Wa, Guanxi and Inhwa: Managerial Principles of Japan, China and Korea

Wa, Guanxi and Inhwa: Managerial Principles of Japan, China and Korea

Wa, Guanxi, and Inhwa: Managerial Principle in Japan, China, and Korea I. Introduction: MANAGERIAL is an act of management in all business and organization to get the desired goals and objectives by inserting PRINCIPLES depends on the philosophies, behavior and culture of an organization. According to Jon P. Alston article, each society has its separate, distinctive philosophy which leads to specific behavior appropriate to the setting and having knowledge of their principles is not only helpful but also a critical success in dealing with people in business particularly in different countries.

Since organization is viewed as a system, management can consider this as an act to the organization to managing their resources including interaction to their environment (external). The management principles governing Japan, China and Korea are considered as an unavoidable challenge to the foreign investors when business ventures are materialized. These enormous market potential tend to determine the boundaries on how one may respond to the culture and philosophies of these countries. The institutions, including formal organizations (e. . , social, economic, and political bodies), and social norms and rules (North 1990; Scott 1995) are known to govern how individuals, firms, and governments behave. Studies across disciplines, including sociology, economics, and management, have noted how these institutions foster collusions among firms and between firms and local governments to create regional economic warlords (Walder 1995) and network capitalists (Boisot and Child 1996), thus twisting free product flows in the country.

Within the firm, these institutions command the way internal firm resources are valued and allocated (Hoskisson et al. 2000); outside the firm, these institutions define the complex firm-to-firm and firm-to-government relationships and changing marketplace (Lau, Tse, and Zhou 2002). This report aims to summarize the distinct business culture and philosophies of the aforementioned countries which are considered to have an economic influence in the global environment. The managerial principles represented by these countries are Wa, Guanxi, and InhWa, respectively.

II. Background of the Article In this context, it will discuss main managerial principle of Japan, China, and Korea namely Wa, Guanxi, and Inhwa. Wa refers to the value the Japanese place on group loyalty and consensus. It translates as the search for or the existence of mutual cooperation so a group’s member can devote their energies to attaining group goals. Guanxi, however, is considered as one of the major dynamics in Chinese society. The terms refer to special relationships two persons have with each other.

Lastly, Inhwa is a key principle of Korean business behavior which stresses the harmony of between unequal ranks. It refers to harmonious relationship of superior and subordinate relationship. In addition, the main principles of the said countries will be evaluated and compared against Philippine set up of doing business, i. e. , whether these principles are likewise practiced or applicable here in the Philippines and if this principles could draw favorable outcome based on the local way of managing business affairs. III. Summary of the Article * Management Principle in Japan (Wa)

Japan is the land of peace and harmony that continues to evolve in a positive unification of tradition and modernization. With its elaborate and colorful history and culture, Japan has formed a distinct model of hierarchy, honor and etiquette that is still reflected in many social and business practices today. If your organization is planning to conduct business with Japan, potential success depends upon an understanding of this culturally influenced protocol. Today, the most valued principle still alive in Japanese society is the concept of Wa.

It’s translated variously as “harmony,” “peace,” “reconciliation” and “unity,” and is generally seen by Japanese community as the most essential attribute of a successful personal or business relationship. The preservation of social harmony dates back to the first constitution in 604 AD and the teamwork needed when living and working on collective farms. In business terms, Wa is reflected in the avoidance of self-assertion and individualism and the preservation of good relationships despite differences in opinion. Which means that the members of the group are expected to submerge their individual goals in favor’s of the group.

The principle of Wa also governs the Japanese view of conflict. Confrontation destroys Wa and is to be avoided at all costs, while consensus is to be created and preserved. In Japan, it is a given that before the meeting begins, alternatives will have been considered, objections raised and the final decision made. These things are done quietly, through the exchange of memos and e-mails and hallway conversations. At the meeting, everyone expresses agreement with, and support for, the decision already made, and the person in charge moves forward with implementation.

The purpose of the Japanese business meeting is not to make a decision but to confirm the consensus of support for a decision already made. The Japanese party will see no need to meet and, in fact, will resist suggestions to meet until the general terms of the agreement have been decided upon through informal communications. The Japanese will view the meeting as a time to strengthen both personal and business relationships and as a ceremony where the parties demonstrate their mutual commitment to each other and to the success of the venture by formally signing the agreement.

