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2. INTERNATIONAL BUSINESS Page 2 AMBICIOUS GROUP SECTION A M.COM 4 KHADIJAH 0004 NEELAM 0010 AYMAN 0014 JASIA 0036 3. INTERNATIONAL BUSINESS Page 3 To make quality and quality with follow INTRODUCTION: ncorporated in 1974 under partnership Act of 1932 is one of the top three handmade carpet manufacturers and exporter of Pakistan. With over 300 people are employed, the company is operating nearly 50,000 looms spread over interior parts of Pakistan and Afghanistan. With an approximate monthly production of 10,000 square meters, UCH excels in production of different qualities depending upon the customers needs and trends of the market. (usman carpet house) UCH basically divides its products into the five following kinds of hand knotted carpets: Chobi Pakistani Modern Transitional Tribal REASONS TO GO INTERNATIONAL: There is variety of reasons for a UCH to go international such as To expand sales. To minimize risk in variations of sales and profits, one other reason of going international is to take advantage of business life cycle differences among countries. To reduce dependence on existing markets. Globalization of markets (free trade areas, lower export barriers). To generate economies of scale. To build brand image. I 4. INTERNATIONAL BUSINESS Page 4 SELECTION OF COUNTRY The country we have selected is JAPAN (Tokyo). And the reason behind selecting Japan is the three windows, the advantages offered by japan to foreign companies when investing in their country (1) Innovation Hub, (2) Business Platform and (3) Trendsetter. Currently, the world's eyes are on Asia. Japan is full of business opportunities due to its strong ties with this rapidly developing region. In Asia, Japan is recognized as a leading centre for innovation, boasts highly attractive business and living environments, in terms of safety, medical services, etc. (JETRO)and is one of the world's largest economies attracting increased global attention for its "soft power". EVALUATION OF COUNTRY ON HOFSTEDES CULTURAL DIMENTIONS (PAKISTAN VS. JAPAN) Pakistan is located in ASIA, with population of 178.9 million (trading economic). Religions: Muslim 97% (Sunni 77%, Shi'a 20%), Christian, Hindu, and other (Inc. Sikh) 3% (kwintessential). Official languages: Urdu is the only official language of Pakistan. Currency: Pakistani rupees. The literacy rate of Pakistan is 56%. Pakistan is collectivism based society only 14% (washington.edu) population prefer individualism. The power distance is high 56% (washington.edu) which means there is vertical organizational structure found in Pakistan. The uncertainty avoidance in Pakistan is low people dont secure their investments through insurance and paper work. There is 50% masculinity and 50% femininity found in Pakistan (geert-hofstede). There are less investment opportunities available in Pakistan because of weak economic conditions. Japan is located in the EASTERN ASIA, with population of127.5, million (trading economic). Religions: Shinto and Buddhist 84%, other 16% (include Christian 0.7%) (kwintessential). Official language: Japanese. Currency: Japanese yen. The literacy rate if japan is 99%. Japan is collectivism based society only 46% (washington.edu) population prefer individualism. Vertical organization structure is found in japan which means power distance is high 54% (washington.edu). The political system of japan is stable that is why uncertainty avoidance is high (92%) people always prefer to secure their investments through insurance and a lot of paper work. There is 92% masculinity and 8% femininity found in japan (geert-hofstede). There are more investment opportunities available in japan because of strong economic conditions. 5. INTERNATIONAL BUSINESS Page 5 ENTRY STRATEGY: We have selected the entry strategy of Exporting. REASONS FOR SELECTING THIS STRATEGY: By selecting this strategy we can avoid substantial costs. Exporting is an excellent way to enjoy pure economies of scale with products that are more "global" in scope and have a wider range of acceptance around the world. (export help) One good reason to begin exporting is when the domestic market becomes saturated. (export help) The global market is a highly competitive place. (export help) So its an opportunity for us to improve our product quality & performance and become more efficient in order to compete in the international market. 