Matsushita (Panasonic) and Japans Culture - Case Study Example

Case Analysis: Matsushita (Panasonic) and Japan’s Culture: Name: Lecturer: Course: Date: Executive Summary The poor performance problems facing Panasonic are linked to its reluctance to abandon traditional Japanese cultures. Its underlying problem in the case is therefore analysis of issues of a company’s deep commitment to traditional culture that no longer address the needs and expectations of the stakeholders, leading to poor performance. Increased performance and resistance to change are the two key underlying implications that the company can expect from adopting modern cultures. The issue is investigated through analysis of theories, such as Hofstede’s Five Dimensions theory, resource-based theory, and entrepreneurial theory to explain the role of culture in businesses and how the business integrated change. The question that surfaces during the period of implementing change is how to adapt an organisation’s human resources to the needs of the stakeholders, in order to recruit the most talented individuals, to drive the goals of the organization and to improve on its performance, as the traditional values had facilitated poor performance. It is further established that the decision to preserve unproductive culture just because of tradition is likely to lead to the downfall of the company. Additionally, the increased pace of the economical, technological or global development can make changes to be an inevitable feature of an organisation’s life, if the organization looks to increase and retain effectiveness. It is concluded that Panasonic should abandon the traditional cultures and instead integrate the modernized cultures that meet the demands and the expectations of the stakeholders. The findings are significant as they show that question on whether to preserve or integrate modern values and norms that have little to do with the dynamics of the culture itself. Instead, the decision should be objectively based on whether it will enable the company to realize its core business objectives. This implies that a culture to be chosen, whether traditional or modern, should allow the company to operate efficiently and effectively within its labour market. Table of Contents Executive Summary 1 Table of Contents 3 Introduction 4 Case Analysis 5 1950-1980 5 How traditional Japanese culture benefitted Panasonic 5 1990-2000 6 The triggers of cultural change in Japan during the 1990s 6 How cultural change affect traditional values in Japan 8 How traditional values become more of a liability 9 Current-future 11 How Japan’s changing culture influence businesses future business operations 11 Potential implications of such changes for the Japanese economy 12 What Panasonic trying to achieve with human resource changes 13 Impediments to successfully implementing these changes 14 The implications for Panasonic and why it takes years to fully implement the changes 15 Recommendations 16 Conclusion 17 Reference List 18 Introduction The case study portrays Panasonic as a company that stuck to the traditional culture that no longer matched the stakeholder needs and expectations, leading to poor performance. In regards to Panasonic’s past business practices, relative to the Japanese traditional cultures, this paper examines how traditional Japanese cultural values and traditions benefitted Panasonic during the 1950s–1980s. It further explores the triggers of cultural change during the 1990s, in addition to ways in which cultural change affected the nation’s traditional values at the time. Also discussed include the ways in which traditional values became more of a liability during the 1990s and early 2000s. Regarding Panasonic’s current and future state, a case analysis of how Japan’s changing culture may influence the way Japanese businesses operate in the future is presented. Also discussed include the potential implications of such changes for the Japanese economy. Several issues also examined include the likely objectives Panasonic perceives in trying to make changes to its human resources, the impediments to successfully implementing the perceived changes and the implications of the changes to the company, including whether the changes take year to be fully implemented. Lastly, recommendations are suggested, based on the relevance of Panasonic case to the relationship between societal culture and business success. Case Analysis 1950-1980 How traditional Japanese culture benefitted Panasonic The Japanese cultures that enabled Japan to hold onto its people and which became consistently stronger each successive year was that of Confucian beliefs and values, which are rooted in three key components, namely loyalty to others, high moral conduct and reciprocal obligations to express appreciation of group involvement and honesty in associating and relating with others. The existence of Confucian values at the workplace benefitted Panasonic substantially. The traditional cultures enabled Panasonic to operate more effectively and efficiently between 1950 and 1980, before it was eventually forced to adopt the Westernised modern cultures. As outlined in the case, Japan had a tradition of strong-group association after the Second World War. Japan had also just recovered from World War II defeat. Consequently, the post-war struggle generation or employees stuck to their fifth generation ideas and traditions of rebuilding the nation. The ideas and traditions were consistent with Confucian values. The traditional values enabled Panasonic to have a dedicated employee base that was committed to ensuring success of the company and Japan. Confucians are less interested in supreme beings or