Seating around a conference table is also according to status, with the senior person in the middle of the table facing the door. Efforts to enhance harmony and unity in a Japanese business relationship require that people act in accordance with and maintain each other’s proper standing and status. Business in Japan cannot begin until the exchange of business cards or ‘meishi’ has been completed, followed by a bow. Business cards are exchanged in large part so that each individual will immediately know the status of the other person. Use both hands to present your card, which should be printed in both languages.

On receiving your counterpart’s business card make a show of examining it carefully before placing it on the table. It is important to deal with another’s business card with care. From the Japanese perspective, mutual trust is imperative to the success of a business venture. They view conduct as being regulated primarily by the overall relationship, not by the wording of a contract. The establishment of personal relationship, bringing together two groups with common interest, allows Japanese to view contract as personal agreement that should be changed when condition change.

Consequently, the Japanese generally prefer loosely worded, open-ended contracts that allow for maximum flexibility. It is good business practice to engage in small talk before negotiations. Expect your Japanese counterpart to ask questions regarding your education, family and social life. More private questions are not acceptable. When Japanese negotiate a contract, they are negotiating an entire social and moral relationship that transcends the terms of the contract. In Japanese business protocol contracts are not necessarily final agreements or a sign that business in over.

In Japan, looking after partners or clients even after business is very important. Aftercare and long-term relationships are positively encouraged. The primary goal of contract negotiations for Japanese is often to preserve and enhance the Wa in the relationship rather than extract the most favorable terms from the other party. That basic understanding and appreciation of some of the cultural differences can prove invaluable in initiating, enhancing and continuing the business relationship and in minimizing misunderstandings.

The Japanese will notice and appreciate efforts to understand them. Based on the managerial principle of Japan, we should learn how to be patient. Spend extra time in non-business discussions, getting to know each other and more about each other’s company. Don’t rush to get down to business. Make an effort to strengthen the relationship for the sake of the relationship, not simply with an eye toward securing more favorable terms of an agreement. Someone who invests extra effort in strengthening the elationship with a Japanese business partner will likely be able to secure more advantageous terms from the Japanese partner who feels a greater level of trust and confidence, and can reasonably expect greater understanding and flexibility from that partner if unexpected business circumstances arise. Importance of Knowledge of Managerial Principle of Japan (Wa) As preparation for our future career as managers, there will come a time that we will meet people from different countries especially people from ASIAN nation.

Therefore, it’s very significant to have a full grasp of the managerial principles of Japan not only to have an idea on how to deal with these people but to build a long term relationship with them as well. As part of the global business community, we are aware of the fact that JAPAN is in the top list aside from America when it comes to business because of their high technology and innovative products. Therefore, we must have a better understanding of the business cultures and practices of Japan so that we can easily cope up with them. We can apply this as a guide when we are dealing with these people.

It gives us an opportunity to understand them. Knowing their culture makes communication and interaction easier. Aside from that, this broadens our knowledge on how to make your Company a successful one. This business cultures and practices of Japan can be a tool to upgrade the existing business settings here in our country. ADVANTAGES OF Wa * You are motivated to exert full effort and participate actively to the group to achieve its fullest potential to succeed. Reward system. * It promotes camaraderie because you are inspired to work for the success of the group as a whole.

There is a saying that two heads are better than one. * Your goal is the same with your group. You are in one direction since you embrace the company as if it is you. * It has better flow of communication of ideas and opinions within the group since decisions making is crucial, if there will be no consensus among its members. * Lifetime employment is possible. * Once you get their trust, it will be easily for you to have a business transaction with them. * Easy to deal with your business partner. * It gives you an opportunity to know more on the person that you’re dealing with.

That’s why it’s very important that your “meishi” or business card shall be professionally done. DISADVANTAGES OF Wa * It limits the business opportunities that others can offer. * It may cost a lot and it takes time to establish business relationship with Japanese. Application of Wa Principle in the local business set-up Our country is part of the business globalization. We are in the race of making it to the top by elevating the status of our economy and by expanding our venture horizon not only here in Asia but in the whole world as well.

