BEO2002: International Business Environment of Japan Subsidiary Report

This research report provides a comprehensive analysis of the international business environment, specifically focusing on the potential for establishing a subsidiary in Japan. It meticulously examines various factors including economic indicators like GDP, per capita income, and unemployment rates, along with political stability and corruption levels. The report also delves into social aspects such as education, crime rates, and social connections, as well as environmental concerns like pollution. Furthermore, it explores the legal framework, including copyright and industrial safety laws. A significant portion of the report is dedicated to analyzing cultural aspects using Hofstede's cultural dimensions, comparing Japan with Australia to highlight key differences in power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence. The report also reviews the Japanese government's policies aimed at attracting foreign businesses and concludes that, despite some environmental challenges, Japan presents a favorable environment for establishing a business subsidiary due to its strong economy, cultural characteristics, and supportive government policies. The report references various sources to support its findings.

RUNNING HAED: INTERNATIONAL BUSINESS
MANAGEMENT

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Contents
Introduction......................................................................................................................................2
Analysis of the national business environment...............................................................................2
Cultural aspects................................................................................................................................4
Analysis of government policy........................................................................................................6
Conclusion.......................................................................................................................................7
Bibliography....................................................................................................................................8

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Introduction
The research report is prepared on ‘International Business Environment’. It is an integration of
external and internal factors of the business. These factors have a major significance in the
business in a particular country1. The key purpose of the report is to enhance the knowledge
based on the international business environment by practically applying the situation and to gain
an efficient understanding of the business environment of Japan.
Analysis of the national business environment
Following are the factors for analyzing the external business environment for a subsidiary
business in Japan:
Economic factors- It is analyzed that Japan has a population of 126.7 million. It’s Gross
Domestic Product value is $5.4 trillion with a growth of 1.7%. The Per Capita Income of the
country is valued at $42,823. The Unemployment Rate is marked at 2.8%. Additionally, its
Inflation Rate is 0.5%2. It has the second most progressive economy in the global world3. It is
estimated that that economic environment of the japan is highly favorable to conduct business
practices. It is suggested that a high population strength provides an opportunity for accessing
large customer market. Additionally, high Per Capita Income and low Inflation Rate will prove
beneficial for the subsidiary business. However, low Unemployment Rate will prove less
advantageous as it has to recruit staff from the restricted unemployed population. Additionally, it
develops the duty of the business to offer high payscale to the individuals to recruit talented staff
in the business.
1 Hamilton , & Webster , , 2015. The International Business Environment. England : Oxford University Press.
2 Heritage, 2019. 2019 INDEX OF ECONOMIC FREEDOM. [Online] Available at:
https://www.heritage.org/index/country/japan [Accessed 5 August 2019].
3 Atlas, W., 2019. The Economy Of Japan. [Online] Available at: https://www.worldatlas.com/articles/the-economy-of-
japan.html [Accessed 5 August 2019].

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Political factors- It is analyzed that japan has a high level of corruption in the country. The
corporate tax rate is marked at 30.88%4. Additionally, the political stability of the country is 1.15.
Thus, it is analyzed that the political business environment of Japan is standard.
Figure:1 Bar graph representing the corruption level in Japan
Source6
Social factors- The education arrangement in Japan is fine and thus it attains a high literacy
rate7. It is referred to as one of the safest countries8. It is assessed that ‘Crime Level’ in Japan is
low9. It is examined that ‘Economic Status’ of the Japanese is decent as only 16% of the
population is marked below the poverty line10. Additionally, the level of social connections
4 Economics, T., 2019. Japan Corruption Index. [Online] Available at: https://tradingeconomics.com/japan/corruption-index
[Accessed 6 August 2019].
5 Economy, G., 2019. Japan: Political stability. [Online] Available at:
https://www.theglobaleconomy.com/Japan/wb_political_stability/ [Accessed 6 August 2019].
6 Economics, T., 2019. Japan Corruption Index. [Online] Available at: https://tradingeconomics.com/japan/corruption-index
[Accessed 6 August 2019].
7 Voyage, 2019. Japanese education. [Online] Available at: https://www.voyagesphotosmanu.com/japanese_education.html
[Accessed 5 August 2019].
8 Nomads, W., 2019. Is Japan Safe? 3 Things Visitors Should Know About. [Online] Available at:
https://www.safetravel.govt.nz/japan [Accessed 5 August 2019].
9 Travel, S., 2019. Japan. [Online] Available at: https://www.safetravel.govt.nz/japan [Accessed 5 August 2019].
10 Atlas, W., 2019. The Economy Of Japan. [Online] Available at: https://www.worldatlas.com/articles/the-economy-of-
japan.html [Accessed 5 August 2019].

