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Why Nissan and other Japanese companies faced difficulties in the 1990’s

Discuss about the Comparative Analysis of Socio Economic Development.

The environment is an important factor in the business success. Both the external and internal environment have diverse influences on the business activities. For any business to be successful, the management has to do a thorough analysis of the environment in which they are operating in. The external business environment directly influences the decisions made by the business. The goals and objectives set by business have to be aligned with the business strategy employed and have to be in consideration for the environment in which the business id is operating in (Sylvers, 2016). Many organizations have at one point or the other faced harsh business conditions that hamper the profitability of the company. Nissan just like any other organization has faced some difficulties before breaking into success. Today, Nissan is a big organization that has employed a lot of people and has a large clientele base that translates to great profit creation (Ghosn, 2016). Culture is a crucial factor in the success of business. Culture lays the foundation for business success by streamlining the procedures and processes to be followed to achieve a set goal. The purpose of this essay is to investigate why Nissan alongside other Japanese companies faced difficulties in the 1990’s in addition to explaining the differences and similarities between the Japanese and the French cultures. Also to what extent is the East Asian or European socio – economic model possible?

The era of the 1990’s had a lot of challenges to organizations in the Japanese economy. The difficulties were largely fuelled by the prevailing business conditions in addition to the Japanese culture.  A closer look at the Japanese economy showed that most companies in Japan were debt ridden and the little profit they could manage to generate was used to service the debts, for example, The Nissan Company. By the year 1999 when Renault and Nissan were forming a business relationship that involved buying stakes in each other’s organizations, Nissan had accumulated a debt of about $ 15 billion (Thao, 2015).

The reason behind this huge debt was attributed to Nissan’s reliance on international debt. Nissan heavily relied on loan capital to finance its growth domestically and internationally (Alpert, 2014). Though the loans are taken for a right course, servicing the loans eats much of the profit generated by these companies. Most organizations in Japan relied on loans for growth in the 1990’s, and this led to pressure from the financing institutions. One crucial factor is that the companies were over borrowing and this could have led to the fall of the economy. An economy cannot survive on huge debts as the amount of money supplying in the economy is little, and the companies were not meeting their objectives and goals. In a nutshell, the Japanese economy faced an increase in the number of loans taken leaving a little cash in the economy to sustain the development of companies such as Nissan.

Individualism versus collectivism

The Japanese culture is another reason that led to difficulties in the Japanese economy. The Japanese common culture was a cause for many problems for the Japanese companies. The collective culture of the Japanese involves doing things as a group and making decisions that favor other people. The Japanese stick together and eat together, work together and travel as a group. The feeling of being part of a group gives the Japanese joy, happiness and the feeling of oneness. The culture is traced from the rich history of the Japanese people from the SAKOKU policy. The SAKOKU policy has aided the creation and development of the group-oriented culture. The Japanese organizations have integrated the Japanese culture in their day to day activities and running of the organization. The Japanese prefer to mix business with culture and have included cultural aspects in every business dealing with elements such as gifts during business meetings.

The management of Japanese organizations in the 1990’s lacked the courage and the knowledge to make appropriate business decisions to avert difficult business situations. For companies like Nissan, the management did not have the adequate knowledge and experience to make decisions such as making workers redundant and cutting down the costs of production. According to the Japanese, a decision such as redundancy was not acceptable and did not exist as the decisions would affect the cohesion of the group. Most Japanese companies had many employees who were not adding any value to the organization. Redundancies increase the cost of production and consequently reduce the profits made by the companies. The Japanese culture promoted the group orientation which affects the efficiency of policies that nay help the organizations during harsh economic conditions. The Japanese culture thus is one of the reasons as to why Nissan and other Japanese companies got into difficulties during the 1990’s.

Though the French culture is individualistic while the Japanese are collectivists, the two cultures share a similarity in power distance. The French and the Japanese cultures are associated with high power distances. Those in power are believed to have rightly inherited it and that the subordinates are supposed to take and follow directions promptly from someone in power. Though the French culture is highly individualistic, there is an exception in the power distance (McLain, 2016). The French and the Japanese are believed to be loyal to each other and especially to the individuals in power. In the Japanese, the culture of collectivism drives the people towards high power distances as individuals do not want to disappoint the society by going against a leader’s wishes, opinions and directives in particular.

