Functional Approaches to International Business

Production Control

     Unexpected problems often crop up in the course of overseas production. Take weights and measures, for instance. Converting all metric specifications to pounds, ounces, square feet, yards and gallons can be a more time-consuming task than one may think. A Japanese company in the United States did not plan for this, resulting in an almost three-month delay in the construction of a factory there.

     Problems can also arise over production processes or allocation of tasks. A Japanese company in India failed to achieve its streamlining plans or efficient reshuffling of its employees as a result of the roughly 3,400 castes there. The problem arose when the company ran into opposition after assigning employees from a higher caste duties normally performed by those in lower castes.

     Depending on the country, and the United States is no exception, many employees cannot read work instructions due to a high rate of functional illiteracy. Often tasks have to be greatly simplified, manuals must be rewritten to include the rudiments, and the most basic training has to be carried out.

Personnel Management

     Of the various approaches to international business, it is this area which requires the greatest amount of harmony and adjustment.

     A certain Japanese department store once decided to promote the opening of its new store in Singapore in typical Japanese fashion by having all of its employees, including the sales staff, split up and personally visit the homes and offices of potential customers to announce the opening. But the company ran into trouble when the local sales staff complained that they had been hired to work in the store and not as traveling salespeople. The store finally managed to bring the employees around by pointing out a section in their contracts requiring them to perform such duties. Managers must keep in mind that what is natural for a Japanese very often may not be so for local employees.

     Wage systems can also differ greatly from country to country. For instance, the various allowances that are paid to employees in Japan are almost unheard of in the United States. Those receiving a family allowance are in the minority there. And if you think companies in every country have a transportation allowance, think again. As a rule, no such allowance exists in either Europe or the United States. It is common practice there to pay for such things out of one's own pocket.

     Another major difference between Japan and other countries is that, unlike Japan, companies in almost every other country have a detailed description for each job which spells out the specifications of the job, its position in the hierarchy, the authority which comes with it, and the necessary qualifications. There have been several instances in the United States where a major Japanese company has been sued for job discrimination because it did not have job descriptions. Caution must be exercised.

Accounting and Financial Affairs

     Many international enterprises incorporate in so-called tax havens for the sake of convenience. They do so to reduce their corporate taxes and because it is easier to set up a company there. When a company or a subsidiary is registered in a tax haven, it benefits because (1) its tax burden can be reduced by more than half compared to its own country and (2) from a legal standpoint it is easier to set up and run a company. This is why many multinational corporations make use of tax havens.

     Some well-known tax havens include New Caledonia, the Bahamas, Curacao, Liechtenstein, and Bermuda (roughly 5,000 corporations are registered in Bermuda but physically located elsewhere). The tax authorities in many countries have recently begun to crack down on use of such tax havens. Even though the idea is alien to Japanese companies, they need to take note of the practice.

     Accounting methods also vary greatly from country to country. For instance, the everyday Japanese practice of using promissory notes to settle accounts is rare in other countries. There is a gradual shift in Japan now toward adoption of international accounting standards. Particularly noteworthy are the stepped-up laws regarding disclosure of financial information being enacted as part of Japan's so-called "Big Bang." Careful attention must be paid to these developments.

Copyright (C) 1998-2010 Jeffrey G. Stocker