Matsushita and Japan’s Changing Culture: Triggers, Economy

Triggers of cultural change in Japan

According to the given case, Matsushita was originally established as a bastion of traditional Japanese values such as group identification, reciprocal obligations, and loyalty to the company. However, cultural change in Japan happened during the 1990s due to two main triggers. Firstly, Japanese society gets richer at that time and the generation born after 1964 is influenced by Western ideas that they had greater opportunities in such a dynamic world than being tied themselves to a single company for life, to be a “salary-man”. The emergence of Western ideas was probably a part of the result of becoming global in 1961. The company entered the U.S market under the Panasonic brand name and expanded to the Europe in 1979. Secondly, due to an economic crisis arising in the 90s, Japanese companies had to make remarkable changes in its traditional ways of doing business such as laying off older workers, abandoning lifetime employment guarantees. The changes resulted in no more beliefs in what was called ‘loyalty to the company’ as such companies committed to their employees. In order to attract new and young generations in a freer, richer and individualistic world, Japanese firms were forced to make cultural changes which eventually affected traditional values in Japan. Traditional values based on strong group identification, reciprocal obligations and loyalty to the company no longer completely exists in Japanese firms. Cultural changes has influenced the perceptions of traditional workplace orientation that people tend to lack loyalty. Additionally, young people were given the choices of employment and got bonuses based on their performance. In the past, workers were employed with connections to family relationships. Since there were changes in Japanese culture, most of Japanese firms would hire people based on their characteristics. Employees would be more appealed to business culture compromises considered to be necessary. Reciprocal obligations and collectivism are being taken over by individualism.

The potential implications for the Japanese economy

As Japan’s changing culture has arisen, companies can no longer put their trust in employee loyalty. Group identification associated with loyalty is now a value of a bygone era. Employees are chasing the dream of working to live than living to work and thus they are more likely to put themselves above the company. Based on Maslow’s hierarchy of needs, a theory of motivation should be applied in any companies, especially when cultural changes are a concern. Traditionally, Japanese employees are equally offered the same benefits at the workplace as long as they are loyal to the company. However, after the most basic needs which are physiological needs (cheap housing), safety needs (guaranteed lifetime employment, seniority-based systems, generous retirement bonuses, etc.) have been fulfilled, people demand the need of interpersonal relationships, contributing as a part of groups. In fact, Japanese society has developed and become a wealthy nation that leads to changes in opinions, thinking and culture.

Maslow indicated that the need for respect or reputation precedes one’s self-esteem or dignity. The highest level in the hierarchy is realizing personal potential, self-fulfillment, seeking personal growth and peak experiences. Therefore, Japanese companies has to modify and update their operation system following the trend of individualism by designing incentive programs to promote individual performance rather than group performance. A transparent and appealing incentive will help to keep and motivate the creative youth assets in the company. Bonuses are paid based on the efficient performance individually, no longer exists as a gift for old employees. The lifetime policy has been gradually abandoned which open doors to many career opportunities for potential and talented job seekers.

Additionally, companies can flexibly reduce personnel and management costs which might be not necessary during the difficult periods. Furthermore, thinking globally is a popular concept mentioned recently in order to encourage businesses in daring to accept changes, identify opportunities to grow and face challenges. It is proven in the case that because of a slow action to dismantle its lifetime employment commitment to those hired under the traditional systems, Matsushita faced a continuous poor performance. Without changes, Japanese companies would be suffered from an obsolescence of the old system and uncompetitive globally.

The world is changing fast with the development of network communications and technology, Japanese business is also changing accordingly. Because the culture in Japan has been formed for thousand years, it will need time to make gradual changes. One CEO of a Japanese company faced a problem that a part of employees found the changes difficult to quickly adapt and accept: “We cannot possibly implement a merit-based pay and promotion system in Japan because our staff would reject it and quit”. It is also said in the case that in the first two years of Matsushita’s new operation, only 3 percent of recruits chose to have a high salary without retirement bonus and the subsidized services whereas 41 percent took the option of forgoing the guaranteed retirement bonus in exchange for cheap company housing and high salaries. Regional and global enterprises should be prepared for cultural sensitivities and other obstacles to stand in the way of the speed of reform. It can be easily seen that such changes have both positive and negative influence on Japan economy.

On the beneficial front, the more young, energetic and innovative employees there are in the company, the more creative thinking and ideas contributing to the growth of the company. Moreover, the changes boost the chances of competing globally by attracting not only local employees but also any talents in exchanging for career opportunities. As the results, high and new technologies are completely utilized by skillful workers which help to advance the production and efficiency. The fast business development makes the development of the whole country’s economy and quickly pull the country out of any recessions. The Japanese economy seems to be experiencing a remarkable transformation: keiretsu are replacing lifetime employment and the seniority system. The word keiretsu refers to a specific type of business partnership, alliances, or extended enterprise. Therefore, production facilities are easily shifted abroad and the main banking system is also changing because of deregulation and the globalization of financial markets. Young managers are now fascinated by keiretsu system rather than the family-owned enterprises. Firms of a keiretsu are associated through cross-shareholdings, which is to say that they can own small portions of equity in each other's businesses.

In summary, because of foreign pressure, more open financial markets, the country face more challenges and competitiveness. A small harmful effect of the changes which also can be concerned is the possibility of frequent changes in human resources systems. No more lifetime employment also means that people can freely decide to switch their workplace. In addition, it would be more difficult to build a team within an organization to handle collective tasks supposing that group identification faded from Japanese culture. In conclusion, I personally suggest Japanese companies should partially maintain the positive side of its traditional values by ways of pursuing suitable benefit and rewards policy for efficient workers, occasionally running team-building programs to connect employees within the company and creating a friendly working environment. Still, changes are crucial to develop and avoid becoming obsolete.

Stand-alone worldwide business divisions

With the great evolution of new industries such as software engineering and network communications technology, Matsushita was evolving and adopting a “start-up culture” to boost their business creativity and country’s economic prospects. This is also the biggest reason that makes Matsushita reorganized itself into stand-alone worldwide business divisions and made a transition from old business system to a more innovative system. Matsushita struggled to establish performance accountability with its outdated organizational structure in 2002. For instance, before current president Kazuhiro Tsuga took control of the organizations, the decline of such Japanese industrial giants as Sharp and Panasonic was often blamed on problems with Japanese corporate culture. Matsushita then replaced its organizational structure with 17 stand-alone business units internationally and focuses on a specific product sector. Matsushita realized that its stability and corporate loyalty was not necessary for innovation or creativity and no longer dominated its business values. The changes consequently helped Matsushita start to make profits again in 2004 and the following years after heavily being suffered from significant losses in 2002. In fact, not only Matsushita reorganized itself but also a considerable number of Japanese companies have undertaken important reforms that has been particularly fruitful in helping them benefit from such opportunities for growth.