Case Analysis of Solving the Labor Dilemma in a Joint Venture in Japan

John is the founder and Chief Executive Officer of Johnsco Electronics which is a United
States based small electronic firms that employs approximately (300) three hundred
workers in Tennessee; many of these workers are unionized. An unnamed Japanese auto
manufacturing company proposition John to collaborate with them by fabricating and
assembling computer components for their new automobiles. In turn for John’s efforts to
build the facility, staff the factory, and provide the product (electronic components), he is
given majority ownership of the business. John has the knowledge and expertise in
assembling small electronics so he thought that this was an excellent opportunity to not
only expand his business but also become a Global entrepreneur. Therefore, he agreed to
build and staff the factory with approximately (500) five hundred employees to meet the
Japanese auto manufacturer’s product demand. John thought the hard part was building
the factory and assumed he could easily find inexpensive workers by using host country
nationals, whereby avoiding the high costs of expatriate assignments. John believed that
there was a large supply of inexpensive labor throughout Asia, particularly women, and
that these laborers were obedient and willing to work long hours on monotonous labor.
As John began the task of recruiting to fill his factory positions, he soon realized he was
very wrong in his assumptions. Not only was there not an abundance of low skilled
laborers available, John also learnt he had an obligation to comply with Japanese and
United States labor laws. To make matters worse the U.S. union expects that their
members are given preference for overseas employment and that the home country
nationals should be covered by the established bargaining agreement; John would prefer
not to incur the costs of hosting his U.S. workers in Japan. John is perplexed and knows if
he does not find solutions, he will lose the partnership and everything he has already
invested in building the facility (Ivancevich 115).

John was overzealous in his desire to expand Johnsco and assumed that his U.S.
manufacturing knowledge would simply transfer to the Tokyo operations. He had no
concrete or contingency plans on how to get the business up and running once the factory
was built. In addition, John failed to perform any research so he is unfamiliar with
Japan’s labor laws, mandated pay scales & benefits, labor trends or culture. John’s most
critical problem is his lack of knowledge of Japan’s culture, labor pool, and employment

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laws. If he does not quickly surround himself with experts in these areas and get the
business in compliance and off the ground soon he will risk losing his partnership with
one of Japan’s premier auto builders, heavy fines by the Japanese government, union up
rise, and/or low production output. One or all of these outcomes will not only adversely
affect the Tokyo operation but he may place his U.S. operation at risk. Johnsco faces the
following challenges:

o Although the operation is based overseas, John has federal contracts, the
government will scrutinize his operations to ensure minorities, and women are
employed. In addition, John must abide by the Civil Rights Act of 1991 if he
intends to use expatriate managers and parent country nationals to staff his
overseas venture. In essence, John must be an Equal Opportunity Employer in a
country that does not give foreign nationals and/or women equal rights.

o John does not know how to cost effectively staff his Japan factory. He is
unfamiliar with Japan’s labor laws, mandated benefits, and labor trends that may
cause him a labor shortage and serious fines that will adversely affect his
operations.

o The union expects that their U.S. based members be given the first rights to job
openings overseas and the union expects that host country nationals hired in Japan
to be covered by the bargaining agreement held in the U.S.

To alleviate John and Johnsco’s problems I offer the following strategic plan as viable
solutions:

o John must establish an executive team consisting of a Global Human Resources

Manager, a Parent Company Manager, and Host Country Manager. These
professionals will quickly bring John up to speed with their obligations under the
Japanese laws, provide information needed for cultural awareness, and identify
what changes are necessary to run a successful operation in Japan.

o John should further partner with the Japanese automobile manufacturer and use
them as consultants on staffing and Japan’s labor laws. By expanding this
partnership and using the Japanese automaker’s acquired knowledge, he can
likely avoid costly and time consuming mistakes.

o John should initiate a collaborative effort with the Union who will assists with
staffing the foreign entity and partner in developing cross-cultural training
programs for expatriates.

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As first step, John must hire a Global Human Resources Manager who is familiar with
operations in the United States and Japan. This GHR executive will be knowledgeable of
both countries (U.S. & Japans) education, economic, legal and political system and
especially its socio-cultural environment. This executive will be key in establishing
Johnsco as a multinational corporation and will take a ethnocentric approach to
management whereby he/she will be knowledgeable of established polices and
procedures and will meld these procedures into their foreign operation to ensure the two
operations are similar and both countries legal employment obligations are met; in other
words she will ensure a good FIT (Ivancevich 97). This professional will also be crucial
in developing criterions for selecting an expatriate manger, developing cultural awareness
programs (in partnership with the Japan automaker), and repatriation program for
employees that return to the United States at the end of their assignments. Considering
John’s unfamiliarity with Japan’s culture and business practice it is recommend that he
add to the team an Expatriate Manager who will work side by side with a Host Country
National Operations manager. Together John and the GHRM will select an Expatriate
Manager who is culturally flexible, has a supportive family structure, and is willing to
work overseas (Ivancevich 101).

