a considerable gap between the management practices used in the large
international corporations and those provided by comparative management.
1.2. Main international comparative management schools
1.2.1. International comparative management schools typology

Despite its short history, there were outlined several schools in comparative
management.
One of the first classifications of schools of comparative management is made by
Hans Schollhammer. In his book The Comparative Management Theory Jungle he identify
four schools:
socio-economic school, emphasizing the critical role of management in

economic growth;
environment school, emphasizing the influence of environmental factors on

the management in a transnational approach;
behavioral school, which focuses on the behavior of leaders in various

activities, regions, countries or cultures;
empirical school, mixing different management approaches which share no

common characteristics, but include elements resulting mainly from field

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investigations that have served some interesting theories and research

hypotheses.
Subsequently, Edwin Miller proposes a different type of typology, which although
consider some of the issues addressed by Schollhamer introduces some new aspects.
According to him, there are three main comparative management approaches:
Economic development and environmental orientation, which is actually a
combination of the first two schools designated by Schollhamer;
Behavioral orientation that focuses on explaining the behavior of individuals and
groups in different enterprises, cultural and national entities;
Contingency orientation, which focuses on the relationship between enterprise,
management and its environment.
The most recent comparative typology of management schools, frequently quoted by
the specialists, belong to Raghu Nath. Based on the earlier typologies, this professor at the
University of Pittsburgh School Of Management defines five schools: economic
development, environmental, behavioral, open systems and cultural.
1.2.2. Ragu Naths approach
A. Economic development school

Early theoretical and empirical investigations conducted in the 1950 - 1960 period
belong to this school which in the following decades continue its existence. Among the many
specialists with major contributions are Frederick Harbinson and Charles Myers. In their
work, Manpower Education and Economic Growth, based on the premise that managerial
input plays a significant role in achieving industrial and economic development they examine
these two major issues in an international comparative vision. For the four stages identified in
the development of human society from agrarian feudalist system to industrial democracy,
specific theoretical approaches to management are discussed. They concludes that
management philosophies are converging towards a democratic and participatory approach,
in line with developments in economic processes.
It also argues the idea that management, in addition to specific developments over
time and across borders, have a basic background with universal applicability. Management
phenomena are studied and investigated in particular at macro level, taking into account the
priority of economic developments in each country considered.

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Limitations: a) unilateral consideration of management, almost exclusively in terms of

economic factors, neglecting management at company/organization level, which is essential
for economic development of each nation; b) relative poor applicability, largely because
microeconomic issues are ignored.
Contributions: a) major contribution to establishment of international comparative
management as a science; b) studies and field research gave a new impetus to development of
management in general, especially with regard to the economic purpose of its approaches,
essential for the development of human society.
B. Environmental school
Theoretical papers and pragmatic approaches specific to this school have been
observed from 1960 to 1970. An important contribution to the establishment and
development of environmental school had Richard Farmer and Barry Richman in their
Comparative Management and Economic Progress paper.
Among the major characteristics of it is worth mentioning the environment as a
framework for conceptualizing the phenomena management analysis. On this basis the
effectiveness of management is examined as a function of environmental factors - sociocultural, legal, political, economic, etc. Their entire design is synthesized as a model with
variables which influences management and effectiveness in a macroeconomic approach,
widely used in literature. An important factor that contributed to the proliferation of of this
school was Farmer's great organizational capacity, promoter of many scientific events with
broad international participation and his rich publishing activity, reflected in a paramount 3
volumes paper - Advances in International Comparative Management, widely distributed
worldwide.
Limitations: a) overemphasize environmental variables, giving management a passive
role, only receiving outside influences, which obviously does not correspond to reality. All
global management practice shows that usually management comes in strong interrelationships with environment, influencing each other; b) another limit lies in the relative
failure to capitalize on theoretical analysis and empirical researches, for instance there are no
investigations designed to quantify the intensity of the correlation between environment and
management.
Contributions: a) environmental approach provides a framework for analyzing the
phenomena of international management, more comprehensive than that provided by
economic development school; b) multidimensional approach of international comparative

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management (not only economic dimension), by conceptual and methodological approach

promoted. As a result, there is a considerable enrichment of theoretical and methodological
approaches and pragmatic analysis performed.
C. Behavioral school
Established few years later - 1965-1975 - behavioral school marks a step forward,
although somewhat unilaterally oriented, in comparative management. Through its many
prestigious representatives - M. Davis, D. Narain, Ghisseli, M. Porter - it manages to bring
into discussion behavioral variables such as attitudes, beliefs, personal values etc.
This school is the first switching from macroeconomic approach, defining for
previous schools - to microeconomic one, meaning organization. Behavioral school is
focusing on specific management phenomena interdependencies in different countries with
variables set to organizational, groups or categories of staff levels. Behavioral school pays
particular attention to operational variables relating to attitudes and values scale. On this basis
it try to explain structures and behavioral patterns of individuals and groups within
organizations that operate in various countries.
According to Ragu Nath overall analysis concerning this school, the main categories
of problems considered are:
identify and analyze beliefs, values and systems required in management hierarchies
prevailing in a given society - a significant contribution in this area having M. Davis;
highlight the relationship between national character profiles and some variables and
organizational behavior, major contributions belonging to M. Davis and D. Narain;
highlight variations in transnational managerial attitudes and perceptions on key
concepts and activities. On this topic significant contributions have Gerald Barrett, Bernard
Bass, Ghisseli, Porter, Nath etc.
Limitations: a) ignoring aspects of business efficiency, hence their poor applicability,
b) insufficient adaptation and validation of research tools to the requirements of transnational
investigations, mainly because they were designed and used in United States.
Contribution: a) highlighting the major role that human factors plays in management
phenomena in a transnational approach. Starting from this premise, it highlights significant
differences in management practice across various countries and specifically between
different ethnic or occupational groups. b) notice, with convincing arguments, special
attention to be given to transfer of management practices from one culture to another, from
one company to another.

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D. Open systems school

Chronologically, this is established later, in the 1970s 1980s, capitalizing to a
certain extent previous schools accumulations. A major influence on its emergence and
content has the broad proliferation of systemic theory, characteristic of the time considered.
This school comprise many of the best known exponents of international comparative
management, among which mention Negandhi and Prasad, Bernard Estafen, Rosalie Tung
and others. Moreover, some leading exponents of other currents, such as, for example,
Richard Farmer and Barry Richman, migrated after 1980 to this school.
Theoretical and methodological premise of this school is the conceptualization of the
organization, management and environment as open systems, linked with strong interactions.
Management as an organically integrated system in the organization engage into multiple
relationships with the environment through information, human resources, material and
financial flows. Content and intensity of these flows, with different characteristics from one
country to another, and often within the same national perimeter, have a strong influence on
management systems and organizations involved. Consequently, all these factors are
considered in terms of open systems theory, paying specific attention to identifying the
relevant variables, assessment and evaluation of multiple interdependencies of their
dynamics.
Most successful and comprehensive management approaches belonging to this school
have resulted in models, like Nagandhi - Prasad and Tung management models.
Limitations: a) the main limitation consist of approximate design of some of the
variables considered, especially cultural related environment variables, resulting in an
insufficient credibility of the results.
Contributions: a) this school is considering a more comprehensive range of variables
affecting organizations, including those with a direct influence - suppliers, clients, customers,
government, etc. - which reflects the depth of analysis undertaken and the qualitative
conclusions; b) on this basis there is a more rigorous systematization of both theoretical and
methodological approaches and results, with consequences for both rigorous scientific
research and educational activities in this field and practice of management in various
countries. This explains also development of empirical research in international comparative
management, often with novel results or conclusions, used on multiple levels in social and
economic activity.

