| Walt Disney Company in Shanghai & Tokyo | Operation in Asia II Region | | | Joanne JohnsonEnes TastanLucia ValadezStanley WoodardKeller Graduate School of ManagementHR584 Managing International Human Resources Instructor: Jack HuddlestonJune 17, 2012 |

Contents EXECUTIVE SUMMARY 2 LAWS AND REGULATIONS 3 DEMOGRAPHICS 5 CULTURE AND LANGUAGE 8 ECONOMIC, POLITICAL, AND CURRENCY FACTORS 13 LABOR RELATIONS 15 HRM POLICIES, PRACTICES, AND TRENDS 17 CONCLUSION 24 REFERENCES 26

EXECUTIVE SUMMARY
Walt Disney Company has had a strong presence in the Far East since the 1930’s when Snow White and the Seven Dwarfs was shown in Shanghai theaters and with the founding of a local subsidiary in Tokyo in 1959. Today, Disney is a market leader in home based and theme park entertainment in the Asian market. The firm is currently exploring a production facility in either two of the hub cities of Tokyo and Shanghai. In this paper will review the demographics, culture, political, economic, and applied HR practices in China and Japan. China and Japan are both economic powerhouses with homogenous cultures, with distinct political and economic structures. The Chinese culture has more Confucian ideals that are more collectivist in nature, while the Japanese culture emphasis harmony and saving face communication. The Chinese manipulation of its currency and increasing dissent among workers puts the nation in higher political risk; moreover the Chinese economy is inevitably going to slow down. The Japanese economy has undergone political reforms to upstart a sluggish economy recovering from a decade long recession in the 1990s. The HR practices in China rely on a strong leadership pipeline from its educational facilities and its union that is heavily influenced by the Communist regime, while the Japanese HR practices are characterized by lifetime employment in an increasingly talent gap. Organizational culture is essential to having global leverage in an industry that requires local adaptation. Since Disney is well established in both China and Japan, the cultural affect on strategy is not as significant. Thus, the political and economic risks of each area should be the deciding factor in determining an expansion site. With lower political and economic risks and greater facilitation of lateral communication, we recommend Disney choose the Tokyo site.

LAWS AND REGULATIONS
China Labor Law and the Labor Contract Law, which became effective from January 1, 2008, are the general guidance and standards for nationwide employment practice in China. Companies in China must comply with the minimum requirements described in the aforementioned laws and regulations while formulating the company’s HR polices. The local labor regulations of Shanghai city will also need to be considered as part of in the compliance review (Ross, 2007). The purposes of the Labor Contract Law are to perfect the labor contract system, clarify the rights and obligations of the parties, protect employees' lawful interests and establish or strengthen stable labor relations. Written labor contracts are the mechanism for doing so.
The Employment Promotion Law promotes employment in the private sector through preferential policies, ease the burden on the unemployed and promote equal employment in the workplace. The government will implement policies to promote employment through a variety of channels, including labor-intensive businesses, the service sector, small and medium-sized enterprises, construction projects, and micro-finance and, depending on the locality, a new or strengthened unemployment insurance system (Ross, 2007).
Non-discrimination is the second major component of the Employment Promotion Law. The law expressly provides that workers have equal rights to employment and to establish businesses in accordance with law without respect to ethnicity (nationality in Chinese), race, gender, religious belief or other characteristics, and may not be discriminated against in hiring or in the conditions of their employment. Although it is unclear how effectively these provisions will be implemented, the absence of specific penalties may limit the force of the equal employment provisions for some time to come even though the statute applies to both employees and recruiters (Ross, 2007). It should also be noted that age is not listed, which indicates that age discrimination in the workplace will remain permissible.
According to Japanese employment law, Conditions of employment must be clearly set out in the employment agreement or in supplementary rules which are provided to the employee. Also, in conditions of employment, an employee is permitted to resign at any time (usually two-week-notice is required), but an employer that tries to fire an employee without rational, reasonable, and socially-acceptable cause may lose an abusive-dismissal court case.
The Labor Standards Act in Japan provides that if an employee is fired, notice must be provided at least thirty days in advance, or thirty days' pay must be provided in lieu of notice. Firing is specifically prohibited during maternity leave of a female employee (and for 30 days afterward) and hospitalization of an employee following job-related illness or injury, and for 30 days afterward.