6. INTERNATIONAL BUSINESS Page 6 CHOSSING A STRATEGY After entering in Japan our strategy to compete international in Japan is the international strategy. We produce carpets in our country Pakistan (hone country) and then sell to Japan. REASON: The reason for selecting the international strategy is that there is low pressure for local responsiveness and also low pressure for cost reductions so it is beneficial for us. STAFFING POLICY: We select ethnocentric strategy approach according to the international strategy. An expatriate will live in japan and make contracts on behalf of Usman Carpet House. RATIONALE FOR THIS POLICY: The manager /employee who work as expat will be well aware of companies culture thats why this strategy is most preferable. ECONOMIC FACTORS Economically Japan is one of the most highly developed nations in the world. Japanese economy the third largest in the world. (yale global online)Japanese brand like Toyota, Sony, Fujifilm, and Panasonic are famous across the globe. (kids web japan)Japan and Pakistan have good trade relations. Japan imports large amount of carpets from Pakistan. As the demand of carpets increased in Japan so its become a great opportunity for us to expand Pressure For Cost Reduction High 1.Global Standardization Strategy 2. Transnational Strategy Low 3. International Strategy 4. Localization Strategy Low High Pressure For Local Responsiveness Usman Carpets 7. INTERNATIONAL BUSINESS Page 7 our business by exporting carpets to Japan. As Tokyo is the capital city of Japan so our initial target market is Tokyo where we were first exported our carpets. ECONOMIC SITUATION (index of economic freedom) CountryName Japan Pakistan Region Asia-Pacific Asia-Pacific World Rank 24 121 RegionRank 6 24 Score 71.8 55.1 Government Spending 45.0 89.0 Tariff Rate 1.6 9.5% Income Tax Rate 40.0 25% Corporate Tax Rate 25.5 35% Tax Burden % Of GDP 28.8 10.1 Government Expenditure % Of GDP 42.8 19.1 Population(Millions) 127.8 175.3 GDP(Billions,PPP) $4440.4 $488.6 GDP Growth Rate % -0.7 2.4% 5yearGDP Growth Rate -0.2 3.7% GDP Per Capital(PPP) $34740 $2787 Unemployment% 4.2 5.6% Inflation -0.3 13.7 FDI Inflows(Millions) -$1758.3 $1327.0 Public Debt% Of GDP 229.8 60.1 8. INTERNATIONAL BUSINESS Page 8 (trading economics) Country Japan Pakistan Economy Market (global edge) Mixed (Ask) Trading Bloc A member of APEC (Asia- Pacific Economic Cooperation). APEC consists of 21 members. (BBC news) A member of SAARC (South Asian Association for regional Cooperation). Consists of 8 members. (your US brazil Trade Assist) Interest Rate 0.00% 10% Export Prices(index points) 107.80 251.30 Consumer spending 313940.60 b 7990018.00 m Sales Tax Rate 5% 16% Economic System The type of economy that Japan has is called the 'market economy' but it includes some command elements too. Japan's economy relies on its manufacturing industry which produces automobiles, electronic equipment, robots, and televisions. Fishing and agriculture is also important. (Ask) Pakistan has a semi-industrialized economy. This economy is boosted by textiles, chemicals, food processing and agriculture which bring in most of the economies money and foreign exchange. (Ask) 9. INTERNATIONAL BUSINESS Page 9 These are some factors which affect our business like if we see the consumer spending that is about 313940.60 billion yen in Japan that is greater than spending in Pakistan which is 7990018.00 million rupees so it is beneficial for us to export our carpets to Japan. Another factor is interest rate that is 0% in Japan as compare to Pakistan is 10%. If we see per capital GDP of Japan that is also greater then Pakistan is $34,740.One important factor is the tariff rate of Japan that is 1.6% favourable for us. So its more beneficial for us to expand our business in Japan because there are more chances for us to generate revenue. POLITICAL FACTORS These are some political factors which explained below either restrict us or help us in doing business in Japan. Country Japan Pakistan Political system Democratic (rog) Democratic (you) Law and order situation strong it is a mixture of civil and common law (sch) weak (pul) Customs tariffs and taxes Japan tariff is on average one of the lowest in the world, approximately 2%. (hkt) Taxation system is also one of the irritant which hinders the growth in the country. (pul) Documentation and procedures Procedures and documentation of Japanese regarding import is difficult to understand. (glo) ____ Political stability There is political instability in Japan. (jap1) There is instability in Pakistan. (tri) Subsidy ____ TDAP had imposed restrictions on participants. It had not given any subsidy to participants of international fairs for the last three consecutive years. (the) currency Yen is most quoted and stable currency. It is the third of the world's reserve currencies after the US dollar and the euro. (pra) In December 2013 the exchange rate is 1 JPY = 1.0671 PKR (cur) and now the latest rate is 1 JPY = 1.2008 PKR (cur) ____ Corruption Japan rank 18 in corruption. (tra) Pakistan rank 127 in corruption. 