QUESTION

We are Estée Lauder company (USA). We are Multi Nations Corporation (MNC) wish to expand the operation to Japan.

*What to do

1+ – Macro-Environment Analysis (in Japan)

I- Economic Forces

1. What is the Japan GDP and inflationary rate in 2011 – 2012?

2. What is the J consumer spending in 2011 – 2012 by different consumer demographics?

3. What are the J consumer spending on targeted product (cosmetics) in 2011 – 2012?

4. What are the J retail sales in 2011 – 2012?

5. What are the J new housing dwelling rates for 2011 – 2012?

6. What are the J new commercial construction rates for 2011 – 2012?

7. What are the J new infrastructure projects in 2011 – 2012?

II- Technology Forces

        8. What internal access to new and emerging best practice technology will your MNC have in the host nation?

9. What availability of skilled labour force will the MNC have within the host nation?

10. What will be the cost of accessing new technology locally, nationally and internationally?

11. What is the projected cost of training the local labour force to use the new and emerging technology?

III- Political and legal Forces

        12. What political constraints are likely to be encountered by an MNC setting up in a host nation?

13. What legal constraints are likely to be imposed on a MNC wishing to establish in the host nation?

IV- Demographic Forces

        14. What is the population demographic of the host nation?

15. Is the host nation an aging population?

16. Is their a high birth rate in the host nation where you are intending to establish a MNC?

17. What percentage of students complete primary school, secondary school and university?

18. What is the average weekly household disposable income of different age demographics within the host nation?

V- Global and local cultural issues

        19. What are the local customs that a MNC needs to consider?

20. What are the local business customs to negotiations?

21. What are the needs and wants of the local community and citizens?

22. What is the leadership style of local managers?

23. What would make your MNC a good corporate citizen within the host name?

24. What set of ethical standards would your MNC need to abide to, if any?

25. What attitude does your MNC have to the setting of working hours, the use of child labour and working conditions?

26. What is your MNC attitude to the use of third party sub contractors within the host nation?

VI- Cross cultural issues to be asked may include

        27. How does your MNC within the host nation intend to be a good corporate citizen?

28. Discuss the advantages and disadvantages of whether company X (Estée Lauder) should establish Ethnocentric,

Polycentric, Regio – centric or Geocentric strategy within the host nation and why?

29. List down how a MNC would need to conduct business in Japan.

*30. Discuss whether your MNC should adopt a Family Culture, Eiffel Tower, Guided Missile or Incubator culture within the host nation and why?

31. Does the host nation offer large markets for products and services?

32. How much government control is there?

33. Is there restriction on foreign investment? If yes, how?

34. What are the key benefits of setting up in the host nation?

In deciding for our Estée Lauder to come to Japan we should answer to these questions

35. What region will provide access to market?

36. How close are competitors within the host nation?

37. What access will the MNC how to infrastructure and transportation (rail, docks airport)?

38. How desirable is the locality to attract highly skilled employees?

39. Will the location promote easy access to international markets?

40. Will the location provide stability in currency transactions and tax breaks?

2+ You only need to write approximately 1000 words only answering to the above questions (just pick some not every). Do remember that this is about Cross Culture analysis. So your second task is to (Cross culture analysis between United State and Japan).

1. First meeting- gift giving etiquette(in Japan)

2. Second meeting- meeting and reading people

3. Negotiation- compromising (BATNA)

3+ Recommendation on those 3 (First meeting, Second meeting,, and Negotiation compromising)

AGAIN THERE ARE 3 TASKS FOR YOU

1- Analyse MACRO Environment in Japan

2- Analyse Culture in USA VS Japan in Negotiation process (USA= Local and Japan-=Host country) ,(First Meeting-gift giving, Second Meeting-reading people, Third-compromising)

3- Recommendation on the three Negotiation process.

SOLUTION

Macro Environment in Japan

(CIA World fact book)

Japan has stunned the world with the way it has developed after World War II disasters it had faced. Its values of strong work ethics, commitment to innovation and hard working population have helped it to make a mark on the globe.

Economy

It ranks fifth in the world in terms of GDP ($4.389 trillion). The services sector contributes the most to the GDP and it is the largest employment generator. With the advent of globalization, Japan has opened itself to world economy. Even agricultural sector is also open for foreign competition. The country has balanced portfolio of imports and exports. Recently, the country faced deflation due to global economic uncertainties, but still it presents a good investment environment.

Technology

Japanese Engineering technologies and standards in industry are known worldwide. It has also advanced in communications technology and ranks among the top ten nations in terms of mobile and internet users. The infrastructure sector has shown a healthy growth and thus providing amiable environment to set up any business.

Demographics

Japan ranks tenth in the world in terms of population. It has large chunk of youth population but still, ageing of population is a challenge here. Majority of the population lives in urban areas and hence rapid urbanization and industrialization is an ongoing phenomenon.

Political and legal environment

Chief of the state is an emperor and Prime Minister is the head of the Government. There is a demarcation between legislative and judicial institutions. The government has played a key role in developing a business friendly environment by adopting liberal policies and amending age old laws.