That’s why we can’t deny the fact that large number of other nationality is now expanding their business and doing great here in our county like Japanese. We can often see them around the business community even before the world war 2 began. They’ve been here making money through business and for so many years that they’ve been here. We’ve learned to embrace some of their managerial principles and apply it in our business setting through the years. Some of the largest companies here are being managed by Japanese people like manufacturing, banks, insurance, entertainment, real estate, mining, and so on and so forth.

Some of us are working for them. Based on experience, some of our business practices are somewhat similar to them which mean we are able to apply their business principles. In order for us to build business relationship with other people especially for those people who are in significant position, some of us make an informal conversation with them at first to get more about that person. They go out in a bar or play golf. They send gifts or they eat outside. This makes them comfortable with each other. Using of calling card as a form of personal introduction to your potential business partners.

We usually have this in our pockets. This serves as a character reference. Dealing business with strangers is not encouraged here in our country. We don’t want to take risks for closing a business deal to someone who do not earn our trust. These are some of the managerial principle of Japan which are currently being seen in our local business set-up. * Management Principle in China (Guanxi) “I’ll scratch your back if you scratch mine” – Richard Burger (CEO, China Media Relation) China Media relation defines Guanxi as relationship of individuals having mutual benefits by exchanging favors.

Jon P. Alston, on the other hand defines Guanxi as special relationships have with each other which can be best translated as friendship with overtones of unlimited exchange of favors (Pye 1982, 88). Thus, if the need arise, a person will use his connection in order to get his objective for the purpose of expediting the desired result. Though it’s not necessary, Guanxi relationship considers involvement of friends as preferential. Accordingly, the relationship is total and personal wherein each partner is obligated to help each other, generally in an unlimited manner.

It involves necessary exchanges wherein it tends to favor the weaker party. This is in relation to the Confucian principle of family loyalty, in which family ties demand exchange of aid. An argument was cited in another text that this set-up is merely like a “bribe” in which they have to provide something not necessarily monetary in nature for them to get the favors. Moreover, this principle considers those individual who has better connection or network with governing officials to have a more immediate positive response.

As an example, there was an Olympic event which was hosted in China, a foreign reporter asked the authorities to allow them to enter to the premises to do documentary. However, the request was declined because they need to undergo an approval process with series of clearance to different level of authorities, thus, would fail them to cover the said event at that time. This is a bureaucratic form of system. In order to continue to witness that event, a particular reporter asked a favor to a certain person who has Guanxi to provide them assistance.

They caught very surprise that they were accepted in a very quiet and peaceful way to the stadium. Hence, in a country that has a very tedious bureaucratic system Guanxi is very important to be able to surpass these circumstances. A practical example in local business set up which is somehow similar with Chinese Customs Bureau is that here in the Philippines, if you want to expedite your goods to be out and cleared by the custom official, a person should find someone who has good Guanxi to assist them with this matter.

As a procedure, releasing and clearing of necessary documents needs to undergo series of process and clearance prior to release of goods, thus, it will take time due to bureaucracy. Based on the article, Guanxi may be considered as an informal structure if the official system does not work. The unofficial system is a legitimate solution that creates jobs and allows business to function (Copeland and Griggs 1985, 176). Therefore, Guanxi is considered as anti-bureaucratic and pro-person. Guanxi, likewise, is synonymous with connection which is considered as a key to success in doing business particularly in China.

The right connection can bring cheap and reliable material supplies, tax concession and others that provide advantage in penetrating the market though connections alone are not sufficient. Does Guanxi still matters? Because of its salient role in enhancing resource accessibility in business operations, firms cultivate Guanxi and solicit it from their staff. This form of inter firm exchange is especially important to firms with poor asset endowments. Endowment and ownership rights dictate to a large extent the availability of resources for firms in China (Xin and

Pearce 1996). It is much easier for state-owned enterprises (SOEs) to secure capital because they are favored by banks that are mostly state owned-that is, until recently. Thus, Guanxi with SOE managers may open up opportunities for financial resources. Collective-owned enterprises, often jointly owned by local governments and individuals, enjoy greater protection and more favorable tax rates (Lau, Tse, and Zhou 2002). Partnering with these firms provides a critical strategic move that gains penetration into local and regional markets (Granovetter 1985).

