Give a summary of the below case ,find the main issue and explain what it is then give a recommendation in 30 words then analysis. how Situation:is it customer, company/cost, culture.condition(economic/political), collaborator/competitor. Recommendation: strategy, tactics and analysis:does your recommendation address the problems you identified in situation? additional information that is important for the reader to better understand your recommendation and take action.
National Offi ce Machines—Motivating
Japanese Salespeople: Straight Salary
or Commission?
CASE 4?4
a bomb. Unfortunately, the problem is considerably more complex
than it appears on the surface.
One of the facts to be faced by NOM management is the traditional
labor–management relations and employment systems in
Japan. The roots of the system go back to Japan’s feudal era, when
a serf promised a lifetime of service to his lord in exchange for a
lifetime of protection. By the start of Japan’s industrial revolution in
the 1880s, an unskilled worker pledged to remain with a company
all his useful life if the employer would teach him the new mechanical
arts. The tradition of spending a lifetime with a single employer
survives today mainly because most workers like it that way. The
very foundations of Japan’s management system are based on lifetime
employment, promotion through seniority, and single-company
unions. There is little chance of being fi red, pay raises are regular,
and there is a strict order of job-protecting seniority.
Japanese workers at larger companies still are protected from
outright dismissal by union contracts and an industrial tradition
that some personnel specialists believe has the force of law. Under
this tradition, a worker can be dismissed after an initial trial period
only for gross cause, such as theft or some other major infraction.
As long as the company remains in business, the worker isn’t discharged,
or even furloughed, simply because there isn’t enough
work to be done.
Besides the guarantee of employment for life, the typical Japanese
worker receives many fringe benefi ts from the company.
Bank loans and mortgages are granted to lifetime employees on
the assumption that they will never lose their jobs and therefore
the ability to repay. Just how paternalistic the typical Japanese fi rm
can be is illustrated by a statement from the Japanese Ministry of
Foreign Affairs that gives the example of A, a male worker who is
employed in a fairly representative company in Tokyo.
To begin with, A lives in a house provided by his company,
and the rent he pays is amazingly low when compared with
average city rents. The company pays his daily trips between
home and factory. A’s working hours are from 9:00 a.m. to
5:00 p.m. with a break for lunch, which he usually takes in
the company restaurant at a very cheap price. He often brings
home food, clothing, and other miscellaneous articles he
has bought at the company store at a discount ranging from
10 percent to 30 percent below city prices. The company
store even supplies furniture, refrigerators, and television sets
on an installment basis, for which, if necessary, A can obtain
a loan from the company almost free of interest.
In case of illness, A is given free medical treatment in
the company hospital, and if his indisposition extends over
a number of years, the company will continue paying almost
his full salary. The company maintains lodges at seaside
or mountain resorts where A can spend the holidays or an
occasional weekend with the family at moderate prices. . . .
It must also be remembered that when A reaches retirement
age (usually 55) he will receive a lump-sum retirement
allowance or a pension, either of which will assure him a
relatively stable living for the rest of his life.
National Offi ce Machines of Dayton, Ohio, manufacturer of cash
registers, electronic data processing equipment, adding machines,
and other small offi ce equipment, recently entered into a joint
venture with Nippon Cash Machines of Tokyo, Japan. Last year,
National Offi ce Machines (NOM) had domestic sales of over $1.4
billion and foreign sales of nearly $700 million. In addition to the
United States, it operates in most of western Europe, the Mideast,
and some parts of the Far East. In the past, it had no signifi cant
sales or sales force in Japan, though the company was represented
there by a small trading company until a few years ago. In the
United States, NOM is one of the leaders in the fi eld and is considered
to have one of the most successful and aggressive sales forces
found in this highly competitive industry.
Nippon Cash Machines (NCM) is an old-line cash register
manufacturing company organized in 1882. At one time, Nippon
was the major manufacturer of cash register equipment in Japan,
but it has been losing ground since 1970 even though it produces
perhaps the best cash register in Japan. Last year’s sales were 9 billion
yen, a 15 percent decrease from sales the prior year. The fact
that it produces only cash registers is one of the major problems;
the merger with NOM will give it much-needed breadth in product
offerings. Another hoped-for strength to be gained from the joint
venture is managerial leadership, which is sorely needed.
Fourteen Japanese companies have products that compete with
Nippon; other competitors include several foreign giants such as
IBM, National Cash Register, and Unisys of the United States,
and Sweda Machines of Sweden. Nippon has a small sales force of
21 people, most of whom have been with the company their entire
adult careers. These salespeople have been responsible for selling
to Japanese trading companies and to a few larger purchasers of
equipment.
Part of the joint venture agreement included doubling the sales
force within a year, with NOM responsible for hiring and training
the new salespeople, who must all be young, college-trained Japanese
nationals. The agreement also allowed for U.S. personnel in
supervisory positions for an indeterminate period of time and for
retaining the current Nippon sales force.
One of the many sales management problems facing the
Nippon/American Business Machines Corporation (NABMC, the
name of the new joint venture) was which sales compensation plan
to use. That is, should it follow the Japanese tradition of straight
salary and guaranteed employment with no individual incentive
program, or the U.S. method (very successful for NOM in the
United States) of commissions and various incentives based on
sales performance, with the ultimate threat of being fi red if sales
quotas go continuously unfi lled?
The immediate response to the problem might well be one of
using the tried-and-true U.S. compensation methods, since they
have worked so well in the United States and are perhaps the kind
of changes needed and expected from U.S. management. NOM
management is convinced that salespeople selling its kinds of
products in a competitive market must have strong incentives to
produce. In fact, NOM had experimented on a limited basis in the
United States with straight salary about ten years ago, and it was
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