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AsiaPacific business systems and organizational structures

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Title: AsiaPacific business systems and organizational structures


1
Unit 2
  • Asia-Pacific business systems and organizational
    structures

2
Objective
  • Discuss differences between, and drives of, East
    and West business systems
  • Outline and describe the principal business
    systems operating in Asia
  • Explore the cultural and organizational
    structural links in Asia-Pacific business
  • Differentiable between Japanese, South Korea,
    Chinese family business and institutional Chinese
    enterprises in Asia-Pacific business in relation
    to
  • Values systems
  • Communication and negotiation styles
  • Leadership and decision making styles
  • Discuss the various competitive strategies
    applied in Asia-Pacific business
  • Evaluation the effects of Asia-Pacific business
    systems in the region

3
Contrasts in business systems East and West
  • The principal differences in the 3 components of
    a business system
  • The firm
  • Market relations
  • The organization and coordination of employees
    and strategies
  • The West seek to adopt specific techniques and
    more general practices associated with the East

4
Contrasts in business systems East and
West-Economic agent (I)
  • In the Anglo-American system
  • Firms are large
  • Diversified companies with separate
  • Relatively autonomous business units controlling
    different functions or products
  • Ownership and management are separate
  • Managers have considerable autonomy from
    shareholders
  • Run the business without interference
  • Ownership change fairly frequently through merger
  • Acquisition activity or through the selling of
    shares or stocks

5
Contrasts in business systems East and
West-Economic agent (II)
  • Chaebol (Korean) as a example, are different to
    the typical Western firm in at least 3 respects
  • Developed with the guidance and support of the
    state
  • Primary aim is to maximize sales rather than
    profits
  • Shareholders are relatively stable and are
    typically family members
  • Japanese firms are common form a large,
    cooperative family of mutually dependent firms
  • Chinese family business is usually small and
    limited in resources
  • Specialized and links into larger networks of
    firms

6
Contrasts in business systems East and
West-Economic agent (III)
  • Most East Asia firms are importance of family
    involvement in business and management
  • Confucian heritage and culture based on Confucian
    principles
  • Korean and Chinese
  • owned and controlled by the family
  • Leadership is paternalistic and fairly
    authoritarian in comparison to Western firms
  • Japanese
  • Separate ownership and management
  • Keiretsu

7
Contrasts in business systems East and
West-Relationships between firms (I)
  • Western Business
  • tend to play rely on formal, legally defined
    procedures to govern relationships with other
    firms and employees
  • Anglo-American industries
  • Short term in nature and relatively impersonal
  • Ability of firms to meet certain requirements for
    price, quality and reliability
  • East Asian Business
  • More personal and are formed and maintained on
    the basis of trust and informal agreement
  • Stems from Confucian values, the importance of
    collectivism and the family

8
Contrasts in business systems East and
West-Relationships between firms (II)
  • Personal, reciprocal relationships are valued
    over legal contractual relationships
  • Rely on networks of contacts such as family,
    friends, school, social and government
    connections
  • People feel much more comfortable dealing with
    people they know
  • Establish a personal relationship between parties
  • Dominate role in the development and guidance of
    industry and the economy
  • Business-government relationships are stronger in
    Asian economies than in most Western countries
  • China and Vietnam, dominated by state-owned
    enterprises

9
Contrasts in business systems East and
West-Organization and coordination of employees,
leadership, decision making and negotiation (I)
  • Western societies are more individualistic
  • Belief the individual is the central concern
  • Equal opportunity for all individuals
  • Eastern societies are more collectivistic
  • Belief group takes precedence over the individual
  • Just one member of a group or many different
    groups
  • Korean and Chinese family firms
  • Loyalty to one company
  • Japanese firms
  • Most enduring loyalty to their company and offers
    life-long employment and security to its
    permanent staff

10
Contrasts in business systems East and
West-Organization and coordination of employees,
leadership, decision making and negotiation (II)
  • Power distance accepts inequality
  • Asian societies where Confucian have influenced
    system
  • Respect for hierarchy and ones superiors or
    leaders are paramount
  • Dutiful workforce and a greater role for
    government in Asian industrialization
  • Western societies
  • Relationships are not strictly bound by protocol
  • Hierarchy of society is not fixed
  • Nor predetermined