Article 4 of the Labor Standards Act prohibits discrimination in pay based on gender: "An employer shall not engage in discriminatory treatment of a woman as compared with a man with respect to wages by reason of the worker being a woman."
Also, like China, Japan prohibits ethnic, national and religious discrimination by employers in regards to work conditions Article 3 of the Labor Standards Act: "An employer shall not engage in discriminatory treatment with respect to wages, working hours or other working conditions by reason of the nationality, creed or social status of any worker..."

DEMOGRAPHICS
Japan
Japan is an island nation in eastern Asia, located in the Pacific Ocean. The demography of Japan indicates that during 19th and 20th centuries there was high growth in population. However, it has been lowered now due to very low birth rate and almost no immigration. There is now low birth rate and very high life expectancy in Japan. Japan is a country of high population (126,475,664, tenth most populated country), covers a total area of 145,925 square miles, and regarding the density of population Japan stands to be 32th country in the world with 336 people per square kilometer (United Nations World Populations Prospects Report, July 2005).
With 21.2% of the population was 65 years or older, Japan has one of the most elderly population rate in the world. This elderly age profile has triggered concerns about the nation's economic future and the viability of its welfare state.
Tokyo, the capital of Japan, is the largest metropolitan city in Japan with highest concentration of population. Other crowded cities and regions in Japan are; Honshu, Kyushu, Yokohama, Osaka, Kyoto, Kobe and Kawasaki. Only about 5% of the labor force is engaged in agriculture.
Japanese is the official language of Japan spoken by more than ninety-nine percent of the population. It is used as the first language of the nation. English is also spoken and is taught in schools. Ethnic groups of Japan consist of 98.5% Japanese and 1.5% other (North and South Koreans 1 million, Chinese 0.6 million, Filipinos 0.5 million, Brazilians 250,000 and Peruvians 200,000 and other nationalities).
Most Japanese people do not exclusively identify themselves as adherents of a single religion; rather, they incorporate elements of various religions in asymmetric fashion known as Shinbutsu shūgō. Japan has full religious freedom and minority religions such as Christianity, Islam, Hinduism and Sikhism.
Japan is the third-largest national economy in the world by nominal GDP. In 2011, the gross domestic product (nominal) was estimated at $5.855 trillion. Japan has a low unemployment rate of around four percent.
China
The People's Republic of China is located in eastern Asia, southeastern section of the Eurasian continent, with the Pacific Ocean along its east coast. China is the third largest country in the world, and covers an area of 3,696,000 square miles (9,640,821 square kilometers). Today, China's population is over 1.3 billion and the largest of any country in the world.
Beijing, the capital of China, population of 19,612,368 and covers an area of 6,487 square miles, is among the most populous cities in the world and one of the Four Great Ancient Capitals of China. However, the largest city by population in China is Shanghai. Shanghai is a global city with a powerful influence over the finance, commerce, fashion, technology and culture of the country and hosts the main stock exchange of China and boasts a fairly wealthy population.
The official spoken standard in the People's Republic of China is Standard Mandarin. Mandarin Chinese is spoken by 70% of the population. Other commonly spoken languages in China, like Wu, Cantonese, Min, Xiang, Gan and Hakka belong to the Sino-Tibetan language family. Non-Chinese languages spoken widely by ethnic minorities include Mongolian, Tibetan, Uyghur and other Turkic languages (in Xinjiang), Korean (in the northeast), and Vietnamese (in the southeast). In addition to Chinese, in the special administrative regions, English is an official language of Hong Kong and Portuguese is an official language of Macau.
The People's Republic of China (PRC) officially recognizes 56 distinct ethnic groups, the largest of which are Han, who constitute 91.51% of the total population in 2010. Ethnic minorities constitute 8.49% or 113.8 million of China's population in 2010. During the past decades ethnic minorities have experienced higher growth rates than the majority Han population, because they are not under the one-child policy.
China is ranked as the world's second largest economy, and is the largest exporter and second largest importer of goods in the world. China's GDP is estimated at around $7 trillion (2012). The coastal regions of China are more industrialized, while inland regions are less developed. Having crowded cities and large economies, an analysis of the social factors of culture and language in both China and Japan are essential.
