Routledge Handbook of Japanese Business and Management

Parissa Haghirian

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9780415734189
• eBook ISBN: 9781317859543
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

The Routledge Handbook of Japanese Business and Management provides a comprehensive overview of management and business processes and practices in Japanese companies. The contributors combine theoretical findings and research results with a practical and contemporary view on how corporations and firms are managed in Japan.

The handbook is divided into eight sections covering:

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• historical perspectives on Japanese management;
• structure and theory of the Japanese firm;
• the corporate environment in Japan;
• the Japanese work environment;
• the Japanese market;
• manufacturing and logistics;
• interaction and communication;
• the future of Japanese management.

This book is an essential reference resource for students and scholars working on Japanese companies, the Japanese market-place, Japanese consumers, or management processes in the Japanese firm. The book also provides an interesting and informative read for managers who need to deepen their knowledge on Japanese business processes.

Part I

Historical perspectives on Japanese management

1

The historical development of Japanese corporate management: 1603–1945

Sumiyo Ishii (translated by Yoshitaka Yamamoto)

Introduction

The end of the Second World War in 1945 undoubtedly marked a dramatic turning point in Japanese economic and social history. The policies of the General Headquarters of the Allied Powers (GHQ) initially did not focus on Japan’s economic recovery and development. Their urgent goal was to demilitarize and democratize Japan, as was the case for the Five Major Reform Directives that resulted in agricultural land reform; the dissolution of the zaibatsu; and the establishment of the trade-union law, labour-standards law, and labour-relations adjustment law. Although the GHQ’s policies underwent subsequent changes, the initial directions that they took had a profound impact on Japan’s post-war economic structure, and led to a number of modifications being made to the pre-war structure.

Nevertheless, more than a few aspects of the post-war Japanese economic system that are considered to have helped to increase the competitiveness of Japanese firms and made Japan’s high economic growth possible were, in fact, inherited from the pre-war economic structure. The distinctive characteristics of the post-war Japanese economic system and corporate management, such as the separation of ownership and management; the prioritization of employee interests; the grouping of enterprises; lifetime employment; seniority-based wages; company-based labour unions; the ‘main-bank system’; and the regulation of banks by the Bank of Japan and the Ministry of Finance, are all continuations, in one way or another, of the pre-war economic system. For this reason, in order to make sense of post-war Japanese corporate management, it is crucial to examine what came before.

To be sure, corporate management in pre-war Japan did not transition seamlessly into the post-war period. Yet, at the same time, the end of the war did not signal an absolute break with the past. The history of Japanese corporate management unfolded as a dynamic summation of contrary forces, with continuities and discontinuities taking place side by side. This chapter will examine the development of Japanese corporate management in the years from 1603 to 1945, with a focus on the aspects of pre-war corporate management that survived into the post-1945 period.¹

The birth of corporate management: 17th century to early 19th century

The Edo period (1603–1868) saw the continuation of economic growth that had begun earlier in the sixteenth century. It must be noted, however, that the more-recent concepts of progress and economic development do not apply to the stationary social conditions in Japan before the Meiji period (1868–1912).² Nevertheless, stationary need not mean static. In Edo-period Japan, the rates of economic and population growth were higher than in any of the previous historical periods, and various elements of the socio-economic system that had not existed in medieval times, and were more modern in character, came into existence. This is the reason that this chapter begins with the Edo period.

One example of the new socio-economic developments of this period was the establishment of a class system that resulted in a division of labour and increased trade between farmers in rural areas, and warriors, artisans, and merchants living in castle towns. Another was the governance of provinces by daimyō (lords), which caused intra- and inter-provincial markets to form and systems of transportation and financial transactions to develop across Japan. In addition, the Tokugawa shogunate minted Japan’s very first unified national currency, allowing the money economy to develop. As standards of education increased across all classes, the literacy and arithmetic skills of the ordinary people improved greatly.³ Also during the Edo period, as Japan sought an alternative to the Sino-centric rule of East Asia, a Eurocentric worldview was becoming widely shared by the middle of the nineteenth century.⁴ Subsequently, more and more Japanese people came to advocate emulating Western ways of bolstering national economic and military strength.

