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Jpint Ventures And Standard Setting Essay Sample

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Jpint Ventures And Standard Setting Essay Sample

  1. Introduction

Activities by separate firms through joint ventures and through their participation in standard-setting organizations are governed by uncertain and often inconsistent or antiquated antitrust rules. Joint ventures are probably scrutinized too frequently and too closely whereas standard-setting organizations are generally ignored or unsupervised. As a consequence, beneficial joint ventures are not undertaken or curtailed and competition-suppressing standard-setting conduct goes unchecked. Both can play important roles in innovation and international competition. However, until the antitrust framework for joint activities is rationalized and closer review is given to standards organization, they will be underutilized for such purposes.

  1. Joint Ventures and Joint Standard-Setting Activities Can Either Be a Cover for Eliminating Rivalry or an Opportunity for Intensifying Competition

  1. Joint Ventures May Increase Rivalry While Also Eliminating Competition Among the Participants of the Venture

  1. Joint ventures can enable the participants to unify complementary technical and managerial capabilities to perform projects whose requirements exceed the expertise and resources of any single firm. By facilitating the transfer of know-how and technology, joint ventures also can improve the skills of individual participants and thereby overcome barriers to entry and expansion in specific markets. Such collaboration may be particularly valuable in permitting firms to realize scale economies for research and development by avoiding duplication of effort and assembling a critical mass of resources and a higher level of investment in inventive activity. Joint ventures also enable firms to spread the risk associated with financially ambitious projects. If channeled in this manner, joint ventures can increase output and lower costs and prices.

  1. However, collaboration among direct rivals may discourage their independent pursuit of promising approaches to enter new markets or develop new products. Such cooperation can lead to direct price fixing or cause spillovers of cost, pricing and design information that reduce the participants’ inclination to compete aggressively against each other.

  1. Standard-Setting May Expand Competition or Have the Effect of Excluding Products Outside the Standard

  1. Standard-setting similarly may intensify rivalry by allowing buyers and sellers to share information about complex product attributes, ease entry for new technologies, encourage consumer confidence (especially where health or safety is involved) and substantially lower search costs, and reduce consumer costs by limiting product incompatibility. At its most effective, product standards expand opportunities for product substitution, thereby increasing the number of sellers competing for buyer purchases.

  1. However, a standard-setting organization can also facilitate anticompetitive practices by serving as a cover for collusive conduct. Professor Areeda illustrates this by the example of several auto tire manufacturers agreeing to produce only five types of tires under a scheme of common specifications. “Such standardization might deprive some consumers of a desired product, eliminate quality competition, exclude rival producers, or facilitate oligopolistic pricing by easing rivals’ ability to monitor each other’s prices.” 7 P. Areeda, Antitrust Law para. 1503, p. 373 (1986)(quoted in Allied Tube & Conduit Corp v. Indian Head, Inc., 486 U.S. 492, 500, n.5 (1988)(standards are implicitly agreements not to manufacture, distribute or purchase certain types of products)).

  1. Some General Presumptions

  1. Market Power Screen. Cooperation among only a segment of an industry either through a joint venture or standard-setting organization without market power — i.e., under 35% — probably creates few risks in a market that is otherwise competitive and if there is a reasonable business justification for the joint venture or standard-setting program.{1} Cooperation by firms with greater market shares or in markets where cartelization is more likely should bear a greater burden of demonstrating likely benefits (i.e., potential increase in output or efficiencies) and of showing that other safeguards will prevent reduced rivalry or encourage future competition as well as the reasonableness of the restrictions chosen

  1. Joint Ventures. A distinction should be made between joint ventures that are (a) limited in scope and number of market participants (i.e., two or three firm joint ventures) and (b) industry-wide, market-wide or network joint ventures. Compare United States v. Penn-Olin, 378 U.S. 158 (1964) with NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85 (1984). The issues that are likely to arise are very different, and should be handled differently, for each. In addition, it is helpful to distinguish generally between joint venture formation and joint venture operation. Most of the case law and discussion in this area revolve around the operation (or rules) of the joint venture, rather than whether it would be permissible for the parties to create a joint venture in the first instance. In all instances, the joint venture’s rules should be reasonably related to the justification for the venture. The venture should also have appropriate safeguards to avoid spillover effects (reduction of competition in other areas of the business). In Re General Motors Corp., 103 F.T.C. 374 (1984), modified 5 Trade Reg. Rep. para. 23491 (FTC 1993); cf. United States v. Minnesota Mining & Mfg. Co., 92 F. Supp. 947, 963 (D. Mass. 1950).