CULTURE AND LANGUAGE
Organizational Culture is the values and behaviors that contribute to the unique social and psychological environment of an organization. It is the sum total of an organization's past and current assumptions, experiences, philosophy, and values that hold it together, and is expressed in its self-image, inner workings, interactions with the outside world, and future expectations. It is based on shared attitudes, beliefs, customs, express or implied contracts, and written and unwritten rules that the organization develops over time and that have worked well enough to be considered valid. Also called corporate culture, it manifests in (1) the ways the organization conducts its business, treats its employees, customers, and the wider community, (2) the extent to which autonomy and freedom is allowed in decision making, developing new ideas, and personal expression, (3) how power and information flow through its hierarchy, and (4) the strength of employee commitment towards collective objectives. It is termed strong or weak to the extent it is diffused through the organization. It affects the organization's productivity and performance, and provides guidelines on customer care and service; product quality and safety; attendance and punctuality; and concern for the environment. It extends also to production-methods, marketing and advertising practices, and to new product creation. While there are many common elements in the large organizations of any country, organizational culture is unique for every organization and one of the hardest things to change. (www.businessdictionary.com)
Disney has created a culture for their employees where they feel that they are valued as an individual and a vital part of the team. They can do this with open communication throughout the chain of command, comprehensive training, and rewards. Providing this type of dynamic employee has given Disney one of the lowest attrition rates for any company in the United States. This philosophy of how to treat an employee has been passed on year after year by the likes of Walt Disney. The basic belief is that you cannot have happy guests if you do not have happy employees, which is an example of organizational culture and can be an example of human resources practices. Disney has accomplished effective feedback by surveying and 360 degree performance reviews.
One way Disney determines if the employees are happy is with a 120-question survey about management's performance. Using this survey is a good way to determine if management and employees are communicating effectively; once the surveys are complete, a staff meeting is held within three weeks of the survey completion and at that time all staff concerns are addressed so that any problems can be resolved. This shows the Disney Company is concerned about the welfare of their employees and want to keep their employees satisfied in turn satisfying the visitors. Additionally, Disney has incorporated a Culture that every employee has something valuable to offer; therefore, employees are encouraged to share their ideas and recommendations with management. The culture of Disney is built upon storytelling, innovation and optimism. Disney goal is to treat every employee as they would treat their guest to ensure that everyone receives a Disney experience (Sparks, 2007).
Japan
Each Disney location offers culture that coincides with the location, such as Disney Japan. Even though it is an exact replica of Disney California, the culture is based on the microscopic attention to detail that Japanese citizens are used to along with the World Bazaar that is similar to Main Street USA, but manipulated to appeal to the Japanese (Sparks, 2007).
Japanese is the sixth most spoken language in the world, with over 99% percent of the country's population using it. Amazingly, the language is spoken in scarcely any region outside Japan. The origin of the Japanese language has many theories in reference to it; some believe it is similar to the Altaic languages, namely Turkish or Mongolian. It is recognized and acknowledged to be close in syntax to the Korean language. Dialects are used in areas, particularly in Kyoto and Osaka, but standard Japanese, based on the speech of Tokyo, has become more popular through the use of television, radio and movies.
The Japanese believe that harmony is the guiding philosophy in family and business settings and in society as a whole. Japanese children are taught to act harmoniously and cooperatively with others from the time they go to pre-school. The Japanese educational system emphasizes the interdependence of all people, and Japanese children are not raised to be independent but rather to work together. This need for harmonious relationships between people is reflected in much Japanese behavior. They place great emphasis on politeness, personal responsibility and working together for the universal, rather than the individual, good. Because they believe in harmony the Japanese rely heavily upon non-verbal communication which includes facial expressions, tone of voice and posture to tell them how someone is feeling. For example if person frowns this would be taken as the person is disagreeing with what is being said. Another example is that it is considered disrespectful to stare into another person's eyes, especially if the person is senior to you because of age or status. Therefore, because of this in crowded situations Japanese walk around avoiding eye contact so that they can have privacy.