Guanxi with government officials enables firms to understand the rules of the game better and, thus, to achieve an advantageous position, for example, in obtaining land, licenses, and distribution channels (Child and Tse 2001). Managers often get past their problems by calling on interpersonal favors. Thus, Guanxi with external entities serves as a firm’s “convertible” assets (Coleman 1988) that affect firm performance. Gold, Guthrie, and Wank (2002) note that China’s recent reforms have helped develop efficient business infrastructures that fundamentally change the role of Guanxi in firm operations.

However, given the deep cultural roots of Guanxi, despite changing influences, its impact remains salient. A certain study centers on Guanxi’’s effect and on how consumer product brands perform (sales growth and market share) in China. As is noted in seminal works, channel access is of pivotal significance to these products (Frazier 1983; Heide and John 1992). Guanxi as an effect in Governance and Structure Guanxi in local business set-up Philippines, as greatly influenced by Chinese traders, have a lot of similarities that are confined with Guanxi principles.

Our local authorities are very slow in terms of decision making which also is reflected in this principle. Based on an article there are few similarities by means of culture, philosophies, and business environmental behavior which is commonly practiced in local business set-up. According to Yun Lin So and Anthony Walker, Chinese business man who use Guanxi in the Philippines wherein the more socio-cultural they used it, the more successful they were. Based on that study Chinese businessmen who used connections are more likely to be successful in their business rather than those who are not recognizing this principle.

In our country, those people that can easily put-up business are likely those who have connection. It is also an important factor to have connections because it will serve as your protecting mechanism to be able to sustain the business. Relationships as business partners are likewise observed. While Chinese prefer those people who are already familiar with them as they stresses family ties in contrast to Filipinos who prefer those who are unrelated to them. Filipinos prefer those who are passionate about their entity and emphasizes interest to the company rather than personal interest. Management Principle in Korea (Inhwa) Inhwa is a key principle of Korean business behavior which means “harmony between unequals”. It links persons who are unequal in rank, prestige, and power. This term requires that subordinates be loyal to their superiors and that superiors be concerned with the well being of subordinates. The concept is derived from Confucianism, which in this context emphasizes the regulation of unequals. It demands that an individual offer loyalty to hierarchical rankings. Ex. Workers owe their employers and supervisors the same loyalty they owe their parents and family elders.

Meaning, when Koreans state that all members of a company form a “family,” the implication is that the leaders are to be obeyed as if they were family elders. The Inhwa relationship is intrinsically an unequal one, but personal relations occur only with those who have claim of equality- especially age and prestige. Ex. Senior Korean officials will not deal comfortably with a junior member of an American negotiating team no matter how expert he may be. Koreans are extremely sensitive about titles and status, and those Americans who wish to deal with senior Korean officials should have senior rank themselves.

Advantages and Disadvantages of Inhwa Principles | Aspects / Values| Culture| Advantages| Disadvantages|  1| Personal Relationship | In Korea, personal relations take precedence over business. In order to be successful, it is vital to establish good, personal relationships based on mutual trust and benefit. | Koreans prefer to develop personal ties with strangers before that conclude a deal with them. | These Inhwa relationships are long-term and may take time and patience to develop and cultivate before a business deal may take place. 2| Loyalty| Inhwa ties form first line loyalties in the same way that family ties supersede all others in Korea. | Koreans establish trust before entering into business deals with strangers thus involving lesser risk. | Once Inhwa relationships have been established, they must be constantly maintained and strengthened| 3| Signing of Contracts| These are treated as personal relationships of the signers rather than agreement per se, the contract is only as possible as good as the personal relations that made it possible.

The intentions of the parties are more important than contractual clauses. | Koreans are not merely documents stating mutual obligations and rights. They are declaration of intentions backed by integrity of the signers A contract may end without any legal obligation to the contracting parties| Renegotiation and redoing of contracts are expected behavior which might draw back interest if not agreed. Lawyers and other intermediaries should not take over the original participants in the contract. 4| Disclosure of business information| Each Korean party has the responsibility to support the other person and make him happy. No one who is part of Inhwa relationship dares to upset the other. | Koreans seldom criticize or give negative information outright. Often, bad news will not be delivered until the late afternoon, so the recipient will not have his whole day disrupted. | This practice may result in misleading information as the Korean businessman tries to avoid delivering bad news. | Importance of Knowledge of Inhwa Principle

The changing face of Korea continues to evolve at an unprecedented pace in current Korean society. A country well known for its difficult history, Korea was liberated from Japanese occupation at the end of World War II, only to be faced with the Cold War struggle that divided the country into two separate states; the Southern democratic republic, and the Northern communist style government. In the years that followed the Korean War, South Korea experienced rapid economic development and has continued to prosper in today’s modern world economy, becoming the largest in Asia after Japan and China.