11
Business systems in East Asia
  • 4 distinct groups of firms
  • The Japanese
  • Kaisha
  • The Korean
  • Chaebol
  • The overseas Chinese family business (CFB)
  • The Chinese state enterprise (CSE)

12
Japanese Kaisha (I)
  • The principal economic agent in Japan is Kaisha,
    specially corporation
  • Play a dominant role in international business
  • The business Week Global 1000 (1999) shows 135
    out of top 1000 firms are Japanese
  • Specific competencies in a single industrial area
  • Honda, manufacture of motor cycles and cars
  • Production that is not central to the firms
    activities is contracted out to other local firms
  • Form a support network

13
Japanese Kaisha (II)
  • The concept of family is very broad and
    importance of a broad relative
  • Not distinguished from that of an adopted
    family member into the business
  • Loyal employee
  • Qualified and experienced manger lead the group
    rather than a less suitably qualified blood
    relative
  • Through the Kaisha they joined after leaving
    college and who thereby became part of the
    family
  • Individuals ability to run the business
  • Broad definition of family member enables more
    suitably qualified managers to be appointed

14
Japanese Kaisha (III)
  • Japanese business culture fostered a long team
    approach to investment in Kaisha
  • Enabled them to expend into high-risk developing
    markets
  • Market relations in Japanese business system are
    made up of complex networks
  • Interdependent firms (Keiretsu)
  • Separate firms rather than predominantly within
    the firm itself
  • Typically have low levels of vertical integration
  • Shareholding dependent on central financial
    institutions
  • Buying and selling within Keiretsu

15
Japanese Kaisha (IV)
  • The ownership of the Keiretsu is shared among
    members of the group
  • Interlocking ownership pattern is apparent
  • Maintain the stability of the group through
    support for members and protection from takeovers
  • Keiretsu are direct descendants of earlier
    integrated groups of firms known as Zaibatsu
  • Central holding company
  • Significant ownership of large group of core
    companies
  • Bank, trading company and a trust and insurance
    company
  • Markets for capital, labour and technology were
    internalized within the Zaibatsu

16
Japanese Kaisha (V)
Typical ownership structures of zaibatsu and
keiretsu groups
Owner family
Holding company
Subsidiaries and affiliated companies
Zaibatsu pyramidal structure
17
Japanese Kaisha (VI)
Typical ownership structures of Zaibatsu and
Keiretsu groups of companies
Group member company
Subsidiaries or affiliated companies
Keiretsu star structure
18
Japanese Kaisha (VII)
  • Keiretsu experienced a far greater separation of
    ownership and management
  • Vertical Keiretsu
  • Incorporates a large number of small and medium
    sized firms
  • contribute to the production value chain in
    certain industry
  • Toyota
  • Horizontal Keiretsu
  • Kigyo shudan
  • Coordinates activities among groups of firms over
    different industries or markets
  • Mitsubishi
  • Providing low-cost capital to members

19
Japanese Kaisha (VIII)
  • The relationships formed between the Kaisha and
    the smaller
  • Subcontracting firms are enduring and long team
    in nature
  • Based on trust and mutual co-operation
  • Sharing information
  • Expertise and joint shareholding

20
South Korean Chaebol (I)
  • Highly diversified conglomerates that operate in
    number of business sectors
  • Heavy manufacturing, chemicals, oil, electronics,
    motor vehicles, distribution, insurance and
    financial services
  • 19 firms being ranked among the top 200
    emerging-market companies in 1999
  • 1994, top ten Chaebol accounted for 58 of
    Koreas GNP
  • Top 30 Chaebol for 83

21
South Korean Chaebol (II)
  • Chaebol gained competitive advantage in labour
    intensive manufacturing exports
  • Government sponsorship and favorable policies to
    encourage industrialization
  • Engineering talent and managerial entrepreneurs
  • Hard working, low-cost labour force
  • Chaebol expanded through vertical integration by
    producing in-house or expending the value chain
    of production internally