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E. Cultural school
In terms of time, as can easily anticipate, this school was last to be last defined, after
1980. Most substantial contributions to its shaping had Geert Hofstede, John Child, Kelly
Lane, Reginald Worthley, Ch Triandis and others.
Surprisingly for comparative management school focused on the role of "culture" is
that the very concept of culture is not accurately defined, there are several understandings in
paper of its leading representatives.
Raghu Nath argues that in most studies, culture is used as a synonym for nation but he
argues that in recent years, there has been some progress in this respect.
Kelly, in his studies, widely use definition of Child and Kieser according to whom
cultures are structures of thinking and ways of action widely spread in the population and
organizations. From this definition, it is recommended that culture to refer to a region of a
country rather than entire country.
J. Collins show that culture is defined as a state of intellectual development of
population, economic culture is a state of economic development and even more: the
attitudes, values, rules which economic activities are based and helps shape the company's
behavior in a given country.
Geert Hofstede in his well-known research, turn to a more complex definition of
culture. According to him, "the essence of culture is the collective mental programming. It is
part of our conditioning that we accept with other members of the nation, region or group we
belong, but not with components of other nations, regions or groups. Of course, for
international comparative management researches culture is considered especially at national
level.
Despite these differences in defining culture, its major role in management, often
decisive, is said more often and more strongly. Thus, in a study jointly conducted by three of
the most renowned experts in the field - Douglas B. Allen, Edwin Miller and Raghu Nath
they argue that culture is generally accepted as a determinant of behavior and an essential
tool for understanding management processes.
Although the notional content of culture is largely different from one author to
another, the essence is the same while similar approaches are employed. Management is
analyzed in close connection with cultural elements, whose sizes vary from country to
another, within the same national territorial and social perimeter, explaining this way the
substantial differences in management systems.

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Limitations: a) even though cultural issues has been extensive research and their
results frequent referenced in the literature, due to the imprecision in defining culture, results
related to the similarities and differences of transnational management to not have rigor; b)
studies belonging to this school are still "suffering" serious methodological problems,
especially accuracy and systematization. To avoid this Kelly Lane establishes a procedure to
be followed to ensure rigor, comprising the following phases:
establishing by experts of culture definition and specify national culture elements
that influence organizational management;
establishing the existence of cultural elements previously established in the analyzed
culture;
demonstrating how the factors identified as forming the national culture influences
behavior, structure and organization management;
consider the fact that not all members of analyzed culture have the same values and
beliefs, and that the intensity impact on cultures members may be different.
Contributions: a) make possible a broad documentation on management practices in
various countries, which often are made in relation with "cultural differences" between them;
b) there has been a major focus on synergistic effects of the environment on the management
practices worldwide. Representatives of this school introduced many novel concepts,
showing a thorough knowledge of management theory and practice, widely recognized by
scholars; c) As a result of its scientific and educational contributions, not only international
comparative management, but management science progressed.
1.3. International transfer of managerial knowledge, essence of international

comparative management
Recent decades have marked an increased awareness of particular importance of
information and knowledge for the economic and social development. For instance, Jean
Jacques Servan Schreibner appreciate that IT is essential in human progress while R. Vitro
explain the development of society basically as an informational process and Alvin Tofler
argues that the third source of power, that tends to become predominant in the future, is
information and its control.
Simultaneously, it appears that, as E. Miller argues, all countries, companies and
individuals are missing relevant information. Economic development is increasingly
accelerated only when increased volume of information and knowledge is generated, used

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and capitalized. Hence, international transfer of managerial know how has to be a priority for
all countries and especially for less developed ones.

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The scale and speed of management knowledge transfer is conditioned by six factors:
1) Educational level of population. The higher it is, the higher and faster managerial
information and knowledge in other countries is carried out with superior results.
2) Number of languages of the active population of a country, which only partially reflect its
educational level, have a significant influence. Knowing several languages facilitates better
information and interpretation of knowledge in all areas, management included. Small
countries, in the immediate vicinity of countries using worldwide spoken languages or
located at international traffic crossroads in this respect, cases of Belgium, Liechtenstein or
Luxembourg being well known.
3) The degree of control and enrolment of population, both at macro and micro economic
level. The lower it is, the more international transfer of managerial knowledge is performed
more easily and effectively and vice versa. Interesting to note that, in order to illustrate the
unfavorable action of this factor in literature, evolution of Ford company after 1920 is often
cited, when Henry Ford promoted an autocratic management style, based on a thorough
control of employers, ignoring or stopping their initiatives, which resulted the loss of
supremacy in the automotive market in less than 10 years.
4) Size of companies. It is considered that usually smaller companies are more responsive to
managerial knowledge from other countries. The main causes are their flexibility, more direct
and easy communication flows, faster decisional making process etc.
5) Mobility and personal freedom. It was noticed that the extent people take relevant
information increases with their mobility and personal freedom. In addition, the free
movement of people between countries - like in the European Union - is always
accompanied, consciously or unconsciously, by a genuine transfer of managerial knowledge,
most often informally.
6) Openness of society. Its influence is manifested, firstly, by the extent to which it typically
provides access to information. Open societies freely circulate large volumes of information
from all areas, including management, leading to a high level of reception by most of the
population. Secondly, open societies encourage display of open mentalities, facilitating
international dialogue for individuals, businesses, organizations or countries. Mentality is a
potent inhibitor or facilitator - depending on its features for management transfer.
Values and the manifestation of these factors naturally varies from one country to another,
from one cultural context to another. In the opinion of specialists, such as the well-known
French researcher Alain Touraine, there is, however, a certain tendency to diminish the

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cultural differences between states. In conclusion, the transfer of managerial know-how in

management is the crucial mission of comparative management.