10. INTERNATIONAL BUSINESS Page 10 MANAGING THE POLITICAL RISKS In order to manage the political risks we select mixed technique which is a mixture of integrative, defensive and protective, and proactive techniques. COMMUNICATION PROBLEMS IN JAPAN AND HOW TO OVERCOME THESE PROBLEMS: We being a corporation named Usman Carpets House going to export hand knotted carpets in Japan (Tokyo) and there are many kinds of communication problems that may be faced by our managers in Japan in order to communicate with Japanese dealers, because Japan is a country with its unique values, traditions and customs. While doing business in Japan we need to understand the areas such as business culture, business etiquette, and negotiation and meeting protocol. CULTURAL PROFILE OF THE HOST COUNTRY (JAPAN) RELIGION: Observe both Shinto and Buddhist 84%, other 16 %( including Christian 0.7%) LANGUAGE: Japanese is the sixth most spoken language in the world, with over 99% percent of the country's population using it. Amazingly, the language is spoken in scarcely any region outside Japan. Dialects are used in areas, particularly in Kyoto and Osaka, but standard Japanese, based on the speech of Tokyo, has become more popular through the use of television, radio and movies. EDUCATION SYSTEM OF JAPAN: The education system is a very important element which forms history and culture of Japan. The Japanese educational system is a very strong instrument for their national politics and cultural constant. Academic achievements of their students are higher and fitting to the international standards. Goal of education is to try to make real Japanese ideal, which would harmonize individual happiness with work for government and society. SOCIAL STRUCTURE: A largely homogeneous society, Japan does not exhibit the deep ethnic, religious and class divisions characterize many countries. The gaps between rich and poor are not as glaring in Japan as they are in many countries, and a remarkable 90% or more of Japanese people consider themselves middle class. Most groups are structured hierarchically. Individual members have a designated rank within the group and responsibilities on their position. 11. INTERNATIONAL BUSINESS Page 11 Seniority has traditionally been the main qualification for higher rank, and socialization of young people in Japan emphasizes respect and deference to ones seniors. JAPANESE ETIQUETTE AND CUSTOMS MEETING ETIQUETTE IN JAPAN: Greetings in Japan are very formal and ritualized. It is important to show the correct amount of respect and deference to someone based upon their status relative to your own. If at all possible, wait to be introduced. It can be seen as impolite to introduce yourself, even in a large gathering. While foreigners are expected to shake hands, the traditional form of greeting is the bow. How far you bow depends upon your relationship to the other person as well as the situation. The deeper you bow, the more respect you show. GET GIVING ETIQUETTE: Gift-giving is highly ritualistic and meaningful. The ceremony of presenting the gift and the way it is wrapped is as important sometimes more important than the gift itself. Gifts are given for many occasions. The gift need not be expensive, but take great care to ask someone who understands the culture to help you decide what type of gift to give. DINING ETIQUETTE: Remove your shoes before entering and put on the slippers left at the doorway. Arrive on time or no more than 5 minutes late if invited for dinner. Unless you have been told the event is casual, dress as if you were going into the office. TABLE MANNERS: Wait to be told where to sit. There is a protocol to be followed. The honoured guest or the eldest person will be seated in the centre of the table the furthest from the door. The honoured guest or the eldest is the first person to begin eating. BUSINESS ETIQUETTE AND PROTOCOL IN JAPAN RELATIONSHIPS & COMMUNICATION: The Japanese prefer to do business on the basis of personal relationships. One way to build and maintain relationships is with greetings or seasonal cards. It is important to be a good correspondent as the Japanese hold this in high esteem. 