22
South Korean Chaebol (III)
  • Chaebol conglomerates still largely rests with
    their founding families
  • The sole ownership structure
  • Founder or his family own all the chaebol
    affiliated companies
  • Hanjin
  • Involves family ownership of a holding company
  • Owns or partially owns the affiliated companies
  • Daewoo
  • Mutual interlocking ownership
  • Founding family owns the holding company and/or
    some type of foundation organization
  • Samsung

23
South Korean Chaebol (IV)
Type 1 Direct ownership structure
Owner family
Subsidiaries and affiliated companies
24
South Korean Chaebol (V)
Type 1 Holding company structure
Owner family
Holding company
Subsidiaries and affiliated companies
25
South Korean Chaebol (VI)
Type 1 Mutual ownership structure
Owner family
Holding company
Subsidiaries and affiliated companies
26
South Korean Chaebol (VI)
  • Described as a hybrid of Confucian values and
    Japanese group loyalty
  • Succession of ownership and control is strictly
    based on blood ties
  • Management is highly centralized around the
    Whoe-Jang
  • Is directly influenced by a single leader who is
    usually the owner
  • Below the Chairman
  • The chairman office control centre in charge of
    administration and planning for the whole group
    of companies

27
South Korean Chaebol (VII)
  • Market relations between the Chaebol and other
    firms are fewer and less enduring than are those
    of Japanese firms
  • Maintain control over most of key activities in
    production
  • Services by integrating them internally into the
    conglomerate
  • Diversified and perform more activities
    in-house
  • Developed in response to government targeting of
    entrepreneurs and potential growth industries
  • Access to resources
  • State funding, managerial talent and low-cost
    labour

28
South Korean Chaebol (VIII)
  • Chaebol to pursue sales and market share rather
    than profits
  • Using retained profits rather than state credit
    to fund growth
  • Limit the number of industry-wide trade
    associations or other cooperative organization
  • Growth of smaller firms in Korea has been
    restricted by the dominance of the chaebol

29
Chinese family business (CFB) (I)
  • The principal organizational form used by the
    Overseas Chinese in Asia
  • The tendency for each family to run own small
    business rather than working for a larger firm
  • Ownership and management of the CFB are strongly
    centered on the family
  • The structure of the CFB is centered on the
    founder or entrepreneurial patriarch that family
    holding the most important executive positions

30
Chinese family business (CFB) (II)
  • The inner circle of the conglomerate and is
    strictly the domain of close family members
  • All decision making is centralized around the
    founder of the business
  • Tight control s kept over information by keeping
    in family circle
  • Basis of their loyalty to the patriarch and their
    performance in achieving his goal
  • Culture, tradition and Confucian principles
    influence the structure, organization and
    management of the CFB

31
Chinese family business (CFB) (III)
  • The patriarchal
  • Rely on close relationships between family
    members in order to do business
  • Inner circle of managers and founders himself
    struggle to cope with the extra burden
  • Loyalty and trust are much more difficult to
    engender in non-family members
  • Delegation to non-family managers threatens the
    integrated unit of the business
  • Much nepotism and centralization strain top
    management

32
Chinese family business (CFB) (IV)
  • Direction and decision making provided by leader
    tends to repress the creativity and ability of
    middle managers
  • Less make autonomous decisions
  • The loyalty of employees to new leader cannot be
    guaranteed
  • Fragmentation of the business over time
  • Lack of clear unified direction
  • Remain small and specialized or to adopt some
    Western style management and recruiting practices

33
Chinese family business (CFB) (V)
  • Market relations of the CFB are typical based on
    family or social connections with others in CFBs
    or government
  • Determined by the spread of the Overseas Chinese
    community
  • Includes ethnic Chinese living in Taiwan and HK
  • Share common cultural heritage and homeland
  • Many wealthier Chinese immigrants with business
    acumen became middlemen for the colonial powers

34
Chinese family business (CFB) (VI)
  • Overseas Chinese can be associated with
  • Being immigrants and settling in foreign
    countries
  • Being an ethnic minority in countries
  • Have unresolved relationships with the mother
    country-China
  • The tradition of network building based on family
    connections and personal relationships has
    fostered cooperation between Overseas Chinese
    communities
  • Dependent on external networks of firms for
    partnerships, subcontracting and financing
  • Flexible relationships with suppliers readily
    encourages a quick response to changes in the
    marketplace