With regards to meeting etiquette in Japan, greetings in Japan are formal and ritualized. For example it is considered impolite to introduce yourself; therefore, it is recommend that if possible that you wait to be introduced. In the US people are accustomed to shaking as a form of greeting one another; however, in Japan, the traditional form of greeting is the bow. How far you bow depends upon your relationship to the other person as well as the situation. The deeper you bow, the more respect you show. While the Japanese prefer to do business with people that they know or people who are highly recommend they are not totally opposed to forming new relationships. However, it may take several meetings for your Japanese counterparts to become comfortable with you and be able to conduct business with you. This initial getting to know you time is crucial to laying the foundation for a successful relationship and may be seen as sort of a trial period. The Japanese may awarded a small amount of business as a trial to see if you are able to deliver excellent service. If you deliver excellent service according to the Japanese standards the reward for this is a long term relationship. (kwintewssential, 2012)
China
The Chinese language is a family of closely-related but mutually unintelligible languages. Over 1.2 billion people speak one or more varieties of Chinese. According to Kwintewssential all varieties of Chinese belong to the Sino-Tibetan family of languages and each one has its own dialects and sub-dialects, which are more or less mutually intelligible.
In general, the Chinese are a collective society with a need for group affiliation, whether to their family, school, work group, or country. In order to maintain a sense of harmony, they will act with decorum at all times and will not do anything to cause someone else public embarrassment. They are willing to subjugate their own feelings for the good of the group. This is often observed by the use of silence in very structured meetings. If someone disagrees with what another person says, rather than disagree publicly, the person will remain quiet. This gives face to the other person, while speaking up would make both parties lose face.
The Chinese' Non-verbal communication like the Japan speaks volumes also because they too like the Japan strive for harmony and they rely on facial expression, tone of voice and posture to tell them what someone feels. As with the Japanese frowning is interpreted as a sign of disagreement therefore, Chinese maintain an impassive expression when speaking. Also like in the Japanese Culture it is considered disrespectful to stare into another person's eyes; therefore, in crowded situations the Chinese like the Japanese avoid eye contact to give themselves privacy.
Chinese culture has a great sense of humor and often laughs at them; therefore, when conducting business one must be ready to also laugh at them.
The Chinese like the Japanese don't like doing business with companies they don't know, so having business references is vital. Also, it is important that you send the Chinese literature regarding your company (written in Chinese) that describes your company, its history, and literature about your products and services. The Business relationships are built formally after the Chinese get to know you. Rank is extremely important in business relationships and you must keep rank differences in mind when communicating. It is also important to note that gender bias is nonexistent in business. The Chinese prefer face-to-face meetings rather than written or telephonic communication when conducting business.
Staffing, Performance and Appraisal, Training and Development, and Reward Management, influence the Chinese cultural values. Developed by the Chinese philosopher and educator, Confucius ( 5 1 - 4 79 BC), Confucian ideology has been firmly established as an undeniable, unofficial, but powerful system of moral, political and social principles governing nearly every aspect of Chinese life since the Han era (206 BC-AD 220). Centered on harmony, hierarchy, development of moral potential and kinship, Confucian thought can be understood as a moral system. Confucianism focuses on five cardinal role relations between: emperor subject, father-son, husband-wife, elder-younger brothers and friend-friend. All these relationships involve a set of defined roles and mutual obligations. Each individual should conform to his or her proper role and act properly to perfect the society (Wang, 2005).
The Confucian system is not officially in vogue in China today. Its legacy, however, continues to inform our understanding of organizations, the self and the nature of relations between the two, Indeed, Confucian principles provide a base for most current organizational management practices in China and a number of other Asian countries, such as organizational bureaucracy, respect for seniority, rituals of etiquette and ceremony, and business relationships (Wang, 2005).
Respect for hierarchy can be traced back to the Confucian principle of propriety. According to Confucius, everyone has a predetermined position in society. Hence, as long as each person behaves according to rank and social status, social harmony and maintaining a harmonious relationship between superiors and subordinates can be achieved. Confucius proposed some important ethical values for superiors and subordinators, as well. Benevolence, wisdom, courage, forgiveness and righteousness are essential ethical values for superiors in a collectivist society (Wang, 2005). As a result of Confucian influences, Chinese organizations are likely to witness more hierarchically authoritative than democratic leadership and reciprocal interpersonal and humanitarian relationships between superiors and subordinates at work. Although Chinese culture is evolving in the dynamics of changing economic, cultural and institutional contexts, the impact of Confucianism is likely to be sustained. The Confucian culture has a significant influence on the political and economic affairs of China.
