(East Asian Map taken from Yahoo Images)
Each time Asia is becoming the center of attention of the modern world, first thanks to the booming economies and the fast changes they are experiencing; there are also important management theories such as the ones coming from Japan influencing thousands of business around the world and their millenary cultures are definitely attention grabbing and magical.
So in order to define the area, according to the presentation of Juliana María Rodas, Luisa Fernanda Saldarriaga y María Camila Restrepo, East Asia is a subregion of the Asian continent that can be defined according to their geographical position or cultural terms.
In geographical terms in the presentation they talk about East Asian having around 12 million km2, which would be 28% of the continent, with a population of 1.5 billion, what makes it one of the most populated places in the world with a density of 131 per km2.
On cultural terms, the Chinese culture plays a huge role in the area, influencing the different cultures with the classical Chinese scripts, different religions and ethical conducts derived from Buddhism, Taoism and Confucianism among others.
And those cultural features that influence political philosophies, language, celebrations, architecture and many other things from the daily life are the ones that influence more the definition of East-Asia.
So talking about the countries of East Asia we got:
- People’s Republic of China (Taking into account Macao and Hong Kong)
- Republic of Korea
- Democratic People’s Republic of Korea
- Republic of China (Taiwan)
- Mongolia
- Siberia, Russia
- Vietnam
From these countries we are going to take a closer look at Japan, South Korea and Vietnam.
Japan
Economically Japan has the first country of the region to take off and its economic development after the Second World War has been an example for the region and the rest of the world, considering as well the influence of the USA through different interventions as the McArthur Plan.
Japan according to Juliana María Rodas, Luisa Fernanda Saldarriaga y María Camila Restrepo’s presentation is an Island country, with a population of 128 millions.
It is a Unitary Constitutional Monarchy and its capital is Tokyo.
In the presentation they also highlight facts as:
- Japan is the largest robot operator in the world and the largest investor in science and technology.
- Due to its geography and large population they are also the largest importer of food worldwide, accounting 60% of their consumption.
- Japan is the second largest producer of automobiles and machinery.
- And it is the second largest oil importer.
Japan is very important and has succeeded thanks to its Management Model. In this model they give a lot of importance to the market share, economies of scale and the value maximization of the firm in the long term is a key.
It is important to establish good relationships with the workers, who are usually employees of a company for life, with suppliers, a very important element in order to reach competitiveness and with the clients, who are a basic source of information.
Comparing the Japanese Model with the American one, Japanese take decision with consensus; it is a more participatory system, what makes the responsibility lay not in one individual but in the group. And they also have a more paternalistic approach in the working environment.
This Model has been applied in companies such as Mitsubishi and Toyota.
Then María Alejandra Gonzalez-Perez made a complementary presentation on the Japanese management system. She mentioned as the three pillars for their management: politics, bureaucracy and business. And she also highlight the commitment to excellence and quality.
And in order to get that commitment the company works as a family where people feel they belong, and with work they define its social role and gain a social status.
And then it was talked about the different models and systems there are implemented, such as TQM (total quality management) and Keizen, that I particularly find very interesting and are models followed all around the world. In Colombia important companies as the Nacional de Chocolates implements some of these systems and in Germany it could be said that almost all the important companies implement at least one of the models.
In Germany it is so important that there is one subject called “Production management” and many of the core lessons are on Japanese systems. In that class the teacher Ms. Iris Hausladen, made a lot of emphasis on the 5 Ss concept, which is:
- Seiketsu (Standarize)
- Shitsuke (Self-discipline)
- Seiso (Keep clean)
- Seiton (Systematic order)
- Seiri (Sort out)
Those concepts represent in a way values that are important for the Japanese culture and play an important role not only at work but in their personal lives too.
South Korea
South Korea is another well-built country economically and with a strong business culture, that somehow has been influenced by the Japanese Model.
It’s capital is Seoul and it has a population of around 48 millions. The government type is a Republic.
With the religions, one of the main facts is the role of Christianity, being the most Christian country in the region. But of course Asian religions can be found there such as Buddhism, Confucianism, Shamanism and Chondogyo.
Considering its economy, the industry plays a huge role and it focus on the electronic and electrical products, motor vehicles with recognized companies as Daewo and Hyundai, shipbuilding, industrial machinery and telecommunications.
