Cultural Challenges of Doing Business Overseas in Japan

Lanette Polak University of Phoenix Online MMPBL 501/Forces Influencing the 21st Century Mr. Frank Kingsland June 25, 2011

Cultural Challenges of Doing Business Overseas in Japan

Steve Kafka, an American of Japanese origin and Franchisor for Chicago Style Pizza, has decided to expand his business into Japan. He knows it is a risky decision, when he became a franchisor; he had to overcome many difficulties. Steve anticipates he will face some of these difficulties again in Kyushu, Japan. Although he was born in the United States, he has family and friends in Japan; speaks Japanese fluently, and has visited the country of his origin several times (Kingsland, 2011). This paper will evaluate differences and incompatibilities between the United States and Japanese cultures, discuss comparative advantages going into international business, apply Hofstedes Theories, and discuss trade barriers in addition to the product demand for Steves upcoming restaurant business. Differences and Incompatibilities between the United States and Japanese Cultures Young people in the United States consume fast food, and Americans eat three times a day (a light breakfast, lunch, and dinner). The Japanese diet consists of Rice, fresh vegetables, seafood, fruit and small portions of meat (Culture Grams, 2011). Many dishes contain soy sauce (fish broth) or sweet sake (alcohol made from fermented rice) (Culture Grams, 2011, 1). The Japanese eat rice with about every meal; the youth eat western food states (Culture Grams, 2011,1). The Japanese eat bean paste soup, noodles, curried rice, (uncooked fish), tofu, and pork (Culture Grams, 2011, 1). The Japanese also consume sushi (combination of cooked or raw fish, and rice); sometimes the Japanese use cumbers instead of using fish to make sushi. Wrapped sushi is in

Cultural Challenges of Doing Business Overseas in Japan dried seaweed (norimaki), and it is very expensive and for special occasions (Culture Grams, 2011).

In comparison, Japanese food is solid and some dishes are relatively easy to prepare (Yoshizuka, 2011). The Japanese do not eat cheese or meat. There are four times to eat breakfast (7-8 a.m.), lunch (12p.m.-2 p.m.), afternoon tea (3 p.m.-5 p. m.), and dinner time (6 p. m.-8 p.m.). The Japanese do not drink with a meal. Traditional Japanese breakfast is broiled fish, pickled vegetables (cucumber, giant radish, egg plant), Miso soup (Tofu and Age, giant Radish, Konbu), rice, savory rolled omelet (Tamago Yaki); Traditional lunch is rice with various small side dishes, afternoon tea-Japanese sweets, green tea, and rice crackers, and traditional dinner rice, fish, small boiled, fried, or grilled side dishes, pickled vegetables, or Miso soup (Yahoo Answers, 2011).The Japanese dine out sometimes, but Americans dine out more (Yahoo Answers, 2011). Steve will encounter business risks in Japan as he would in America, and Steve would have to create a menu to appeal to Japanese culture. Steve could mitigate these risks by introducing other products at his new restaurant such as soup and salad to appeal to the Japanese market. Comparative Advantages The most important comparative advantage Steve has is the labor force. He will hire inexpensive labor in Japan and train the employees on-the-job to help run the restaurant. Foreigners have the same opportunity as Japanese citizens. Japan experienced a tsunami in 2010, and it has affected word trade with the

Cultural Challenges of Doing Business Overseas in Japan United States. Japan has received more imports than sending out exports to the United States from 2002 to 2010 (Terri, 2011). U.S. Trade with Japan

Value in billions of dollars (Terri, 2011). In 2010, Japan was the 4th largest trading partner (exports and imports) by dollar value. Japan was the largest importer of United States wheat (nondurum) and corn (non-seed) by dollar value in 2010. Over the last five years (2006-2010), Japan has the third largest growth rate at over 31% for United States soybeans (Terri, 2011). Foodstuffs exports fell 9% in 2009 to 370.billion yen. Exports to the U.S. declined 8% to 61.0 billion yen. Exports to Asia were down 9% to 250.0 billion yen, states (Japan Foreign Trade Council, 2010). Imports from the U.S. declined 32% to 1.3 trillion Yen, (Japan Foreign Trade Council, 2010, 33).