ECONOMIC, POLITICAL, AND CURRENCY FACTORS
Having the number two and three world economies respectively, the political and economic stability of China and Japan has a profound effect on the global economy. China’s devaluing of its currency has been the source of controversy with its major trading partners. These accusations are well supported as there is evidence that China has kept the renminbi artificially low to support exports and deter imports (Mastel, 2011). In 2010, China bought $200 billion in federal reserves, which were mostly denominated in American dollars, to make foreign currencies scarcer and more expensive in comparison to their renminbi (Mastel, 2011). Moreover, China’s trade imbalance with the U.S. has steadily been $200 billion annually. The political winds of Washington have entered into the controversy, with Senators Graham and Schumer proposing a 27.5 percent tariff on Chinese imports if China doesn’t adjust their currency accordingly (Mastel, 2011). This proposal is unlikely because of the interdependence of each nation, but if enacted they would have a profound effect on Chinese economic and political stability. Henry Rowen, a renowned Pacific-Asia researcher predicts “big discontinuities for China before 2020” (Rowen, 2011). The Chinese economy has grown at a rate of nine percent for nearly thirty years, with the Tiananmen Square year being the only exception, thus a continuing high growth to 2020 is not expected (Rowen, 2011). Rowen states: “A common view is that the slowdown will happen gradually through more sluggish growth in the work force, a reduced flow of workers from low-marginal-productivity farming to higher productivity urban work, and the country's approach to the world technological frontier”. Moreover, there are eight hundred fifty million cell phones and five hundred million internet users in China, therefore the days of the Communist regime suppressing their citizen’s communication are long gone. These high tech tools could eventually spur political instability in Beijing.
The “Open Door Policy” adopted by China in 1979 has brought about enormous growth in the industrial output as well as economy as a whole. The opening up of the vast market has created many opportunities and, at the same time, many problems to foreign enterprises. Because of the unique political, economic and cultural environment in China, it is difficult for foreign joint ventures to introduce their preferred approach in managing the employees and the organization in China (Siu, 1999). While China has experienced enormous growth, Japan’s economy is slowly recovering from a decade long recession.
Japan suffered what most economists describe as “the lost decade” from 1988 to 2003, in which there was deflation and a dramatic drop in stock portfolio and real estate values. In response to their deep recession, Japan implemented political and economic restructuring that concentrated on more competition. Many economists believe that these political and economic changes were not enough, and did not bring about a systematic change in Japan (von Staden, 2012). One noted Japanese scholar stated in 2001 that reform has been stagnant because of four economic factors: reliance on banking instead of stocks for investment because of the keiretsu system, corporate governance that favors banking instead of stocks, long-term corporate contracting, diminished price competition, and a large influence of indirect policy on the economy (Lincoln, 2001). Lincoln adds that the government is: ‘intrusive in the economy’, and there is a general ‘mistrust of markets’. Moreover, this will ‘temper the drive for efficiency’ (Lincoln, 2001). The financial crises of 2008 and the 2011 Kobe Tsunami further slowed the Japanese economy; this will spur more political influence of the Japanese economy.
. The political and economic risks are significant factors in evaluating potential expansion into both Shanghai and Tokyo. From an HR perspective, these risks have to be weighed with the cultural risks. These political risks are part of the institutional perspective required when a firm is trying to adapt to local needs- requiring closer network relations form both countries (Evans, 2011). Having a long history of business relations in Shanghai and Tokyo, Disney can potentially benchmark and/or learn viable solutions to diminish these political and economic risks. The political and economic risks are environmental risks, but they also have a significant influence on the social risks of labor relations.
