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An Application of Japanese-Style Management to Latin American Countries

“Globalization and Customer Satisfaction”

The 15th Anniversary Congress of the Masters in Quality Engineering

Iberoamericana University

October 1 and 2, 2008

Nobuo KAWABE

(Waseda University)

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An Application of Japanese-Style Management to Latin American Countries

1. Characteristics of Japanese-Style Management

2. How and Why Did Japanese-Style Management Develop after WWII?

3. Competitiveness of Japanese Enterprises and the Toyota Production System

4. CS in Japan

5. Changes of Japanese Style Management

6. The Possibility of Japanese-Style Management in Latin American Countries

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1. Characteristics of Japanese-Style Management

(1) Three Pillars of Japanese-Style Management

・ Life-Time Employment (Life-Time Commitment)

・ Seniority System (Single Wage and Salary Track)

・ In-House Trade Union (Company Union)

(2) Collectivism and High Context

・ Participation in Decision-making Process

・ Rotation and Information Sharing

・ Economic Democratization (Equality of Employers and Employees)

・ The Reform of the Education System

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Comparative Business Systems

UK

USA

Asia

Japan

Generalists

Specialists

Operatives

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Market Structures in Japan and United States

United States Japan

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2. How and Why did Japanese-Style Management Develop after WWII?

1. Rice Growing Culture

2. Latecomer Effect

3. Democratization by the Occupation Army

4. High Economic Growth

5. Demographic Structure

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Demographic Structure of Japanese Male Workforce

65-

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

-24

Age65-

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

-24

Age65-

60-64

55-59

50-54

45-49

40-44

35-39

30-34

25-29

-24

Age

19851955 2005

３５ -３９

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3. Competitive Advantage of Japanese Companies and the Toyota Production System

1. The 2nd Industrial Revolution to the 3rd Industrial Revolution

2. Importance of the World Market (Individual Market)

3. Increasing Productivity and Improving Quality

4. Cooperative Society

5. The Toyota Production System

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Leader

Infrastructure Technology Market Business Transaction

　 　 Product 　 System 　

　 　 　 　 　 　

　 　 Machine Tools 　 　 　

UK CanalsTextile Machines

Large Mass Production

Market

　 　 Existing Family Small Lot/(wholesalers)

　 　 　 　 Less Frequent 　

　 　 　 　 　 　

　 　 Electrical Machines

　 　 　

USARailways/Steam Ships

Combustion Engines

NuclearMass Production

Hierarchy

　 Telegraph/Telephone

Chemicals FamilyMass Distribution

(Internalization)

　 　 　 　 　 (manufacturers)

　 　 　 　 　 　

　 　 　 　 　 　

JapanTelecommunication

MEPersonal

Flexible Production

Network

USA Jumbo Jets IT 　 Small Lot/ (retailers)

Europe

　 　 　 Frequent 　

The 2nd Industrial Revolution to the 3rd Industrial Revolution

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The Economic Principle of the 2nd Industrial RevolutionUnit Cost

Volume

Cost vs. Variety (Service)

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The 2nd Industrial Revolution to the 3rd Industrial Revolution

1. The Development of ME/IT

　・ Introduction of Industrial Robots and Machine 　　　　　 Tools

2. Family Market to Personal Market

　・ Flexible Production System

・ Small Lot and Frequent Delivery

3. Integration with Networking

　・ External Relations of Japanese Business 　　　 (Keiretsu and Outsourcing)

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Importance of the Global Market

１． The Development of the Personal Market

　　・ Changing concept of existing products

(Family use to personal use)

２． The Development of the Global Market

　　・ Responding to a variety of markets

　　・ Scale of economy based upon mass production

　　・ Importance of Emerging Market (BRICs)

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Employment and Training(Internal Labor Market)

1. Employment of New Graduates

・ Emphasizing character and personality more than profession

2. OJT

3. The Meaning of the Internal Labor Market

(1) Accumulation of Company-Specific Skills

(2) Fixed Cost

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Cooperative Social Systems１． Cooperation between Business and Government

　　・ Japan Inc.

２． Corporate Governance

　　・ Cooperation between Employers and Employees (In-house unions)

　　・ Less pressure from stock holders

３． Relationships among Companies (coexistence and co-prosperity)

　　・ Business Group (Stock Sharing and Interlocking Directorship)

　　・ Keiretsu 　　

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Increasing Productivity and Improving Quality

1. Introduction and Adaptation of American Management Technologies to the Japanese Situation

　　 1955 Establishment of the Japan Productivity Center

　　　　　　　　　 QC, IE, ZD, OR, MBO etc.

