JCSM Shareware Collection 1993 November

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BUSINESS CUSTOMS AND PRACTICES An understanding of and sensitivity to Japanese business and social practices is of great importance in establishing and maintaining strong and successful business relationships in Japan. Many Americans may assume that because meetings and correspondence are carried out in English, Western rules apply. While Japanese business executives do not expect foreigners to be fully knowledgeable about all business and social customs, you will find that accommodation to such customs and practices is well worth the effort. Remember, you are not just trying to sell your product, but also the image of your company and, to a large degree, yourself. Showing understanding and sensitivity will only help in your efforts to succeed in Japan and will demonstrate to your potential customers your seriousness about the market. Japanese business executives place considerable emphasis on face-to-face contact. A personal call on a potential business partner based on an introduction will be more effective than initiating contact by a letter or a fax. The "cold approach" is definitely not the best approach in Japan. Time and time again, American firms that make such overtures find that the Japanese companies they have contacted do not reply. Rather, an introduction by an intermediary who holds significant status is of tremendous assistance in establishing business contacts and cannot be overemphasized. Initial contacts between Japanese firms are usually formal and made at the executive level, while more detailed negotiations are often carried out at the working level. The main purpose of a first meeting is to get acquainted, establish the broad interest of the calling party, and allow both sides an opportunity to access each other to determine whether or not more substantive discussions are desirable. Do not expect to have a contract signed by the time you leave the first meeting. Remember, the objective of your first few meetings is to establish rapport and trust between the two parties. A futile attempt to pressure your potential partner into a contract will only alienate. Business cards (meishi) are exchanged extensively in Japan and serve as a useful reference and record of contacts. The exchange of business cards, usually at the start of a meeting, helps to formalize the introduction process and establishes the status of the parties relative to each other and their place of business. You should attempt to familiarize yourself with the etiquette of exchanging cards, as well as other Japanese social practices. The traditional Japanese greeting is the bow, although most Japanese dealing with foreign business executives will expect to shake hands. A nod of the head or slight bow by a foreigner in acknowledgement of a Japanese bow is appreciated. Japanese business executives do not normally deal on a first name basis in business relationships, and initial business and social contacts are characterized by politeness and formality. One source of confusion in business communication may come from the Japanese language itself. The word "hai" means yes in Japanese but its usage varies. "Hai" is often used to mean "yes, I understand what you said" rather than "yes, I agree." It is usually safer to assume that a Japanese person is not making a decision but instead is acknowledging and understanding what has been said. Also, the Japanese language is less precise than English and allows the Japanese to be deliberately vague. The concept of saving or losing face is an important one, and the Japanese are able to avoid confrontation, embarrassing situations, and direct rejection by their use of indirect language. The Japanese rely heavily on nonverbal communication. They tend to look to nuances, inferences, and signals to convey intent. Thus, while American negotiators are inclined to focus on tactics and press for agreement as a negotiating objective, the Japanese side prefers to probe, feel out the other party, and be relatively certain of the other side's position before putting forward a proposal on which both sides can agree. Interpreters are widely used in business meetings between Japanese and foreign firms. While many Japanese business executives speak some English, the use of a good interpreter can avoid miscommunication. The effective use of an interpreter requires preparation, including the thorough briefing of the interpreter in advance on the background of the meeting, and on any technical aspects which may be covered in particular. Using an interpreter efficiently can make or break a potential business deal. Always bring your own interpreter, even if the Japanese side is supplying one and even if the Japanese side speaks English as well. Try to always use the same interpreter. Have the interpreter debrief you after the meeting on his/her impression of nonverbal signals and the mood of the meeting, and conversation among members of the Japanese side. After a meeting (or trade show, if applicable), go through the business cards and other information that you have collected. Have the interpreter translate the cards not already translated and clarify those that are, especially titles. Get the interpreter's impression on who is in charge, whether the people you have met have the ability to make decisions, and