afterlife. Rather, they tend to be more interested in what takes place at present and how to manage interactions in the course of living (Hofstede 1983, pp.110-117). The traditional values enabled Panasonic to have a loyal base of employees. In Confucian traditions, loyalty to those in superior positions was considered a sacred duty, as well as a lifelong obligation. However, the loyalty should be reciprocated. In which case, while the subordinates are loyal to their superiors, the superior needs to reciprocate to show loyalty to the subordinates in ways that the subordinate views are relevant to their courses of life. Indeed, as indicated in the case, the traditional Japanese between 1950 and 1980 based their values on strong group association, mutual obligation and the tendency to remain loyal to the company (Beechler et al. 1996, pp.7-8). Panasonic also benefitted from reciprocal obligations. The company achieved its obligation of committing itself to taking care of the employees in varied aspects of life. In return, the employees reciprocated by staying loyal to the company. The company offered the employees varied benefits, such as guaranteed lifetime employment, affordable housing, charitable retirement bonuses and seniority-based pay systems. The employees reciprocated by showing loyalty to the company, in terms of hard work and dedication. Ultimately, the employees worked diligently for the greater good of the company. In return, the company offered the employees generous benefits. 1990-2000 The triggers of cultural change in Japan during the 1990s After the 1990s, the main triggers of cultural change in Japan included economic crisis in Japan in the 1990s, penetration of Westernised ideas into Japan, which led to the emergence of a generation after 1964 that lacked commitment to Confucian cultures. The emergence of a new generation of Japanese population became a critical factor that triggered cultural change in the 1990s. The younger generation embraced changing values as they had been brought up in more affluent environments, compared to that of their parents who had been born after the Second World War. Among the changes embraced by the younger generation included doing away with the ideology of lifetime employment in a company and the desire to work with different employers to that of their parents. Additionally, the younger generation was far more socially mobile compared to their parents. This implies that individuals were likely to move out of the strata where they were born. The penetration of Westernised modern ideas in Japan was also a critical triggering factor for cultural change. Consequently, the younger generation that was born after 1964 lacked commitment to the Japanese traditional culture. The basis for this is that they had grown up in a world that embraced more globalised values and Western ideas. For instance, unlike the earlier generation that reciprocated to Confucian traditions by showing loyalty to the company for the generous perks, such as lifetime employment, the younger generation showed contempt for such values, including lack of appreciation for the social status of being a ‘salaryman.’ The slump of the Japanese economy in the 1990s also triggered cultural changes. Deep changes in cultural perceptions emerged when the Japanese economy went through prolonged economic crisis in the 1990s, forcing companies that operated in Japan to change their long-established traditions in conducting business. As a consequence, firms began laying off older workers. The trend marked an abrupt shift from the tradition of lifetime employment initially guaranteed by the companies. The younger generation witnessed the huge layoffs and reached a conclusion that their loyalty to the company may not be reciprocated. To them, it appeared as if companies had become determined to undermine the long-practiced traditions that ensued after the Second World War. As a result, unemployment rates increased while the real wages plummeted. There was also an overall feeling of job insecurity, which increased social mobility and the feeling that there was no reason to be tied to a company. How cultural change affect traditional values in Japan The cultural changes brought far-reaching impacts on Japan, after the traditional Confucian-like values of collectivism were ignored in favour of the Westernised traditions of individualism. Based on Hofstede’s five dimensions -- namely individualism-collectivism, power distance index, masculinity, uncertainty avoidance, long term orientation -- an insight into the cultural changes in Japan that affect Panasonic’s business can be effectively understood (Soares et ak. 2007, pp.278-280). It is argued that the cultural changes started to affect traditional values in Japan in three key ways: individualist-collectivist, short-term orientation and uncertainty avoidance. Regarding uncertainty avoidance, Japan started to embrace higher uncertainty avoidance, where the younger generation began to manage their destinies, risks and innovation, prompting the Japanese society to become more innovative. The Japanese society also started to embrace short-term orientation, as a result of assimilation with the Westernised cultures. Panasonic therefore had to appreciate efficiency, where more analytical thinking, quicker profits and consumption values were sought after. There was a culture change from collectivism to individualism. Soares et al. (2007, pp.278-280) portrayed an individualist society as one where individuals look after themselves and their immediate family. In collectivist culture, individuals belong to particular groups that they feel look after them in return for loyalty. Critically, Japan was largely