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CHAPTER 2 INTERNATIONAL COMPARATIVE MANAGEMENT

METHODOLOGY
2.1. Features of international comparative management researches

Research methodology in comparative management has to consider the main
differences between an international comparative management and a traditional management
study. Typically, a comparative management study differs from general management one
through several elements reflecting its specific features, conceptual and operationalization.
1. A first issue is the higher complexity because it involves elements belonging to
different cultures. The number of cultures investigated is larger and their approach is broader,
both increasing its complexity. Sometimes this complexity is amplified to a higher rate,
because of the need to take into account a significantly larger volume of interdependences
between the elements analyzed.
2. Equivalence in the design and conduct of the comparative management studies is
a factor of major importance. In the context of comparative management, we understand
equivalence as that approach which, by the concepts and methods used, the way information
is collected, processed and interpreted avoid distortions, making possible to draw accurate
conclusions, particularly with regard to cultural specificity.
In comparative management research are two possible equivalence approaches that
substantially affect results.
a) The first approach, standardized equivalence, use a standardized set of methods and
techniques, in the same way across various cultures involved in the topic investigated,
regardless of differences between them. Apparently a coherent approach, conclusions are
hard to rely to, largely because of lack of specificity. Often research results are distorted,
failing to sufficiently highlight the cultural particularities, and thus cannot reflect the actual
relationship between general and specific. This approach is usually used in small scale
researches and is less costly than the next one.
b) Unlike previous, equivalent approach is characterized by the fact that, based on a
unitary framework/concept, use concepts, methods and techniques partially identical,
partially different, adapted to each culture, being able to reach a specific set of purposes.
3. Because of both its complexity and territorial dispersion of the subjects
investigated, comparative management research involves a greater and more diverse
workload. Direct expression of this characteristic is an increased number of people and / or
periods necessary to carry out international comparative management research. To a certain

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extent, this can be reduced by using experienced researchers and large-scale computing
facilities for data collection, processing and analysis.
4. Various researchers argues that comparative management researches are very
expensive. A comparative management study, designed to investigate a specific topic is
always more expensive than a similar study of general management. Two main causes
generate this. One is, of course, higher workload and the other travel and accommodation
costs substantially higher due to size of the geographical area investigated. Consequently,
budget of these studies are substantially higher and finding funding sources is one of the main
problems to be solved.
5. A final major characteristic of management studies is their difficulty. Higher
complexity of topics, proper resolution of many issues concerning the equivalence of results,
greater workload, their diversified nature and significant funds required, all contribute to this
characteristic. The only way to counter them, and thus to mitigate at least to some degree the
difficulty is to set up a rigorous design for the study, based on competent and deeply involved
researchers and support staff.
Knowing and taking into account these major features of comparative management
research is essential to assure accuracy and effectiveness. Otherwise, the danger is that under
"business" comparative management disguise to undertake a study of general management,
which fail to capture the specific cultures involved, proposing, therefore, unsubstantiated or
even false conclusions.
2.2. Stages of a complex comparative management study

Comparative management studies are not possible without applying a structured
methodology to properly consider the issues involved, in a logical and operational manner.
We present a methodology to conduct a comparative management study, structured in
several stages, which rely mostly on the approach of Nancy J. Adler from McGill University
in Montreal.
2.2.1. Setting up goals stage

Comparative management investigations can be considered for two categories theoretical and pragmatic.
Theoretical goals concerns the development of an equivalent theory within various
cultures, such as establishing a typology of managers or organizational fundamentals
underlying organizational structures of industrial firms.

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Pragmatic goals relates to outline management approaches or development of

appropriate social behaviors in various cultures. For instance, establishing the most
commonly used and effective development strategic options for electronic business or design
of effective ways to motivate staff for multinational companies in certain countries are
examples of such pragmatic goals..
In the process of setting up goals several major problems may occur, which must be
considered and properly addressed.
Defining culture is considered the first of them. It is essential, as argues Chris Lane,
to adopt a specific definition of culture and to determine how it will be investigated. It is
advisable to consider issues related to the identification of a culture with a country, the degree
of population considered homogeneous or heterogeneous in terms of culture or approaching
culture as an independent, dependent or residual variable.
Next, universal or specific behavioral issues are established, requiring a similar or
different approach.
Based on all previous elements composition of the research team is established.
Multicultural teams are recommended, whose components reflect the cultures included in the
study.
Another major issue during this phase is establishment of standardized or equivalent
approaches. For high levels of abstraction, such as the typology of management styles,
approaches in different cultures should be identical, while for lower abstraction levels should
be equivalent (for example, collecting data on leadership styles and ways of improving them
across countries).
At the end of this stage, given the issues noted above, composition of research team is
established. Jean Claude Larrch recommended that, besides the criterion of competence, to
consider age, gender and nationality of specialists. The group must include, in addition to
older people that have experience and are open minded, young people with energy and
enthusiasm, women who approach a topic differently than men, specialists of different
nationalities who understand the peculiarities of cultures involved.
2.2.2. Specify topic stage

Starting from the goals of the study previously established, as well as the options
regarding culture, universal / specific behaviors, identical or equivalent approaches, and the
dangers of distortion involved, specify topic is the next stage. Naturally, this takes place
separately for theoretical goals, with a high degree of abstraction and pragmatic goals, much

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more concrete. A correct specification of topic is essential considering that its approach is
largely different according to goals.
Concerning management topics, investigated in a transnational view, Nancy Adler
considers that three requirements have to be met simultaneously:
Conceptually, the topic has to be equivalent meaning that the concept or

concepts investigated has to have same content (understanding) and essential
characteristics in each of the investigated cultures;
Importance of the topic has to be the same, having a central or marginal

position in all investigated cultures;
Specificity of topic has to be the same across cultures, meaning that they have
similar religious and political sensitivities.
We express doubts over the last two requirements raised by Adler. Of course, the
subject must have a common conceptually equivalent across various cultures, otherwise
under the same title, different things are analyzed, which makes the effort to establish
similarities and differences between particular concepts not comparable, in fact. But
concerning the importance of topic and its specificity, we consider that these are actually
features that should be investigated during the research and not presumed. The fact that a
management problem is less important in a culture than another, or is viewed differently by
the church or dominant political parties, has to be investigated, and not a prerequisite for its
inclusion as a topic.
2.2.3. Sampling stage

While the first two stages settled basic theoretical and methodological issues
involved, the next ones covers operational elements of an international comparative
management study.
The first of these issue is about establishing sample of investigation. Its importance is
crucial as the scientific validity depends on whether the sample adequately reflects each
culture included in research.
Judicious sizing of the sample is a major issue to be solved first, which refers to the
number of cultures considered and the number of subjects in each.
Selection of cultures investigated, reflected in the number of samples, is
recommended according to the theoretical dimensions of research and purpose, and not
according to how easy access to cultures is. If considering only 2-3 cultures, we actually

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perform a pilot study, allowing "training" for the research team on the peculiarities of
methods used, and not a real study.
Management practice usually use representative samples when the goals are
theoretical and the topic is very broad. Another approach consider pair samples from two or
more cultures, common when research fulfill pragmatic objectives or narrow topics, a
common situation for managerial practice. In such cases, it is recommended that major
attention be paid to ensure their functional, de facto equivalence.
Regarding the independence of samples, in international studies it is difficult to
achieve.
Due
to
increased
international
division
of
labor,
globalization
and
internationalization of economic activities, the increased interdependence between cultures, it

is difficult to use strictly independent samples.
2.2.4. Translation stage
Considering translation as an independent phase may be awkward for some, but we
considered it separately due to its importance in the success of an international comparative
management research. It is essential that each version of translation for various stages of
research to be fully equivalent to the other. So translation does not have to be "literally" the
same, but to reflect the cultural differences involved. To ensure this requirement, several
issues must be considered.
In terms of phrasing, it is recommended to use common words, avoiding idioms,
making full but short sentences or phrases, etc.. Two way translation technique can be used,
from original language into other languages, and again in the original language, using
bilingual people with a good knowledge of the topic. Another possibility is to use experts,
both in the language and the specific culture and management, usually people who lived in
both cultures.
A major concern is to avoid the so-called wharfian syndrome, consisting of literary
translation, but which does not ensure equivalence of content. Unfortunately, this syndrome
is quite often met with considerable negative consequences of the results.
2.2.5. Measurement stage

Given the multitude of cultures in which comparative management investigated is
performed, with different scale of values and of different variables used in specific ways,
these issues must be properly addressed.