what the next move of the Japanese side may be. Speak slowly and clearly, avoid idioms or slang that may be difficult to translate, and look at your Japanese counterparts, not the interpreter, when speaking. The group decision-making process which is universal in Japan may make it impossible to receive a prompt response. The Japanese negotiator represents a group, and until internal agreement has been reached on issues under discussion, no commitment can be made. For this reason, you should not expect an immediate answer, but should recognize that negotiations normally extend over a long period of time. It takes a longer time to cultivate business relationships in Japan than in the United States. American business executives coming to Japan expecting to settle their business in just a few days often depart in frustration, having made no progress. The Japanese approach business negotiations in a tentative manner, developing a relationship in stages: first, a limited arrangement; then, if the relationship is mutually satisfactory, it may be expanded into a broader, more binding agreement. Since Japanese are accustomed to international business dealings, the foreign preference for more formal and structured contractual obligations is recognized. Therefore, contracts have become a universally accepted practice in foreign trade. However, Japanese business executives emphasize good faith over legal safeguards in business relationships and have little confidence in detailed contracts which attempt to cover all possible contingencies. The Japanese preference is for broad agreements and mutual understanding, so that when problems arise they can be handled flexibly on a case-by-case basis. Thus, discussions with Japanese entities should be comprehensive. Before entering into a contractual agreement, both sides should thoroughly and openly discuss the arrangement and their expectations to avoid misunderstandings later. Japanese prefer the security of long-term, reliable, and exclusive business arrangements. Once a commitment is made, it is for the long term, and it becomes quite difficult to break an agreement and find a new Japanese business partner. Although all forms of payment are in general use in international transactions, an irrevocable letter of credit payable on sight is the most common form of settlement. Deferred payments in transactions with U.S. firms are comparatively rare. With Japan, trade settlements are customarily done on the basis of promissory notes, typically 60 to 120 days, and banks will provide short-term financing through discounting and rollover of notes. In the instance of a commercial dispute settlement, the Japanese legal system tends to be slower and more cumbersome than its U.S. counterpart. In general, Japanese companies are more apt to seek out-of-court dispute settlements and avoid judicial proceedings. The following are typical Japanese negotiating tactics: (1) The Japanese usually respond to the other party's proposal -- rather than taking the initiative. (2) The Japanese tend to single out specific elements and negotiate one element at a time -- rather than packaging a deal. (3) The Japanese tend to maintain a relatively quiet response mode at meetings after stating their official position. They usually allow the other party enough maneuverability in order for the other party to keep giving bit by bit. (4) Once a concession is made, it becomes the new baseline (without a counter-concession on their part) and they move on to the next item. Their strategy usually is to keep whittling away one concession at a time. (5) The Japanese use time and patience to wear down their opponent -- consciously planning on long, drawn out periods of successive meetings. (6) The Japanese negotiating team never has the authority to commit in a "give and take" type approach. They are usually only authorized to receive offers and communicate prior authorized consensus positions. (7) The Japanese tend to use the "bad guy" ploy extensively, that is, constantly referring to other organizations such as government agencies/authorities concerning requirements or required concessions. How to respond: (1) Do not expect rapid progress. (2) Learn to be quiet and accept long pauses in discussions. Out wait the Japanese until they respond constructively to your last proposal. (3) Do not make successive individual concessions -- insist on a package deal. (4) Do not make a follow-on proposal with further concessions until the Japanese respond to the current proposal with concessions on their part. Set an agenda for the next meeting accordingly. (5) Do not fall for the "cultural differences" ploy. Be polite but direct. You can expect the Japanese to understand Western business practices and culture. They should be prepared to compromise and accommodate on those issues which you identify as vital and absolutely essential. However, you should likewise show an appreciation of Japanese culture. This will help facilitate negotiations. (6) Keep records on concessions by both parties. (7) Have a fluent Japanese speaker present at negotiations to preclude private discussions during meetings and to insure the translations are accurate. (8) Negotiate from a position of strength and confidence. The Japanese do not respond positively to real or perceived weakness, nor do they respond to idle threats and intimidation.