based on collectivism traditions before the 1990s, where the traditional Japanese based their values on strong group association, mutual obligation and the tendency to remain loyal to the company. This triggered utmost commitment to the company (Colignon et al. 2007, pp.16-17). In return, Panasonic was committed to taking care of the employees in varied aspects of life. The employees reciprocated by staying loyal to the company. However, the younger generation lost faith in mutual loyalty during the 1990s, indicating a shifting towards individualistic society. They experienced and had a drive to explore more opportunities, having grown up in rapidly growing economy. Essentially, their attitude towards the Japanese values changed. According to Hofstede (1983, pp.110-117), individualism depicts how independent individuals are. Usually, countries with higher scores of individualism show that individuals are more self-reliant, self-motivated and self-concerned. This characterised the Western traditions. Earlier, Japan had citizens who conformed to the social norms and regarded the group needs to be more significant. How traditional values become more of a liability Between the 1990s and early 2000s, the traditional Japanese values had become a liability. After years of poor performance, Panasonic began doing away with the traditional values in 1998. At that time, a number of other countries had already done away with the traditional business models in favour of the modern Westernized models that placed greater weight on individual performance. The traditional cultures meant poor performance. The adoption of individualistic values was viewed to bring more entrepreneurial activity, which implied an opportunity for new products, innovative ways of doings business and greater profits. Companies that failed to embrace or go with the change were at risk of losing relevance and becoming less profitable. In this present case scenario, it is clear that Panasonic learnt this but rather late as it was among the last companies to do away with the traditional Japanese values. In fact, it was based on this realisation that the company decided to modify the traditional values in 1998. While the older values tended to be relatively conservative, the new values implied the opportunity for new products, as well as innovative ways of doing business. For instance, in the old Japanese traditions, meticulous employees or salary-men performed business. They were also satisfied with the lifetime employment and became loyal to the company. On the other hand, the younger generation after 1990s believed in having own values and living better standards. They also felt inspired to live in more socially mobile environments. Overall, they didn’t want to follow in the footstep of their parents. These show that they regarded the traditional values to be more of liability. The traditional values were inconsistent with the trending concept of globalisation, hence a liability to the predominant course. Businesses in Japan had to change the way they used to do business because of the changing cultures and due to the effects of globalisation. In return, the old traditions were viewed as liability as they became more and more irrelevant, prompting changes in the way businesses are operated. The companies had to modify their human resource strategies, including the recruitment and payment systems to be consistent with the changes in cultural values, where employees did not look for life-time employment opportunities (Hill & Stewart 2000, pp.114-117). Additionally, the workforce became more mobile as the younger generations sought for job opportunities anywhere. Due to these, companies had to do away with retirement bonuses, in addition to other benefits such as housing. Similarly, as the younger generation sought to move from one company to the other, companies had to adjust the recruitment system that enabled them to get more international workforce. Current-future How Japan’s changing culture influence businesses future business operations Japan’s changing culture may influence the way Japanese businesses are to be run in future. For instance, companies would no longer view employees as working for the greater good of the company, as loyalty that had been the basis of doing business after the Second World War would soon be outdated. Next, group identification that was linked to loyalty would also be a thing of the past as employees would in future prefer to take care of themselves. This would mean that companies shift to the incentive programs intended to encourage individual performance, instead of group performance. Business would also broaden the benefits that should accrue to the employees based on democratisation, rather than on seniority to ensure employee commitment and satisfaction (Suma, S & Lesha, J 2013, pp.47-48). The changing cultural influences in the more modernized ones will make more and more businesses to go global by establishing bases across the globe. In the present case scenario, companies started to reorganize their structure in order to exploit the new growth opportunities brought about by individualism and a more mobile workforce. For instance, Panasonic established performance accountability in 2002 in a bid to reorganize itself and to do away with the outdated organizational structure. The company change its structure into one that had 17 standalone global divisions, focused on particular product sectors. The objective of making these changes is that the company hoped it would position itself more strategically to exploit the growth opportunities, brought about by a more globalised workforce. Indeed, these signalled good tidings for the company as