Electronic Commerce and New Ways of Working Penetration, Practice and Future Development in Japan

Gesellschaft für Kommunikations- und Technologieforschung mbH, Oxfordstr. 2, D-53111 Bonn

3.1 Business Environment Overview

3.2 ICT Penetration

3.3 Major Policy Initiatives

4.1 The current situation in Japan

4.1.1 Business to business

4.1.2 Business to consumer

4.2 Barriers and constraints

4.2.1 Cultural issues

4.2.2 Technology issues

4.2.3 Tariffs

4.3 Future developments

4.3.1 Growth patterns

4.3.2 Technological keys

4.3.3 Effects on business processes

5.1 New work forms

5.2 News Ways of Working Context

5.3 Telework

5.3.1 Japanese Definition of Telework

5.3.2 Japanese Classifications of Telework

5.1.1 Telework Population

5.1.2 Corporate Telework

5.1.3 Mobile Work

5.2 Networked Outsourcing

5.3 Barriers and constraints

5.3.1 Cultural barriers

5.3.2 Technological constraints

5.3.3 Legal and regulatory barriers

5.4 Future developments

6.1 Market forces

6.2 Demand patterns

6.3 Regulatory measures

6.4 Conclusion

1.1 The Japanese Context
Contrary to popular wisdom, Japan is neither at the forefront of ICT penetration nor cutting-edge applications thereof. In fact, the Japanese business environment is characterised by considerable conservatism in its approach to both e-business and work arrangements.

Until the mid-nineties, the use of personal computers was not at all widespread in Japan. Accordingly, growth, while rapid, starts from a quite low base. In fact, it was not until June 1995 that the number of Japanese Internet users topped the one million mark. According to the 1998 Communications White Paper, there are now 16.94 million Internet users in Japan (11.0% of households, up from 6.4% in fiscal 1997).

The 1998 Communications White Paper reports that Internet-based electronic commerce reached JPY2, 597.9 billion ($21.83 billion) in 1998, of which transactions of consumer goods doubled to JPY166.5 billion ($1.40 billion).

With the boom in mobiles phones (cell and PHS, 47 million as of fiscal 1998) and high sales of notebook and sub-note computers (2.55 million sales in 1996 or 153.7% year-on-year growth), mobile computing in Japan is projected to increase quite rapidly over the next few years.

Looking first at new ways of working, the central government has been the major driving force with only limited interest displayed at either the prefectural or municipal (city, town, village) level. Within central government, the main players to date are undoubtedly the Ministry of Posts & Telecommunications (MPT) and the Ministry of Labour (MOL), other institutions showing occasional rather than sustained policy interest.

Turning to government promotion of electronic commerce, this is still in a very embryonic stage and dominated by awareness-raising campaigns and/or trial projects. The major government players are the Ministry of International Trade & Industry (MITI), Ministry of Construction (MOC) and the MPT.

Generally speaking, big business in Japan has been slow to enter the e-commerce market. Their activity is further characterised by a significant number of experimental projects and trial malls, but a dearth of fully-fledged business developments.

According to MITI/Andersen Consulting (1999), e-commerce relationships classified as B - B (business-to-business) dominate the market in terms of transaction value share (¥8.62 trillion). This value corresponds to an e-commercialisation percentage of approximately 1.5% (compared to 2.5% in the US). The B-B category also shows the largest predicted growth rate until year 2003 (¥68.4 trillion/ 11.2%).

MITI/ Andersen Consulting (1999) predict B-C trading value will double each year within the period 1999 - 2003. The current level represents approximately 1/35 of the American market (in value terms), with Japan estimated to be some 4 -5 years behind the US. By 2003, this gap should close to around 1/7 of the US market or a 3-year lag.

Often-cited motivation for starting B-C electronic commerce businesses include gaining more market space; more effective customer service; and lower sales and marketing costs. The current reality is much more experimental and takes the shape of pioneering the VSM concept.

Major barriers and constraints in the e-commerce domain include management culture issues (reluctance to use open computer networking; significant computerisation discrepancy between large and small enterprises; priority for face-to-face communication), technology issues (reliance on costly proprietary and customised solutions; low knowledge of EDI/CALS), and tariffs (high costs; absence of flat rates, etc.).