Its trade is mainly concentrated with countries in the area as Japan and China, and then with the Arabic peninsula as one of its main suppliers because of oil.
One of the most critical issues is the conflict with North Korea, since they were divided through the parallel 38 and the constitution of the two different governments since 1948. Here the question is if one day it would be possible to be just one country again.
(Photo taken from Getty Images. "South Korea, Seoul, Gyeongbokgung Royal Palace garden in autumn" by Andrea Pistolesi.)
Concerning the management model, according to the presentation, Korea was a Japanese colony for 36 years and shares somehow a cultural background, which has made it easier for them to develop a pretty similar model.
Still some of the main differences are that in Korea employees tend to change jobs freely; the top Management makes the important decisions by itself and is likely to be authoritarian and they are not so involved in environmental analysis as the Japanese.
In Korea the important and large companies follow usually the model of Chaebol, which means that they are run by family members and they give a huge importance and respect to the family heritage. They are somehow as strong as the Keiretsus in Japan (the business conglomerates).
Vietnam
Concerning Vietnam we had the opportunity hear the presentation of María Alejandra Gonzalez-Perez, who actually has been there.
The general information of Vietnam is that it is a Communist State, which capital is Hanoi since 1995 and whose population is of around 86 million people.
Before defining Hanoi as its capital, Saigon, renamed Ho Chi Minh City, was the capital.
It has a long story of domination, first from the Chinese, who were there from 111BC till 936 AD, and then from the French, who were there in the 19th and 20th centuries.
(Photo taken from Getty Images. "Vietnamese Masks" by Frans Lemmens.)
In the history of Vietnam, there is a very important person, who shaped the country to what it is today. That was Ho Chi Minh, born in 1890 and who died in 1969.
He was an important thinker and a huge influence for communist countries.
Ho Chi Minh was very smart and he lived and studied in France, where he became too involved in politics and actually was one of the founders of the French Communist Party in 1920. Later on the Second World War started and he creates a guerrilla (Vietminh) in Vietnam, this guerrilla received support from the URSS. And after the Hiroshima and Nagasaki bombs the Vietminh managed to take over and become one of the leaders of the country.
Lately, one of the most discussed topics is the economic recession Japan is being facing along other countries in the world; still the case of Japan is definitely unique and critical because of the significant contraction that its economy is likely to face during this year.
In Japan’s history there had been two major economic changes, one being the Meiji Restoration [1] that brought a modernization and industrialization wave to the country, and then the period after the Second World War [2] which democratized the Japanese economy and society and finally all the different improvements of the industries, the investment and the exportations placed Japan as the second economy of the world. However, during these growth and expansion periods not everything has been easy and perfect. There were some sorts of weakening moments for the economy that they manage to pass through smoothly [3] until their “loss decade” in the 90’s were Japan start facing economically something without precedents and that harmed many of their strengths.
The “lost decade” was mainly due to a banking / financial crisis Japan suffered in the nineties until the beginning of the new century, which is also taken as an example for the current financial crisis in the USA and Europe (Nakamae, 2008). The crisis began because of the accumulation of bad loans in the banks that were also backed by dreadful collaterals [4], and financially it caused that the value of the assets deteriorate fast, the financial institutions had a deficient capital and couldn’t make new loans and the shareholders saw their equity went down (Nakamae, 2008).
The forecast for this year’s Real GDP growth is negative for Japan. According to the Economic Intelligence Unit (EIU), it is likely to face a decrease of around 6,3%, being the worst year for Japan. In the same forecast they start talking about a positive growth [5] the next three following years, but that growth is minimal and won’t be able to recover efficiently the economy. Besides the GDP, two other macroeconomic facts that generate concern among the economic specialists are the deflation Japan may be facing the next two years and the exchange rates of the Yen ¥ per US dollar $ and per Euro €, what is causing a revaluation and in economic terms decreases the competitiveness of Japanese exports, and may increase their imports [6]. With these numbers, specialists keep on saying that the economy of Japan seems each time more troubling and as the worst of the world, even worse than the USA where the crisis started (The EIU, 2009).