Cultural Challenges of Doing Business Overseas in Japan

Value in millions of dollars, sorted by 2010 data (Terri, 2011). Hofstedes Thoeries

Japans Cultural Dimensions (Hofstede, 2009).

Cultural Challenges of Doing Business Overseas in Japan

US Cultural Dimensions (Hofstede, 2009). Power Distance Index is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect power distributes unequally. This represents inequality (more versus less), but defined from below, not from above. It suggests societys level of inequality endorses the followers as much by the leaders. Power and inequality, of course, are extremely fundamental, facts of any society and anybody with some international experience will be aware that all societies are unequal, but some are more unequal than others (Hofstede, 2009, 1).

Cultural Challenges of Doing Business Overseas in Japan In Japanese culture, individuals are put into groups. Everyone has to take care of themselves and people take care of each other. People have built strong family relationships in exchange for loyalty. In Japan there is a gap between mens and womens values. Japan has a high level of masculinity,

which means the Japanese like large businesses and value economic growth. Men are very assertive and competitive in the Japanese workplace (Hofstede, 2011). Young Japanese men want to have careers, and few women hold high positions in organizations (Hodgetts, Luthans & Don, 2005). Uncertainty Avoidance Index ranked second highest on the Hofstedes Cultural Dimensions chart. Uncertainty is a mans search for righteousness; some members may feel comfortable or uncomfortable in unstructured situations (Hofstede, 2009). Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level in the absolute Truth; there can only be one Truth and we have it, (Hofestede, 2009, 1). People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy. The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they normally expect; they try to have few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side-by- side. People

Cultural Challenges of Doing Business Overseas in Japan within these cultures are more phlegmatic and contemplative and

not expected by their environment to express emotions (Hofstede, 2009, 1). Long-term Orientation values are thrift and perseverance, which comes from Confucius teachings, an amazing Chinese philosopher, (Hofstede, 2009). In comparison, the United States has a very high rate of IDV (91%). The United States has lower MAS, UAI and LTO than Japan. Japans PDI (60%), IDV (45%), MAS (90%), UAI (89%), and LTO (74%). The United States PDI (45%), IDV (89%), MAS (62%), UAI (51%), and LTO (29%). The best results are for Steve to hire males to help in his restaurant who will be long-term committed to operating the restaurant. Trade Barriers Japan is willing to trade with the United States. Japan has many tariff and non-tariff trade barriers against trade in the agricultural sector. Japan has many policies for trading agricultural products. The Maximum Residue Limit enforces legal trade; this verifies that Japan is complying with international standards of following its pesticide residue policies to create organic trade. Japan is responsible for complying with the Food and Agriculture Organizations standards; in addition, Japan must comply with World Health Organization

Cultural Challenges of Doing Business Overseas in Japan evaluation committee in abiding by food regulations and treating post-harvest fungicides, according to (Foreign Trade Barriers, 2011, 269). Border enforcement is a critical component of effective IPR protection. The United States Government notes steps taken by Japan to strengthen its own border enforcement as well as to provide assistance to improve the border enforcement of key trading partners. The United States Government also welcomes revisions to the Customs Tariff Law, which went into force in 2007, including an expanded list of prohibited goods for export to include items that infringe copyrights and related rights, and strengthened penalty clauses for customs offenses. The Japanese government must continue its aggressive interdiction of infringing articles and to apply new provisions of the Customs Tariff Law. Japan has positively contributed to the enhancement of IPR enforcement in for such as the G-8, APEC, and the WTO TRIPS Council, and through border enforcement capacity building work in the Asia-Pacific region (Foreign Trade Barriers, 2011, 269).

