Why Are Japanese Companies Susceptible To Labour Unrest Overseas? – Analysis


By Ira Majumdar

While the Maruti mayhem engulfed the country with a paranoia that the bad old days of trade unionism are back , the labour Ministry’s statistics reveal a different situation of industrial relation in the country. The number of strikes and lockouts declined drastically from 430 in 2010 to 165 in 2011. Man- days lost slipped by less than half from 17.9 million days in 2010 to 4.7 million days in 2011. Furthermore, it is an irony that Maruti violence represents a case in point where the auto giant is managed by a foreign company, a Japanese company, whereas hitherto strikes and lockouts hit mostly the Indian managed companies.

Since reforms in 1991, India received a galore of foreign investment. There were rare cases of any hyper labour unrest in any foreign company since then. There were, however, labour troubles in some foreign companies, but they were short-lived and were doused quickly without causing any big damage to the company or loss of human life. Maruti should be the first foreign company, where labour unrest erupted like volcano, causing a death of a supervisor. This labour trouble was neither spontaneous nor has erupted on the basis of caste abuse. The unrest was the outcome of a accumulated anger over a period of time and it burst when the anger reached the critical point. The management pundits say it is the reminiscence of labour unrest in textile and jute mills before the reforms.


Why are Japanese managed firms susceptible to labour unrest overseas? Are they only in India, or were also noted in other countries? Why did not the other foreign joint ventures or subsidiaries face such damaging lobour unrest in India? Is the contract labour only cause for unrest, or there are other reasons which fueled the unrest. These are some of the questions which remain unanswered.

The whole gamut of the situation was that the unrest was sunk in the whirpool of several factors and reasons. Contract labour issues was one of the causes for the unrest. Globally it was observed that wherever the Japanese investment increased, labour problems sparked in those countries. India is not the first country which faced Japanese susceptibility to the labour unrest.

China, which prohibits strikes, faced similar Japanese labour unrest in 2008. Interestingly, it was (as revealed in some media) the Chinese authority which remained mute on these strikes. The strikes erupted in Japanese auto subsidiaries in China. Foshan Fengfu- a Japanese subsidiary in China manufacturing exhaust- went on strike on the demand for higher wages. Mitsumi Electric Company, supplying electronic parts and Nippon Sheet Glass, supplying glasses for auto, companies failed to comply with their supply schedules due to strikes in their factories. Japanese majors Honda and Toyota were victimized by the disruption of supply of auto parts by the Japanese vendors in China. The main reason for the strikes was the demand for higher wages. Wages in China were rising on an average by 10-15 percent till 2008. Thereafter, wages spurred by 25-30 percent. In fact, wages in Japanese affiliated companies lagged those in other foreign owned companies. The wage increase in China hit not only the Japanese companies, but also other foreign subsidiaries. While other foreign subsidiaries sorted out the problem quickly, the Japanese management, culturally infected by long time decision making process, deepened the problem.

Maruti’s eruption of labour unrest is akin to such cultural gap in management practices by the Japanese expatriates. In overseas the Japanese companies were transferring the management practices along with their expatriates in their subsidiaries. Maruti is the biggest and one of the oldest foreign joint ventures in India. Over two decades since it began production in 1984, there was no major labour trouble. Maneswar plant, which witnessed strike in January 2012, was probably the first plant to face a major labour trouble. This was followed by the violence on 18th July. Why is it that the industrial peace in Maruti turned upside down after a period two decades of harmonious industrial relation in the company. The pundits were abuzz with rumours that the change of the management could be one of the major reasons, besides contract labour issue. The management of Maruti changed hands from Indian to Japanese expatriates in 2007. Since then the air of industrial peace in the company was getting clouded, according to one observer.

Japanese management believes “The Japanese Way” of doing management even in overseas. Most of the Japanese subsidiaries prefer Japanese as the heads of the their divisions. Even for the best or talented persons in the company, the door of boardroom is closed. It is not the linguistic problem only, but the age old stint in the believe that only the Japanese can manage the Japanese companies. Their work culture, gembaisu , embraces life long employment , loyalty , promotion by seniority, not clamoring for higher wages and late sitting . The grievances are sorted out within the company itself. No doubt, this work culture was the backbone for Japanese economic miracle. But, they proved a liability when they are practiced in overseas. According to Professor Noato Sasaki of Tsukuba University, Japanese management lacks international outlook. Japanese do not want to manage their business operation in overseas in any new special way.

Group culture, another common method of decision making process in Japanese company, is imposed on Japanese subsidiaries in overseas. This clashes with the individual decision making processes, which is a common management practice in Indian companies. Group decision debars the Japanese expatriates to take a prompt decision. Japanese executives in overseas lack autonomy to take decision, till they hear from their head quarters. By the time the decision is taken, the smaller problems grew into bigger ones. Lack of cosmopolitan attitudes, linguistic weakness and fragile individualistic confidence debar the Japanese to mingle with overseas staff freely.

Therefore, India should not be made the scapegoat for the return of disharmony in the industrial relation with the Maruti episode. Industrial dispute in Maruti should be looked into from different perspectives. This is because India has been able to peel off its image of labour unrest after achieving a higher growth in industrial production in the last decade. Had this size of mega labour strike and violence erupted in any other company, this would have had an immediate contagion impact on other industrial belts in the country.

(The author can be reached at e-mail [email protected])


SAAG is the South Asia Analysis Group, a non-profit, non-commercial think tank. The objective of SAAG is to advance strategic analysis and contribute to the expansion of knowledge of Indian and International security and promote public understanding.

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