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Among issues to be considered, first is to assure equivalence of variables. This

involves selecting specific variables and selective methods to measure them, so their
assessments across various cultures to realistically reflect the same phenomena, with the
same accuracy, based on similar concepts.
Another important element relates to the measurement of variables. Differences
between variables parameters considered in different cultures are not interpreted correctly if
the measurement scales have not been made equivalent. This means appealing to the
equivalent procedures or similar correlation systems for variables considered. For example,
when examining the influence of motivational variable wage in different cultures, and
national differences are not considered, wrong conclusions are drawn (for instance, in U.S.
minimum wage is $ 15 while in Romania - $ 0.80 to 0.90, so when analyzing motivational
incentives it is compulsory to consider the scale).
Another issue concerns the identification of possible dangers of distortion due to the
interaction between the variables considered in the investigation. Of course, some
interference is unavoidable, requiring a constant effort to minimize them, paying particular
attention to their handle during the investigation.

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2.2.6. Research administration stage

The main issues which form the subject of research administration stage refers to how
to deal with subjects, establishing rules and instructions and ascertain period of
research. Naturally, achieving equivalence is still a major, taking into account the need to
prevent or minimize the Heisenberg effect. Basically, this effect concerns changes the way
investigated communities decide and act as a result of being under observation by specialists.
Consequently, events occur that are not characteristic, which after analysis and interpretation
are reflected in distorted findings and conclusions.
Research is recommended to be designed and conducted as to properly deal with:
Familiarity of subjects concerning research tools instruments and social situations
during the investigation;
Psychological tension that arises because subjects must feel the same (confidence,
tension, etc.) on a specific topic toward investigators;
Experimenter effect, stemming from the way the researcher transmit to the
investigated subjects his preferred assumptions;
Behavioral parameters of subjects related to their sensitivity toward specific issues
(political, religious, economic, etc.), the extent to which attempts to discover what the
researchers intentions are and help him or not etc.;
Personality and characteristics of the investigators (gender, race, nationality, social
position, etc.), which determines respect, indifference, hostility, cooperation, etc. of the
subjects, according to the characteristics of culture which they belong;
Purpose and presentation features, which, given the way they are brought to the
attention of those investigated, the instructions received, required amount of time, manner of
presentation and, respectively, the way information is collected may determine various
reactions of the subjects.
2.2.7. Information analysis stage

Certainly, in general lines international comparative management studies are not
fundamentally different than general management investigations. In their case, too, it is
essential that entire analysis is subordinated to achievement of objectives. Complexity of
analyzing management across various cultures more likely determines a lack of focus in their
case.
Strictly from a methodological point of view, two less common issues should be
considered.

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Multitude of variables involved and complex interdependencies between them

strongly requires multivariate statistical techniques. More difficult to use, multiple
correlation analysis and other multivariate techniques are only ones allowing a relatively
accurate and comprehensive understanding managerial phenomena.
The other aspect refers to the so-called "ecological fallacy", determined by a common
mistake of treating cultures as individuals. Consequently, correlations between cultures are
analyzed and confused with individuals relationships. The reverse situation (confusing
individual relationship with those among cultures) is also happening. Hence false
conclusions, determining theoretical confusions and ineffective management solutions.
In international comparative management practice, particularly in this stage,
specialists frequently manifests two tendencies:
a) Acceptance and use of a priori general perceptions/assumption on culture
characteristics, use of cultural "stereotypes" about certain cultures, such as those about
German culture (Germans makes best cars), Chinese culture (Chines products are cheap
but poor quality.) etc.;
b) Substantiation of researchs approach on individual special experiences of expertsboth positive and negative - about the culture investigated.
Both tendencies negatively influence the analysis stage.
2.2.8. Conclusions and dissemination stage

Any study is ending with formulation, based on abstraction, systematization and generalization, of the main conclusions,
according to predetermined objectives. The conduct of this phase is different, corresponding to the nature of the research objectives.
If the research has theoretical goals, its focus is on coherent theories, consistent with the research hypotheses pursued in previous
phases. Depending on the size and scale of findings, conclusions take the form of scientific communications or essays, studies, articles and
books. Naturally, it is recommended that they should be disseminated with priority in countries whose cultures have been investigated.
Completion of pragmatic research is largely different. The most common form is managerial methodologies, recommendations or
solutions for the companies who financed them. Another possibility regard applied research and investigations aimed at developing case
studies for management training. Of course, all these results can be used as a foundation for scientific papers, comprising however
theoretical elements that make them more interesting and useful for various beneficiaries.
Whatever the nature of research, the drafting of the final material should be paid attention to the presentation to make it fully
accessible for beneficiaries. It raises major questions as to ensure equivalence of language and consider the extent to which persons involved
are familiar with management concepts and specific elements.

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2.3. Typology of comparative management studies
2.3.1. Parochial studies

Parochial studies involves only one culture. Their dominant feature is that one culture
is investigated by researchers from that culture. Very often, the concept of culture and its
implications are not explicitly presented at all. A survey of such studies, developed over nine
years, showed that in only 8% cases they covered management issues, discussed in the
context of culture involved. So culture is not addressed as a factor or as a variable, dependent
or independent, but as a constant. In terms of research orientation, most often are focused to
answer the question: How people behave in a company? To answer, the researchers use
traditional scientific research design, sampling, investigation, analysis and interpretation of
the phenomena involved.
Concerning topic, these studies are very comprehensive, dealing with practically
every issue with managerial significance.
Regarding similarities between cultures and management across various countries,
these are assumed without being demonstrated. As a result, there is a tendency that the results
of such studies to be extended from one country to others, although obviously they are valid,
at best, only in the culture investigated. This orientation is most frequently observed in
United States.
Various experts argues that parochial type of studies can hardly be considered
international comparative. They are, in fact, traditional management studies. The only
argument which calls for their consideration as an early form of international comparative
management studies refers to the tendency, particularly in United States., to extend the
validity of the findings to other countries. Therefore, although in terms of scientific rigor are
not part of international comparative management, often from pragmatic considerations, their
results are used to management analysis in various countries.
2.3.2. Ethnocentric studies

Defining for this type of study is that the initial investigation designed and
implemented within a culture is exactly repeated in a second culture. By taking over and
expanding the research in a second country or culture it implicitly assumes that first culture is
more important or superior to the second.
For researchers (theoretical perspective), ethnocentric studies are designed to give an
answer to the question: Is theory valid in culture A valid in culture B, also? Managers,

