Understanding the sources of Japanese business ethics
Japan Management Review ISSN 0968-7130
Keywords: Ethics, Moral responsibility, Religion
Copyright 1995 / MCB University Press
Western businessmen need to brush up on their Buddhism if they have any hope of moving into the Japanese market. Being deeply religious is not a prerequisite to doing business in Japan, but it helps to explain the particular set of business ethics that permeates the Japanese business environment. Business ethics in the country have evolved almost directly from the Buddhist temple or the Shinto shrine. The following article outlines how religious thought has influenced the development of Japanese business ethics before moving on to explain how western businesses need to understand these ethics in order to operate successfully in the Japanese market.
Religious thought influences business ethics
The Japanese religions - Confucianism, Shintoism and Buddhism - are transcendental in nature. This means that each believes that every single thing, including people, has its own soul or spirit, or numen as the Japanese call it. Each individual numen combines with all others to form the great life force of the universe. Inasmuch as Japanese people live in an environment in which everything and every event has a purpose as an expression of this life force, the meaning of work for them becomes unique. Work is understood to be a self-expression of the great life force, and Japanese people unconsciously, and sometimes consciously, try to unify themselves with the great life force by concentrating on their own work.
The second aspect of transcendentalism that affects Japanese working practices, and therefore ethics, is the emphasis on groups. In the group environment, a group is considered to be superior to its ordinary members mainly because, while the group is expected to be able to connect with the numen of the universe in a direct way, the members of the group individually are not related to the force in the same way. The only way for the members to connect with the life force is through the activities of their group.
The four circles of business relationships
Groups exist on all levels, but in Japan there are four concentric rings that encompass them all. These rings, from inner to outer, are: family, fellows, Japan and the world. Japanese people and organizations are likely to attribute different ethics or moral practices to each circle.
Businesses also use the four rings to delineate the nature of their business dealings. The family circle consists of closely-related business partners, while the fellow circle is made up of cross-share holding corporations, steady customers, banks, fellow traders and the like. Each member is under implicit instructions to maintain a balance between benefits to the group and debts owed to it. If a company does not offer enough benefits to counterbalance its debts to the group, it is expelled from the group. Third is the Japan circle. In this circle, fellow circle ethics are substantially replaced by the principle of free competition. Competitors, unrelated corporations, ordinary stockholders and so forth all fall within this circle. The last circle is all other competitors around the world.
Western firms need to concentrate on moving to the third circle from the outer circle, but this is a very hard move to achieve. Foreign firms might claim that because they are located outside Japan, they cannot enter the Japan circle. Japanese businessmen insist that if they understand the long-term reciprocal ethics they can enter the Japan circle; what is more they might become fellows of influential Japanese companies. The Japanese believe that if foreign corporations understand the long-term ethics, they will easily be real members of the Japanese business community.
Knowing how to balance debt and benefits
There is a crucial problem involved in opening the Japanese market, however. This is how to let newcomers know what the rules are and how the Japanese business community applies the rules, especially when it comes to balancing debts and benefits in the fellow circle. An example of how to balance debts is if company A helps company B when B is in the midst of serious financial difficulties, then B will give the most preferential trade status to A after overcoming its difficulties. B will rarely change this policy, even if B finishes repaying its monetary debts to A.
Moreover, even if A's products are relatively expensive, as long as the price is not extraordinarily unreasonable, B will continue to purchase A's output. If A's products are not sophisticated enough to meet B's standards, B will often help A to improve its products in various ways.
Yet if B were to change the above policy soon after repaying its debt to A, such as buying cheaper products from C, not only A, but also other corporations who have been aware of the process, will regard B as an untrustworthy company in their business community. Foreign companies, especially American ones, do not understand "fairness" in this context. They are more likely to switch immediately to C once the debt to A has been paid off. This difference in the understanding of fairness is the main stumbling block between Japanese and non-Japanese companies.
In order to break into the Japanese market, Western firms have to understand - and demonstrate that understanding of - the Japanese tenets of fairness in terms of benefits and debts, as well as the religious basis of many of the country's business ethics. Conversely, Japanese companies as a whole have to remove obstacles to entry, alter their group-centered climate to a democratic one and create open access channels to the other circles to all-comers. It will be far easier - and quicker - for Western companies to adapt to Japanese ethics. After all, the Eastern religions on which the ethics are ultimately based are thousands of years older than Christianity.