While the GHRM is working on the aforementioned assignments, John must strengthen
his partnership with the Japan automaker and gain valuable insight on effective staffing
venues and Japan’s labor laws. As a bargaining chip, John will offer the automaker an
increased share of their joint venture, an overseas internship in effort to develop one of
their up and coming managers, and the opportunity for both businesses to grow and
flourish internationally. Once the agreement is made, the Japanese automaker assigns a
bi-lingual (Japanese/English) manager to work with Johnsco as a Host Country
Operations Manager. The Japanese automaker also offers valuable insight to the high
demand and apparent shortage of low skilled laborers in Japan. It is explained that after
the bombing of Hiroshima during WWII, Japan’s economy slumped and there were many
unemployed and under employed workers. In post WWII reconstruction and in effort to
rebuild the economy Japan focused on enhancing the skills of their workers. Their
enhancements included allowing citizens to travel overseas for education and returning to

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the country to teach and develop; advancement of Japan’s education system; promoting
technological advancement; enhancing their own educational systems to match and are
some cases surpass the Western educational standards; and offering their citizens’
employment perks such as lifetime employment, three tier pensions systems, along with
government sponsored healthcare (Gross and Minot 2-3). Because of these government
inspired initiatives, the number of low skilled workers decreased as the Japanese people
became more educated and effluent. In light of this Japan’s industrial evolution and to
overcome their staffing challenges the automaker sought and recruited “Freeters” -
unemployed men and women who did not subscribe to japans’ culture of education and
employment for life opportunities (Kuhn par 3). The automaker informs John how to
recruit “Freeters” and also suggest that he consider hiring a pool of “non-regular”
employees versus all full-time employees, to off-set government requirements of pension
programs and sponsored medical coverage. The course of hiring contract and part time
employees is highly recommended, at least until the business is established and begins to
show profits. The Japanese partner encourages John to seek out graduating university
students to fill some of his technical or management positions. Due to Japan’s masculine
culture few women are able to make it to managerial positions (less than 9 percent), and
these students often seek out foreign companies for better employment opportunities
(Gross and Minot 4).

With this newfound knowledge, John will approach the union and convince them to
develop and finance a cultural awareness-training program in exchange for offering their
members preference for promotional opportunities at the Japan plant. The training
program will be developed in conjunction with the GHRM and will include a pre-
departure component to reduce anxiety and culture shock that may occur as the employee
becomes acclimated to their oversea assignment; this phase will occur before the
employees move aboard. As a second phase, the training program will include cultural
awareness, diversity, and intense language training; this phase will occur upon arrival in
Japan. The last phase of training will entail reintegrating the employee to American
society, when their assignment ends; this phase will begin in Japan and end once the
employee successful integrates back into the U.S. workforce. The union will agree to this

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venture because they see this as an opportunity to globalize their business and an
opportunity for their members to have increased more promotional advancement and
opportunities to work aboard.

This recommended course of action will arm Johnsco with a team of executives (Global
HRM, Home Country and Parent Country Managers) that will ensure both governments'
labor requirements are met and they will help to manage his oversea operations by taking
U.S. established best practices and customize them to fit the Japanese business. The
expanded collaborations with the Japanese automaker and US Union leaders not only
provides insight to Japan’s history and culture but both ventures provides valuable
knowledge, human commodities, and learning tools necessary to develop and maintain a
effective workforce. Although John was hesitant to spend additional monies to transfer
US employees to Japan, he now realizes that using labor from his established business
will help to establish the Japan Corporation in the time frames necessary and their
knowledge will form the foundation to eventually build the business into a global
corporation, without national boundaries.

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 Works Cited

Gross, Ames, and John Minot. "HR and Recruiting Issues in Japan." SHRM online -

Society for Human Resource Management. N.p., n.d. Web. 5 June 2010.

<http://www.shrm.org/hrdisciplines/global/Articles/Pages/CMS_020001.aspx>.

Ivancevich, John M.. "Global Human Resources Management." Human Resource

Management. 11Rev Ed ed. New York: Mcgraw Hill Higher Education, 2009.

93-122. Print.

Kuhn, Anthony. "Tent Villages Spotlight Plight Of Japan's Unemployed : NPR." NPR :

National Public Radio : News & Analysis, World, US, Music & Arts : NPR. N.p.,

28 Apr. 2009. Web. 6 June 2010.

<http://www.npr.org/templates/story/story.php?storyId=103547305>.