35
Chinese family business (CFB) (VII)
  • Mutually supportive and interdependent and can
    form longer lasting relationships with other
    firms
  • Networks connected with government officials and
    foreign owned multinationals
  • Larger CFBs also coordinate activities across
    national boundaries
  • Hopewell group (HK)
  • Develop both within a country and across
    geographical boundaries, binding people with a
    common origin together

36
Chinese state enterprises (CSEs) (I)
  • CESs are owned and wee formerly managed by the
    Chinese government
  • State enterprises are medium and large sized
    firms and some are significant players
    internationally
  • Diminished power over allocation and productive
    use of resources
  • Altered the nature of ownership and control of
    these companies
  • Control access to finance, labour and all
    importing and exporting
  • More significant role in production, distribution
    and sale of products and services

37
Chinese state enterprises (CSEs) (II)
  • Workers faced redundancy and economic hardship as
    the new owners restructured
  • Chinese government attempted to increase the
    performance of the CESs while maintaining
    ownership
  • Central purpose of the reform was to change from
    a socialist economic system
  • Allocation of resources and productive use of
    such resources was directed and controlled by the
    State

38
Chinese state enterprises (CSEs) (III)
  • Reforms relating to the CSEs were intended to
    confront a number of problems
  • Relating to supply and demand
  • Centralized control over resources and products
    meant that these did not always correspond
  • Poor quality of some products
  • Often based on quotas or rationing rather than
    actual need, aggravated the shortage problems
  • Poor performance of the CSEs
  • Centralized model reduced incentives to work hard
    and take risks and responsibility
  • No punishments for poor performance as any losses
    were absorbed by the state
  • Less productive and become a burden on Chinas
    future economic development

39
Chinese state enterprises (CSEs) (IV)
  • The State Council of the central government
    directed the operations of CSEs
  • Profits were remitted to the State treasury and
    also covered any losses
  • Direct control alternated between the central and
    provincial level authorities
  • Central government controlled the inputs to
    production
  • Land, capital, plants and equipment, raw material
    and labour
  • Butter use of capital and more efficient
    investment

40
Chinese state enterprises (CSEs) (V)
  • Ownership is now officially separated from
    management
  • No longer run in response to goals and objectives
    of the State
  • Managers determine the ways that economic goals
    are reached by the enterprises, not the owner
  • Achieve continuity and stability in their goals
    and operations
  • Inefficiency and lack of accountability or
    responsibility for decisions and actions
  • CES manager has been able to tailor production to
    market requirements

41
Chinese state enterprises (CSEs) (VI)
  • The primary function of the CES as a state
    production unit to an emerging market-oriented
    firm
  • CSE more autonomy in both purchasing and
    acquiring inputs and the distribution and sale of
    outputs
  • CSEs to produce marketable products
  • Surplus of supply resulting from improved
    productivity
  • Higher levels of output tailored to market
    requirements
  • Both has become a vital function of the CS manager

42
Chinese state enterprises (CSEs) (VII)
  • CSE hire appropriate managers and technical staff
    on the basis of their skills and experience
  • More incentives for employees to productive and
    to produce quality output
  • CSE were trapped in a cycle of debt with their
    suppliers and customers
  • Profits and taxes were still being directed to
    higher-level institutions and government
  • Officials demanded and pushed for higher returns
    as profits increased

43
Summary of Japanese, Korean and Chinese company
characteristics (I)
44
Summary of Japanese, Korean and Chinese company
characteristics (II)
45
Culture and business systems (I)
  • Business systems of Chinese, Japanese and Korean
    people are influenced by 3 key culture values
  • Confucian beliefs
  • High power distance
  • collectivism
  • The importance of the family in Chinese society,
    which stems from the Confucian belief of filial
    piety
  • Hierarchy and the family in high power distance
    society is illustrated by Korean business system