it broke even in 2003 and assumed a more profitable future. Potential implications of such changes for the Japanese economy The changes would increase the labour market into one that accommodates those who no longer value traditional values and providing new opportunities that could not be exploited under the traditional values from the outset. The changes would also lead to more service-based efficient economy. In the traditional age of manufacturing economy, which is characterised by sticking to tradition values of having lifetime employees, companies created value through manufacture and delivery of products to end-consumers (Buera & Kaboski 2010, pp.1-3). In the service-age economy, companies establish network of operations that contribute to the transformation of resources into the anticipated benefits (Ambrosini et al. 2009, pp.S12). The service-age is characterised by having leaner workforce and hiring out services to cut back on production costs. Indeed, this is what happened at Panasonic in the 2000s. The company cut 13,000 jobs, including 1000 management positions. The business also concentrated on consumer service industry, such as software engineering and network communications technology. The trend can be perceived within the context of resource-based theory, which argues that the aim of an organisation’s growth should be the driving factor for reshaping the organisational structure to position a company to be more competitive (Arya & Lin 2007, pp. 698-702). The companies therefore streamline themselves to become sources and tools of differentiation. Therefore, companies build on their unique capabilities (Writz & Ehret 2013, pp.35). A related perspective is provided by entrepreneurial theory of service economy, which hypothesises that entrepreneurial action of businesses is concerned with exploring and exploiting profit opportunities from the under-used resources or under-served needs. The resources include rules, routines and employees that are exploited for profit opportunities (Writz & Ehret 2013, pp.35). What Panasonic trying to achieve with human resource changes The changes that Panasonic integrated into its human resource policy signify an attempt to embrace the current modern Westernised trends in the workplace that embraced individualism. The company had to integrate changes in its human resource that gave precedence to individual performance. The company came up with a three-tiered option for the employees, which include the option of a retirement bonus and subsidized housing or having high salary and no subsidized services, or a combination of the options. In particular, the changes were not popular as a mere 3 percent of the newly recruited employees went for the option of ‘higher salaries and no benefits’ option, while some 40 percent opted for the ‘combination package.’ By integrating the changes into its human resources policy, the company appeared determined to welcome the current demands in the labour market that consisted of individuals who no longer valued traditional values. Therefore, the company had to abandon the traditional cultures. In the case study, Panasonic had been presented with a vibrant history of good business performance before the 1990s, largely attributed to its capacity to retain a workforce by providing remuneration and work benefits that met the expectations and demands of the labour market during the period. It is argued that during the 20-year profitable period, the company’s human resources practices that company set up were at the vanguard of the human resource options available in the country at the time. It is further reasoned that those human practices embraced during the period were based on the current cultures based on the current norms and values as demanded by the labour market, other than the values and norms the Japanese labour market embraced in the previous 20 years before 1964. Therefore, until the 1990s, these traditional practices were beneficial to the company, as they enabled it to operate effectively and efficiently within the labour market. Impediments to successfully implementing these changes The real impediment to successful implementation of change was resistance to change by the older generation of workers at Panasonic. Even as individual performance became prioritized at the expense of seniority for compensation, the company met impediments to effectively integrating the changes, as it was then dealing with the issue of an ageing workforce or older generation that still embraced the traditional Japanese values. The underlying implication was the changes would take years or perhaps decades to be fully implemented due to resistance from the ageing workforce. Indeed, the question that surfaced during the period of implementing change after 1998 was how to adapt its human resources to the needs of the stakeholders, in order to recruit the most talented individuals, to drive the goals of the organization and to improve on its performance, as the traditional values had facilitated poor performance. Its underlying problem was therefore a commitment to the traditional culture that no longer addressed the needs and expectations of the stakeholders. The implications for Panasonic and why it takes years to fully implement the changes The implication is that the company has to adopt and enact change. Organisational change will often be met with resistance and will need to be managed by the capable change agents who must be provided with the required resources required to ensure the change is implemented successfully (Brown 2012, pp.562-563). In the case, this may have prompted the need to appoint principal change agents, such as Kunio Nakamura, as the agent of