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practitioners (pragmatic perspective) are interested, instead, of another question: Can we use
management approaches of the first culture in other cultures?
Researches examine with priority level of similarity between cultural conditions in the
two cultures, so that theoretical framework established for the first culture can be validated in
the second.
In terms of methodology it use a standardized approach, using the same
methodological approach. Research is conducted in the same way, using the same type of
sample and tools, except the language used, the administration is based on the same set of
instructions, and for analysis and conclusion same methods are used. The premise behind this
type of study is that the standardization and equivalence are synonyms. This is even more
obvious in the way translation is done, using "ad literam" translation based on standardization
of words.
Regarding the similarities between the investigated phenomena, on the one hand, and
universality of final findings, on the other hand, both are questioned and investigated.
However, specific, even questionable issues arise in terms of scientific rigor. Thus, the
discovery of similarities between the two cultures is often interpreted as a confirmation of
management universalism. In addition, demonstrating the validity of the theory within two
cultures is regarded as sufficient to affirm its universality, even though it is obvious that such
a conclusion is not justified.
Regarding the possible differences discovered between the two cultures, these are
often labeled as arising from differences of samples analyzed. For example, different
education of individuals in the two cultures is to blame for such an occurrence. Moreover,
research is frequently biased by self-criteria, i.e. the ones used in the first culture, which
shows ethnocentrism, reflected in the characteristics and findings on the second culture,
which often contain phrases like "less than "," lower compared to "insufficient" compared
with ".
Ethnocentric studies are the first real international comparative management studies,
are widespread, having a significant utility for scholars and practitioners even though they
fail to answer the question whether similarities and differences between the cultures studied
are significant in the context of the second culture.

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2.3.3. Polycentric studies

In essence, this type deals with description, explanation and interpretation of certain
management practices in specific cultures. Polycentric studies are actually studies that
address same subject, in several cultures, by national teams of researchers and practitioners.
Main theoretical goal pursued is to identify a structure of relationships that reflects a
particular culture. Ideally, a polycentric study produces theories - new or reconfirmed - that
are applicable to each culture.
In terms of pragmatic goals it seeks answers to questions like: How managers lead
and how employees behave in a specific county?
To give answers to these questions, investigations are focused on identifying
differences between cultures, aiming to capture the specificity of each. Similar to polycentric
research in anthropology, polycentric approach in management question the universality of
theoretical issues involved, many time even denies the existence of universalism. It even
argues that functional equivalence between two cultures, and as a consequence between
management phenomena, cannot be demonstrated. Labeled as "Malinovschi dilemma, it
argues that transnational cultural comparison is as false action, by comparing elements which
cannot be actually compared.
In terms of specific methodology, they rely mainly on inductive methods, developing
specific structures, models, etc. They rely on detailed description of the phenomena
investigated, which gives polycentric studies a rather descriptive than evaluative approach.
Critics complain that this type of international comparative management studies have
two significant flaws: equifinality and cultural relativity.
a) Equifinality assumes existence of several distinct cultural approaches to achieve
any specific managerial objective or purpose. Logically demonstrable, equifinality is,
therefore, accepted by most researchers.
b) Cultural relativity argues that there is no managerial way of achieving a goal,
specific to a culture, superior to others. This assumption is not generally accepted, naturally,
since there is always differences in quality and yield between various ways and actions and,
therefore, not all have the same effectiveness in practice in terms of productivity, work
satisfaction, profit etc.
In conclusion, polycentric studies serve as a counterweight to ethnocentric studies
with their focus of management and cultural differences. Their usefulness lies not in itself but
on complementarity with ethnocentric studies, encouraging consideration of national

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specifics, with beneficial effects on international transfer of management theories and

practices.
2.3.4. Comparative studies
Marking a substantial improvement over previous types, comparative studies are
designed to identify similarities and differences of two or more cultures. Their essence is,
therefore, to analyze what various cultures have in common and what is specific, usually
employing multinational teams of researchers. Researchers are assuming that there is no
dominant culture, and hence there is no a priori best national management model superior to
others (for instance, management in Germany is not a priori considered superior to
management practiced in Italy or Russia).
From a theoretical perspective, the main question is: Which aspects of management
theory are indeed universal and what are cultural specific?. From a pragmatic perspective,
these studies tries to determine To what extent culture A is different compared to cultures B,
C, D, etc.?
Starting from discovered transnational similarities, comparative studies specifically
aim to identify universality while simultaneously differences comes under scrutiny. In
the terminology characteristic to this approach, similar elements are called universal and
differences are considered cultural specific, both equally accepted and not presumed, like in
the previous studies. Moreover, the main emphasis during the course of study is the
delimitation of the universal/specific cultural behaviors. The balance between universal and
cultural specific elements is not presumed, but are an actual result or not of each study.
Methodology for conducting such studies is highly complex and is described in the
previous section.
It is worth mentioning an appropriate approach of a comparative study has to solve
five dilemmas:
What is culture?
Analyzed phenomenon is cultural specific or universal?
How can researchers alleviate their national prejudices/assumptions?
Which parts of the methodology must be equivalent and which identical?
How can dangers of distortion caused by interactions between cultural

variables be identified and diminished?

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Comparative studies marks de facto maturity of international comparative

management as a science, which is reflected in the substantial increase in the quality of
managerial solutions which they serve as a theoretical and methodological foundation.
2.3.5. Geocentric studies

Unlike previous ones, geocentric studies focus on multinational corporations, without
explicit reference to cultures involved. Moreover, often cultures of countries on whose
territory multinationals act are ignored or poorly considered.
Geocentric studies, almost entirely pragmatic, aim to give answer to the question:
How international corporations and how their management can be improved? The answer is
the development of approaches for studying problems they are facing.
However, by default, geocentric studies seek to discover the similarities of cultures in
which multinational corporations operate. This conclusion follows from the fact that
management aims to outline the most effective approaches to corporate subsidiaries that are
located in various countries and cultures. Yet, common management approaches cannot exist
if management systems that operate in different countries do not have appreciable
similarities. Explicitly, geocentric studies are considering aspects of territorial dispersion of
branches and subsidiaries of multinational corporations and their implications on the
functionality of their management. Even though to some extent universalism is assumed in
transnational management approaches, it is not demonstrate through cultural variables but
usually employing non-cultural variables.
Regarding methodology, it is predominantly traditional, but slightly more complex, a
feature determined by taking into account geographical distance. Translation is no concern
because multinational corporations use a common language, often English.
In conclusion, geocentric studies, pragmatic by default, has a noticeable contribution
to international comparative management development as a specific form of it, focused on
multinationals.

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2.5.6. Synergistic studies

This type of research focuses on understanding structures of relations and
management theories that apply when people from many cultures interact in working process.
More specifically, these studies analyze human behavior in regard to people working in multi
and transnational companies or companies operating internationally or nationally but with
multicultural teams.
Researchers, through synergistic studies, seek to provide answers on the rules that
govern the interaction and management of individuals belonging to various cultures and
conditions in which the universal approach is possible and appropriate and when is
recommended a pluralistic approach that uses cultural specificities identified. For managers,
synergistic investigations are designed to answer the questions: how transnational interaction
within the organization has to be managed, when it is best to use the universal approach and
when to use specific, indigenous cultural approaches.
Specific for synergistic research is use of cultural similarities and differences in
management as sources of growth and development. Based on them, but also on models and
theories developed and managerial solutions established, researchers are seeking to extend
universality in management.
Major differences between synergistic studies and the others are:
- Focuses on understanding interactions between people from different cultures and
not on the cultures themselves;
- Emphasize creation of structures or models for management and organizations, and
not identification of configurations that occur naturally, often by emphasizing the similarities
and differences;
- Focuses on understanding, harmonization and generate the best balance between
specific cultural models (pluralistic) and universalism, and not understanding the similarities
and differences between them.
Summary of international comparative management studies
Criteria/type
Number of
Similarities and
cultures
differences
Universalism
Coverage