Given the small size of B-B and especially B-C electronic commerce, it can only be concluded that there is considerable potential for growth. Andersen/MITI expect largest growth in Travel (highest growth rate), Cars & PC market sectors towards 2003. Others see new products and light-version mobile Internet shopping habits emerging.

With regard to the effect on business processes, the development of a workable, broadly adopted electronic money system would have an obvious impact on business processes, especially at the micro-commerce level. E-commerce also offers the chance to develop an open and advanced service environment on open business networks (OBN). This would represent a major shift in existing proprietary management systems in Japan.

The Japanese work environment is essentially a conservative one with many structural and market rigidities built in. Nevertheless, certain NWW forms are moving forward from an admittedly low base.

The most recent attempt to assess the number of teleworkers in Japan is the Telework Population Survey conducted by the Satellite Office Association of Japan. This showed that, as of 1996, the number of full-time, white-collar teleworkers was 809,000, of which 680,000 - or 4.23% of all white-collar workers - were regular teleworkers. When calculated as a percentage of the total work force in 1996, this figure represents a telework level of 1.5%.

Corporate telework in Japan has had a rather chequered history. Main drivers include:

Mobile work is another new work arrangement taking hold in corporate Japan. Major drivers include:

Using computer networks to bring together diverse worker skills is another new model of work emerging in Japan. Commonly cited benefits include access to new pools of workers, a sharper competitive market edge, and better outsourcing quality control.

Traditional Japanese corporate culture and traditional business practices are often cited as barriers to achieving stated telework objectives. The deep-rooted emphasis on face-to-face communication and poor evaluation skills of managers are two factors singled out specifically. Lack of manager awareness of telework and a preference for hierarchical management systems are additional factors. A lack of clear-cut missions and/or job descriptions is a further constraint. Elsewhere, a lack of awareness of the potential for micro-outsourcing in Japanese corporate circles is seen as another hurdle.

Underdeveloped IT infrastructure, the need for better communication tools, and low levels of computerisation and/or computer literacy are the most frequently cited issues hampering the greater penetration of telework in the technological area.

As already discussed in the section on electronic commerce, high communications/ Internet access costs are a serious barrier to the greater diffusion of new ways of working in Japan as well.

Despite the fact that the Ministry of Labour has reported officially in the Telework Promotion Council that there is no legal restriction on home-based or off-site working and that workers' compensation, for example, would apply, many Japanese companies labour under the misconception that home-based working is not allowed. At the very best, many are unsure of how far they are permitted to let employees work off-site under existing labour legislation.

Japanese housing is often cited as a further constraint, although this only affects the take-up of home-based telework, and mainly those living in inner urban areas. Nevertheless, the design of home-based workspaces is, indeed, more challenging in the absence of a dedicated room.

The trend towards ICT-facilitated news ways of working is gathering steam. However, a crucial factor particularly in the corporate sector will be whether management can embrace a radical departure from the status quo.

The Japanese market is not immune from the twin market forces of globalisation and ICT diffusion. As such, the overall trend is undoubtedly one of harnessing ICT to expand business opportunities and raise competitivity.

Demographic change represents the single most important demand factor in Japan. A projected labour shortage is expected to force the adoption of a variety of new work arrangements, especially ICT-facilitated forms such as telework and mobile work. In the face of diverse lifestyles, ICT-facilitated business can excel in customising services for burgeoning niche and even micro-niche markets.

Without doubt the single greatest dampener of all efforts to promote electronic commerce and new ways of working is telecommunications costs, especially the tariff structure. An especially pressing issue is the introduction of a flat-rate tariff system.

Specific to the area of new ways of working, a clarification of the implications of existing labour legislation is imperative. Such clarification on employee and non-employee configurations and dissemination via traditional as well as web-based mediums will go a considerable way in alleviating existing confusion concerning who is responsible for what as new ways of working emerge and are embraced by business and individuals alike.

In summary, the basis for the sound development of electronic commerce and new ways of working are being laid in Japan by market forces, changing demand patterns and regulatory reviews and measures. While initial take-up is low, growth in supporting infrastructure is rapid. It therefore seems tenable to expect both Japanese EC and NWW efforts to expand in the future although they will still lag behind the U.S. for some time.