46
Culture and business systems (II)
  • Confucian values
  • Confucianism is a system of ethics and morals
  • Guide for living, relationships and appropriate
    behavior
  • Resistance to change and continued duty, loyalty,
    filial piety and respect for age and status in
    ones relationship
  • Key values of interpersonal relations, thrift,
    perseverance and hard work, sense of shame and
    status
  • Hsiao or filial piety is fundamental to Chinese
    life
  • Stability and direction to family activities
  • Dutifully followed by all members
  • Obliged give their obedience, respect , trust and
    support
  • Traditions, reputation (taken very seriously),
    property and family possessions are common

47
Culture and business systems (III)
  • Family hierarchical structure is also evidence in
    business
  • Father as the boss over his subordinate children
  • All-encompassing over the family line, or clan,
    relationship through marriage and even future
    generations
  • Guanxi (??)or relationships with others linked
    through a common language, village or school
  • Face or the prestige they have achieved within
    the various relationships
  • Mianzi is associated with persons status ,
    social position and wealth

48
Culture and business systems (IV)
  • High power distance
  • People accept that not everyone is equal and
    defined place in society
  • Stability and harmony in relationships between
    members of society
  • Strong respect for authority and hierarchy
  • Korean, as example
  • complete loyalty to hierarchical structures in
    the family
  • Strive to protect the honour of ones self, ones
    family, ones company and ones country
  • The chain of command respected and honoured
  • Loyalty to a central figure in family and company
    help to maintain group harmony

49
Culture and business systems (V)
  • Paternalism and authoritarianism
  • Engendered the values of hard work, diligence,
    devotion, commitment and personal sacrifice
  • Require the utmost dedication and adoption of the
    leaders personal beliefs and values
  • Between subordinate and superior is expected to
    fall as new employees demand more participatory
    management
  • Collectivist societies
  • Loyalty and support within the group is strong
    and enduring
  • Collectivist society is integrated into cohesive,
    unified in-groups
  • Actions and decisions must be in the best
    interests of the group rather than those of a
    single individual

50
Culture and business systems (VI)
  • Employees identifies with work group, works hard
    to advance the achievement of that group rather
    than him/her
  • Harmony and commitment are achieved through
    internal promotion within the company and
    consensus decision making
  • Confucianism (??)
  • Not based around a central god, has no after-life
    and no associated church, and does not require
    its followers to exclude other religions or
    ideologies
  • Central goal of Confucianism is to achieve social
    harmony by guiding the relationships between
    individuals
  • Ren (?), two people relate to each other or way
    in which social interactions take place

51
Culture and business systems (VII)
  • Recognize his or her place in a hierarchy of
    social relationships
  • ruler-subject, father-son, husband-wife,
    brother-brother and friend-friend
  • Governance by ethics is preferred over governance
    by law
  • Values of thriftiness, hard work, perseverance,
    obedience to ones superiors, benevolent
    leadership, scholarship and harmony
  • Application of Confucian
  • Harmonious and productive
  • Asian governments play a dominant part in
    fostering and controlling business development
  • Family solidarity and unquestioning devotion to
    those superior in status, age, skill and
    experience in organizational structure of the
    firms

52
Culture and business systems (VIII)
  • Business networks and connections
  • Chinese-guanxi, Japanese-Keiretsu
  • Education
  • Desire to learn and the companys desire to
    develop the skills of its life-long employees
  • To be inhibiting their development
  • Change to a modern, capitalist society and
    impeded economic growth
  • Never endowed technical skills and trading
    profession with respect
  • Traditionally placed merchants at the bottom of
    hierarchy

53
Culture and business systems (IX)
  • Guanxi
  • Social networking in Chinese society and business
    systems
  • Enable 2-way flow of personal or social
    transactions
  • Multiple Guanxi which based on mutually binding
    obligations and dependencies
  • Put away in times of abundance and plenty for
    times of trouble and need
  • Renqing (?)
  • Reciprocal social relationship
  • Humanized obligation that exchange of favours in
    social sense
  • Establish and maintain Guanxi relationship and
    lead to an economic exchange in future
  • More benefits one gets from Guanxi, the more one
    is obligated to return Renqing

