Nemawashi: Doing Business in Japan

The Japanese business approach of utilizing the "nemawashi" consulting system which requires all internal stakeholders to review and sign the final decision in exploration has both pros and cons. This system of consensus building reminds me very much of an automotive aftermarket company I worked for a process they referred to as "routing." This was generally used when documents that were coming out of the marketing department needed to be viewed by key management for approval prior to going live with it publicly. Considering my then position, I was generally the one crafting the said documents for approval. On the surface this process seemed to work because every effected department head would technically have 3 sign-off cycles to have input, make corrections and have ownership in the final product. Again, I believe that it allowed everyone on the management team to be accountable for the corporate image thus making it difficult to "blame" on particular individual or department. Although the particular company to which I refer is a US company, this is not the standard approach within the US business environment. My personal experience with that previous company is in some ways comparable to the idea of "nemawashi" in Japan. With this in mind, I would like to compare the advantages and disadvantages of this kind of decision making.

Let's look at how the process as it is used both within the corporation and as part of engaging the communities in which the company is a part of. In the case of Toyota for example, "the same process used to gain consensus with these outside community groups in Arizona is used every day to get input, involvement, and agreement from a broad cross-section of the organization. This does not mean all parties get what they personally want, but they will get a fair hearing." By including a variety of perspectives and experiences '" the final decision is reflective of a number of solutions and alternatives which is particularly beneficial in the early stages of product development. "In the process of asking questions, he had to talk to many engineers from different departments'" body engineering, quality, vendors. He learned a lot about quality and design and met people whom he would continue to draw on as resources throughout his career."

In contrast, this procedure in a European/American company would be to simply prepare (sometimes alone or with your core team) a proposal, schedule a time and present the proposal in front of everybody when having a meeting with the bosses. This is a kind of sink or swim approach without having strengthened one's final "product" or proposal. Through the process of nemawashi, a successfully vetted proposal will be accepted for sure. If there are people who don't like your proposal, the process provides an opportunity for improvement through modification. If the idea is "bad" or not sustainable, it will be destroyed before the big bosses know effectively eliminating ideas that don't have many success possibilities. In my point of view this is very good for cost savings and conservation of corporate resources.

Because the he process can last weeks or months, decision making can take up a considerable amount of time and does not leave much room for situations when "fast action or responses to emergencies are required. The limitation within the system of nemawashi could be seen as a disadvantage. I believe however, that with that great a demand on quality control, teams would be required to be organized and methodical with their approaches and wise to begin working on projects at least six months in advance to introducing concepts.

Now, as part of the welcoming team responsible for facilitating a meeting with a Japanese delegation of potential business partners for my firm, I will need to be very strategic in order to decrease intercultural communication apprehension on both sides. Most importantly, I will need to research and understand basic business etiquette and acceptable practices for meeting with my Japanese business guests. I will make sure that I have an interpreter on hand or preferably someone on the team who is Japanese. This would be key factor in relationship building '"in intricate part of business foundation in Japanese culture. Having an interpreter on hand will give me a more candid "temperature check" for my potential for doing business with the firm and cut thru the business politeness which can be misinterpreted. "Such polite, reserved and well-mannered meetings are typical of Japanese business but are often especially frustrating for US company executives because, in the US (and to a lesser degree in Europe), business is very informal and businessmen meeting for the very first time can often seem to have been lifelong friends within minutes of first shaking hands. Do not be disheartened though - just because the Japanese side is not talking about yesterday's ball game does not mean they are not interested in your product/service. I once did over half a million dollars of business with a Japanese customer who just 2 or 3 weeks before had had a very 'chilly' meeting with the then Chairman of the company I was representing!"

Assuming that our host meeting has worked out and we are now tasked with setting up a representative office in Japan, our major online resource will be JETRO (Japan External Trade Organization) as well as other Global resources. As we begin our research, this final paragraph will describe the complexities of setting a Japanese representative office. The included information will include some of the advantages and disadvantages when compared to other forms of business establishments in Japan.
First it will be critical to understand the business process. Because we are setting up a representative office, we must be very clear about our limitations for doing business while evaluating the start-up costs profit/loss for the opportunity.

1.1.1 Representative office
Representative offices are established as locations for carrying out preparatory and supplemental tasks aimed at enabling foreign companies to engage in full-scale business operations in Japan. These offices may conduct market surveys, collect information, purchase goods and implement publicity/advertising efforts, but they are not permitted to engage in sales activities. The establishment of representative offices does not require registration. A representative office cannot ordinarily open bank accounts or lease real estate in its own name, so agreements for such purposes must instead be signed by the head office of the foreign company or the representative at the representative office in an individual capacity.

Setting up as a Representative office allows us to have a presence in the Japanese Market mostly for research and marketing. We will not be allowed to sell anything. Understanding this will help us determine the kind of employee(s) we will need to hire for our new location. Since, the idea is to eventually expand in the market, we will have to decide if we will staff for long-term or short term. Meaning do we simply hire secretary and marketers or do we bring in someone who is a senior management type? Will we decide to staff with a Japanese Citizen or will we send a non-Japanese citizen. This decision could hinge on the immigration process and how easy the process will be as per visas, etc. Once we have decided on the "new hire(s)," we will have to enter into labor contracts with each worker, specifying in writing all the terms of their employment conditions. If there are part-time workers, we will have to additionally list eligibility for pay increases, retirement allowances, and/or bonuses. Finally, we will need to protect our trademarks and designs. Especially since we are unable to sell initially, who's to say that another company already positioned to sell could not utilize or ideas and begin profiting before we are? In summary, the advantages of a Representative office are as follows: It is not subject to Japanese income taxes and does not have to file income tax returns, Registration for start up is not necessary; costs can be deducted from headquarters' income. Disadvantages are your business; cannot engage in any commercial transactions, activities are restricted to storing, purchasing goods, collecting and supplying information for headquarters, advertising; market research. So in my view, unless a company has a considerable budget to include market research, this form of enterprise would not be the best the most profitable way to enter into the Japanese market even though it is the simplest and fastest way to have a presence there.