Working With Japanese Businesses & Investors

When doing business with Japanese, it is essential to understand that traditions and values affect the way Japanese contemplate and resolve business negotiations.  Japanese business communications and decision-making is deliberate and Japanese forms of expression are often misunderstood by Western businessmen.  In certain cases, perceived negative responses may be positive, whereas favorable responses may be actually negative.

Japanese invariably obtain detailed information about the American executive and his business from various sources before meeting with the American.  Americans must spend substantial time and effort learning about their Japanese counterpart because the scope of relevant business information is quite broad in Japan.

If the American executive understands the cultural values and sensitivities of the Japanese client, partner or business competitor, better business communications and financial success will result.

Joint Ventures and Acquisitions
Japanese-foreign business joint ventures have been increasing both in Japan and outside Japan.  However, both Western and Japanese businesses must proceed with caution regarding their own technologies.  For example, there have been cases in which Japanese companies register trademarks in Japan to induce the real owner to deal with the trademark holder when it seeks registration.

U.S. businesses often deal through shokainin(or agent), or affiliate with a Japanese company in a joint venture or establish a branch operation inJapan.

Joint ventures and contracts between Japanese and North American businesses may experience misunderstandings and other difficulties.  Japanese often provide volumes of general information to Western businessmen which is not useful.  The Japanese may not understand the purpose of the information request or may not have access to the relevant information.  Moreover, Japanese businesses seldom provide detailed information regarding their internal company matters. 

Japanese government ministries responsible for foreign partnerships in the past have been often negative towards joint ventures, licensing or foreign participation in business in Japan.  In their policing of joint ventures and foreign affiliates in Japan, Japanese businesses are given protective advantages vis-à-vis foreign business.

During the past several years, the United States has been the largest recipient of investment by Japanese companies.  The U.S. continues to receive approximately 40% of the total annual funds invested in acquisitions and mergers of foreign businesses.

Negotiation Approaches

Negotiation styles differ according to the type of industry and the size of the firm involved.  For example, banking institutions and major firms follow traditional approaches.  However, Japanese retail businesses and smaller and newer firms adopt more flexible methods in business negotiations.

Americans must exercise patience in bargaining and encourage the Japanese company to spend as much time as necessary to rethink problems which develop.  It is essential to remember that Japanese businesses treat a negotiation as an opportunity to develop a business relationship with the goal of long-term mutual benefit.

Japanese make decisions based upon corporate consensus.  Japanese typically negotiate through carefully assembled teams.  The spokesman is often not the key decision-maker.  In such cases, the decision maker usually only appears when a final decision is imminent.

When an impasse arises with Japanese, often the most persuasive negotiation techniques involve asking more questions, repeating the American company’s needs and desires and use of positive approaches, rather than aggressive or negative responses.  Informal or indirect approaches are much more successful than direct confrontation.

The Japanese sense of timing differs from Western planning.  Japanese proceed cautiously during the planning stages of projects and quickly after the planning has been completed and a decision made.

Japanese negotiators react adversely to threatening tactics.  If an American attempts to utilize a competing offer to negotiate, this is usually interpreted as a threat.  Thereafter, the Japanese company may elect not to deal with that American company.

Japanese Business Contracts
Business relationships are typically based upon mutual understanding and benefit.  Disputes are usually not resolved in Japan through the court system.  Traditional Japanese contracts are relatively short and express the main principles of the relationship.  Japanese believe that contracts must be flexible to accommodate changing business conditions.

The form of business contracts must be negotiated based upon the size and significance of the agreement and the prior experiences of the parties.  Certain Japanese companies understand the need for detailed contract if they have experienced American disputes and litigation.  However, smaller and less experienced Japanese companies may be wary of lengthy and detailed contracts.

American contracts may cause lengthy delays if Japanese lawyers spend considerably longer in reviewing contract provisions.  Often, a form of compromise contract is used to satisfy the competing needs of expedience and detail.

Communication is often the most difficult problem.  Americans often are unable to understand the personality of individual Japanese and may feel uncomfortable.

Many Japanese companies are reluctant to respond to written correspondence due to their concerns regarding their understanding of the English language.  Personal meetings and verbal interaction are the most common methods of communication.  Foreign businessmen are well advised to utilize drawings, graphs and other visual aids in order to successfully communicate in Japan.

Japanese use distinctly different verbal communication channels.  Official or formal speech occurs through “tatemae” which means facade or public face.  On the other hand, “honne” is the personal communication medium through which Japanese communicate their true feelings.  There are strict rules which determine whether tatemae or honne is the appropriate method of speech.

Tatemae is used in all group or official settings.  Honne typically applies after business hours and is used only when the Japanese has a strong personal relationship with the listening party.  The honne discussions often provide a more accurate reflection of events and opinions than the official statements.  It is essential for the American counterpart to establish a close personal relationship in order to obtain the benefits of honne discussions.              
American and Japanese companies derive substantial economic benefits from business cooperation.  Many Japanese businesses have been quite successful in making adjustments to American negotiation styles.  Americans need to improve in their understanding of Japanese procedures.  Understanding and managing the differences in negotiation styles on both sides of the Pacific is a key to successful international business transactions.

Japanese Business Relationships

Japanese are extremely careful in initiating relationships.  It is essential for the Western counterpart to establish mutual confidence.   Many Japanese businesses which have Western business experience understand the need for detailed contracts and adopt Western contracts.

Alliances With Japanese Businesses

The number of Japanese-American alliances has grown rapidly in the past several years. Alliances are formed for development of products and markets in Europe. In the past, many Japanese alliances were driven by market improvement factors.  Recently, Japanese companies pursue alliances to obtain new technologies to use together with their own technology advances.

Japanese companies which have developed innovative technology in many fields for several decades can offer many valuable new ideas and processes to American businesses.  Japanese multi-national companies work toward gaining technological leadership as well as market power in world markets.

There are many examples of larger Japanese companies joining with smaller American firms to reduce risks in the development and marketing of new products.  For example, Kirin Brewery and Plant Genetics Inc. entered a joint venture to develop a process to produce seeds from plant cells.  By working with the larger Japanese company, the American company reduced development time and the associated risks.

Japanese companies offer various benefits to American companies, including financial resources, technological advances, applied engineering expertise and long range planning skills.  Many Japanese companies have lengthy histories in partnerships, research consortia and affiliations.  The majority of Japanese businesses maintain positive views about forming new business alliances.

Japanese prefer long-term commitments in which close personal relationships among top executives is essential.  Top level executives of the companies need to maintain close relationships and make adjustments to meet changing business conditions.    Success in these international alliances can only be achieved if the parties manage cultural differences carefully.  American managers need to understand the Japanese consensus style of decision-making and conflict resolution.  An important benefit of Japanese teamwork is that it permits thorough analysis of operational details.

Successful international alliances provide mutual advantage by making both American and Japanese companies more competitive and profitable.  Alliances must be flexible and adaptable to rapid changes in Japan and throughout the world market.

Japanese Culture

Top Japanese executives typically are highly skilled in interpersonal communications.  The leaders typically behave with outward modesty which belies their strong confidence.

Many Japanese have a cultural aversion to answering a question with “no” as this implies disharmony. A Japanese businessman may reply affirmatively simply in order to maintain a facade of unity and harmony.  This often leads to confusion by the listening party.

Cultural differences must be understood, including Japanese communications through non-verbal means and important Japanese traditions which must be followed.  Knowledge of Japanese business etiquette is an essential part of preparation for business meetings.

Important cultural characteristics impact business dealings heavily. Japanese communications occur on two different levels, one public and the other private.  It is essential to understand the subtleties and significance of each mode of speech.

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