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Parish
1 culture
Similarities and
Universalism is
differences are
assumed
Internal context
assumed
Ethnocentric
2 cultures
Try to discover
Universalism is
Repetition in a
similarities
researched but
second culture
commonly is
assumed
Polycentric
Comparative
Several cultures
Several cultures
Try to discover
Universalism is
differences
denied
Both similarities
Universalism is
Foreign cultures
Foreign cultures
and differences are researched

investigated
Geocentric
International
Similarities
business
Synergetic
Try to extend
Multinational
universalism
companies
Intercultural
Similarities and
Seek to create
Teams made up of
research
differences are
universalism
people from various
used to create new

approaches in
management
cultures

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CHAPTER 3 MANAGEMENT IN JAPANESE COMPANIES

In the first decades after the Second World War, American management was a true
myth, a "Mecca" of management and efficiency for almost all experts in the field, and
generally for all those involved in initiating or conducting business. Japanese economic
miracle has led, especially after 1970, to increased attention paid on Japanese management.
Currently, most frequently studied management concepts and instruments are from United
States and Japan. U.S. and Japanese companies are characterized by the highest
competitiveness. An article published in Business Week about top 1000 companies in the
world (according to the degree of market capitalization) is a proof of the previous statement.
Japanese firms hold 47% of total number of companies in that ranking, with sales of $ 3.000
billion and the U.S. 32%, followed by companies in Western Europe, with only 17%.
Japan's astonishing economic results of the postwar period, especially until 1990, led
to a relentless research in that matter in an attempt to discover the causes and factors that
generated them. One of the main findings of studies and observations, unchallenged by
anyone, is that Japanese management has a major role in achieving such performance. Hence
the importance and necessity of understanding the basic characteristics of Japanese
management.
3.1. General features of Japanese culture

To understand the content of Japanese business management is important to know
specific cultural context.
A first specific element that influence management of Japanese companies is socalled "AMAE", which designates a specific feeling and mutual dependence that exists
between the components of any organization. AMAE involves interpersonal relations based
on a certain emotional attachment so dependent person has a specific behavior, avoiding to
take individual responsibility. Human relations resemble those between a mother and her
child in that dependent person has a desire to be loved and be protected. AMAE has a vital
importance to the Japanese psyche and emotional stability, it permeates the entire social
structure, becoming a dominant Japanese mentality and behavior.
Characteristic of Japanese social climate, their specific culture, so-called paternalism
or familiarity. In essence, it is the Japanese tend to focus on the group they belong, in the
sense of protection, as opposed to other groups. As a result, for Japanese organizations,
priority is on the group, not personal attributes of members.

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In close connection with AMAE, there is another vertical interpersonal relationship

specific to Japanese culture, namely, oyabun - kobun (Oya - father ko - child). In essence, by
oyabun-kobun are designated personal relations between employees located on different
hierarchical levels. Person located above in the hierarchy (chief) is oyabun, who subordinates
several kobuns. Equal treatment of his kobuns is required, otherwise he loses his status of
oyabun. This relationship is relatively similar with that bewteen father of a family and his
sons. One oyabun can have more kobuns but the one kobun is always related to one oyabun.
A Japanese organization involves a set of relationships that gives it a strong
cohesion. In these relations rules of proper conduct are established, with a substantial
contribution having of a wide range of leisure activities practiced together. Of these mention
the organization of one to two annual trips, a monthly meeting, on Saturday, party together
"to a drink" after-hours, etc.., all funded by the company. The result of these actions is the
absolute primacy of authority, respect for seniors and wide proliferation of "friendly" senior
staff, with an affectionate work style, concerned with promoting and protecting the interests
of those kobun.
Another major feature of management and business organizations in Japan is wide
proliferation of "small groups" and known in Japanese as "habatsu. Resultant specificity of
mentality and behavior already mentioned - AMAE, paternalism, oyabun-kobun small
groups are basic functional components of government bodies, political parties, large
companies etc. The most common criteria on establishment of these groups are graduating the
same university, marriage ties and work together in the same community. Small groups
protect the interests of its members and also provides a system of contacts.
3.2. Economic and social features of Japanese context

Consideration of socio-economic mechanisms of Japan reveals the major role that the
government and its agencies have in shaping business landscape. In fact, government set up
and operate a comprehensive national management system, which combines elements of
formal and informal decision-making, which is the result of Japan's economic strategy and
coordination between the key actors. Dominant feature of their work is the wide and intensive
cooperation between government and business circles of Japan.
The MITI (Ministry of Industry and International Trade) is the most powerful
economic ministry. Among its major actions mention the development of guidelines
regulating the use of production and pricing cartels, initiating major economic activities etc.
Typically, strategy and economic policy proposals originates from various governmental

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bodies. These are submitted to the Council of Economic Policy, consisting of political leaders
and economic experts that examines them, enhance/improve and then submit to various
ministries. Though responsible for strategy, they never reject proposals received.
The main objective pursued in recent decades to set up the development of
competitive industries in foreign markets. It acts simultaneously stimulate both financial
support and priority sectors and to protect industries and corporations are faced with difficult
problems. The main actions concerns:
formation of cartels to obtain complex products at competitive prices on foreign
markets;
reducing excess production capacity through financial and other incentives;
reduce surplus labor in certain sectors;
selection of firms necessary to survive due to their importance for the Japanese
economy;
funding of research development;
providing subsidies for exports of certain products;
providing capital for new investments;
finance training and investment programs.
Economic circles, large companies manifests their main influence on economic policy
through "Zakai", which is a political-economic group of financial leaders coming from the
main national business organizations: Kaidanren, Kiez Doink, Nikkeiren, Nissho. Among
these organizations Kaidanren is the strongest (meaning Federation of Economic
Organizations, whose steering committee is made of the chairmen or CEOs of major
companies and government personnel from industry, commerce and finance). Zakai proposals
on economic issues are always considered by Japanese Assembly and the government. In
practice, Zakai actually carries veto over major economic problems of Japan.
3.3. IAMBAS defining features

Japanese economy has a dual structure, the major economic groups (keiretsu or
Zaibatsu) coexisting with a large number of small businesses. Currently there are six major
economic groups - Mitsui, Mitsubishi, Sumitomo, Fuji and Dai Ski Sonwa Kongya
compared to 10 at the end of World War II, abolished by the Americans according with the
Treaty of Peace. Most Japanese companies are small, however. Employing, according to
Japanese regulation, fewer than 100 employees, small businesses represent about 98% of

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Japanese firms. Today there are 6.5 million such companies which employs 40 million
people, or 80% total of employment, providing more than 50% of the Japanese GDP.
3.3.1. Specific vision on organization