Low-context versus high-context communication styles

The high power distance in this cultures is believed to drive these groups towards the realization of the set goals and objectives in the society and an organization such as the Nissan. For example, Carlos Ghosn’s success at implementing the Anglo-Saxon model can be attributed to the fact that the Japanese are associated with high power distance. Carlos adopted the French culture and successfully used it to navigate his way into taking Nissan from its debt-ridden state to a profitable company today (Ghosn, 2014). If the Japanese were not associated with high power distance, Carlos Ghosn would have found it much difficult to impose the policies and strategies he had such as on redundancy and cost reduction. Though the Japanese are collectivists and the French are individualists, it was much easier for Carlos Ghosn due to the similarity of high power distance between the two cultures. The Japanese and the French accept a hierarchical order in which every member of the society has a place and needs little or no justification.

One clear difference between these two cultures is the collectivist and individualistic nature of these two cultures. For instance, the French are associated with a high individualistic culture while the Japanese are associated with a high collectivism culture. The Japanese culture involves group orientation with much emphasis on group and its interests. The Japanese culture focuses on shared interest in various aspects of the society in which each member of the group has a priority to the group first and not themselves (Brewer and Ya-Ru 2007). In a nutshell, the Japanese aim at meeting the objectives and needs of the group first and aim at not disappointing the group at any cost. On the other hand, the French culture is highly individualistic with much emphasis on individual gains and well-being. In the French individualistic culture, the priority of people is about themselves and not the group as in the Japanese culture (Elliot, Katagiri and Sawai, 2012). Individuals in these type of culture lack the group mentality and place a high value on personal goals and achievements rather than that of a group. In individualistic cultures, the relationship between people is on convenience with little loyalty from both parties.

The individualistic cultures i.e. the French prefer low-context communication while high-context culture relates to collectivism cultures i.e. the Japanese. The low-context culture involves direct communication that is precise and specific and direct. In the individualistic cultures, the low context communication style is used to remove any possibilities that can lead to conflict between the parties. In an individualistic culture such as that of the French, the people form relationships that only last for short periods of time thus the need for honest communication. The low-context communication style is directed at content delivery and little regard for relationship dimensions (Kittler, Rygl and Mackinnon, 2011). The low-context culture places little importance on the body language of the speaker, the tone of the speaker and other communication elements such as the use of gestures. In low-context cultures, the emphasis is placed on factual information as facts are more reliable than intuition during making decisions. The messages are explicit, concise plus direct as the members of an individualistic culture place more importance on goals and objectives rather than relationships. In the individualistic culture, the primary method of learning involves following other societal members directions plus explanations. 

On the other hand, the Japanese have a high context communication style for their collectivism culture. The high-context communication style involves the use of contextual elements in communication. Contextual communication elements such as body language and the speaker’s tone are mostly used by members of a collectivism culture i.e. the Japanese. One important factor to note is that members of high-context culture form relationships that last for an extended period. In contrast to the low-context cultures that form relationships that last for short periods of time, in high-context cultures, the relationships are built on shared thoughts and goals thus making them last. It is critical to note that the high-context communication style is suitable for the group-oriented societies such as the Japanese.

 The high-context communication style is developed as a result of extended interactions for many years between the members. The Japanese people spend most of their time and work in groups thus the cohesion is developed that leads to the members knowing the rules are, how they think and behave and thus, as a result, the rules do not have to be explicitly stated. The high context cultures are not easy to navigate, and thus it requires time and skills to form long lasting relationships to be able to understand the unwritten rules of the culture (Pfanner, 2015). The high-context cultures are characterized by the basic use of non-verbal communication techniques to relay meaningful information through the use of facial expressions, the tone of voice and movement of the eye. In the Japanese culture, the situation, members of the society and the non-verbal elements are more important than the actual information being relayed. In the high context cultures, the emphasis is placed on interpersonal relationships between the members of the community.