  1. Standard-Setting. Development of standards by groups of competitors, even those representing an entire industry, are desirable as long as standards increase product compatibility, can generally be met or otherwise do not exclude products or services. But where standards are denied (or unreasonably delayed) to products/services by those with market power, the burden of justifying such exclusions, at least once a threshold of likely benefits/value of the new product is passed, should be on those denying the standard; consensus procedures, especially where those with competing interests thereby gain power to block or delay approval, should be disfavored.

III. Legal Standards: The Costs of Ambiguity and Uncertainty

  1. Joint Ventures — An Uncertain Trumpet
  2. The Operation of a Joint Venture: The Problem of Characterization

  1. Courts, agencies and antitrust practitioners have struggled with distinguishing legitimate joint venture rules from illegitimate cartel behavior. What often takes place is a general attempt to “characterize” the activity as either a legitimate joint venture or as simply a cartel. That effort has not proved worthwhile and should be replaced by an analysis of the venture, its purpose, and its surrounding market(s).

  1. Early cases, largely from the U.S. Supreme Court, focused on the “form” of the joint venture. These cases do not appear to recognize the potential pro-competitive aspects of joint venture activities. For example, in United States v. Sealy, Inc., 388 U.S. 350 (1967), the Supreme Court appeared to have latched primarily onto the notion that the exclusive territorial arrangements were the products of horizontal competitors and therefore must be condemned as illegal per se. The struggle facing the Court was characterization — but largely between vertical and horizontal restraints. The Court rejected out of hand respondents’ arguments about joint venture concepts. The fact that Sealy was engaged in vigorous competition with “large integrated bedding manufacturers and with retail chains selling their own products” was glossed over. This focus on “form”–attempting to distinguish how the restraint arose rather than its effects–can be seen in the other early joint venture cases, Timken, Topco, and Addyston Pipe.

  1. Integration and risk-sharing as the key determinants of a legitimate joint venture have been relied upon in more modern cases as well as agency pronouncements.

  1. In Arizona v. Maricopa County Medical Society, 457 U.S. 332 (1982), the Supreme Court struck down as illegal price fixing an agreement by physicians to establish the maximum fees charged to policyholders of certain insurance plans. The Supreme Court noted that the doctors’ scheme did not permit them to sell a different product. The Court also explained that the arrangement was not one where “persons who would otherwise be competitors pool their capital and share the risks of loss as well as the opportunities for profit.” Id. at 356. In this type of case, “the [joint venture] is regarded as a single firm competing with other sellers in the market.”

  1. Maricopa is the principal touchstone for claims that “integration” is the distinguishing characteristic of a legitimate joint venture. See, e.g., FTC and DOJ, “Statements of Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust” (Sept. 27, 1994), at 70 (demonstration of integration through sharing of financial risk).

  1. A number of joint venture cases, however, do not rely on integration, as such, to analyze the propriety of the joint venture’s operating rules. These decisions review the markets and the likely effects of the presence of the joint venture in those markets before passing on its antitrust propriety.

  1. For example, in Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986), Judge Bork (joined by then-Judge Ruth Ginsburg) faced a challenge to a restriction preventing Atlas’ agents from also acting for any other interstate moving line. To assess this rule, the court analyzed the market for the interstate moving services and then analyzed the rule in that context. Having concluded that the rule was reasonably related to the efficient operation of the joint venture, and was likely to increase output and competition in the interstate moving market, the court upheld it.
  2. Similar approaches can be seen in Broadcast Music, Inc. v. CBS, 441 U.S. 1 (1979); National Collegiate Athletic Assn v. Bd of Regents of Univ. of Oklahoma, 468 U.S. 85 (1984); Chicago Professional Sports Ltd. Partnership v. NBA, 961 F.2d 667 (7th Cir. 1992) (Easterbrook, J.).

  1. While some of these cases do mention the fact of “integration,” it is not a necessary first step for determining the legality of the joint venture or its operations. Rather, the use of the term “integration” in their analysis is a conclusion that the restriction at issue is “reasonably related to the partial integration achieved through the joint venture.”