In the seventeenth century, the population grew dramatically as large swathes of land were cleared for cultivation and agricultural productivity soared. Even though the increase in population decreased the size of arable land per capita, a larger labour force resulted in higher productivity, leading to an ‘industrious revolution’.⁵ These developments in agriculture enabled cities to grow. In particular, the Three Cities (Edo, Kyoto, and Osaka) grew rapidly. Edo developed as the centre of governance and consumption, where daimyō on alternate-year residencies and their retainers spent a significant amount of time. Kyoto excelled in the handicraft manufacturing of high-quality silk textiles and other goods produced by highly skilled artisans. Osaka served as a major distribution centre for goods from all over Japan, and as a central node in the Japanese economy.⁶

The nationwide economic growth in the latter half of the seventeenth century provided merchants with big business opportunities. Wholesalers in Edo and Osaka who traded goods from all over Japan found ways to innovate by specializing in a certain type of goods and using their own funds to buy and sell goods. Echigoya (Mitsui) of Ise Province secured its position as one of the largest merchant houses in Japan by first operating a successful wholesale kimono-fabric shop in Edo and venturing into the money-exchanging sector in Edo, Kyoto, and Osaka.

There were also kimono-fabric dealers from Kyoto, such as Shirokiya, that opened new shops in Edo and operated them successfully. After opening new pharmacies, bookstores, and metallurgical shops for silver and bronze in Kyoto, Sumitomo, from Echizen Province, was appointed by the Tokugawa shogunate to oversee the management of metal mining, and also opened money-exchange shops in Edo and Osaka. Merchant houses from Osaka, including sake manufactures and rice wholesalers such as Kōnoike and Kajimaya, began to provide various financial services, including money transfer and financing for daimyō. The financial businesses that these merchant houses successfully operated presaged the growth of diversified companies and the expansion of the zaibatsu in the Meiji period and onwards.⁷

In the eighteenth century, as the production of agricultural commodities and handicrafts increased in regional areas, regional towns other than the Three Cities also began to prosper. The previously underdeveloped farming villages in the vicinity of Edo began to develop as well, turning Edo into a major distribution centre comparable to Osaka. In the latter half of the eighteenth century and the beginning of the nineteenth century, the volume of trade in Osaka decreased while the volume of trade in Edo and regional towns increased.

Large merchant houses of the Three Cities as well as regional merchants adapted to this shift. The merchant houses of Mitsui, Kōnoike, Daimaru, and Shirokiya, as well as the regional merchants of Ōmi and Ise Provinces, opened and operated regional branches in addition to their main shops in the Three Cities. They put into place a system of product and labour management and finance that was comprised of partly centralized and partly decentralized modes of operation, linking the main stores and the branches. As their businesses continue to expand and the number of employees soared, they set up internal rules for employees regarding hiring, posting, welfare, and retirement.⁸

Moreover, as shops grew larger in scale, the heads of merchant houses could no longer directly oversee their management, and began delegating their managerial roles to head clerks, resulting in the division of ownership and management. Strategic business decisions pertaining to products, finance, and labour management remained under the purview of house-wide rules and policies, however. What was delegated to head clerks consisted of day-to-day operational tasks, and as such, their decision-making power was limited. Also, since merchant houses were managed in the manner of an ie (household), a family-like group of tightly knit individuals, the head of a merchant house was also embedded within the larger framework of a going concern that was the ie business.⁹ Not only the large merchant houses operated in this way, but smaller, regional businesses such as soy sauce manufactures in Noda and Chōshi (in present-day Chiba Prefecture) and the indigo sellers of Awa Province (present-day Kagawa Prefecture), as well as farming houses with large-scale operations, also practised similar forms of business management.¹⁰

Formation of the zaibatsu and entrepreneurial networks: mid-19th century

From the latter half of the eighteenth century and onwards, the Japanese economy grew less agrarian as the non-agricultural sectors increased their output. Then, in the mid-nineteenth century, the opening of ports to foreign trade sent the nationwide system of distribution into disarray, resulting in severe inflation. Amid such drastic changes in the Japanese economy, merchants developed new distribution routes encompassing the newly opened ports of Yokohama and Hyōgo, traded directly with foreign merchants, and brought in high profits through money exchange. On the other hand, many long-established merchant houses and a large number of businesses in the financial sector failed to adapt to the shifting tides in the economy and went into decline at the beginning of the Meiji period. Only a handful of powerful merchant houses, including Kōnoike, Mitsui, and Sumitomo, would weather the turbulent times, although they, too, almost collaps...

Table of contents

• Cover
• Half Title Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• Notes on contributors
• Introduction
• PART I Historical perspectives on Japanese management
• PART II Structure and theory of the Japanese firm
• PART III The corporate environment in Japan
• PART IV The Japanese work environment
• PART V The Japanese market
• PART VI Manufacturing and logistics
• PART VII Interaction and communication
• PART VIII The future of Japanese management
• Index