LABOR RELATIONS
The establishment of the Communist Party in 1921 launched the nationwide labor movement in PRC, the All China Federation of Trade Union (ACFTU). While political reform encouraging market based labor was enacted in 1992 and 1994 via the Trade Union Law and Labour Law, the ACTFU still has a profound influence on the 230 million union workers in China. Recently, the ACTFU has allowed more grass roots participation that encourages feedback and constructive criticism of the union practices. Moreover, the decline of state-owned enterprises has spurred union membership among private enterprises-with seventy percent of the total union membership comprising of private domestic enterprises. ACTFU’s strategy since 2004 has been to include more credible representation, more protection of its union members, and increasing membership among foreign owned enterprises. Surprisingly, Wal-Mart established its first union store at its Guangzhou store in July 2006. In order to spur more union involvement in foreign owned enterprises, ACTFU has stated that unions differ in China because they are: “more “cooperative” and have more “supportive attitudes toward management and this have resulted in increased business efficiency” (ZHU, 2011). Although this movement toward more unionization is imminent, the real power still remains with employers. Union elections are still not free and the power of private association remains with employers. This has lead to employee dissent and potential strikes, the ACTFU has responded by allowing some collective bargaining. This trend toward collective bargaining may affect the localization strategy of Disney at a Shanghai plant. While Disney cannot curb union membership, the risk of employee dissent and potential strikes can be diminished by instituting its organizational culture of 360 degree feedback and employee empowerment.
Japanese union membership has decreased significantly in the last 25 years, from 30.8 percent in 1980 to 18.1 percent in 2007 (HARA, 2008). The organizational structure of union in Japan is predominantly by enterprise, with bargaining power mainly comprising of enterprise based membership versus management. The bargaining power of these unions is less than trade unions because higher wages may result in lower profits. Moreover, Japanese workers tend to have very long employment contracts-further reducing union bargaining power. Individual unions join together and annually conduct “Spring Offensives” that push for higher wages among union workers. This movement undoubtedly increases union premiums and spills over to non-union firms (HARA, 2008). Hawa and Kawaguchi found in a comprehensive survey, which was contrary to earlier studies, that most union members who were laid off did not believe they could find comparable wages in the non-union sector and that there was a thirty-two percent wage premium for Japanese union members. Moreover, they found that union membership has increased employee compensation packages throughout the Japanese economy.
The labor relations in China and Japan are in stark contrast because the union membership in China is based on a monopoly union versus Japanese enterprise-specific unions. While the bargaining power of Chinese workers has increased significantly the last decade, it is eons below the power of Japanese unions. Enterprise based unions in Japan are similar to European work councils, in that the union is much more collaborative with employers. Disney should do a thorough cost-benefit analysis of the local Shanghai and Tokyo labor unions via their network relationships to determine what labor agreements align with their global strategy.
HRM POLICIES, PRACTICES, AND TRENDS
Finding Talent & Attracting Expatriates China
Finding, developing and retaining good talent in China is always a challenge. As China becomes an even more strategically important market for most businesses, a strong leadership pipeline is critical to the expansion of most businesses in China.
Since early 2010 the HR job market has become increasingly buoyant and the old problems from pre-Global Financial Crisis times have come back to haunt companies. The tightness in the supply of strong HR talent is now prevalent once more as are the trends of salary and title inflation and ‘job hopping’. The signs in early 2012 point to a slowdown, with slightly fewer HR positions being recruited. A lowering in candidates’ confidence in the economy and the job market has meant that salary expectations among job seekers have become more realistic. The demand for HR professionals in 2011 was very strong across all sectors in Shanghai. Strong recruiters have also been in demand, as have Learning & Development and increasingly Organizational Development professionals (Letcher, 2012).
Job fairs/talent exchanges arranged by the local authorities are used by arms in Shanghai. The fairs are generally held at least twice a year in major Chinese cities. This method is cheap and often results in the company obtaining a large number of candidates, especially for professional positions. Direct recruitment from universities frequently takes place. A relatively limited number of companies used head hunters, mostly domestic Chinese ones, for the recruitment of managers. The headhunters typically charged some 30 percent of a successful candidate’s yearly salary (Lu, 1999).
In order to attract good employees, companies offer attractive compensation, sometimes including company sponsored housing and perhaps even so called ‘golden handshakes’ (for instance, a certain sum of money when the person joins the arms, another sum after one year, and a anal amount when certain targets have been reached). The practice of offering golden handshakes is mainly found in Shanghai (Lu, 1999).
