The differences of entrepreneurship in China and Japan - Research Paper Example

?Entrepreneurship can be defined in among other ways, as a process that causes changes in economic systems through the innovations facilitated by individuals as they respond or generate economic activities opportunities that add value to both themselves and society in which they live and do business. In retrospect, China was not particularly keen on entrepreneurship due to its suppression by the communist regimes under leaders like Mao Zedong for decades (Liao and Sohmen, 2001). However, today, China is on the path to entrepreneurial prominence and despite the rock upstarts, with many people opening small businesses all over China and this increasingly makes it easy for others both foreigners and locals to follow suit. Consequently, it would be fitting to say that entrepreneurship; especially in the form of small business is one of the main pillars in China’s economic development. Similarly, small businesses are central to the Japanese economy; research by the economist in 1993 showed that self-employed and their unpaid family employees make up over a third of the labor force in Japan. In fact, Japan has more business owners in per capita than most of the world’s big economies. Research by the Japanese ministry of internal trade has shown that 75 percent of the working population Is employed in these small firms, furthermore most of the projects being undertaken by the Japanese abroad are run by small and middle sized firms(Leo, 1999). As such, the flagship of entrepreneurship in Japan just as in China is the small and medium sized enterprises known as chushokigyo. However, entrepreneurship, in both countries is different based on a variety of geographical, social, economic, and political factors. This paper will undertake an examination of the characteristic and circumstances of small and medium sized enterprises, which embody entrepreneurship in both Japan and China with a view of understanding the unique characteristics in each and how they contrast with each other. The taxation levels in Asia have seen many American and European companies relocating and outsourcing to Asian countries such as China and India. This is because the rates of corporate taxes in these countries are so low they qualify as tax havens. One of such countries is China; consequently, many American firms have set up their manufacturing firm there in order to take advantage of not only the low taxes but also the comparatively cheap labor. Considering this, one can identify a significant difference between the costs of doing business in China verses Japan. The tax rates in China is at 25 percent, which is one of the lowest in Asia, with some parts of China such as the Taiwan province where taxes are as low as 16 percent. As such, entrepreneurs do not have to pay much in taxes, and this encourages more people to invest therein, whether they are locals, or foreigners. In sharp contrast, Japan has the highest tax rate among the countries in the region, standing at approximately 40 percent (EU-Japan Centre for Industrial Cooperation, 2011). This is almost as high as that the United States being the second highest in the OECD member states after the USA. This inevitably has made it more difficult for small business to take off in Japan unlike in China, and the international firms are more likely to choose Japan over China in an effort to cut costs. A decisive way in which the difference between Chinese and Japanese entrepreneurship can be differentiated is in their corporate cultures, the Japanese leverage their corporate culture with the intention of producing high quality products and services, by patiently building their global reputations on diligence and quality. When a Japanese firm employs someone, it is done under the assumption that the person will stay with the firm indefinitely and they take loyalty extremely seriously as opposed to the bottom line. For instance, a firm in Japan is expected to make decisions that will allow the firm to avoid laying off workers even in times of crisis; however, a Chinese firm may take it a more money oriented stand and favor the bottom line more. As a result, the small enterprises in Japan focus on not only entrepreneurship or profit making but also building of reputations on diligence. Chinese firms on the other hand, seem to be more focused on profit making and growth of enterprise sometimes at the expense of reputation and quality, and one must acquiescence that China has made unprecedented leaps in economic growth over the last 30 years. However, unlike their Japanese counterparts, the Chinese entrepreneurs are more focused on creating wealth for themselves and society than building successful firms are accruing to Xiang Bing of the China Daily. Chinese business people do not focus so much on long-term goals and are often short sighted in their approaches business and investment. He argues that many Chinese employees especially in small firms are profit oriented and will want to leap at the next generous offer because the concept of entrepreneurship has become extremely materialized (Bing, 2009). The Chinese government has introduced new ownerships to facilitated partnership and cooperation between business owner at different levels ranging from small firms to government and international companies. These include collective, individual, or joint enterprises with, in which the different parties may merger or collaborate with each other as well as, Chinese and foreign