So the questions start pumping and the origins of that situation come from different perspectives. The most common to hear in the news, name it German, British, Colombian news [7], is that Japan is more affected because of its huge dependence on exports, but in the Economist, they consider it as a factor but not as the most relevant one. On its article “The incredible shrinking economy” from April 2nd, 2009 they stated: “The share of exports in Japan’s GDP is much smaller than in Germany or China and until recently was on a par with that in America. During the ten years to 2001, net exports contributed nothing to Japan’s GDP growth. Then exports did surge, from 11% of GDP to 17% last year.”
According to the article “The incredible shrinking economy” the problem lays in the Japanese exporters’ behavior, saying that: “Japanese exporters expanded capacity in the belief that the Yen would stay low and global demand remain strong, resulting in a huge misallocation of resources.” Moreover, the article also presents the analysis of the economist of Macquarie Securities [10] Richard Jerram, who says that the exports are not only falling due to a decrease of the demand, but as a result of the temporary close of the plants, seeking to get rid of excess inventory. For example, at the beginning of the year the Japanese vehicle production decreased in a 50% while de car sales globally shrink about 25%. At the same time, Mr. Jerrams says this trend is more likely to end by June, what may bring a GDP growth.
Furthermore, the exports are only one side of the problem. Another topic that generates concern is the negativism among the manufactures. The Bank of Japan (BoJ) makes the Tankan survey [11] and this year it reflects the lack of optimism and the way the crisis has affected the economy. This downbeat feeling is more likely to affect the job market in Japan, which turns into an enormous damage for the internal market. Like that, the economy with an international market with low imports and the internal one with less consumption can only become a disaster.
It should also be added the pressure the government may be feeling right now. In the past days the government announced a stimulus package of USD 99 billions that would represent a 2% of their GDP, that according the Prime Minister Mr. Taro Aso [12] would be for a support plan with job security, help for temporary workers in order to grant them the benefits full-time employees, program for unemployment, improvement of the healthcare, investments in infrastructure and environmentally friendly technologies, and subsidies for local governments (The EIU, 2009). The political analysts from the EIU mentioned how sensitive the feeling towards the politic leaders is and how a bad management of the packages would directly affect the credibility of the government and may push for elections way sooner that the planned General Election for September. Something the Prime Minister and its party don’t want. And the analysts are on that very critical and pessimists, since according to them, Japan has not always managed to use its public spending efficiently. Another concern around this stimulus is the reduction of taxes’ revenue, as the economy contracts leaving the government with a less fiscal strength and reaction margin.
The other weakness for the Japanese government according to its fiscal health is the public debt that according to the EIU is around 180% of the GDP right now, and according to the OECD it’s possible that next year it will reach 200% of the GDP.
(Image taken from the Economist. And Illustration from Claudio Munoz.)Despite of the crisis and the bad economic outlook that is found everywhere about Japan, it is important to highlight the good things that Japan also has. Through the years they’ve been able to recover for horrible things as the Second World War and all the mess it left and they got over their “lost decade”, so an economic crisis won’t stop them. The Japanese people work hard for their things and have commitment in all activities they undertake, what makes them a very competitive population. These features have helped them become the most qualified work force in the world (Roldán, 2009).
As a culture based on Confucianism’s values they are extremely organized, they have a saving culture[15], discipline and perseverance among others; values that help them overcome any difficulty and challenges they encounter. Besides the kids are not spending a lot of time at school and at after-school activities and preparing themselves for the future to let an economy crisis swept their motivation and dreams away. Somehow they will found the way to make their country step on its two feet again.
[2] In this period the USA played an important role for the recovery with their help through the McArthur plan. That with the intentions of creating a favorable market for them and stop the advance of the socialists’ movements.
[3] One of the crises they overcame easier was the oil crisis in 1973.
[4] Almost all the collaterals were in the real estate market that had a collapse in its values.
[5] The forecasted growth is: for 2010 0,3%, 2011 1% and 2012 1,1%.
[6] In the EIU inflation forecasted for 2009 is -1,5% and for 2010 -0,3% and the Exchange rate for 2009 is 94 ¥/$ and 92,5 ¥/USD in 2010. According to the comments during the class “Asia Pacific Studies” at the University EAFIT, it was commented by the Teacher that the ideal exchange rate for Japanese exporters is between 110/120 ¥/USD.