A Japanese company, in any cultural context, has simultaneously several dimensions:
economic, social, technical, legal, etc. Japanese companies specific priority is its social
dimension. For a typical Japanese the company is a place to daily meet colleagues and spend
time together. Psychologically, most Japanese have two families: at home, the traditional one,
the other being the community in which he is included in the company. Both have their
importance for a balanced life. Richard Dare considers that a Japanese company's first feature
is that it is a human community in which the principal stakeholders are its employees.
In addition, specific to Japanese organizations is the absence of a clear demarcation
between managers and subordinates, like in European or North American companies.
Personal contacts within the organization has a crucial importance for employees.
Oyabun-kobun relationships and other labor relations like common leisure activities after
finishing work program have a strong emotional charge, provide consistency and special
meanings. This is not uncommon for a Japanese when he retires, often, his personal balance
is affected with such intensity that he end up divorcing.
Japanese company employees shows, in opinion of Professor Kaarna Koboyashi,
three major obsessions.
a) First obsession translates into intense concern for updating and enhancing their
skills, directly contributing and involving in economic activities of the company. This is
reflected in wider acceptance of the technical elements, in case of Japanese companies the
"NIH syndrome" (Not Invented Here) being far less common than in Europe or America.
b) Second is focus on team work. Due to the strong belonging to the group feeling,
essential in Japanese culture, Japanese employees emphasize work in common and group
performance, but have a local nature (company or community), doesnt mean they necessarily
achieve effective multicultural work teams.
c) Uncertainty acceptance. Finally, due to social willingness to live and work together
but also the historical background, Japanese does not rely on rigorous instructions and are
willing to accept ambiguity. For instance, the concept of law was introduced in the later 19th
century while still it was no word to describe it. Use of insufficiently or less precisely defined
concepts, acceptance of uncertainty favors a rapid, complex and sometimes chaotic
ambiguity, associated with economic efficiency.

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At the core of Japanese companies is of the the so-called "Anshinkan" which in

translation means ensure safety and protection for customer. Hence, company focuses on
providng QPDS, ie quality, price, delivery and service. Considering a priority in attracting
and convincing customers not only price and quality of their products and services what
typical North American and Western European businesses do but also the delivery (when,
how, under what conditions) and after sale services provided to the customer. This shows
both focus on the client and concomitantly their comprehensive approach, designed to meet
customers full requirements and preferences.
3.3.2. Structure of large industrial groups - ZAIBATSU

Each Zaibatsu is a complex structure comprising groups bank, general commercial
company and factories/plants.
Bank exercise primarily its traditional function of providing financial resources for
major operations and development of the group. In addition, assure - a situation rarely seen in
other countries - an integrative function through financial policies they promote. While
Japanese companies are characterized by rapid expansion, which requires massive loans, this
enables groups bank to supervision other parts of Zaibatsu activities, usually deciding CEO
of it.
General commercial company, in addition to conventional business functions, plays
an important role in innovation and boost the development of zaibatsu. They are trading a
significant part of groups products and raw materials, for example, Mitsubishi Corporation,
Mitsui & Co. and Sumitomo Shaji, general commercial companies of Misubishi, Mitsui and
Sumitomo account for more than half of the respective groups export and import. The main
activities of general commercial companies involves:
carry out marketing research for Zaibatsu products in exchange for a fee;
initiate the development of new companies or startups, especially in new industrial
sectors;
organize joint ventures both in Japan and other countries;
provide group credit for Zaibatsu suppliers and customers, especially for small
businesses;
buy shares in Zaibatsu bank on behalf of suppliers and customers to tighten relations
with them.
Factories/plants are the operational units of Zaibatsu, places were products and
services are manufactured.

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Between all these components of Zaibatsu there are strong economic and management
connections, which gives these big monopolies impressive economic strength, demonstrated,
by the spectacular evolution of the Japanese economy in recent decades since Zaibastus are
considered the core of Japanese economy.
3.3.3. Decision-making by consensus

Perhaps the most specific Japanese feature in terms of decisions is the consensus
based decision making process called ringisei, a unique process to make decisions. Relying
on decisions by consensus significantly changes the way decisions are made. The decision
process is triggered by those directly involved in that activity, being down-top.
Step 1. Presenting solution at department level. When an employee address a major
problem and wants to offer a solution, he announces his direct supervisor. Supervisor
organizes a meeting in which the problem and that decisional variant proposed by employee
are discussed. If participants consider that solution deserves to be considered, they trigger the
consensus process that requires involvement of other organizational divisions of the
company. A formal consent from people involved directly and indirectly in the department
facing that problem has to be achieved.
Step 2. Discussing solution with other departments. Head of department where
solution occurred organize a meeting with representatives of other departments involved.
Typically, each department sends its head and two deputies. Solution is presented and
discussed. The process is repeated until the participants get all information judged as
necessary. To provide the information requested, they use formal and informal approaches in
all other departments and, if necessary, outside them. When they considered that all
information requested was sufficient, the solution was valid and consensus was reached,
decisional process switch from informal to formal approving the decision.
Step 3. Formalization. Employees from the department where solution was initiated
draft a document outlining the solution, collected information is attached and request formal
approval of all senior staff involved in implementing that decision. Each manager puts its
stamp of approval on the document. Normally 10 to 14 approvals are required. Finally, they
submit the document to top executives, which gives final approval, making it official.
Step 4. Implementation. Registration takes place and then decision is implemented.
From the above scenario we conclude that the main features of decision making by
consensus are:

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high degree of complexity due to large number of managers involved and numerous
interventions on the decisional proposal;
frequent involvement of senior staff during the decision making process, but their
proposals are not automatically accepted by the others;
combining formal and informal communication, the last often having a decisive role;
crucial role is played by mid-level executives in achieving the necessary consensus.
Finally, we consider useful to point out that this system of decision-making, despite
its shortcomings - the slow progress and focus on continuity in terms of avoiding uncertainty
- has two major advantages that make it particularly effective. It provides a high degree of
involvement in leadership from staff, and accelerates the process of implementing the
decision.
3.3.4. Inter and intra groups communication

Communication in Japanese companies differ substantially from North American or
European companies. A first difference relates to the large share of symbolic, nonverbal,
ritualistic issues.
Japanese take very much respect to traditions in communication processes. Two types
of communication can be discerned: intra and inter group.
Intra group communication, within the group that person belongs, composed of
individuals working together in the same compartment, is radically different from
communication between representatives of various groups. Communication specific to the
primary group is highly informal. Meetings take long, a familiar, intimate atmosphere is a
rule, hierarchical differences between group members fades, there is a process of democratic
participation for all. In the first part of the meeting are presented and discussed mainly factual
information, then, gradually, group members proceed to outline points of view and discuss
decisional choices. Its worth mentioning that every member of the group manifests great
care to avoid conflicts with the others. Different views are expressed in elegant form,
opinions are expressed in a diplomatic manner, without hurting others feelings. Where a
decision has to be made, discussions continue until consent is reached from at least 70% of
participants. Once that threshold reached, the minority automatically join the majority and
involve without reserves in implementing that decision.
Inter groups communication (between representatives of several groups) is very
formal, being carried out according to a carefully planned ceremony under strictly observed
rules. Often, meetings at this level are conducted using a predefined scenario. Moreover, the

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presiding manager is accompanied by a meeting secretary sitting next to him to facilitate its
smooth application.
Regarding the content of communication processes, it is important to note that each
participant submit information and express views only about the group that he represents. If
there are new, important issues to be discussed without being previously on the agenda,
participants may require a postponement for consultation with group members or even a
postponement for the next meeting, being forbidden to express opinions without consent of
other group members.
3.3.5. Organizational structures

