1. Compare and contrast business systems in Japan and China. Answer with reference to relevant theories and use comparative country and/or corporate examples.

Topics: People's Republic of China, Capitalism, Socialism Pages: 7 (2483 words) Published: January 15, 2015

After the World War Two, Japan embarked on a journey of reviving its economy. The fast industralisation process is nothing short of spectacular. Japan’s basic infrastructure was basically destroyed in the war and she grew from a war-torn state to a world leading economy in a few decades. This requires good company and government governance, in order to achieve this result. Japan is also a major technology and export hub in Asia and she is currently the world third largest economy by Gross Domestic Product. (World Bank, 2014). Prior to the economic reform of Deng Xiao Peng, the Chinese government has total control of all the State Owned Enterprises (SOEs) under the communist system. It is a very highly centralized system that only the Chinese State government has power and control over it.(Laaksonen, 1988) Under the reformation policy, individuals are allowed to trade and sell surplus products in rural area and small businesses are allowed in urban or city. This marks the start of the China’s Socialist market economy. As a result of the open door policy, Chinese economy grew from a third world country to the second largest economy of the world in less than four decades. (World Bank, 2014) Despite the great differences of these two economy, the fact that its governance and cultures are deeply influence by the idea of Confucianism. (Chan, 1986) Hereby, in this article, discussion will be separated into two parts that are based on the similarities and differences between the two business systems. Differences

1. Keiretsu Vs Reform Policy
In Japan, Keiretsu formed the largest business group and its one of the key contributors to the Japan’s economy which usually employed Japanese style of management and system. Zaibatsu was the forerunner of Keiretsu which are family run and it is the main business system before Second World War. There are two types of Keiretsu: namely horizontally organized Keiretsu and vertically organized Keiretsu. In horizontally organized Keiretsu, capital and human resource are closely knitted together and cross directorships and holding of stock among group members are not uncommon. The cross-holding of stock among the top 6 corporate group was as high as 24% (Tokyo Business Times, 1989) in the late eighties. This allows the group to be very close and strong. Some of the examples of company with this structure are Mitsubishi and Sumitomo. (Okumaru, 1976).The governing of company are handed to professionals or agents to prevent dispute among group members. In vertically organized Keiretsu, it is formed by a huge parent company. She has its own supply distributorships and suppliers. Every flow and operations of the company follows a top to down process so as to control inventories and manufacturing quality. Many small and medium sized enterprises in japan utilize this system. Some of the example of such company are Sony and Toyota. In 1979, China started her reform programme after the initiating of economic open door policy by Deng Xiao Ping. The state government vows to liberalise and modernised China’s key industry like agriculture, technology and defence. More autonomy are given to the State Owned Enterprise to manage their own division. For example: The State Owned Enterprises are given the rights to form their company structure in accordance to the needs of leaner production process or market maximization. Hence, workers are now able to choose and change job with respect to their interest and expertise. This highly promotes the effectiveness of the State Owned Enterprises. (Lichtenstein, 1993) The state government also implements the use of Profit and Loss contract (yinkuibaokan) whereby a portion of the profits are contributed to the state government and the remaining profit can be kept by the State Owned Enterprise. China’s state government also undertake a few other methods to reform, this includes the downsizing of the State Owned Enterprises , setting up of stock exchange in...

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