[7] By German News it is meant the Deutsche Welle and the Newspaper Spiegel, by British news the BBC and by Colombian news: El Colombiano, La Republica, El Tiempo, RCN and Caracol.
[8] Statistics from the Japanese Ministry of Finance found at EIU:
Month Sep. 08 Oct. 08 Nov. O8 Dec. O8 Jan. 09 Feb. 09
Exports 1,5 -7,9 -26,7 -35 -45,7 -49,4%
Imports 28,8 7,4 -14,4 -21,5 -31,9 -23%
[9] The cars’ industry is probably the most affected one in the whole world during this crisis. And Japan as Germany and even the USA as the huge leaders and producers of cars are having lots of critical issues and need to preserve this industry that is a key element of their economies.
[10] It is a consulting firm on financial markets. It also has a subsidiary in Japan, where they offer different financial analysis.
[11] See the results of the Tankan Survey at: http://www.boj.or.jp/en/type/stat/boj_stat/tk/yoshi/tk0903.htm One future to take into the account in the analyses from the EIU in this survey is the index of -58 for large manufacturing firms, the cut of investment in a 20% and the reduction of salaries and jobs.
[12] The Prime Minister belongs to the Liberal Democratic Party and started his period on September 24th 2008, pretty much around the time when the financial crisis started for the USA.
[13] When we mention the the older population we mean people over 60 years old, that actually account 3/5 of the Japanese saving market (The Economist, 2009). This group is also known as the “dankai” generation and was the babies born during the postwar between 1947 and 1949, they started retiring around 2007 and will receive a huge amount of money, making their demand a core stone for Japanese economy. (Japanese Market, document) In order to profit from these situation, the challenge for Japan comes in improving the pension system and the future nursing care, which are the main concern for this population, and makes them retain their savings and not move their consume (The Economist, 2009) or use it abroad through trips or even moving completely to other countries (Roldán, 2009).
[14] The unemployment situation is getting out of hands for Japan. The Japan Research Institute forecasts a loss of 1,5 millions of jobs by 2010, changing the unemployment rate of 2008 of 4% to 6% (The Economist, 2009). It is also vital, to control the part time jobs and the needs of this group for further education and other support policies, as well as the immigrant workers that with a population growing older each time is becoming more important for the economic structure of the country (The Economist, 2009).
[15] People in Japan don’t spend Money without thinking on what they are buying and they have the custom of saving some of their earnings. This is also reflected in its reserves of foreign exchange and gold. According to the CIA’s World Factbook, on December 2007 Japan has USD 954,1 billions, being like that the second country in the world with the best international reserves after China.
[16] Japan is strong in the world market with technologies for the iPod and Boing (Landry, 2009) and entertainment technology with Nintendo and Sony’s Playstation.
References:
1. The Economist. 2009. Not regular and not wanted: Japan’s floating workforce is particularly vulnerable in the downturn, February 5th. http://www.economist.com/. Accessed 15 April 2009.
2. The Economist. 2009. Veiled in the darkness: Dreadful economic results in Japan suggest that things will only get gloomier, February 16th. http://www.economist.com/. Accessed 15 April 2009.
3. The Economist. 2009. The incredible shrinking economy: Japan is in danger of suffering not one but two lost decades, April 2nd. http://www.economist.com/. Accessed 15 April 2009.
4. The Economist. 2009. Under pressure: East Asia has been hard-hit by the global economic slowdown, April 14th. http://www.economist.com/. Accessed 15 April 2009.
5. Gonzales-Perez, M. A. 2009. Presentation "South East Asia" part of the subject Organizations and Cultures at the University EAFIT
6. Hausladen, I. 2007. Class "Production Management" at the University HHL, Leipzig
7. Landry, J.T. 2009. Reviews: Choose and Focus Japanese Business Strategies for the 21st Century. Harvard Business Review: 30
8. Restrepo, M.C. & Rodas J.M. & Saldarriaga L.F. 2009. Presentation "East Asia" part of the subject Organizations and Cultures at the University EAFIT
9. Roldán, A. 2009. Class "Asia Pacific Studies", second module at the University EAFIT
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