Japan allows imports of United States beef and beef products from animals aged 20 months or younger, (Foreign Trade Barriers, 2011, 275). Japan was not open to the beef market in 2003 because of a cow was unhealthy. The United States has gained a small portion of exports to the Japanese market. United States government has encouraged Japan to follow its agricultural import policy. Before 2003 Japan was the largest export for United States beef and beef products totaling $1.4 billion

Cultural Challenges of Doing Business Overseas in Japan yearly (Foreign Trade Barriers, 2011, 276). Japan has prohibited the

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United States importing poultry, poultry meat, and eggs due to exposure to avian influenza and high pathogenic avain influenza, and low pathogenic avian influenza in United States domestic birds (Foreign Trade Barriers, 2011, 276). Product Demand Japans GDP per CAPITA in 2008 is $34,129 in United States dollars; Inflation rate is -1.30% in 2009. Japans Country Risk Rating is A1 and it ranks 18/183 of doing business in 2011. In 2010, Japan reported to be six out of 139 globally competitive. Japans GDP purchasing power parity in 2009 was $4.15 trillion United States dollars. In 2009, Japans GDP-real growth rate was -5.30% in 2009. GDP composition in the agriculture is 1.50% in 2005; consumer prices were -1.40% in 2009; the Japanese labor force consisted of 65.93 million laborers in 2009. The unemployment rate in 2009 was 5.10%. Japan also exported $542.30 billion United States dollars in 2009, which Japan exproted17.8% to the United States. Japan did $499.70 billion United States dollars worth the imports in 2009 (Global Edge, 2011). The inflation rate is down and unemployment rate is on the rise. Steve would probably have customers to support his business, low employment results in higher income that reflects a increase in demand, however; Steve would need to take into consideration what his competitors are charging. His prices would have to be less than his competitors, which would cause the demand of pizza to become elastic. Conclusion

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Understanding cultural differences while doing business overseas in Japan is a very important step into becoming a successful business partner. Learning customs, traditions, eating habits, norms, and acceptable behaviors in Japan will make Steve a successful business person. Thorough knowledge of cultural differences and incompatibilities between the United States and Japan, comparative advantages assessed, applying Hofstedes cultural dimensions to the business environment, knowledge of the economy and macroeconomic indicators will guide the overseas business explorer to a safe path for business success.

e Cultural Dimensions

Cultural Challenges of Doing Business Overseas in Japan References

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Culture Grams. (2011). Japan: Diet. Culture Grams World Edition. (1) Retrieved June 26, 2011 from http://online.culturegrams.com.ezproxy.apollolibrary.com/secure/world/wor ld_country_sections.php?contid=3&wmn=Asia&cid=82&cn=Japan&sname =Diet&snid=13 . Foreign Trade Barriers. (2011). JAPAN (269, 275-6). Retrieved June 27, 2011 from http://www.mac.doc.gov/japan-korea/nte/2011nte-japan.pdf . Global Edge. (2011). Japan: Statistics. Michigan State University. Retrieved June 27, 2011 from http://globaledge.msu.edu/countries/japan/statistics/ . Hays. 2009. Retrieved June 25, 2011 from http://factsanddetails.com/japan.php?itemid=658&catid=19&subcatid=123 http://factsanddetails.com/japn.php?itemid=658&catid=123#02 . Hodgetts, Luthans & Don. (2005). International Management: Culture, Strategy & Behavior 6e. (4). The MC Graw-Hill Companies. Retrieved June 26, 2011 from ecampus.phoenix.edu week 6 materials ebook. Hofstede. (2009). Japanese Geert Hofstede Cultural Dimensions Explained. ITIM International. (1-2) Retrieved June 26, 2011 from http://www.geert-hofstede.com/hofstede_japan.shtml http://www.geert-hofstede.com/hofstede_united_states.shtml . Japan Foreign Trade Council. (2010). Trade by Major Products. (3) 33.

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Special Study Report-Foreign Trade 2010. Retrieved June 26, 2011 from http://www.jftc.or.jp./PDF_foreign_trade2010/ForeignTrade2010_chapter3. pdf. Kingsland. 2011 The Cultural Challenges of Doing Business Overseas. Retrieved June 25, 2011 from ecampus.phoenix.edu week 6 materials tab. Terri. (2011). US Trade with Japan in 2010. Global Reach. Retrieved June 26, 2011 from http://blogs.census.gov/global/reach/foreign-trade-data/ . Yahoo Answers. (2011). How often do Japanese People go Out to Eat in Japan? Retrieved June 25, 2011 from http://answers.yahoo.com/question/index?qid=2009512163123AAepYhO . Yoshizuka. (2011). Easy Japanese Meals. About.com Guide. Retrieved June 26, 2011 from http://japanesefood.about.com/od/receipeindex/up/easyjapanesereceipes. htm .