Interviews are by far the most commonly used selection method. In joint ventures with well-developed routines, usually a local HR manager screens candidates, rest, based on their resumes an, then, through interviews. Subsequently, the line manager and an expatriate top manager interviewed the candidate. Seasoned expatriates emphasize the importance of drawing on the local managers’ input in the selection process. Managers go through a learning process concerning how to conduct interviews in China.
Japan
Under the tradition of lifetime employment, most Japanese companies hire a new class of graduates from colleges and universities each year, and provide on-the-job training to their employers throughout their working lives. Tokyo Walt Disney is able to recruit their new class of managers successfully from these institutions. Foreign companies face some difficulty in hiring new employees from universities, which involves breaking through the strong company-university ties in Japan. Most foreign companies therefore rely on temporary staffing, mid-career hiring, overseas Japanese returnees and expatriates to fill their positions. Common recruitment methods for foreign companies include word of mouth, employment agencies, newspaper ads in English and Japanese and executive search firms (Gross, 1998).
Given the traditional constraints on employment in Japan, foreign companies are also increasingly turning to Japanese returnees -- that is, Japanese nationals studying and/or living abroad who either want to return to Japan or have already returned. These individuals, many of whom are in their late 20s or early to mid-30s, are often well trained and highly motivated. They have Japanese roots and some Western business and/or cultural experience, and many (particularly women) believe that they will have a difficult time readjusting to the highly formalized Japanese way of doing business. A Western company may therefore offer a welcome alternative to the Japanese corporate environment.
While expatriates may be necessary to start a foreign operation, they are generally very expensive and should be kept to a minimum. This is particularly true in Japan, which has been one of the most expensive countries in the world to maintain an expatriate (Gross, 1998).
Compensation & Benefit Program
China
Social insurance is a mandatory, non-profit social security system established by law in China. It is administered by the labor and social security departments. There are five types of social insurance in China: old-age, medical, unemployment, work-related injury and child-bearing. Among these, the premiums for old-age, medical and unemployment insurance are jointly contributed by the enterprise and the individual, whereas work-related injury and child-bearing insurance premiums are the sole responsibility of the enterprise (Chinese Graduate, 2011).
China’s Social Security Scheme consists of different programs, including retirement, medical care, unemployment, maternity, industrial injury, etc. aimed at meeting the basic needs of urban employees. Currently, rural residents are not covered by a systematically designed Social Security Scheme nationwide. It is compulsory for all employers and their employees. The self-employed participate voluntarily.
Employer receives a 6-8% of the total insured salary for Medical Care Benefit according to the local medical cost level. Benefits include Individual Medical Accounts used for normal clinical expenses, co-payment of critical illness, and hospitalization expenses. If eligible, employees are provided with coverage for death, health, disability, and old-age benefits when they are enrolled in private benefits (Chinese Graduate, 2011).
Japan
All employees in Japan are covered fewer than one of three health care plans: National Health Insurance (NHI), Employer's Health Plan, or Private Health Insurance. Japan’s local governments administer NHI. Individuals who do not receive health care benefits from their company or who are self-employed can obtain coverage under this program if they do not already belong to another private health plan. Under NHI, the individual must pay approximately 30% of clinic or hospital costs. The plan also covers approximately 70% of medical, dental and prescription drugs. The annual premium for NHI participation is based on the previous year's income and individual residents' tax payments, with a maximum monthly payment of 63,000 (approximately $450) (Gross, 1998).
Most employers enroll their workers in the Employer's Health Plan. Under this system, insured employees pay approximately 10% of the cost for medical services, dental treatment, and medicines, while their dependents are charged approximately 30% of the cost of outpatient services and 20% of inpatient or hospitalization service costs. Under this plan, the employer and employee contribute each contribute 50% of the monthly premium, with the employee's share deducted from payroll (Gross, 1998).
Many individuals, particularly foreign employees, are allowed to "quit" their national or corporate plans and obtain private health insurance. Private insurance is generally more flexible and provides more options than current government plans, and a growing number of foreign companies are offering private insurance programs in Japan through companies' central insurance policies. While private insurance holders are increasing rapidly in the urban areas of Tokyo, hospitals in rural Japan are not yet used to private insurance schemes. Thus, certain procedures like obtaining reimbursement can be very difficult for privately insured workers in rural areas (Gross, 1998).