12. INTERNATIONAL BUSINESS Page 12 BUSINESS MEETING ETIQUETTE: Appointments are required and, whenever possible, should be made several weeks in advance. Punctuality is important. Arrive on time for meetings and expect your Japanese colleagues will do the same. BUSINESS MEETING NEGOTIATION: At a meeting you are always deal with a team because there is a proper team of Japanese in meeting with particular expertise. So we have to confident enough to handle all questions we receive. The Japanese are very detail oriented. Expect a lot of questions and these questions repeated in different ways. Japanese like dealing with quiet, sincere and compromising individuals. CULTURAL BARRIERS: The culture of Japan is much different from Pakistani culture so a lot of communication problems can be faced doing business in Japan. Here are some areas which cover the whole culture of Japan regarding doing business and also solutions which help us to overcome these cultural barriers for successful business in Japan. MEETINGS AND GREETINGS: In Japan while doing business, we have to assess the Japanese people in very first meeting so always maintain professionalism. The bow is an integral part of Japanese culture and it is used when meeting, getting attention, show sympathy or as an apology. While doing business in Japan as Pakistani, you would not be expected to bow; you will most likely be greeted with handshake combined with a slight nod of head. Introduce yourself with proper name and followed by your full company name and when you want to address someone then use proper title. GROUP ORIENTATION: In Japan team work and group meetings are preferred and in this society individuals are identified by social group. So being Pakistani we have to manage ourselves according to the culture of Japan. RESPECT: Respect is the main component of Japanese culture and they conveyed respect through language, behaviour, etiquette, body language and also through non-verbal communication. 13. INTERNATIONAL BUSINESS Page 13 BUILDING RELATIONSHIPS: When doing business in Japan a successful relationship with Japanese colleague or client or dealers is based on three factors: SINCERITY: In Japan it means you understand, compromising and you want to conduct business at personal level so we have to consider all these facts. COMPATIBILITY: Compatibility is established when you focus on good personal relations not only on financial gains. TRUSTWORTHINESS: It relies to faith put in you to protect from loss face. So we have to build trust first then relations will be strong. (kwintessential) LANGUAGE BARRIERS: While doing the international business if manager do not understand the language of host country they may face a lot of difficulties in the settlements of their dealings. In Pakistan mainly two languages are spoken, Urdu and English. English is one of the official languages of Pakistan and is widely used in the documentation and all official work and Pakistani uses the English language in doing business at international level. Whereas Japanese language is much difficult to understand almost all people in Japan use Japanese language because they dont know English language except a few. Therefore before exporting in Japan we first understand and learn the Japanese language then we can understand things in better way and it also helpful in strengthen our relations with Japanese dealers. PERCEPTUAL BARRIERS IN COMMUNICATION: Due to above mentioned cultural and language barriers there is also problem of perceptual barriers while communicating with Japanese dealers. Without understanding the language and cultural barriers there are possibilities that what an exporter wants to give the message to Japanese client, he is unable to understand. Due to cultural and language differences they will perceive different things in different meanings thats why first we have to overcome the language and cultural barriers then we are able to convey our message in correct meaning and Japanese also interpret our message in understandable way. 14. INTERNATIONAL BUSINESS Page 14 PAKISTAN-JAPAN BILATERAL RELATIONS Historical links between the peoples of the two countries date back to pre-historic times. Around 1930, a chair for Urdu language was established in Tokyo University and Tokushoku University. Since then, the research on Urdu language and on people of the region started in Japan. Since the creation of Pakistan