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The European senior management team of a business which had been newly acquired by a Japanese company complained to me about being treated as if Europe was one homogenous country, when in fact they only had offices in 5 very different countries in Europe, with a headquarters in Germany. “It’s true, we know how to work with each other in Europe – after all Europeans have been living and working together for hundreds of years, but it seems strange that on paper we’re supposed to be a tri-regional structure of Europe, North America and Asia, and yet North America has only two employees and Asia has no regional headquarters, with Taiwan, China, Korea and Japan being managed separately”
This was just a small company, but actually I have seen similar situations in many other much larger Japanese multinationals. It’s partly that Europeans are very sensitive to their status –and want to be treated on a par with other regional heads – and this means the European definition of regions, with Asia as one region.
But it’s also due to a justifiable concern that if the company is meant to be offering global products and services, it needs to have a well-balanced global structure operating off common platforms, systems and processes. If the company grows by acquisition, you often end up with very different portfolios of services and products from country to country, incompatible processes and systems and no clear idea of how revenue and costs should be shared across the regions which are contributing to the global offering.
This can cause huge, long running arguments, partly because standardizing trade, production processes and technology are interrelated issues. Once you decide what products and services are global and what are local, you have the basis for splitting revenue accordingly. But you have to be careful this does not lead to regional organisations focusing on their local products and services, refusing to participate in global contracts because they make more profit out of local contracts.
Once you know what you are offering globally, you can standardise the technology – such as having all the company’s websites running off the same content management system, or production running off the same platforms or sales and purchasing using the same global accounting system.
Sometimes Japan headquarters has to swallow their pride for the sake of speed and efficiency. I was impressed that Nomura, when it acquired Lehman Brothers, decided to move their dealing onto the Lehman platform, because they judged it to be technically superior and faster than trying to integrate platforms or shift everyone onto the Japanese system.
Nobody wants to deal with these problems because they are so complex and lead to fights and easy resistance by those claiming that the global standard is not going to work in their markets. But unfortunately, if you do not deal with these issues soon after an acquisition, they fester and become even more difficult to resolve.
This article was originally published in Japanese for the Teikoku Databank News and appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.