Training
China
China’s successful development as a major economic power can only be achieved with the aid of highly skilled, professionally trained management. In China the management training function is not only aligned to economic structure and development but also to political and ideological beliefs. Since management development is perceived as an important means of enhancing managerial competence and improving competitive advantage, international companies involved in joint ventures need to be aware of the cross-cultural implications in the design and implementation of management training programmers for Chinese managers and its integration into the strategic human resource system (Siu, 1999).
China has excellent technical education and training. There is a dearth of managerial training because, in the past, managers were promoted on the basis of their political party allegiance, and many parts of the country remain provincialized. Some of the major training methods of China are: Technical training (both expatriates and local employees), language training (expatriates), departure training (expatriates), and training on work culture (expatriates) (Jills, 2012).
Japan
On-the-job training (OJT) is practiced by all Japanese affiliates to equip the staff with necessary skills. Japanese affiliates encourage employees to further develop themselves. However, job rotation is not practiced to the same degree as at parent firms, and job rotation across departments is rare. Job rotation is more commonly carried out on production floor of manufacturing industries. On-the-job training in Japanese organizations such as Walt Disney is intensive and designed to train employees with a broad range of skills to be productive in a variety of capacities for a significant length of time (Chew, 2005). Japan continues to heighten training and education because Japanese technology has facilitated industrial development. Japanese institutions of higher learning have assisted in HR training continuously.
Retention
China
Training programs are an essential component of solid retention strategy in China. Training programs often include training in English language, business writing, presentation skills, public speaking etc. In China understanding boss-employee relationships is another key retention. These relationships tend to be much more complex than in Japan. The Chinese view the company as an extended family (Gross, 2007).
Japan
In Japan, retention is not a major concern, since most employees stay with the same company throughout their career. Yet, Japan is undergoing a period of major economic change. As economic stagnation and growing competition forces companies to downsize, human resources practices that once formed the core of Japanese corporate life are being superseded by more competitive recruitment and retention methods. While conventions such as lifetime employment and seniority are still visible, the number of mid-career shifts and companies switching to performance-based pay is growing. Foreign companies looking to hire staff for their Japanese operations should pay close attention to these developments, including the new and changing expectations of Japanese employees, in order to build a successful staff in Japan (Groess, 1998).
CONCLUSION
We have reviewed the legal, demographic, language, culture, political, and economic aspects of doing business in China and Japan. We also reviewed the HR policies and practices in both countries. Since both Shanghai and Tokyo are the largest markets in each country, we assume that the local economies are very similar to the national context. Local responsiveness is the key to increasing employee morale and local market share, thus Disney should maintain this strategy. Local Shanghai and Tokyo residents have distinct tastes that need to be incorporated in the local SBU. Along with consumer tastes, the distinct HR policies such as lifetime employment, top-down union membership, on-the-job training, and saving face communication must be weighed with Disney’s global HR policy of openness. Evans states that organizational culture differences are harder to overcome than differing national cultures (Evans, 2011). With Disney’s long history of business in Japan and China, the organizational culture has been successful, thus cultural differences are not a significant factor in evaluation. This cultural adaptation to Disney’s culture or vice versa can be achieved via Disney’s extensive networks in each country. With this in mind, the most significant factors in evaluating a potential site is the economic and political factors, and which site is more aligned with Disney’s current global strategy.
A Shanghai facility would have cost benefits, specifically lower union labor and logistics costs, but the imminent slowdown in the Chinese economy and increasing political risks are high. Moreover, the risks of significant governmental influence via the union by Beijing are possible. The Tokyo facility could be operated by returnees or executives from other Japanese operations at much lower political risk. This facility would also facilitate more lateral communication within the region and globally, thus Disney’s global strategy is easier to achieve. Lateral communication is the key for collaboration and achieving competitive advantage in the entertainment industry. Moreover, lateral communication supports the “global mindset” that Evans describes throughout the text. This global mindset is the ability to balance local versus global, exploration versus exploitation, differentiation versus integration, short-term versus long-term orientation, etc. Balancing these dualities is a must in the global business environment. Therefore, we recommend that Disney support this lateral communication and expand its operations in the Tokyo area.

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