change. Overall, since the changes are largely issued to do with social cultures, implementing them would take years or even decades. This perspective is pointed to by Hofstede (2003, pp. 811-813) who defined culture as a complex web of expectations that people have acquired over the years and which dictate their activities. It consists of norms and values that the society has embraced over time, due to the economic and political philosophy, education, language and social structure influences the society is in touch with (Hofstede, 2003, pp. 811-813). Based on the definition, it can be argued that the cultural values have to be embraced over time. It is therefore submitted that the modern Westernised values that Panasonic must embrace for the future will take time to absorb and implement. Critically, preservation of traditional values that contribute to poor performance or hinder the company from attaining its corporate objectives places the company at a huge economic and competitive disadvantage. Hofstede (1983, pp. 78-80) demonstrated that organizations that are determined to safeguard traditional cultures aligned with collectivism while it operates in an industry that has employees with huge entrepreneurial skills are at disadvantage, since it is individualism that contributes to entrepreneurship. Another reason why it will take time is explained by Hofsted (2003, pp.811-813) who argued that under the façade of modernism, cultural difference always remain deeply rooted. In which case, companies that abandon the dimensions of traditional culture that still embraces strong support from society will often be put at a disadvantage, since it triggers resistance from a section of employees. Armenakis and Bedeian (1999, pp.294-298) who hypothesized that it is human nature that change be met with some resistance shared a similar perspective. Hence, the current Panasonic employees, mostly those who still embrace traditional values, may resist change. This also means that it will have to take time for the company to re-educate them to accommodate the changes. An additional implication of the change is positive economic performance of the company, as the primary objective of the company is to increase effectiveness and efficiency (Armenakis & Bedeian 1999, 294-296) Recommendations The question on whether to preserve of integrate modern values and norms has little to do with the dynamics of the culture itself. Instead, the decision should be objectively based on whether it will enable the company to realize its core business objectives. This implies that a culture to be chosen, whether traditional or modern, should allow the company to operate efficiently and effectively within its labour market (Hofstede, G 1983, 76-79). From the case, it is clear that the company’s persistent poor performance and the loss of capacity to attract new employees shows the perceived benefits of traditional culture have become irrelevant to the stakeholders, hence triggering ineffectiveness. Therefore, Panasonic should abandon the traditional cultures and instead integrate the modernized cultures that meet the demands and the expectations of the stakeholders. The Panasonic case identified the traditional values as the origin of poor performance. Hence, it is recommended that preserving unproductive culture just because of tradition is likely to lead to the downfall of the company. The increased pace of the economical, technological or global development will make changes to be an inevitable feature of an organisation’s life if the organization looks to increase and retain effectiveness (Eisinger 2002, pp. 118-120). As illustrated in the case, culture is not static as it evolves over time. Therefore, preservation of traditional cultures should only be recommended when it can enable an organization to operate more efficiently and effectively, than when the company takes to the modernized cultures. Based on this assumption, the lesson from the case therefore is that preservation of traditional cultures that contributes to poor performance under-privileges the company. However, the traditional cultures may as well be preserved if it is consistent with the demands and expectations of the stakeholders, and hence ensures excellent organizational performance. Panasonic is reflected in the case as a company that stuck to the traditional culture that no longer matched the stakeholder needs and expectations. Increased performance and resistance to change are the two key underlying implications that the company can expect from adopting modern cultures. Conclusion Increased performance and resistance to change are the two key underlying implications that the company can expect from adopting modern cultures. Using theories such as Hofstede’s Five Dimensions theory, resource-based theory, entrepreneurial theory, it is established that the poor performance problems facing Panasonic are connected to its reluctance to abandon traditional Japanese cultures. The underlying question that emerged when the company sought to implement change was how to adapt an organisation’s human resources to the needs of the stakeholders in order to recruit the most talented individuals, to drive the goals of the organization and to improve on its performance, as the traditional values had facilitated poor performance. It is further established that the decision to preserve unproductive culture just because of tradition is likely to lead to the downfall of the company. In is concluded that Panasonic should abandon the traditional cultures and instead integrate the modernized cultures that meet the demands and the expectations of the stakeholders. 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