  1. Admission to the joint venture may raise special issues and deserves special consideration. There is a fair amount of case law, and controversy, about this issue. See, e.g., Donald I. Baker, Compulsory Access to Network Joint Ventures Under the Sherman Act: Rules of Roulette?, 1993 Utah L. Rev. 999 (1993).
  2. Standard Setting — Predation Through Governmental Processes{2}

  1. The antitrust legality of the conduct of standard- setting organizations generally is reviewed under the rubric of “boycott” analysis because those adhering to the standard agree in fact or practice not deal with products or services not meeting the standard. Thus, the testing of products and refusal to give a “seal of approval may constitute an illegal boycott if nonobjective tests are used to drive out competitors. Radiant Burners, Inc. v. Peoples Gas Light & Coke Co., 364 U.S. 656 (1961) Under Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284 (1982), a modified per se rule applies: “Unless the cooperative possesses market power or exclusive access to an element essential to effective competition, the conclusion that expulsion is virtually always likely to have anticompetitive effect is not warranted.” In the absence of power, the Court focused on efficiency justifications and did not require “due process” when a member was excluded. See also Massachusetts Board of Registration in Optometry, 110 F.T.C. 549 (1988).

  1. This framework was applied to the actions of a standard-setting organization in Allied Tube & Conduit Corp v. Indian Head, Inc., 486 U.S. 492 (1988) where the Court ruled that antitrust liability could attach to the participants where competitors of the proposed new standard controlled the process and abused it by rejecting the suggested standard for meritless reasons. The abuse of process was important because of its unreasonable market impact and the Court seemingly approved of consensus procedures. But the Court also stated that exclusionary standards should be “based on the merits of objective expert judgments and through procedures that prevent the standard-setting process from being biased by members with economic interests in stifling product competition” if antitrust liability was to be avoided. The issue of adequate technical basis has not been explored. It includes such questions as the adequacy of supporting evidence, unreasonable discrimination against (or for) competing products, and the need to show that no less restrictive measures were available.

  1. In Allied Tube the plaintiff was awarded damages on the theory that the stigma of banning the plaintiff’s product from a privately developed uniform code caused independent marketplace harm. In Sessions Tank Liners, Inc. v. Joor Manufacturing Inc., 17 F.3d 295 (9th Cir. 1994), the Ninth Circuit relied upon this limitation to find that antitrust injury had not been shown to have been caused by private action because the improperly developed code provision was adopted by governmental bodies and “[t]he injuries for which Sessions seeks recovery followed directly from government action.”

  1. As a practical matter, this limitation on antitrust liability gives virtually all exclusionary standard setting a free ride because in today’s regulatory state, codes and other standards are primarily drafted for use by government agencies. Even where standards are relied upon by private users, invariably they will acknowledge that they adhered to them because of government codification, not because of the approval of private groups. Because of government’s dominant role as a purchaser in many markets or as otherwise establishing minimum market requirements, proof of separate and solely private effects will be uncertain.
  2. Guidelines for Joint Ventures

  1. Current Guides
  2. A number of statutes address or otherwise bear on the analysis of joint ventures providing a range of protection from limited to absolute immunity without setting forth criteria for judging the legality of the joint venture generally. They generally reflect a “beggar they neighbor” approach being unconcerned in most instances with encouraging legitimate joint ventures but rather providing immunity to encourage exports and because of unlikely consequences to U.S. consumers. See Export Trading Act of 1982; Webb-Pomerene Export Trade Act of 1918. Other statutes have a greater concern with encouraging legitimate joint ventures, particularly in special circumstances of research, production and health care. See National Cooperative Research and Production Act of 1993; Health Care Quality Improvement Act of 1986.

  1. Agency policy guidance for joint ventures is limited and sometimes inconsistent. The 1992 Merger Guidelines, of course, provide important discussions of market definition, entry barriers, and the balancing of efficiencies. But they do not provide a framework for general analysis of joint venture operations. DOJ/FTC Merger Guidelines (1992). The Health Care Statements are specifically directed, in part, to joint ventures but are not comprehensive or helpful beyond fairly narrow concerns. See Antitrust Enforcement Policy and Statements in Health Care Area (1993); Statements of Enforcement Policy and Analytical Principles Relating to Health Care and Antitrust (1994). The only guidelines that attempt to establish a comprehensive approach to joint ventures were the now repealed DOJ Antitrust Enforcement Guidelines for International Operations (1988) and they did not address the vexing issues resulting from ambiguities in the case law.

