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05. Relationships (Business in Japan, Japanese Business Culture, Japanese Business Etiquette)

Relationships are important in every country, and even more so in a "high context" country as Japan. You need to build relationships, take care of your relationships, understand why and with whom you build relationships, and avoid certain kind of relationships. You also need to understand the network of relationships which your partners and competitors work under. Here are a few facts:

- You need to carefully plan your relationships in Japan, and you need to understand your relationships. You need to be aware, that relationships in Japan are seldom defined by legal contracts alone, you need to work on your relationships and take care of them.

- You need to be aware that, as anywhere else, your business partners in Japan will not tell you everything they know and everything they think and feel and plan for the future. In that regard Japan is really not that different from other countries. However, in your own country it will be easier for you to make guesses about what your partner could think and fell, while in Japan this might be more difficult for you. There are many examples, als in this day and age, where Western top management returns from negotiations with Japanese partners, celebrating success, while two days later a relationship breaks up. There are many cases where the Western side view and the Japanese side view of one and the same partnership are dramatically different, and one or both sides do not even know about this difference. Be warned, and do your homework.

- Traditional big industry in Japan tends to be organized and structured in historically grown industry groups. These used to be called "Zaibatsu" (= financial groups), and today these groups are usually called "Keiretsu" (= industrial groups). Until recently there were six such large groups, each grouped around a large bank and a large trading company at the center with a large number of companies in many different areas ranging from transportation, ship building, cars and electricals to insurances and department stores and beer factories. Recent bank mergers and other economic difficulties mean that the importance of these Keirets has somewhat decreased, but Keiretsu relationships are still enormously important in Japanese business and economy. For many foreign companies it is essential to understand the Keiretsu structure and to plan your business taking account of this knowledge. The figure below shows an up-to-date mapping of todays Keiretsu structure taking account of recent Bank mergers, including the announced Mitsubishi-Tokyo-Bank and UFJ merger. You will find a more detailed discussion and a large scale image (for printing) of our Keiretsu map here: "Best practice for foreign technology business in Japan"

Figure: Plan of "Keiretsu" industrial groups in Japan. Traditionally companies will only do business within the same keiretsu. For example, a keiretsu member will only buy beer from the beer company within the same beer company within the keiretsu, even if that beer is much more expensive than non-keiretsu beer. Of course such traditional business practices are opposite to procurement by competitive bidding. In today's Japan you will find both competitive bidding, and other cases where traditional relations take priority over achieving the best price.

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