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Where Are Asia's Global Companies?

Tickers in this article: BX GS JPM IBM SNE TM HMC PC UBS CS NMR
NEW YORK ( TheStreet) -- China and Korea are emerging from third-world status on the same path as Japan.  Japan's rapid growth was founded on low-quality, low-priced products. In the 1980s, as its economy strengthened, Japan developed large trade surpluses and produced substantial increases in GDP per person.

The predictable result was yen appreciation and associated product cost increases. However, Japan's product quality improvements neutralized its yen-appreciated cost increases. As a result, many Japanese corporations grew into powerful global giants.

In 1989, Japan's equity and real estate bubbles popped.  Given its rapid growth, the burst was not surprising. What has been surprising is the unabated weakening of Japan's once great global companies. Over the past five years, these companies have continued their long share price decline.

A few representative examples: Sharp (-74% five-year share price drop), Sony(SNE) (-73%), Seiko (-60%), Panasonic(PC) (-59%), Toshiba, (-56%).  Even the mighty NEC Corporation , with 109,000 employees, is selling for $1.50 a share and trades as an over-the-counter stock. 

Why can't these mega-companies turn it around?  Economists blame government stimulus programs and political instability; demographers blame population declines.  But neither explains why Japanese corporations have not been able to sustain their successes outside of Japan. 

A better explanation is that few of Japan's corporations can effectively manage a global workforce. Non-Japanese simply do not like working for Japanese companies. CNN Money compiled a list of the 100 most desirable employers as evaluated by U.S. MBA students. Although many European companies made the list, only three Japanese companies were represented: Sony, Toyota(TM) and Honda(HMC) . No other Asian companies made the list.

The world's smartest financiers go to Goldman Sachs (GS) , J.P. Morgan Chase (JPM) or Blackstone Group (BX) .  They also go to European banks like Credit Suisse (CS) or UBS(UBS) .  But they do not go to Tokyo Mitsubishi Bank or Nomura Securities (NMR) . 

The right people are not on the bus, and that is there is nothing more important to business success than that. John Wooden, the great UCLA basketball coach, claims that his success was all about recruiting. No amount of coaching can create a winning team without great athletes.

Why don't people want to work for Japanese companies? There are many complaints: "They don't listen to my opinions," or, "I cannot make it to the senior levels," etc. But at the very bottom of the root cause analysis, there is one reason, one "main thing," from which almost all workforce management problems emerge -- coercive leadership. Coercive leadership sounds bad, does not necessarily imply that the leader is cruel. The coercive style is defined as directive and expecting compliance.

Coercive leadership is not exclusively a Japanese style. It is common throughout Asia. Its genesis is in the child-raising methods of East Asian cultures. To succeed in life, children must pass rigorous school examinations. For their first 18 years, they work under two leaders: their teacher and their mother. Both leaders use a coercive style. Both are highly vigilant of mistakes and teach children to stay inside the box. Coercion is the appropriate leadership style to meet the demands of the Asian educational system.

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