  1. A Critique. Modern pronouncements, from Maricopa to the Health Care Statements to recent speeches by Commission officials, point to the need for “integration” to prove a joint venture’s bona fides. However, such a test often may be not only inappropriate but also generally unhelpful in making appropriate distinctions.

  1. How do we define the necessary integration? Is it really as simple as sharing of profits and losses? Do we really mean general risk of market success or failure? Was Maricopa really based on the fact that 70% of the doctors participated in the foundations, and hence there was really no other group with which to compete? Isn’t a test based on integration too narrow? Don’t the members of cartels, like OPEC, take the risk that their joint decisions are wrong which will, in turn, affect profits and losses? Doesn’t a test based on integration also risk being too broad? If the parties are truly integrated (and therefore the parties have the same economic interests), can it later claim a Section 1 exemption in light of Copperweld (i.e., that a parent and wholly-owned subsidiary are viewed as a single enterprise for Section 1 purposes because “[t]here is no sudden joining of economic resources that had previously served different interests”).

  1. Rather, the only acceptable rationale for either the formation of a joint venture or an operational rule of the joint venture are demonstrable efficiencies or increased rivalry. This can be demonstrated either through lower costs or greater output (including new or expanded entry). These “efficiencies” can include: permitting competition in the market by the joint venture parties where they otherwise could not compete, creating a new product (many network joint ventures, sports leagues), or applying the parties’ complementary skills and knowledge to improve each party’s independent competitive efforts (e.g., GM/Toyota joint venture). The parties should not be required to pick the “least restrictive alternative” in designing appropriate rules for the venture which often are only ex post hindsight. Instead, reasonable business justifications should be permitted where the overall rule can be defended on efficiency grounds. In virtually all cases, a market analysis (i.e., competitive effects) is required. The Merger Guidelines provide a useful framework for market definition. Issues relating to entry and appropriate scale may be critical, particularly to “broad” (industry-wide) joint ventures.

  1. Recommendations. Sufficient experience has now been garnered by the antitrust agencies to draft enforcement principles generally applicable to the formation and operation of joint ventures. We believe that such guidelines should concentrate on competitive (primarily output and entry barrier) effects, efficiency justifications, and the scope (term, inclusiveness, etc.) of the restrictions. The form of the arrangement generally should be irrelevant. The current attention on “integration” and “risk sharing” in Maricopa and the Health Care Statements seems misplaced.
  2. A Critique of Standard-Setting Standards and Oversight

  1. General Absence of Guidance. In contrast to merger rules, international operations and the licensing of intellectual property, the antitrust agencies have not provided either significant guidance on the proper limits on standard-setting or oversight of the operations of such organizations. Casual empiricism suggests that this absence has been filled by consensus-based standards that are routinely used to exclude product innovation, insulate established products and procedures from competition, and deny consumers the substantial benefits of such competition.

  1. Liability Rules. The development of guidelines for standard-setting organizations should address the permitted evidentiary basis for technical and other justifications, the application of standards to proprietary products, and the protection against the misuse of procedures. The issue of who has the burden of establishing the technical basis for a standard is unresolved and probably determinative in most cases. It also is unclear whether those participating in evaluating standards can have a competing interest (as is generally the case with consensus or “balanced” procedures) or must have either demonstrated expertise or an informed judgment on the technical issues being decided.

  1. Antitrust Injury and Causation. As currently interpreted, the expansion of Noerr-Pennington principles, particularly by the lower courts beyond the specific holding in Allied Tube and Omni Outdoor Advertising, essentially immunize private standard-setting activities from antitrust damages where such standards are incorporated in government codes.

  1. Recommendations. The Commission should fill this void by the issuance of guidelines preceded by hearings to permit a full ventilation of the issues. These discussions should examine both substantive rules and appropriate procedural options. Rational rules should examine market place effects and the actual or potential for exclusion (or cartelization). Consensus-based procedures that allow competitors to block or substantially delay standards — probably the most common failing of current procedures — should be deemed per se illegal. Finally, the Noerr-Pennington exemption for petitions to government or attempts to influence government action should be narrowly limited — as originally intended and shown by the principles of the sham exception — and not applied to insulate otherwise clear violations from damages or other relief.
  2. Conclusions

  1. Importance of Striking a Balance. Neither joint ventures nor standard-setting organizations should be subject to per se rules in most settings, at least without an opportunity for demonstrated “efficiency” justifications and a showing of an intended legitimate purpose. Antitrust attention should define the relevant market, identify the market power, and examine the competitive effects before concluding that liability is appropriate. Exemptions based on claims of Noerr-Pennington immunity should be limited to direct petitioning of government and not extended to standards adopted for general purposes including government codification. On the other hand, the absence of technical support or the use of consensus procedures positioning competitors to veto standards should be presumptively impermissible.

