The purpose of this work is to discuss the future of small businesses in Japan and to consider whether the era of the supportive small firm has ended. Further this work will address the following issues:
Are small businesses beautiful in Japan's present economy?
Explanation of the changing roles (trends) of the small firm in Japan.
Small businesses have supported the large firm segment in Japan.
Future of Small firms will be addressed.
The International Symposium was inclusive of the Research Institute of Economy, Trade and Industry (RIETI) were hosts .The topics that were debated during the symposium among participants who became knowledgeable as to empiric research:
(1) Changes in the governance role of banks;
(2) The impact of foreign institutional investors on Japanese Firms
(3) Legal reform o f corporate boards; and (4) the issue of convergence and possibility of a new 'hybrid' model of corporate governance in Japan." (RIETI Policy Symposium, 2004)
I. Issues and Problems in Management
The corporations in Japan have various dilemmas related to governance and has been thus since the decade of the 90's. The firms were termed "bank-based or stakeholder-oriented models with the external of corporate management vested in the main banks and the corporate management was a composition of internally promoted insiders that were assimilated into the culture of the corporation based on lengthy relationship terms .Approximately fifty-percent of the workers at a manufacturing company located in central Japan in the Tokai region work in a managerial capacity which is said to save money for the firm. The company, who wanted to be unnamed in an aggressive move convinced union members to become managers in 1999. Yet convinced these individuals that the company could not afford to pay them overtime. The managers make less in terms of overtime pay than do ordinary employees. With the second largest economy on a global basis, the country of Japan struggling with a banking (internal) crisis and an accompanying financial crisis. Most of the financial complications are linked to risky bank loans based on highly inflated real estate value from the west and a 60% decline in the trade surplus and according to the journal article those
"There are four different types of business alliances in Japan:
(1) The keiretsu, a network of large and small companies;
(2) The sanchi, a cluster of small firms in a related field of business;
(3) The kyodokumiai, cooperatives of small businesses; and,
(4) Sshita-uke gyosba, a subcontracting arrangement where many small firms rely on one large company.
Stated as the "purpose of these alliances is to: provide support and mutual gain for all involved, and laws are written in their favor."
A forum of the Japanese Trade Union confederation has brought the discussion to the table in an attempt to narrow the gaps in wager that exist between workers at larger and smaller companies. Japan is reconstructing its policy in order to "facilitate small business development. The measure being considered are of a nature that will make present reform effort stronger through their ability for promotion of labor flexibility, technology innovation as well as new opportunities of employment within the country of Japan. (JETRO, 1999) Accordingly the restructuring process present ongoing in Japan has made the acquaintance of a more intent focus on "corporate efficiency and profibitliy." (JETRO, 1999)
According to the Work entitled Focus: Small business Development the need for change has been recognized with future initiatives set to focus on the policies in terms of whether they are on the basis of either competitive or protectionist in principal. (JETRO, 1999) The stated objectives and goals of Japan is to "further strengthen the development of small businesses in Japan; the Japanese government is seeking to establish a network system similar to the Small Business Development Center (SBDC) program in the U.S." ((JETRO, 1999)
New Approach in Development of Small Businesses
The program has been stated to be highly successful in the United States. The new legislation is stated to be "Self-support of business management. Enhancement of Competition through" either (a) assisting their ability to obtain adequate capital, human resources and information; and rectifying difficulties arising from contractual and sub-contracting relationships with large firms. (b) Provision of a safety net in situations of emergency.
Three Classifications of Small Businesses in Japan
Japan has stated intentions of classification of the SME's into three categories with each having goals and objectives differential from the other. Those stated classification classes are:
Venture Business- These are over-the-counter and public offerings with a stated goal being: "To have an equal number of IPO's as has the United States."
Competitive SME's: with distinctive goods or services with a stated goal as being: Within three to vie years to have an increase of 10,000 new companies.
Start-ups and existing companies who: seek to expand their business activities with a stated goal of; increase of business start-ups from 140,000 to 240,000 new enterprises to create one million new jobs within the next five years.
Specific Measures: Japan's Legislative Program
Listed as Number One in the way of reforms is: is
(1) "Reform of Japanese over-the-counter market" in facilitation of risk money to firms that are deserving of such.
Number Two is stated as,
(2) "Creation of new sources of venture capital in the expansion of tax incentives for 'angel' investors as well as seeking to extend the options of granting stock which was legislated in 1995.
Listed as Number Three the:
(3) Promotion of Flexible Financial and Corporate Structures This is inclusive of (a) granting government guarantees for bonds in order to encourage their use over bank loans, and/or (b) Introduction of a factoring system in easing the requirements of cash flow and creation of a new system that relaxes collateral requirements to companies with proven growth potential. Other plans have been made by the government in Japan to abolish "taxes that family-owned companies formerly paid on their retained earning. It is also been made a proposition that the obligations of inheritance and business in terms of tax payments be eased. Inclusive is small business credit risk database system for the use of lenders and investors to "facilitate financing" and assist in the reduction of premiums on insurance liability.
According to Holub (2001) "The Japanese government reports that new start-ups are expected to have a major role in revitalizing the economy and creating new jobs (Small and Medium Enterprise Agency, 1999). Foreign and domestic investors also recognize the importance of start-ups in Japan. In 2000, Softbank, a highly successful Japanese firm, launched a 150 billion yen venture capital fund for Internet start-ups (Spindle, 2000). The Wall Street Journal reports on substantial foreign investments in Japanese start-ups."
In terms of Japan's economic and small business future outlook consider the following statements in relation to opportunities that exist in SME field related to both the environment and nursing (Holub, 2001):
In the environmental-related sector, the domestic market is expected to grow to 38 trillion yen with 1.36 million employees by 2010.
This field has increased considerably since the 1998 figures of 21 trillion yen and 880,000 workers.
Since Japan is experiencing a growing aging population, the market for the nursing care business is also expected to rise dramatically.
Since 1999, the market for the nursing home business this field has risen 36%.
Further stated is that, "Japan also presents vast opportunities for Internet-related businesses. This market is expected to reach 31.25 trillion yen with 76.6 million users by 2005" (Holub, 2001) Although in Japan, venture capital investment is somewhat new there are hundreds of millions of dollars invested from domestic as well as international sources in Japanese start-ups it appears that there should be much optimistic outlooks for the future of Japan's economy.
Emerging Patterns of Corporate Governance among Japanese Firms…