in 1947, the two countries enjoyed friendly relations. At the 1951 San Francisco Peace Conference, Pakistan was the only major country invited from South Asia (as China was not invited, and India and Burma stayed away from conference for their own reasons). Since the establishment of diplomatic relations on 28th April 1952, Pakistan-Japan relations have progressed. Soon after the San Francisco Peace Conference, Pakistan was one of the very few countries which opened their commercial office in Japan. Similarly, Japan opened one of its earliest trade offices in Karachi. In 1952, Pakistan opened its Embassy in Tokyo. Mr. Mian Ziauddin became the first Ambassador of Pakistan to Japan. In early 50s Pakistan was a major import destination for raw cotton for Japan. During the Korean War and in the Cold War, Pakistan and Japan found themselves on the same side of the divide. During the latters visits of presidents, agreement to start two projects on Yen Credits and Transferring students were concluded. Accordingly, 80 Pakistani students were transferred to Japan, mainly to Chiba University where they acquired Japanese language training and technology skills. Yen Credits was established to deepen trading and economic relationship. According to the Yen Credit contract, Japan accepted long repayment periods and Pakistan only bought Japanese products. It was aimed to achieve two purposes, for Pakistan good products were available at discounted price, and for Japan, its products were introduced in Pakistani and other Muslim countries to use Japanese products but also established strong connectivity between Pakistan and Japan. Since 2001, Japan has also been highly appreciated of Pakistans vital role in the war against terrorism. It excluded humanitarian assistance to Pakistan in the wake of 2005 earthquake. Japan welcomed the 2007 return of democracy in Pakistan. Japan has also come forward to assist Pakistan in its flood relief and rescue operations. It announced contributions for food relief and rehabilitation efforts at the Pakistan Development Forum on 14-15 November 2010. Japan has tirelessly supported Pakistan on various fronts. (brief-histor-pakistan-japan- relations) Pakistan also expressed its solidarity and support to the government and people of Japan in the aftermath of devastating earthquake and tsunami that hit Japan in March 2011. President Asif Ali Zardari visited the Japanese Embassy to convey sympathies and express solidarity with people of Japan. Two C-130 loads of relief goods were provided. Representing the sentiments of whole Pakistani nation, members of different local outfit of Pakistani helped 15. INTERNATIONAL BUSINESS Page 15 the victims by providing them food, disposable water bottles and other relief goods and voluntarily worked in the shelters. (brecorder.com) Above mentioned the brief history of Pakistan-Japan relations it is realized that Both nations have been sharing cordial relations over half a century now. Both nations people have soft corn in their hearts about each other and helped each other in every difficult phase. So Usman Carpets House dont face any kind of difficulty in exporting carpets to Japan (Tokyo) because both nations have good relations at govt. level, political level, economic and also at social level. CONCERNS FOR LOCAL COMMUNITY IN JAPAN Environmental, Social, Educational and Political issues: As we are going to export carpets in Japan (Tokyo), this activity does not raise any problem that will affect the Japanese community. First we discuss the social structure of Japan and there is strong believe that they run business on basis of sincerity, good relations at personal level and much committed with their norms and traditions so we are ready to establish good relations with them both at social and corporate level. Though the government of Japan is large and powerful, and plays a substantial role in the lives of many Japanese, so we have to maintain good relations with the Japanese government. Japanese people are much aware about using the carpets because they use carpets from door to toilet means everywhere in homes, offices, hotels carpets are used in Japan. BIBLIOGRAPHY geert-hofstede. (n.d.). Retrieved from http://geert-hofstede.com/pakistan.html JETRO. (n.d.). Retrieved from http://www.jetro.go.jp/en/invest/whyjapan/ kwintessential. (n.d.). Retrieved from http://www.kwintessential.co.uk/resources/global- etiquette/pakistan.html kwintessential. (n.d.). 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