  1. Need for Clearer, Rational Guidance. The potential benefits from joint ventures and standards organizations to product innovation and increased competition make it particularly important that they be encouraged to operate within a competitive framework with guidance from antitrust agencies.

October 26, 1995

* George Mason University Foundation Professor of Law

** Partner, Baker & Miller, Washington, D.C.

Footnotes:

{1} As in all areas of antitrust examining competitive effects, proper definition of markets is essential.

{2} R. Bork, The Antitrust Paradox ch. 18 (2d ed. 1993)

Source #2

The Human Resource Challenge of International Joint Ventures

Book by Dianne J. Cyr; Quorum Books, 1995

CHAPTER 13

Richness and Complexity when Diverse National Cultures Combine

Probably the biggest thing in terms of joint ventures, or I should say working with the Japanese, or with any other culture, is the fear–the uncertainty of the other culture. . . . There’s more emotion involved in coming to work here everyday in a joint venture environment between foreign companies, and working for a foreign company in your own country. . . . It’s been difficult. I think it’s harder if you’re a person that likes direction and continuity . . . it’s always changing here.

Supervisor, Diamond Star

International joint ventures between culturally diverse partners offer unique opportunities for learning at the organizational level. The partners may potentially gain information and skills related to each other’s management practices or culture. In the realm of HRM, new policies and practices can be created in a way that match the needs and requirements of JV groups. Alternately, culturally diverse joint ventures can pose overwhelming challenges to managers who fail to embrace a philosophy of synergy rising from diversity. For many employees, cultural diversity compounded by language difficulties is threatening. There is less certainty about how work is to be accomplished.

The challenges and outcomes in each joint venture are particular to the company’s strategy, culture, and people. However, Diamond Star represents a good example of how members of the HR department, along with other managers in the plant, endeavoured to create culturally appropriate HR policy and practice that meshed Japanese philosophy and production techniques with the expectations of the largely American workforce. The impetus behind the changes and the process for the creation of new policies is elaborated in this chapter. Further, American employees at DSM share their opinions about working in an environment where culturally diverse parents both have an active presence.

THE RELATIVE IMPACT OF CULTURE W JOINT VENTURE FIRMS

Despite that Mayo Forest Products, OCG, Siecor, and Diamond Star are all the product of a union between international partners, only at Diamond Star is national culture a significant concern related to the development of culturally sensitive HRM policy and practice. At Mayo, OCG, and Siecor (where there are few or no expatriates who do not speak English), HRM policy either parallels policies in the American or Canadian parent firms, or was created for the joint venture with little need for cultural adaptation. Alternately, at Diamond Star both American and Japanese managers are actively involved in the venture, and new HR policy is created which draws on the preferences of Japanese managers adapted to the largely American work group.

Cultural differences are represented in “shades of gray” rather than in absolute terms. Perceptions of culture by members within a given joint venture vary. An interesting finding at Diamond Star is the fact that some Japanese managers, as well as some of the American managers, do not view their respective cultures as widely divergent. These managers generally prefer to consider that both similarities and differences exist between the national cultures of the United States and Japan. Other managers continue to maintain that the cultural divide is huge.

Further, Mitsubishi managers at DSM note that generalizing management practices as being Japanese is false, and that commonalties exist between Japanese and American management styles, or between Japanese and American managers and workers. To elaborate, a Japanese VicePresident at Diamond Star comments,

I don’t really know what is the Japanese management system that many people talk about, you know. Some people may say that it’s lifetime employment, or consensus management, but it is not new or unique to Japan. It is also in America. In Japan, lifetime employment is not necessarily so.