The present-day increase in business opportunities in Korea only increases the importance of cultural knowledge for those wishing to enter into this modern day market. It is vital that one who wants to do business with Koreans should know their culture and management principles. Here are some tips on how we should deal with them in order to have successful business undertakings. * Working practices in Korea * Before doing business in Korea prior appointments are required and should generally be made a few weeks in advance.

The most suitable times to arrange a business meeting are normally between 10am and 12pm or 2pm and 4pm. * For both social occasions and business meetings, punctuality is essential. Your Korean counterparts will expect you to arrive on time as a sign of respect; therefore it is advised to call beforehand if you will be delayed. You may find however, that top Korean business executives may arrive a few minutes late to appointments. This is a reflection of their extremely busy and pressured schedule and should not be taken with offence. It is recommended that you send any proposals, company brochures, and marketing material, written in both Korean and English, as a preview for your Korean contacts before you visit the country. * Structure and hierarchy in Korean companies * Korea is known for its vertical social structure based on age and social status. The organizational arrangement of Korean companies is highly centralized with authority concentrated in senior levels. * Influenced by Confucianism, Koreans respect for authority is paramount in their business culture and practices.

High-ranking individuals tend to have more power over their subordinates than in the West. Consequently, decision making in Korea will follow a formal procedure in which senior approval is necessary. * Working relationships in Korea * Generally speaking, responsibility is delegated to trusted, dependable subordinates by their superiors. Therefore, it is imperative not to offend or ignore the lower ranks and to show the various managers the same respect as other senior levels. * Age is the most essential component within a relationship in Korea.

A person older than you automatically holds a certain level of superiority. This is particularly evident in Korean business settings. * Personal ties in Korea, such as kinship, schools, birthplaces etc, often take precedence over job seniority, rank or other factors, and have significant influence over the structure and management of Korean companies. * Business practices in Korea * The exchange of business cards in Korea is vital for initiating introductions. Korean’s prefer to know the person they are dealing with.

Therefore, it is important to emphasize your title so that the correct authority, status, and rank is established. It is advised to have the reverse side of your card translated into Korean. Cards should be presented and accepted with both hands and must be read and studied with respect and consideration before placing them on the table. * Gift-giving is a common practice within Korean business settings. Generally given at the first business meeting, gifts are often used to acquire favours and build relationships.

You should allow the host to present his gift first and be sure to accept the gift with both hands. * To avoid loss of face, gifts of similar value should be exchanged and gifts of greater value should be given to the most senior person respectively. * Like most Asian countries, Koreans believe that contracts are a starting point, rather than the final stage of a business agreement and prefer them to be left flexible enough so that adjustments can be made.

Although many Koreans now appreciate the legal implications regarding the signing of contracts, they may still be interpreted as less important than the interpersonal relationship established between the two companies. It is vital that you are aware of how your Korean counterparts view these documents in order to avoid any possible misunderstandings. * When meeting your Korean counterpart for the first time, always wait to be introduced as third party introductions are generally preferred. Today, it is quite common for Koreans to shake hands with foreign colleagues after a bow, encompassing both cultural styles.

To show respect during handshaking, you should ensure that you support your right forearm with the left hand. When departing, a bow is usually sufficient. Inhwa in local business set up As our country is considered as globally accepted business partners to other countries (i. e. , ASEAN), we ought to understand how their business system works and how their management principles are applied. However, it is not only us who should adapt to their principles most especially if they are the one who will do business in our country.

Laws governing our country should prevail like contracting parties should abide to the terms and conditions set forth in the signed agreement. Breach thereof might constitute legal obligations as mandated by the law. In the Philippines, the culture of different companies depends on who mainly is forming part of the management team and the board of directors. If the management is mainly composed of Koreans, a person employed in that company must give high respect to senior ranking officers.