The Renault-Nissan alliance brings a lot of aspects to light with regards to socio-economic models with a particular interest in the East Asian socio-economic model and the European socio-economic model. On the subject of the East Asian socio-economic model, the Renault-Nissan alliance can be used to depict the socio-economic conditions. Economic growth plus high living standards in addition to the good working conditions represent the socio-economic growth (Rose and Harrisson, 2007). Though the East Asia model can still be depicted in some countries and organizations, the European model has been manifesting itself as a force to reckon with due to the influence it exerts on the East Asia socio-economic model. Much has been documented on the Renault-Nissan alliance but one point that stands out is that the influence of Renault is what salvaged Nissan from the ashes (Penissat, 2015). The European model is much more prominent than the East Asian model as Nissan is a proof of the European socio-economic model (Tsaurkubule, 2014). The East Asian model comprises of a collectivism culture that limits the model in policy efficiency and implementation. The European model is result-oriented and thus to a larger extent in the light of Renault-Nissan alliance the European model can be spoken of highly.

Conclusion

In conclusion, the Renault-Nissan alliance resulted in positive changes for the Nissan Company. Carlos Ghosn’s cultural background together with the business strategies and economic policies greatly helped the organization to overcome the debts and become profitable. Collectivist and individualistic cultures have varying differences and similarities amongst them. One common similarity that stands out is the high power distance especially amongst the Japanese and the French. Though some similarities may appear the differences are great and the cultural practices in the communities are different to suit the values and morals held by the community.

Reference

Alpert, L. I. (2014, April 5). Ghosn Says Renault-Nissan Alliance on Track in Russia. Wall Street Journal (Online). p. 1.

Brewer, M. B., & Ya-Ru, C. (2007). Where (Who) Are Collectives in Collectivism? Toward Conceptual Clarification of Individualism and Collectivism. Psychological Review, 114(1), 133-151.

Elliott, A., Katagiri, M., & Sawai, A. (2012). The New Individualism and Contemporary Japan: Theoretical Avenues and the Japanese New Individualist Path. Journal For The Theory Of Social Behaviour, 42(4), 425-443.

Ghosn, C. (2014). Our Differences Are Many, Our Potential Is Great. Vital Speeches Of The Day, 80(12), 390-391.

Ghosn, C. (2016). Rather Than Fear the Disruption, The Auto Industry Must Embrace It. Vital Speeches Of The Day, 82(5), 145-146.

Kittler, M. G., Rygl, D., & Mackinnon, A. (2011). Special Review Article: Beyond culture or beyond control? Reviewing the use of Hall’s high-/low-context concept. International Journal Of Cross Cultural Management, 11(1), 63-82

McLain, S. (2016, October 20). Carlos Ghosn to Hold Chairman Roles at Nissan and Mitsubishi. Wall Street Journal - Online Edition. p. 1.

Penissat, E., & Rowell, J. (2015). The Creation of a European Socio-economic Classification: Limits of Expert-driven Statistical Integration. Journal Of European Integration, 37(2), 281-297

Pfanner, E. (2015, May 14). Renault Ghosn Defends Global Auto Partnerships. Wall Street Journal (Online). p. 1.

Pfanner, E. (2015, December 16). Nissan, Renault to Tighten Alliance Without Merger. Wall Street Journal (Online). p. 1.

Renault-Nissan infotainment is open-source. (2015). Automotive Engineer, 40(3), 5.

Rose, D., & Harrison, E. (2007). The European Socio-Economic Classification: A New Social Class Schema For Comparative European Research. European Societies, 9(3), 459-490.

Sylvers, E. (2016, October 20). Nissan-Renault Chief’s Pay May Hit Big Leagues. Wall Street Journal - Online Edition. p. 1.

Thao, H. (2015, May 6). Renault-Nissan Alliance Needs to Drive in Same Direction. Wall Street Journal - Eastern Edition. p. C14.

Tsaurkubule, Z. (2014). Comparative Analysis of Socio-Economic Development Of The Baltic States In The Context Of European Integration. Professional Studies: Theory & Practice / Profesines Studijos: Teorija Ir Praktika, (14), 279-287.

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