Crossing the Cultural Divide, Part 1

Editor’s Note: this is the first part of a two-part series. Here is the second part of Cross the Cultural Divide.

For Japan, Penetrating U.S. and Global Markets Means Making Changes

TOKYO — The struggle for domestic corporations in any country to become global means more than just selling tools or other products outside their national borders. Often it means a clash of cultures that forces a company to rethink the way it does business, adopting different, if not outright foreign, means of getting things done in order to compete internationally.

Alas, Electronic News (the print edition): we hardly knew ye!Nowhere is this more evident than in the globalization of Japanese semiconductor equipment companies. Just as American companies have eyed Japanese markets, Japanese companies seek to become competitive forces on the other side of the Pacific. As a result these companies have had to overcome the cultural and political obstacles that separate the United States and Japan.

“As a matter of fact, the conflicts in Japanese business culture in the United States started years ago,” observed Tetsuro Higashi, chief executive officer and president of Tokyo Electron Ltd. (TEL), the largest semiconductor tool maker in Japan and the second largest in the world. Those conflicts extend back 150 to 160 years ago, Higashi suggested. “Since then we have been struggling.”

But those struggles have paved the way for change on both sides of the Pacific. For many Japanese companies, competing in America and around the globe has meant changing the decision-making process.

Higashi observed what many others have also pointed out: that leadership and decision-making within American companies tends to follow a top-down model, whereas Japanese companies tend to be much more consensus based; the organization as a whole plays a much more central role than the chief executive officer.

“In Japan it takes a long time to make one decision,” Higashi said. “But once it is decided the action is very quick.” This lengthy time preceding action can frustrate U.S. companies and executives, he added.

 Technicians assemble memory testers at one of Advantest's production facilities outside of Tokyo.
Technicians assemble memory testers at one of Advantest's production facilities outside of Tokyo.

It can even frustrate Japanese executives at times, once they have become used to American decision-making methods, said Toshio Maruyama, executive managing director and senior vice president of Advantest Corp.’s Automated Test Equipment Sales division. Maruyama spent 10 years helping Advantest establish a presence in the United States before returning to work in Japan.

“I agree with the American style,” Maruyama said, adding that the Japanese style of decision making, with its potentially long and numerous meetings, can affect productivity.

Of course, in the volatile world of semiconductors, time is often a critical factor. This is why TEL has taken a cue from its U.S. brethren and reorganized its corporate structure. Three years ago, it split its executive functions from its board of directors; in Japan typically the board also handles what in the United States would be considered executive duties and powers. Now TEL’s board oversees the fundamental policies and long-term goals, while its executives set corporate strategy to achieve the company’s goals and handle day-to-day operations, Higashi explained.

TEL may have an historical edge over other Japanese companies when it comes to understanding American business practices. TEL was founded in 1963 as an electronics import/export company and had considerable dealings with U.S. suppliers and customers from the beginning.

“Compared to other Japanese companies, our understanding of the American way is much deeper, I think,” Higashi said.

Indeed, TEL has been a leader among Japanese in adopting the American custom of the stock option. “We are the first company in Japan to offer stock options through the entire (corporate) group,” not just the parent company, Higashi explained.

Of course, it only recently became legal for Japanese companies to offer stock options in this manner, but then it is a foreign concept after all. As Advantest’s Maruyama explained, until recently employee turnover in Japan was virtually nonexistent. The Japanese, both employer and employee, saw employment with a company as a lifetime commitment, which has made it difficult for Japanese companies establishing U.S. subsidiaries to adjust to American practices of merit and performance bonuses and stock options in order to attract qualified candidates.

“It’s a very tough job,” Maruyama admitted, “this is one bottleneck we are having.”

But that bottleneck may soon be opened. “We are getting better though,” he added, noting that this phenomenon was one of the reasons behind Advantest’s announcement last fall that its U.S. subsidiary, Advantest America, would be publicly traded on the New York Stock Exchange.

Editor’s Note: As explained at length elsewhere on this site, this is a news story written by me that originally appeared on the now-defunct Electronic News’ website, which is long gone. It’s former sister pub Electronic Design News (EDN) currently holds the copyright to all Electronic News copy (to the best of my knowledge). You can still see a copy of this story at EDN.

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