The Cost of Doing Business in America and Japan

A manager or company has many factors to consider when deciding to conduct business internationally. Besides being sensitive and respectful to the foreign country’s culture, one must also be cognizant of how the culture influences the cost of doing business. To illustrate this point, consider the following scenario of countries A and B:
Both countries [A and B] are characterized by low labor costs and good access to world markets. Both countries are of roughly the same size (in terms of population) and both are at a similar stage of economic development. In country A, the education system is undeveloped, the society is characterized by a marked stratification between the upper and lower classes, the dominant religion stresses the importance of reincarnation, and there are three major linguistic groups. In country B, the education system is well developed, there is a lack of social stratification, group identification is valued by the culture, the dominant religion stresses the virtue of hard work, and there is only one linguistic group. Which country makes the best investment site? Country B does. The culture of country B is supportive of the capitalist mode of production and social harmony, whereas the culture of country A is not. In country A, conflict between management and labor, and between different language groups, can be expected to lead to social and industrial disruption, thereby raising the costs of doing business. The lack of a good education system and the dominance of a religion that stresses ascetic behavior as a way of achieving advancement in the next life can also be expected to work against the attainment of business goals. (Hill, 2011)
Two countries that are undeniably culturally diverse are America and Japan. In order for an American businessman or businesswoman to be successful in executing business ventures in Japan, cross-cultural literacy must abound. In other words, “an understanding of how cultural differences across and within nations can affect the way business is practiced” must be continually taken into account (Hill, 2015). To understand this fact, one must begin by noting the cultural differences between America and Japan. In America, people celebrate personal accomplishments, and “the value systems of many Western societies . . . emphasize individual achievement. The social standing of individuals is not so much a function of whom they work for as of their individual performance in whatever work setting they choose” (Hill, 2015). On the other hand, citizens of Japan take pride in the team or company they are a part of. In a work entitled Japanese Society, Chie Nakane explains that “when a Japanese faces the outside (confronts another person) and affixes some position to himself socially he is inclined to give precedence to institution over kind of occupation. Rather than saying, ‘I am a typesetter’ or ‘I am a filing clerk,’ he is likely to say, ‘I am from B Publishing Group’ or ‘I belong to S company.’” (Hill, 2015). Thus, people raised in Japanese culture are motivated by the success of the group as opposed to their own individual success. This observation is important to note because “if the worth of an individual is closely linked to the achievements of the group (e.g., firm) . . . this creates a strong incentive for individual members of the group to work together for the common good” (Hill, 2015).
Although the concept of the team’s success being held in much higher regard than the individual’s success can be perceived as a good thing, it is also the reason why the entrepreneurial spirit is more alive in America than in Japan. “In the US and Europe, the success of entrepreneurial economies has to an extent supplanted social casting by employment, but in Japan, entrepreneurs are not accepted so readily and are often seen as eccentrics or misfits” (Japanese business culture, 2009). People raised in Western culture celebrate personal accomplishments and oftentimes feel that their individual success takes precedence over the success of the team. Therefore, within the U.S. is a “lack of loyalty and commitment to an individual company and the tendency to move on for a better offer” (Hill, 2015). Citizens in Japan have a far different perspective, however. “Japanese business culture is still dominated by the concept of 'lifetime employment'. A young man, entering a large corporation such as NEC immediately after graduating from [a] university at age 22, anticipates that he will retire from that same company when he reaches age 65” (Japanese business culture, 2009). Whereas people in America have little remorse in partnering with another company that can provide more benefits, once one has established a good rapport with Japanese business partners, he has a partnership on which he can truly rely. Understanding Japanese customs and business practices will enable a Western businessman or business woman to see how Japan’s culture can work to his or her benefit. Moreover, “certain aspects of Japan’s business culture, especially the very stable long-term relationships resulting from the conservative Japanese sense of loyalty to trusted partners, can be very beneficial for those foreign companies that understand how to swim with the cultural tide” (Japanese business culture, 2009). This culture in which relationships are held in such high regard is partly due to the influence of Confucianism on Japan. “In Confucian thought, loyalty to one’s superiors is regarded as a sacred duty – an absolute obligation” (Hill, 2015). In addition, “Confucian thinkers emphasize that although dishonest behavior may yield short-term benefits for the transgressor, dishonesty does not pay in the long run . . . . When companies can trust each other not to break contractual obligations, the costs of doing business are lowered. Expensive lawyers are not needed to resolve contract disputes” (Hill, 2015). Although having the ability to create strong relationships is an undeniable asset of conducting business in Japan, there are other factors to consider. “The Japanese tax system is a victim of the country’s love of bureaucracy. The World Bank and IFC rank Japan 123rd in the world for their corporate tax system, which can soak up 330 hours a year in management time, with 14 payments required annually. Corporate tax rates stand at 30%, with a line of other levies also requiring consideration” (Top 10, 2013). Although many readily think of cost in terms of actual money, which must certainly be accounted for, the cost of time also cannot be ignored. In addition, “the use of imported energy resources has increased production costs in the Archipelago, while the price of electricity was already high by international standards. The decision to authorize an average electricity price increase of 10% since July 2012 has been a weakening factor for businesses, but especially for large consumers like the electric steel-making arc furnaces” (Japan, 2014). Hence, although there are advantages to conducting international business in Japan, the disadvantages are inevitably present. If one does, however, decide to collaborate with Japanese business partners, he should note the following characteristics about his foreign associates: * they are obsessed with detail, * they evaluate all options, * they are conservative, * they make their decisions in committees ('ringi')
(Japanese business culture, 2009)
With the entrepreneurial spirit pumping through its veins, the U.S. stands to be in a better, more prosperous position economically in the future than its Japanese counterpart. “Although the long-run consequences are unclear, the United States could continue to create more new industries than Japan and continue to be more successful at pioneering radically new products and new ways of doing business” (Hill, 2015).

WORKS CITED
Hill, C. (2011). Chapter 3: Differences in culture. In International business: Competing in the global marketplace. New York: McGraw-Hill/ Irwin. Retrieved from: http://www.academia.edu/4716993/Internationalbusiness_charles_w._l._hill

Hill, C. (2015). International business: Competing in the global marketplace. (10th ed.). New York: McGraw-Hill Education.
Japanese business culture. (2009). Retrieved from http://www.venturejapan.com/japanese-business-culture.htm
Japan: Risk assessment. (2014, January 1). Retrieved September 13, 2014. Retrieved from: http://globaledge.msu.edu/countries/japan/risk
Top 10 challenges of doing business in Japan. (2013, July 19). Retrieved September 13, 2014. Retrieved from: http://www.tmf-group.com/en/media-centre/resources/top-challenges/apac/japan