54
Culture and business systems (X)
  • The moral dimension to Guanxi is that if a person
    fails to reciprocate this Renqing, he or she
    loses face and looks untrustworthy
  • Finance is given to members to facilitate their
    business based on the strength and trust of the
    personal relationships
  • Relationship bearing trust (Xinyong, ??) and
    human-heartedness (Ganjing, ??) as network that
    give everyone the flexibility to make deals and
    to profit from business
  • Allowed business obligations to be settled by the
    rules of the market and not by the equity and
    reciprocity relationships evident in social
    Guanxi
  • Allow the extension of the family firm
  • Limitations of size and spread their business
    widely both economically and geographically
  • The strength of kinship and association
    relationships based on reciprocity and mutual
    trust

55
Doing business in East Asia (I)
  • Communication and negotiation styles
  • Comment in detail on specific characteristics of
    negotiations
  • Preparation
  • Negotiating teams
  • Negotiating style
  • Use of time
  • Use of relationships and authority
  • Contracts
  • bargaining

56
Doing business in East Asia- The Chinese (I)
  • Reputation for being shrewd and clever
    negotiators
  • Chinese negotiator first likes to establish the
    areas of agreement between 2 parties
  • Gain concession as possible from the other party
    and concede as little as possible on belief of
    firm
  • Exchange of concessions for demands are an
    acceptable way of resolving conflicts in the
    negotiation process

57
Doing business in East Asia- The Chinese (II)
  • Preparation
  • Chinese are extremely thorough about doing their
    homework, finding out about the other firm
    involved in the negotiations
  • Existing or previous partners and the personal
    characteristics of the negotiating team
  • Negotiating team
  • Difficult determine who the main decision makers
    are within these teams
  • Team leader who takes a hard line with
    negotiations
  • High, fixed price and limited concessions

58
Doing business in East Asia- The Chinese (III)
  • Negotiating style
  • Proposed deal or contract and discuss it fully
    and separately from other issues
  • Given an equivalent proportion of attention
  • Chinese custom of devoting equal time to all
    issue often frustrates Western negotiators
  • Displaying emotion and weakness
  • Showing pleasure, dismay, approval or
    disapproval,
  • Communicate style dealing making process that use
    humility and gain concessions on weakness
  • Negotiating partner will be obliged to give more
    concessions

59
Doing business in East Asia- The Chinese (IV)
  • Time
  • Making the correct decision is more important as
    a long team commitment to deal or relationship is
    anticipated
  • Desire to form relationships with business
    partners before business takes place
  • Having multiple decision makers or people
  • Middle management, owners of the business, state
    officials, Gunaxi network
  • Glean information, connections, technology or
    even experience
  • Return to re-negotiate a particular issue
  • Gain a mote advantageous position or further
    concessions

60
Doing business in East Asia- The Chinese (V)
  • Relationships
  • Being vital to doing business, used for
    negotiating leverage
  • Violates the spirit of an existing agreement of
    the friendship has been established between two
    parties
  • Maybe be demanded on the basis of past injustices

61
Doing business in East Asia- Japanese (I)
  • Developing relationships and a long term
    perspective towards the implications of business
    deal is evident
  • Learn to have patience and to control their
    emotions when dealing with Japanese
  • Preparation
  • Research and information gathering on other party
  • Pre-negotiation meeting and social activities
  • Have great know the other party and to develop
    personal relationships
  • Objectives and boundaries be defined at this stage

62
Doing business in East Asia- Japanese (II)
  • Negotiating teams
  • Degree of cooperation and cohesiveness in firm
    will be enhanced
  • Implementing the decision in the decision making
    process
  • Send a fairly substantial negotiating team with
    at least several senior or high ranking staff
  • Negotiating style
  • Preservation of harmony in the process
  • Politeness, conflict avoidance and refraining
    from showing emotion and personal feelings are
    the norm
  • Equally, aggressive behavior, impatience and an
    overly negative reaction to a proposal

63
Doing business in East Asia- Japanese (III)
  • Disagreement during negotiations will met with
    silence or smile
  • Persistence and inflexibility
  • Contracts
  • On-going and the contract as an indication of
    commitment and cooperation
  • Deal on sincerity and goodwill and a strong,
    enduring relationship between both parties
  • Establish bonds of trust and commitment
  • Fully honour the contracts
  • flexibility the the contract is designed
  • Improve both parties or resolve difficulties