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between Japanese is average11. It is assessed that the Social environment of Japan is considered
to establish a subsidiary as it has a low crime rate and is safe to operate business activities.
Additionally, its low illiteracy rate provides an advantage for the business to hire skilled and
efficient employees in Japan.
Environment factors- Rapid industrialization in Japan has led to the enhancement of
environment pollution. Air pollution is a serious problem in Japan. Additionally, it is also facing
serious issues in respect of global warming, deforestation12. Hence, it is evaluated that Japan does
not provide a suitable working environment to conduct business activities. It can prove
disadvantageous to the business in the long run as the level of pollution might increase in the
future that can affect the health of the employees in the subsidiary business.
Legal factors- It is assessed that there is a prevalence of ‘Copyright Law’13. It has also
developed the ‘Industrial safety and health law’14. Additionally, there is ease in availability of
imported goods without any restrictions15. It is estimated that the Japanese government attains
high concern for the business. It has developed necessary law that can prove highly beneficial to
the subsidiary business. Copyright Law protects the original work of the business from being
imitated. Industrial Safety and Health Law will assist in safeguarding occupation health and
safety of the employees by initiating protection programs.
Cultural aspects
Culture is a set of collective beliefs, values and attitude of the people. It is a key component and
therefore it has a significant effect on business activities and long term success in a country16.
11 Sociology, J., 2014. The need for greater social connections in Japan. [Online] Available at:
https://japansociology.com/2014/05/11/the-need-for-greater-social-connections-in-japan/ [Accessed 5 August 2019].
12 Clark , , 2017. AN OVERVIEW OF JAPAN’S ENVIRONMENTAL ISSUES AND POLICIES. [Online] Available at:
https://www.apfed.net/overview-japans-environmental-issues-policies/ [Accessed 5 August 2019].
13 CRIC, 2019. Copyright Law of Japan. [Online] Available at: http://www.cric.or.jp/english/clj/cl2.html [Accessed 5 August
2019].
14 Times, T.J., 2015. INDUSTRIAL HEALTH AND SAFETY LAW. [Online] Available at:
https://www.japantimes.co.jp/tag/industrial-health-and-safety-law/ [Accessed 5 July 2019].
15 Export.gov, 2019. Japan - Import Requirements. [Online] Available at: https://yogaholism.com/ [Accessed 5 August 2019].
16 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].

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Figure2: Hofstede Cultural variances between Australia and Japan.
Source17
Power distance- Japan has scored a higher rank than Australia in the power distance index. They
usually have the habit of taking slow decisions. They believe in handwork and achieving a
hierarchical position based on their skills. It suggests that high power distance in Japan will
prove beneficial for the company as it can avail quick and quality work performance from its
independent employees18.
Individualism - It is assessed that individualism is low in Japan as compared to Australia. It
suggests that the Japanese are followers of collectivist culture. They consider themselves as a
part of a group and society. Thus, they actively participate in groups. Hence, it suggests that low
individualism in Japan will benefit the company as the company will have to lay fewer efforts in
developing a team, generating cordial relation between the staff members19.
17 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].
18 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].
19 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].

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Masculinity - It is assessed that masculinity is extremely high in Japan as compared to Australia.
It states that Japanese attain higher importance for competition, achievement, and success. They
are motivated by the masculine factors such as monetary gains, promotion and incentives in the
workplace. They are highly focused on their work and gave prior importance to their job in the
workplace. It is evaluated that high masculinity between the Japanese will prove advantageous to
the company, as it will generate healthy competition in the workplace. Moreover, it will not have
to struggle for developing motivation among the workforce as they are already dedicated to their
work20.
Uncertainty avoidance – Japan has scored a higher rank in the uncertainty avoidance dimension
in contrast to Australia. It states that Japanese avoids unknown situation and uncertainty. They
are not comfortable with ambiguous circumstances because it develops anxiety among them. It is
evaluated that high uncertainty avoidance among the Japanese will prove erroneous and
atrocious for the company. It is because it will develop a challenge for the company is
introducing new machines, work methods in the workplace in Japan21.
Long term orientation - Japan has attained a high score in respect of long term orientation. It
states that Japanese believe in achieving steady growth and persistent results. They pay less
attention to leisure activities and are thrifty in their nature. It will bring a great opportunity for
the company as Japanese’s perseverance in nature will save the company cost. Additionally, they
do not believe in achieving the quick result and therefore delivers quality work. It will prove
beneficial for the company as they will pay their attention to work22.
Indulgence- Japan has achieved a low rank in the indulgence factor. Japan follows the culture of
restraint. It suggests that the Japanese are motivated by the monetary incentives and expect
rewards for their performance. Additionally, they are pessimist by nature. Hence, it will develop
a challenge for the company to establish a positive work environment in the workplace in Japan.
It brings a duty for the company to regularly motivate the employees by offering bonuses and
other financial benefits. This, in turn, will enhance the cost of the company23.
20 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].
21 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].
22 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].
23 Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/ [Accessed 6 August 219].

