What does the Panasonic case teach you about the relationship between societal culture and business success?

Panasonic and Japan’s Changing Culture

Closing case: Panasonic and Japan’s Changing Culture
Established in 1920, the consumer electronics giant Panasonic was at the forefront of the rise of Japan to the status of major economic power during the 1970s and 1980s (before 2009 Panasonic was known as Matsushita). Like many other long-standing Japanese businesses, Panasonic was regarded as a bastion of traditional Japanese values based on strong group identification, reciprocal obligations, and loyalty to the company. Several commentators attributed Panasonic’s success, and that of the Japanese economy, to the existence of Confucian values in the workplace. At Panasonic, employees were taken care of by the company from “cradle to the grave.” Panasonic provided them with a wide range of benefits including cheap housing, guaranteed lifetime employment, seniority-based pay systems, and generous retirement bonuses. In return, Panasonic expected, and got, loyalty and hard work from its employees. To Japan’s postwar generation, struggling to recover from the humiliation of defeat, it seemed like a fair bargain. The employees worked hard for the greater good of Panasonic, and Panasonic reciprocated by bestowing “blessings” on employees.
However, culture does not stay constant. According to some observers, the generation born after 1964 lacked the same commitment to traditional Japanese values as their parents. They grew up in a world that was richer, where Western ideas were beginning to make themselves felt, and where the possibilities seemed greater. They did not want to be tied to a company for life, to be a “salaryman.” These trends came to the fore in the 1990s when the Japanese economy entered a prolonged economic slump. As the decade progressed, one Japanese firm after another was forced to change its traditional ways of doing business. Slowly at first, troubled companies started to lay off older workers, effectively abandoning lifetime employment guarantees. As younger people saw this happening, they concluded that loyalty to a company might not be reciprocated, effectively undermining one of the central bargains made in postwar Japan.
Panasonic was one of the last companies to turn its back on Japanese traditions, but in 1998, after years of poor performance, it began to modify traditional practices. The principle agents of change were a group of managers who had extensive experience in Panasonic’s overseas operations, and included Kunio Nakamura, who became the chief executive of Panasonic in 2000.
First, Panasonic changed the pay scheme for its 11,000 managers. In the past, the traditional twice-a-year bonuses had been based almost entirely on seniority, but now Panasonic said they would be based on performance. In 1999, Panasonic announced this process would be made transparent; managers would be shown what their performance rankings were and how these fed into pay bonuses. As elementary as this might sound in the West, for Panasonic it represented the beginning of a revolution in human resource practices.
About the same time, Panasonic took aim at the lifetime employment system and the associated perks. Under the new system, recruits were given the choice of three employment options. First, they could sign on to the traditional option. Under this, they were eligible to live in subsidized company housing, go free to company-organized social events, and buy subsidized services such as banking from group companies. They also still would receive a retirement bonus equal to two years’ salary. Under a second scheme, employees could forgo the guaranteed retirement bonus in exchange for higher starting salaries and keep perks such as cheap company housing. Under a third scheme, they would lose both the retirement bonus and the subsidized services, but they would start at a still higher salary. In its first two years of operation, only 3 percent of recruits chose the third option—suggesting there is still a hankering for the traditional paternalistic relationship—but 41 percent took the second option.
In other ways Panasonic’s designs are grander still. As the company has moved into new industries such as software engineering and network communications technology, it has begun to sing the praises of democratization of employees, and it has sought to encourage individuality, initiative taking, and risk seeking among its younger employees. But while such changes may be easy to articulate, they are hard to implement. For all of its talk, Panasonic has been slow to dismantle its lifetime employment commitment to those hired under the traditional system. This was underlined in early 2001 when, in response to continued poor performance, Panasonic announced it would close 30 factories in Japan, cut 13,000 jobs including 1,000 management jobs, and sell a “huge amount of assets” over the next three years. While this seemed to indicate a final break with the lifetime employment system—it represented the first layoffs in the company’s history—the company also said unneeded management staff would not be fired but instead transferred to higher growth areas such as health care.
With so many of its managers a product of the old way of doing things, a skeptic might question the ability of the company to turn its intentions into a reality. As growth has slowed, Panasonic has had to cut back on its hiring, but its continued commitment to long-standing employees means that the average age of its workforce is rising. In the 1960s it was around 25; by the early 2000s it was 35, a trend that might counteract Panasonic’s attempts to revolutionize the workplace, for surely those who benefited from the old system will not give way easily to the new. Still, by the mid-2000s it was clear that Panasonic was making progress. After significant losses in 2002, the company broke even in 2003 and started to make profits again in 2004. New growth drivers, such as sales of DVD equipment, helped, but so did the cultural and organizational changes that enabled the company to better exploit these new opportunities. The company continued to make solid profits until 2009, when, like most enterprises, it was hit by the global recession. Panasonic’s response to this showed how much the company had changed. The company quickly announced that it would close 27 plants and lay off 15,000 employees, half of them in Japan, signaling perhaps, the final end of its lifetime employment commitments.
Case Discussion Questions
1. What were the triggers of cultural change in Japan during the 1990s? How is cultural change starting to affect traditional values in Japan?
2. How might Japan’s changing culture influence the way Japanese businesses operate in the future? What are the potential implications of such changes for the Japanese economy?
3. How did traditional Japanese culture benefit Panasonic during the 1950s–1980s? Did traditional values become more of a liability during the 1990s and early 2000s? How so?
4. What is Panasonic trying to achieve with human resource changes it has announced? What are the impediments to successfully implementing these changes? What are the implications for Panasonic if (a) the changes are made quickly or (b) it takes years or even decades to fully implement the changes?
5. What does the Panasonic case teach you about the relationship between societal culture and business success?