investors. The policy is instrumental in facilitating the interaction between these enterprises (Chow, 1995). In Japan, on the other hand, the state does not take such an active apart in determining the kinds of ownership, and the recognized forms of ownership are the conventional ones that are commercial and limited partnership, General Corporation and limited liability Corporation. Geographically, entrepreneurs face a myriad of logistical challenges that vary according to the country in question. Japan comprises of approximately 5000 islands although the majority of the population lives in the four main islands; Hokkaido, Honshu, Kyushu und Shikoku, furthermore, the country is also divided by several mountains ranges (Discover Logistics, n.d). As a result, transport and distribution of finished material and raw products throughout the country can be highly complicated and difficult than in Japan. For transport of goods, many of the entrepreneurs are compelled to use air transport, which is the most effective albeit expensive mode of transport. China, on the other hand, is encumbered with its own problems, for instance despite the fact that the road networks in the big cities are nearing excellent levels the quality of roads deteriorates considerably as one goes into the interior. The undeveloped infrastructure in the metropolis, translates into logistical difficulties, which prevent entrepreneurs from expanding their business beyond the urban areas. The processes of acquisition of raw materials, as well as the distribution of finished products to the markets, have also being encumbered by the poor infrastructure within the interior of the country. Other factors come into play such as; natural and calamities especially the tsunamis, which have ravaged Japan in the causes of the last few years. They have made it difficult for Japan to compete effectively in business because of the millions spent in recovery efforts. These have had a negative effect on economic growth and consequently the strain make it difficult for investors both local and foreign to open new business in the country. Because of China’s high population, the methods of productions are likely to be labor intensive as opposed to being capital intensive; as a result, the cost of production of goods is considerably low. This is what has given Chinese firms an edge over many other firms worldwide resulting in Chinese goods especially electronics flooding the world market. Conversely, Japan, does not have a population as high as that of China; consequently, majority of production activities are dependent on capital as opposed to labor. As a result, the small businesses in Japan are likely to require more capital than in China, in addition to this, the cost of manufacture will still be higher in Japan. Such challenges can be attributed to the superiority of the Chinese in the numbers of entrepreneurs, over not only Japan but also most of the world’s countries, bearing in mind that, with over 2 billion people, China is the country with the highest population in the world. Ultimately, the roles of entrepreneurs who run the small and medium sized business enterprises cannot be overrated. Entrepreneurship, especially in the small and medium size enterprises is undoubtedly an integral part of the economies of both Japan and China. Despite the many differences that exist in the entrepreneurship, in the two countries, it noteworthy that the business cultures in both countries are closely related and unlike their western counterparts, business transactions are personalized and people oriented. Foreigners wishing to start a small business in either country have to be well versed in the business cultures of the respective countries, and failure to do this can result in frustration. Personal trust is valued in both countries and especially in Japan, contracts are not considered final and are open to be renegotiated, and one needs to be introduced to clients and customers by someone who knows them, as opposed to just approaching them as is characteristic of business interactions in the west (Siew, 2004). However, despite the cultural similarities, entrepreneurs wishing to start or run a successful business in any of these two countries will encounter a variety of different situations depending on the country in question. References EU-Japan Centre for Industrial Cooperation. (2011). An analysis based on interviews of European investors and investment facilitators. Retrieved from http://documents.eu-japan.eu/fdi/fdi_report_investing_japan_oct2011.pdf Discover Logistics. (n.d). China. Retrieved from http://www.dhl-discoverlogistics.com/cms/en/course/trends/asia/china.jsp Bing, X. (2009). What Chinese entrepreneurs can learn from Japan?. China Daily. Retrieved from http://www.chinadaily.com.cn/m/eduonline/2009-11/17/content_8988301.htmWeb 10 Chow, C. K. (1995). "Evaluating Small Business Development in China's Retail Sect.” Journal of Small Business Management 33.1: 87. Leo, P. D. (1999). "Small Business as a Supplement in the People's Republic of China (PRC).” Journal of Small Business Management 37.3: 76-80. Liao, D and Sohmen, P. (2001). “The Development of Modern Entrepreneurship in China” Stanford Journal. VOLUME 1. Siew, W. (n.d). Small Business Sticky in Japan Red Tape Turns Opening a Simple Coffee Cart into a Complex Adventure in Bureaucracy. San Francisco Examiner: Waldman, C. (2004). "The Labor Market in Post-Reform China: History, Evidence, and Implications." Business Economics 39.4: 50-62. Read More