Problems and Solutions for Management of Japanese Companies in China

ABSTRACT

1. Following the rapid growth of the Chinese economy, Japanese companies are aggressively expanding operations in China. These companies, however, are saddled with various management problems. These problems are related to Japanese company systems and Japanese-style management.

2. Concerning the management of personnel and labor, when Japanese systems are introduced directly they do not fit with the circumstances in China, and incentives for employees become deficient. Delays in the localization of personnel cast a shadow on various areas such as management costs, procurement, sales and etc.

3. High costs are also hindering Japanese companies’ development of operations in China. The large number of dispatched employees requires a substantial payroll, and because many business transactions are done among Japanese companies the procurement costs are also high. In addition, excessive attention to quality increases costs. This is also connected with Japanese-style management.

4. In terms of organization, the transfer of authority from Japanese companies to subsidiaries in China is insufficient, and these subsidiaries have little independent discretionary power. As a result, strategic development of operations in China is difficult. Profits in China are low, and consequently many companies receive compensation from the home company to stay in the black. Furthermore, the supervising companies in China are not functioning properly.

5. The weakening presence of Japanese companies in China, their inadequate commitment to social contribution, their sluggish response to unforeseen incidents or scandals and etc. have hurt the image of these companies among Chinese society, and are having a negative impact on their operations development.

6. Regarding market strategy, insufficient entry into the Chinese market and weakness in organizational control represent problems. Strategic procurement and the restructuring of operations in response to market shifts are slow.

7. To rectify these problems and improve business, it is necessary that Japanese companies organize business strategies for Chinese operations, encourage the autonomy and independence of their local subsidiaries, and promote the localization of personnel. It is also critical that these companies be aware of the compatibility of Japanese-style business with China.