Cultural differences- USA v/s Japan

(World Business Culture- Japanese Culture, 2012)

Differences in communication styles

Japanese communication style is very difficult to judge. It is impossible to understand a person’s intent by looking at his expressions. It may go unnoticeable but what one states and what he really means are two different things at a time. They have absolutely neutral body language. There is an observed lack of body gestures which make the other person difficult to read the mind.  Whereas in US, people show lots of body gestures which indicate the intent of the person.

Japanese are not very fluent English speakers. The lack of knowledge about the language mixed with the Japanese accent makes it very difficult for a foreigner to communicate in English. Owing to the difficulty in comprehension, lots of cross-national meetings end up in mess. It is advisable to have a professional translator in your team of negotiators.

Another big difference from rest of the business cultures is that Japanese tend to get silent when they are under stress. When such an incidents happen in meetings, it is very difficult for a person of non-Japanese origin to break the ice and move ahead. A person from US would want to keep the discussion going on in order to fill up for the silence which would probably irritate the Japanese.

Management structure differences

In Japanese management structures, it is a culture to have a regular flow of information from the levels down the hierarchy of the company to the top levels. Hence, senior managers more or less do the supervision of the personnel and rely on the correctness of the information provided to them from lower levels. In US, senior managers have hands-on experience and thus they take decisions independently. Hence, it is best to start convincing people sitting at lower and middle management level if you want to strike a deal in a Japanese company.

Japanese meetings v/s meetings in US

Japanese respect time and are therefore very punctual. They expect the others to reciprocate their punctuality. It may be equivalent to disrespect if you don’t reach a meeting on time. There are no strict time restrictions on meeting in US on the other side. However, it is a culture to have informal talks after the meetings and thus one needs to spare time for that as well. Japanese value relationships and networking and hence they want to have informal talks and expect patience from the other person in such occasion.

Often seen in Japanese meetings, no one really puts forward his opinions in a strong and forced tone. They avoid one-to-one conversations and never want to end up a discussion as confrontation. The final decision as an outcome of a meeting is reached through a process of building consensus and hence involves a lot of convincing of various people and hence one needs to be patient enough. In US, everyone gives an independent opinion and the decision is reached based on the prevailing logic in the end. Building consensus is not a culture in US meetings and no one is ready to compromise on his stand.

Recommended negotiation processes for current case

For this proposal, following are recommended steps:

1.    Proper market study to make a good proposal

(Tan, 2010)

For the current case, a partnership is to be set-up for entering into perfumes market in Japan. The process should start with market research study particularly for female population who are the potential customers. In Japanese society, beauty is considered as virtue for females and hence females tend to be very conscious about the way the carry themselves. Almost 99% of females use perfumes. The majority of population is brand conscious and is highly influenced by the publicity and marketing of products. Hence, a partnership proposal should consist of proper profiling of customer segments along with targeted product for each segment.

2.    Networking- Right from first meeting

(World Business Culture, 2012)

As Japanese emphasize highly on business networking, and so exchange of business cards is a ritual. As a businessman, you should carry good number of business cards and if possible, print your details in Japanese. Any business card received should be treated with care and respect as Japanese value it. They are even particular about exchange of gifts. It is preferable that a senior representative from the management should initiate the negotiation process by presenting the proposal along with the exchange of gift in an informal discussion. Gifts exchange is considered to be a healthy relationship building process. However, gifts should not be considered as bribery and so they must not be lavish.

3.    Communicating effectively- After first meeting

(Kitao and Kitao, 1989)

As Japanese have subtle communication style without any body gestures, the best strategy is not to assume anything and ask straight-forward as to what the other person meant to say or interpreted what you say. Every single doubt must be explicitly stated and clarified. Restating what you have interpreted is the best thing to be sure. Hence in the second meeting, detailed proposal should be discussed among the top management people. A two way communication process must be set so that both parties clarify their doubts rigorously. A fine draft of the contract must be prepared in the next few sessions and the written communication should be exchanged across both the parties.

4.    Building consensus- In further meetings

(Kitao and Kitao, 1989)

Japanese believe in harmony in every field. Even when the business decisions are to be taken, they want compromises among the parties involved.  Hence, final stage involves finalizing the contract after several compromises on both sides. Hence, a US person should not be very firm on his stance and should be ready to compromise on his demands. It is best to involve CEOs of both the companies to sit and finalize the contract as per the consensus reached.

Once a successful partnership is set up, an informal platform should be staged such as a dinner party where gifts should be exchanged to give a positive start for the new partnership.

It is best to have a Japanese translator with the team in all the stages,to have better communication. With these tips in mind, it becomes very easy to negotiate with Japanese and build cordial business relations with them

Bibliography

Hague, Paul, Hague, Nick, Carol-Ann Morgan; 2004; Market Research in Practice

Solomon, Michael, R.; 2011; Consumer Behaviour: Buying, Having, and Being

CIA World Fact-book; viewed 25 March 2012 ;< https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html >

Japan-Geert Hofstede; viewed 25 March, 2011; < http://geert-hofstede.com/japan.html >

Kenji Kitao and S. Kathleen Kitao; 1989; Intercultural communication: between Japan and US

Tan, Suelin, Caroline; Understanding Consumer Purchase Behaviour In Japanese Personal Grooming Sector; Journal of Yasar University, 2010

World Business Culture- Japanese Culture; viewed 22 March, 2011; <http://www.worldbusinessculture.com/Business-in-Japan.html >

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