2. Development of the Quality Management Movement

　　 1949 Establishment of the Japan Union of Scientists and Engineers (JUSE)

　　 1950 A Series of Lectures by Dr. Deming

　　　　　　 Statistical Quality Management by Dr. Deming 　

　　

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The Toyota Production System

１． What is the Toyota Production System (TPS)

　　・“ Complete Elimination of Waste”

　　・ Just-in-Time: Kanban

　　・ Automation controlled by human-beings ： Multi-processes and stopping line by line worker’s judgment

　　 (Employee participation and management by employees)

　　・ Simultaneous attainment of quality, cost and delivery (Business system for the 3rd Industrial Revolution)

2. Cooperation among workers (linkage among processes)

3. Technological rationality and organizational rationality （ Workers’ Operational Objectives ）

4. Expansion of TPS into Sales and Services (TQC)

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The TPS and Customer Satisfaction (CS)

1. Market Orientation ・ Product out to market in2. Importance of After Service ・ Integration service with sales3. Providing Customers with More than They want4. Early Introduction of CSI ・ J.D. Power’s CSI and Japanese Automobile Companies in the 1980s5. Establishment of the CS Committee ・ Chairman was Mr. Shoichiro Toyoda (CEO) ・ Mental revolution of the company as whole

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4. CS in Japan

1. Competition of Products Quality to Service Quality2. Changes of Social Conditions ・ Economic activities and corporate management to emphasize : ・ consumers and customers ・ Increasing importance of consumers and customers than producers ・ CS management to satisfy customers are more than marketing 3. Measuring Customer Satisfaction as well as Expectation4. Corporate Level of Revolution to Improve Quality of Products and Services by Changing Consciousness of Bottom to Top

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The Development of CSI in Service Industries

1. CS Orientation of Japanese Companies ・“ Consumer is God” ・ Honda’s three joys (buying, selling and creating) 2. Background ・ Increasing importance of service industries (more than 70% of Japanese GDP) ・ Improving Productivity of Service Industries Is A Key for sustainable growth3. Problems of CS in the Japanese Service Industry ・ High quality and low productivity ・ Late introduction of IT in the service industries ・ Small-scale business units in the service industries ・ Services are traditionally free of charge

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Annual Growth Rate of Labor Productivities (%) (1995 to 2003)

Japan U.S. UK Germany

Service 0.8 2.3 1.3 0.9

Manufacturing 4.1 3.3 2.0 1.7

Source: OECD

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CS in the Service Industries

1. April 2007 Ministry of Economy and Industry ・ Report by Working Group on Innovations and Productivities in Service Industries ・ Application of IT (improvement of operations), ・ Development of CSI and introduction of scientific methods ・ Establishment of ADR organization ・ Improving quality of service by understanding the degree of CS2. May 2007 Establishment of the Council of Service Industry ・ Improvement of productivity ・ Prizes for quality service companies ・ Development of CSI and certification ・ Development of human resource3. December 2007 The First Selection of High-Service Companies ・ 6 criteria: global development, application of know-how from manufacturing, scientific and engineering approaches, high value added, contribution to regional community, and HRD

CS Portfolio by convenience store

5s

　 　 　

4 　 　 　

　 　　　　■ 　　　　　　　 　 ■ 　

3 　　　　　　　■ 　　■ 　　　　　　　　 ■ 　

　 　 　

2 　 　 　

　 　 　

1 　 　 　

1 2 3 4

Variety of merchandises

Manners and attitudes of store managers

Easy finding and clearness

Attractiveness of

merchandises

Price lines of merchandises

Evalu

ation of satisfaction

factors

Impacts on total customer satisfaction

good

bad

small big

Source: Hiromi Hidaka, “Strengthening of CS Management,” JEJ (Oct.5, 1991)

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1. Coming of the Third Industrial Revolution

(1) Coming of the information society

(2) Globalization

2. Indigenous Problems

(1) Coming of the aging society

(2) After effect of the collapse of the “bubble economy”

(3) Changing values of people

5. Changes of Japanese Style Management

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New Business Strategy

1. Advanced Technology Development and New Business

(1) Security of Production Property

(2) Establishment of Sales Channel

(3) Risk Hedging (product category and regions)

(4) Intellectual Property Management

2. Global Strategy

(1) Development of World Strategy (R&D, Production and Sales)

(2) Brand Strategy

(3) Production/Logistics Strategy

(4) Localization Strategy

(5) Entry Strategy (green fields, alliance and M&A)

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Lifetime Employment and Performance Based HRM

1. Employees are Human Resources: importance of individual persons

2. Social Responsibility of Enterprise is “Employment”

3. Cooperation and Loyalty to Company: big products need 10 to 20 years for development

4. Introduction of Performance (team) based HRM:

Abolition of Seniority System

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6. An Application of Japanese-Style Management to Latin American Countries

1. Japanese-Style Management Developed in the Catch-Up Process

2. Development of Cooperative Society

3. Imitation and Incremental Innovation

4. Use of Knowledge and Experience of Shop-Floor Workers (organizational learning)

5. Business Systems for the 3rd Industrial Revolution Simultaneous Achievement of Quality, Cost and Delivery (Services)