64
Doing business in East Asia- Korean (I)
  • Attributed to the shared, Confucian roots of
    society and how they have influenced cultural
    characteristics
  • Personal relationships
  • No relationships between the two parties and
    therefore the person maybe accepted the equal
    contributor to the process
  • Well-established and accepted way doing business
    with Korean, particularly for the foreign
    business
  • Gained the trust of fostered a relationship
  • Protocol to relationships and rank and formality
    in using language and observing customary
    politeness are required in negotiation process

65
Doing business in East Asia- Japanese (V)
  • Bargaining
  • Set an initial price much higher than their
    acceptable final price
  • Bargained down to what is considered to be
    reasonable
  • Each side is expected to make concessions until a
    final price is agreed upon
  • Authority
  • Higher rank will expect to control the
    negotiating process
  • Not be receptive to someone of lower rank trying
    to persuade their argument
  • Protocol and respect is shown in negotiations by
    those considered to be lower in rank
  • Harmony must be maintained
  • Outward are fusels or rejections of ideas or
    proposals should be avoided

66
Comparison of Chinese, Japanese, Korean and US
negotiating style (I)
67
Comparison of Chinese, Japanese, Korean and US
negotiating style (II)
68
Leadership and decision making styles (I)
  • Leadership and decision-making in both Chinese
    and Korean companies typically take top-down
    authoritarian approach
  • Leadership-Head of company
  • Decision making-Centralized at top management
    level
  • -Decisions are channeled down
    through company
  • Family head in the CFB and founder or chairman
    (Whoe-Jang) in the Chaebol
  • Employees do not question the decisions made by
    their superiors
  • Leadership style is strongly rooted in the
    extended family structure of the company

69
Leadership and decision making styles (II)
  • Centralized decision making in the CFB
  • Response to the hostility of the external
    environment
  • Entrusted to the owners of the business, and/or
    the secretariat in a larger firm
  • Often reactive rather than proactive, and
    planning for the future is often perceived to be
    of limited value
  • Opportunities can be sized when they arise, and
    changes can be implemented very quickly
  • Consensus-style decision making has perpetuated a
    long team view and incremental, slower decision
    making

70
Leadership and decision making styles (III)
  • Korean leadership style
  • Authority is given to the chairman and his top
    directors and managers
  • Approval for decision also comes from this group
  • Responsibility of the head of the company to care
    for his employees
  • Kaisha provide security for the permanent
    employee by offering life-long employment in
    exchange for total loyalty
  • Harmony
  • Challenge are central to Chaebol leadership
    style, employees are encouraged to fulfill the
    aspirations of the company
  • Stress harmony between unequal in the group
  • Samsung as exapmle

71
Leadership and decision making styles (IV)
  • Desire to keep the business within the family
    network if possible
  • Adapt and respond to changes in the business
    environment
  • Mounting pressures to modernize business
    practices
  • Rising influence of managers who are educated in
    Western universities
  • Deteriorating influence over the Chaebol by the
    founder/chairman
  • Becoming less centralized and management
    hierarchies less absolute and less authoritarian

72
Leadership and decision making styles (V)
  • Japanese managers encourage group harmony and
    group sprit
  • Engenders a strong incentive to follow the
    direction of the group
  • Managers facilitate this cohesiveness by allowing
    all employees to see their role in long term
    vision of the firm
  • Achieved through fostering a strong group spirit
  • Desire by all to achieve success for company
  • Ringi
  • Employees involved in suggesting and implementing
    changes to improve production process or product
  • Reduce wastage and defects

73
Leadership and decision making styles (VI)
  • Nemawashi
  • Seeking employees opinions and ideas about a
    proposed project or course of action
  • Ringi seido
  • Formal procedure used in consensus decision
    making
  • More decentralized
  • Decision being passed up through the ranks of
    management
  • Being approved by everyone before being
    implemented
  • Major advantages
  • Approval and consensus
  • Reducing resistance
  • Encouraging group cohesion and direction
  • Major disadvantages
  • Slow the process of decision making
  • Threaten the firms ability to respond quickly to
    opportunities or competitive pressure