The most widely used types of organizational structures in Japanese companies are,
according to organizational documents, functional, divisional and matrix structures. But
regardless of the type adopted formal organizational has a minor importance compared with
elements of informal organization. Functionality and effectiveness of organizational
structures are based on encouraging initiative at lower levels of the hierarchy, responsibility
distribution to all components involved in delivering major actions, delegation of tasks.
Information flows are less the result of formal organizational and more of personal
relationships between various organizational structures managers.
Configuration of the company's organizational structure is influenced by the
placement of Japanese managers in managerial positions largely depending on their age.
In the organizational pyramid, the decisive role is played by middle management.
Experience shows that the Japanese management system is effective when middle managers
are competent, covering convincingly the "gap" between top and lower management. In this
process, interpersonal relations with other echelons of management is of major importance.
Top management, represented by Board of Directors, President and his deputies,
concentrates its efforts in three main directions:
initiating and guiding radical change in company;
solving the crisis that may occur in the company,
promoting "public relations" with staff, stakeholders and government.
3.3.6. Lifetime employment

One of the best known and discussed features of Japanese management is hiring
employees for life, which is rooted in family tradition of feudal period and Zaibatsu practices.

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What is less known, however, is that of lifetime employment benefit only a minority of
Japanese workers. According to the investigation made by Namik Nobaaki and Prakash Sethi,
the percentage of this type of employees varies between 25-40%, with manufacturing
departments in the top of the range.
Japanese companies staff is divided into three categories: permanent, which is
subject to lifetime employment, semi-permanent or experimental recruits and temporary
workers. Permanent staff, made of specialists, represents companys elite workforce.
Annually, in April the company is recruiting young graduates. The selection gives priority to
generalist, those able and willing to perform any tasks. It places particular emphasis on the
ability to work as a team, to emphasize group interest above personal one. Recruitment is
based on a staff selection plan according to whom the company is employing yearly around
6% of current staff to cover retirements - 2% - and to enable enterprise development. Please
note that recruitment is seen as a long term investment, short-term cost is often regarded as
secondary. When candidates are very good, everyone is hired, and vice versa.
Lifetime employment success depends on the fulfillment of a double set of
expectations with a strong determination in Japanese culture and traditions. The worker is
expected to be able to work in the company for his entire life, and moreover to be willing to
do so. This desire is driven by the fact that, according to Japanese-specific rules, he is
expected to achieve good financial returns through continued work at the same company. In
turn, the employer count on the employee's lifelong involvement, ensuring a standard salary
under normal working conditions. Social and cultural norms require that employer must
ensure permanent wage for lifelong employees and take care of them. If not, its behavior is
considered as a major negative deviation from social norms, which is reflected in the massive
decline in the morale of its employees and trade union resistance, the pressure from
government bodies and public opinion.
It is important to notice that lifetime employment is not a widespread system. Small
businesses do not practice at all, while only large companies have enough resources to use it
and only for specific categories of employees. Currently, efforts are being made in many
companies to reduce the percentage of permanent staff.
This system have considerable disadvantages and advantages. Among disadvantages
we mention:
Rigidity and inflexibility of the system in recruiting skilled personnel;
High labor costs, especially in periods of economic crisis;
Insufficient incentives for employee training and development;

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Generate strong pressures for increasing the volume of business activities, which
often leads to excessive diversification.
Disadvantages are, however, shadowed by considerable advantages in the context of
specific Japanese mentality and culture:
Top executives pays special attention to long-term training and labor productivity;
Significant investment in HR training;
It is easily to balance wage curve if the period an employee work for the company is
known;
Improvement of workforce performance based on employees' sense of security, a
state of harmony and cooperation within the company.
3.3.7. Management - trade unions relationship

In Japan, as in other countries, unions interest are opposed to those of management.
However, a number of specific elements occurs, which make Japanese trade unions radically
different than those operating in other countries.
Japanese trade union organizations are established on company and not on
professions or industries, as in most other developed countries. All personnel within an
enterprise, except senior managers, are part of the union. Even though interests are potentially
adverse, dialogue dominate between unions and management, working to make
agreements and harmonize interests in companys best interest.
Talks between unions and company management on salaries are occurring usually in
May. They take place between union leaders and HR department, who have staff
specialized in this field. Only when they cannot reach an agreement despite best efforts senior
management gets involved.
It is worth to mention that conflicts between companys management and union are
constantly under contextual pressure from local community and the need for general
consensus by Japanese society. Trade union protests usually have a demonstrative form,
emphasizing inaptitude of companys executive in meeting employees needs. Usually
protests are held during breaks when employees shout slogans and march with placards on
company's premises. Through these actions they try to convince senior management of the
company to be more conciliatory in negotiations with the union and to better interests of
employees. Strikes are very uncommon form of protest as it is considered a moral shame for
both top executives and union leaders.

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Another aspect worth to mention is that unions have always considered company's
interests on the long run, looking for agreements on wages and working conditions without
harming or impairing companys interests and jeopardizing financial situation. Therefore,
zeal strikes" are more common than conventional strikes so widely used in most countries
around the world.
3.3.8. Wage system based on seniority and education

In determining income the most important criteria are seniority and education. Wage
differences between those with higher and secondary education are small, however, the
decisive criterion is the age. Number of years worked in the company is the main foundation
to establish the size of wage and promotions. Wages grow very rapidly, coupled with number
of years worked in the company. As a rule, the salary at retirement is 3.5 times higher than at
employment, a significant higher proportion than in U.S. companies.
Besides wages, the Japanese company's employees benefit additional payments, the
most significant of these being the bonus system. On average a bonus is 2-3 times higher
than the monthly salary and is awarded twice a year, differentiated according to performance,
based on the profitability of the company and individual performance.
Along with bonuses Japanese employees receive incentives for hard work,
dangerous conditions and overtime. In addition, they receive salary supplements depending
on the family situation. For instance, when a Japanese is getting married he receives a
significant bonus, then when having the first and second child.
Another category of indirect revenue are represented by low interest loans granted
by enterprises to their employees (especially in case of zaibatsus bank), high interest rates
enjoyed by employees who deposit their savings in the company where they work,
accommodation allowance etc.
In case of managers, they enjoy a dedicated annual budget at their disposal to ensure
effective coordination of their compartment and foster relationships with other companies.
Specifically, managers uses their budget to organize parties or invite to restaurant employees,
suppliers, customers and any other person who, in his opinion, can bring value to the
company. Size of the budget is confidential, differentiated from one enterprise to another and
within it from one manager to another. Overall, it is estimated that this budget varies between
500,000 yen allocated for a production manager and 30,000,000 yen for CEOs or marketing
managers.

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Regarding retirement system, only in the last decades was introduced in Japan.
Traditionally, when an employee retires he is granted a special premium whose size is 50-60
times the monthly salary. If the employee leaves the company for personal reasons, this
premium is drastically reduced.
Wage arrangements used by Japanese companies show a main disadvantage:
insufficient reward of creativity and the outstanding results achieved by employees. To some
extent, these are offset by the elimination of individual competence, which often has a
destructive effect on harmony and interpersonal relations within groups.

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