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Analysis of government policy
To attract foreign business in Japan, the Japanese government has taken several steps. Some of
these are as follows:
1. It has removed the language barriers in specific business areas like retailers and
restaurants.
2. It has improved internet connectivity.
3. It has also strengthened the consultation services for foreign business.
4. It has also simplified the regulations and administrative procedure in respect of foreign
companies.
5. It has improved the living atmosphere for foreign nationals.
6. It had minimized the commercial tax rate below 30%.
7. It had also led to the reform of the health care sector.
8. It had also strengthened corporate governance24.
Conclusion
The research report is summarized on ‘International Business Environment’. It is concluded that
environmental factor of Japan is not suitable for the subsidiary operations. Additionally, from the
Hofstede Cultural Analysis, it is determined that the cultural environment of Japan can prove
beneficial. From the last section, it is evaluated that the Japanese government is highly favorable
towards foreign businesses. Hence, Japan is considered as a suitable country to establish a
business subsidiary as it offers satisfactory business environment.
24 Jetro, 2019. Japanese Government's Efforts to Attract Foreign Businesses. [Online] Available at:
https://www.jetro.go.jp/usa/topics/japan-government-efforts-attract-foreign-business.html [Accessed 6 August 2019].

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Bibliography
Atlas, W., 2019. The Economy Of Japan. [Online] Available at:
https://www.worldatlas.com/articles/the-economy-of-japan.html [Accessed 5 August 2019].
Clark,, 2017. AN OVERVIEW OF JAPAN’S ENVIRONMENTAL ISSUES AND POLICIES.
[Online] Available at: https://www.apfed.net/overview-japans-environmental-issues-policies/
[Accessed 5 August 2019].
CRIC, 2019. Copyright Law of Japan. [Online] Available at:
http://www.cric.or.jp/english/clj/cl2.html [Accessed 5 August 2019].
Economics, T., 2019. Japan Corruption Index. [Online] Available at:
https://tradingeconomics.com/japan/corruption-index [Accessed 6 August 2019].
Economy, G., 2019. Japan: Political stability. [Online] Available at:
https://www.theglobaleconomy.com/Japan/wb_political_stability/ [Accessed 6 August 2019].
Export.gov, 2019. Japan - Import Requirements. [Online] Available at: https://yogaholism.com/
[Accessed 5 August 2019].
Hamilton , & Webster , , 2015. The International Business Environment. England : Oxford
University Press.
Heritage, 2019. 2019 INDEX OF ECONOMIC FREEDOM. [Online] Available at:
https://www.heritage.org/index/country/japan [Accessed 5 August 2019].
Insights, H., 2019. Hofstede Insights. [Online] Available at: https://www.hofstede-insights.com/
[Accessed 6 August 219].
Jetro, 2019. Japanese Government's Efforts to Attract Foreign Businesses. [Online] Available at:
https://www.jetro.go.jp/usa/topics/japan-government-efforts-attract-foreign-business.html
[Accessed 6 August 2019].
Nomads, W., 2019. Is Japan Safe? 3 Things Visitors Should Know About. [Online] Available at:
https://www.safetravel.govt.nz/japan [Accessed 5 August 2019].

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Sociology, J., 2014. The need for greater social connections in Japan. [Online] Available at:
https://japansociology.com/2014/05/11/the-need-for-greater-social-connections-in-japan/
[Accessed 5 August 2019].
Times, T.J., 2015. INDUSTRIAL HEALTH AND SAFETY LAW. [Online] Available at:
https://www.japantimes.co.jp/tag/industrial-health-and-safety-law/ [Accessed 5 July 2019].
Travel, S., 2019. Japan. [Online] Available at: https://www.safetravel.govt.nz/japan [Accessed 5
August 2019].
Voyage, 2019. Japanese education. [Online] Available at:
https://www.voyagesphotosmanu.com/japanese_education.html [Accessed 5 August 2019].