74
Leadership and decision making styles (VII)
  • Heavily in the training and education to their
    workforce
  • Practices and reciprocal loyalty from the
    employee make investment into training and skill
    development
  • Work more vigorously in pursuits of company goal
  • Keep research and development spending high and
    tried to avoid redundancies
  • Long team commitment to the employee and to the
    goal of the Kaisha-Ichiban-being number one

75
Sun Tze Bing Fa and other battle tactices (I)
  • Sun Tze Bing Fa (????)
  • Recognized as a genius of military strategy and
    business
  • The battles for territory or market share waged
    by the enemy and competitor
  • Leadership provided by the general or the manager
  • The former is an act of construction, the latter
    an act of destruction

76
Sun Tze Bing Fa and other battle tactices (II)
  • 6 basic elements of a successful army described
    by Sun Tze can be applied to the modern business
    setting
  • Moral cause
  • General must present the morality or
    righteousness of going to battle
  • Common purpose and unity of direction are also
    features of a successful company
  • Strong loyalty from employees to the founder of
    the business is usual in Chinese and Korean
    business

77
Sun Tze Bing Fa and other battle tactices (III)
  • Capability of the general in charge of the army
  • Able to judge business trends and be decisive
    when opportunities or threats arise
  • Trust and discipline are necessary to run in
    business
  • Manager to delegate some responsibility to others
    lower in the hierarchy
  • Accepted as being more important than technical
    or academic qualification

78
Sun Tze Bing Fa and other battle tactices (IV)
  • Climate and terrain-the weather and the features
    of the battlefield
  • The successful general learns how to use
    uncontrollable factors
  • The weather
  • Choosing where to fight
  • Choose the best location for the business
  • Alter products and prices to suit the condition s
    in the marketplace

79
Sun Tze Bing Fa and other battle tactices (V)
  • Strength
  • Determines the victor in battle
  • Remaining flexible, having quick responses and
    concentrating on small, specialized areas of the
    market
  • Impossible to obtain adequate information and
    insight about an adversary
  • Conceal the strengths and strategies of the firm
    and to know those of your competitors
  • Try to turn the strengths of its competitors into
    weaknesses or take advantage of an adversarys
    misfortune

80
Sun Tze Bing Fa and other battle tactices (VI)
  • Doctrine and training, and discipline
  • Clear doctrine of rules and regulations
  • Ranking of individuals which ensures allocation
    of responsibilities to appropriate people
  • Discipline need to maintain order and cohesion
  • Respond correctly to signals and to be able to
    cope with delegation of responsibilities
  • Rewards and punishments are required
  • Understands the changing nature of business
    environment and competitors

81
Sun Tze Bing Fa and other battle tactices (VII)
  • The Book of Five Rings ()
  • Understand the problem or situation from multiple
    perspectives and to be flexible
  • Diversion or divide and conquer strategies
  • The Three Kingdoms (????)
  • About strategies, plots and intrigues of the
    three fiefdoms leaders and advisors in their
    struggle after Han dynasty (??)
  • Importance of kinship in guiding action in battle

82
Sun Tze Bing Fa and other battle tactices (VIII)
  • The thirty-six Stratagems (????)
  • 36 strategies matching suitable strategy to each
    different situation
  • Mixed and matched to the problem at hand on
    business or personal relationship problem
  • Lure the tiger out of the mountain
  • (?????)
  • The offensive strategy
  • Bewildered and less able to fight

83
Impacts of East Asian business on the regional
economies (I)
  • Regional investment (Japan)
  • Management practices and other skills accompany
    this investment
  • Modern practices, marketing and distribution
    channels, heightened technology
  • Suppliers and contractors have also shifted
    production offshore and mini-Keiretsu
  • Government
  • Integrate with the local economies through local
    partners or appointing local managers

84
Impacts of East Asian business on the regional
economies (II)
  • Regional interdependence and integration
  • Mutual development strategies employed by both
    government-and privately-owned firms
  • Encouraged participation by the larger Asian
    firms
  • Considerably advanced the economic progress of
    the poorer nations
  • Asian markets that were serviced by export
  • Less attractive and spending power has fallen

85
Unit 2
  • The End
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