Related to these remarks, it is possible that many of the accepted concepts of what comprises Japanese work orientations or practices may be overstated. For example, a Japanese and an American manager who work together at Diamond Star both suggest some differences between the cultures of the two groups have been exaggerated. In the area of planning, for instance, a Japanese manager remarks that although the Japanese as a whole are considered to be good long-term planners, Americans also excel at long-range planning, and alternately some Japanese do not.

In addition, a senior Japanese manager at Diamond Star comments it is false for Americans to assume Japanese employees work primarily for the intrinsic satisfaction of accomplishing a job. He adds that in Japan employees work hard because they are actually striving for better jobs or salaries. However, because time frames for accomplishing goals are longer, employee motivations may not be transparent to an external observer.

This same manager suggests that although there is a collective or “group” philosophy that operates to some extent in Japan, there is also considerable emphasis on the individual and individually-oriented criteria. He stresses that to motivate employees (either in Japan, or when working with Japanese employees outside Japan), managers often offer individual encouragement. In his view, a distinction operates: in Japan a “group philosophy” applies when employees consider their allegiance to the company; however, the treatment of employees is on a more individual basis.

As a further example, a Japanese manager explains that contrary to popular belief, Japanese do not avoid conflict at all costs. On a subtle level, much depends on the context in which these discussions occur.

Open discussion with one’s boss occurs in certain circumstances, but conflicts are likely to be avoided when “outsiders” are present. Related to the importance of context, previous research has considered the relative determinants of conflict management in United States/Japanese joint ventures ( Mendenhall and Black, 1990). More specifically, depending on the organizational or social situation, the appearance of harmony is more important than the actual absence of conflict. Context determines interpretation.

THE CULTURAL CHALLENGE

Within the organizational framework of Diamond Star, Japanese and American managers work together to create an efficient manufacturing operation staffed by primarily American workers. Different styles of operation and philosophical variations prevail among the groups represented at Diamond Star. There is a conscious attempt by Diamond Star management to blend the cultures of the two national groups into policies and processes that are appropriate for a company which seeks to manufacture automobiles in a way previously unfamiliar to most of the American auto industry. On a personal level, managers at the plant need to communicate to each other, despite language difficulties. The nuances of what each group wants to accomplish, and why, are not always easily comprehensible.

A Japanese executive in the HRM area points out the importance of being able to merge the Japanese and American cultures. He suggests this requires a great deal of trust and flexibility from all concerned. The management philosophies prevalent at Mitsubishi cannot be introduced to the North American plant without modification. However, creating suitable policy for Diamond Star is a challenge. He continues it is “very difficult to find out what is adequate, what is not adequate. Still we are struggling.”

Another Japanese manager explains, “if we can say that both cultures completely mixed is 100 percent, we are now 45 or 50 percent of the way [at Diamond Star].” He adds that in every meeting the managers at Diamond Star face cultural issues. From an American manager’s perspective, he notes that when ideas are presented the Americans and the Japanese see things very differently. Both groups often become frustrated by approaches embedded in diverse operating styles. “It’s not necessarily that either person is opposed to the other’s idea. The objective that they’re trying to accomplish is probably mutual. But the road that they want to take is totally different.”

Ajapanese executive comments that differences between the American and Japanese points of view go beyond a comparison of “so-called Japanese management style” versus American practices. On a deeper level the executive remarks,

The base culture [of the United States and Japan] is completely different, so we think it takes time to understand each other. . . . It’s very easy to simplify the different philosophies between the Japanese and the American companies such as no layoffs, or training within the company or promotion within the company, or so-called lifetime employment. But it is very superficial.

The Japanese executive observes that many of the difficulties they experience at Diamond Star are related to differences in expectations between American and Japanese employees. In the area of promotion, for example, career advancement is much slower in Japan because of longer time-lines for employment with the company.

He adds American workers don’t understand this arrangement, and are impatient for fast promotions. In another area, the Japanese executive notes most of the Japanese managers are frustrated because they are not able to hire manufacturing engineers in the United States with broad-based skills. He adds that in the United States, employees are too specialized in their job experience and knowledge, as opposed to Japan where a wide range of skills is valued. Consequently, how to train and hire is different in Japan.

In the area of job rotation, a representative of Mitsubishi comments that generally people expect job rotation in Japanese companies, but from a practical point of view job rotation is desirable only when employees have extensive knowledge of a particular job. In Japan, a worker who has been in a job for five years is still considered “green.” Therefore, it may take five years or longer for a worker to be rotated to another position in a Japanese factory.

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