Your responses should be well-rounded and analytical and should not just provide a conclusion or an opinion without explaining the reason for the choice. For full credit, you need to use the material from the week’s LECTURE, when responding to the questions. It is important that you incorporate the question into your response (i.e., summarize the case in the Summary) and explain the principle(s) or concept(s) from the text that underlies your judgment. Provide at least two references in APA format (in-text citations and references). Each answer should be double-spaced in 12 point.
Use the following headings and lengths in your paper:
1. Summary
a. In this section, you should summarize the case in one paragraph.
2. Questions
a. Number each question. Each specific question under the numbered Case Discussion Questions should be a paragraph in length because many Case Discussion Questions contain more than one question.
Be sure to restate each question before answering it.
b. Apply the concepts from the appropriate chapters in your answers.
3. References
a. Include citations throughout the paper and a reference page with your sources. Use APA style citations and references.
You might read the term globalization almost every day online, in the newspaper, or hear it in the news. Moreover, in each case, the word globalization might have a little different meaning. So for our purposes, what is globalization?
At a political and economic level, globalization is “the shift toward a more integrated and interdependent world economy. Globalization has several facets, including the globalization of markets and the globalization of production… The shift toward a more integrated and interdependent world economy” (p. 6).
Globalization is in progress and has been for thousands of years as the world economy moves to an integrated and interdependent one. Businesses must adapt by changing how they market, where they build, how they manage their human resources, and how they become more multicultural in their practices overall.
Sony consumer electronics, Starbucks’ coffee, and McDonald’s hamburgers are examples of this norm.
Yet there are still enough differences between cultures that most organizations need to ensure that their marketing strategies, products, and services are customized to a particular country. The largest global markets are not actually for consumer goods.
The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital). By doing this, companies hope to lower their overall cost structure or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively. Consider Boeing’s 777, a commercial jet airliner. Eight Japanese suppliers make parts for the fuselage, doors, and wings; a supplier in Singapore makes the doors for the nose landing gear; three suppliers in Italy manufacture wing flaps; and so on. In total, some 30 percent of the 777, by value, is built by foreign companies. For its most recent jet airliner, the 787, Boeing has pushed this trend even further, with some 65 percent of the total value of the aircraft scheduled to be outsourced to foreign companies, 35 percent of which will go to three major Japanese companies. (p. 8)
The United Nations & Other Supranational Organizations
We have seen the creation and rise in power of global economic institutions such as the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO), in addition to the United Nations (UN). These institutions are serving a purpose globally to facilitate global economic development.
Recently, two large macro factors seem to “underlie the trend toward greater globalization. First, the decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II and second, technological change. Why? Because, while the lowering of trade barriers made globalization of markets and production a theoretical possibility, technological change made it a tangible reality” (p. 14).
National Differences in Political Economy
Political and economic systems vary around the world. We have seen a strong move away from pure communism as it was created and implemented in the early to mid-20th century in the Soviet Union and China, as well as their satellite states, since the collapse of the Soviet Union toward the end of the last century. We still see a range of free market versus command economies. There is no economy where the government plays no role, but it serves less of a role in choosing what happens and in actual ownership or high regulation of economic activities in some nations and less of a role in others. We also see a range of political openness that ranges from full democracy in most Western states to totalitarianism in many Middle East nations, Korea, and China.
In consequence, democracy and totalitarianism are opposed, and at one extreme, to each other within the political dimension scope. Democracy refers to a political system where representatives at all levels are elected by the people. Totalitarianism is a “political system in which one person or political party exercises absolute control over all spheres of human life, and prohibits opposing political parties” (p. 47).
Pure market economies bring us supply and demand to determine the production of goods and services, including price and quantity. These elements cannot be planned and only market forces decide them. On the other side, in a pure command economy, the production of the same goods and services that a country produces, including the price and quantity, are determined by the government. In this case, resources are distributed according to the needs of the people and the society, and the government is the owner of the majority of productive businesses. Now, when an economy includes elements of both of them (market economy and command economy), it is called a mixed economy.
Each country has a risk of doing business that involves where the costs are determined by a combination of economic, political, and legal factors. Political risk is the chance that political issues cause serious adjustments in the business environment of a country that could affect, usually in a negative way, the business, the potential profits, and other general aspects of a business enterprise. On the other hand, economic risk is the possibility that economic negligence also causes important changes in the country’s business environment, and there is a legal risk associated with the possibility that partners may break a contract and convert intellectual property rights. In international joint ventures, an international company often partners with a local company where the international company brings technology and know-how, and the local company brings expertise in the local market. They are partners who each wish to learn from the other in order to one day compete with their current partner.
Property Rights
In many nations, the level of corruption is high and doing business requires companies to make bribes. Because this is common practice, is it acceptable? How about providing a facilitating payment to an official as may be customary? The United States has a law called the Foreign Corrupt Practices Act that makes it illegal to provide any form of payment to a foreign official to facilitate business of any kind. All companies must keep detailed records so it is obvious that no violations of this act have occurred.
When we look at value, we look at intellectual property rights such as “computer software, a screenplay, a music score, or the chemical formula for a new drug. Patents, copyrights, and trademarks establish ownership rights over intellectual property. A patent grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention. Copyrights are the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit. Trademarks are designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products (e.g., Christian Dior clothes). In the high-technology ‘knowledge’ economy of the 21st century, intellectual property has become an increasingly important source of economic value for businesses. Protecting intellectual property has also become increasingly problematic, particularly if it can be rendered in a digital form and then copied and distributed at very low cost via pirated CDs or over the Internet (e.g., computer software, music and video recordings)” (p. 56).
Differences in Culture
The fundamental building blocks of culture are “a system of values and norms that are shared among a group of people and that when taken together constitute a design for living. By values we mean abstract ideas about what a group believes to be good, right, and desirable. Put differently, values are shared assumptions about how things ought to be. By norms we mean the social rules and guidelines that prescribe appropriate behavior in particular situations. We shall use the term society to refer to a group of people who share a common set of values and norms. While a society may be equivalent to a country, some countries harbor several societies (i.e., they support multiple cultures), and some societies embrace more than one country” (p. 90).
Some cultures allow a great deal of social mobility and others allow little or none. Those that have low social



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Panasonic xxxxxx Japan’s Changing Culture

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Panasonic xxxxxx Japan’s Changing Culture

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