V.
Challenges in Cross-Cultural Communication and Negotiation
5.1. Misunderstandings from Western Perspective
Differences in communication styles between Japan and the Western
can lead to cross-cultural misunderstandings and challenges due to varying
cultural norms, values, and expectations surrounding verbal and nonverbal
communication. These differences can result in misinterpretations and
difficulties in understanding each other's intentions, leading to friction and
tension in cross-cultural interactions. Individuals from the Western, where
communication is typically more low-context and straightforward, may
misinterpret Japanese communication styles as vague or ambiguous. They
may struggle to understand the underlying meanings and cultural nuances
embedded in Japanese communication, leading to confusion or frustration.
Conversely, Western culture encourages egalitarianism and individualism,
where people are urged to speak out, express their views, and engage in
open dialogue regardless of hierarchical differences. This contrast in
communication norms can lead to misunderstandings regarding decision-
making processes, leadership styles, and expectations for participation in
group settings. In addition, cultural differences in the perception and
interpretation of silence, feedback, and conflict resolution strategies can
further intensify cross-cultural misunderstandings. Western silence may be
interpreted as agreement or consent by the Japanese, whereas it may
indicate contemplation or discomfort in Japanese culture. Similarly, feedback
and criticism given straightforwardly by Western may be received as harsh or
insensitive by Japanese counterparts, who value indirect, diplomatic
communication. These divergent approaches to communication can obstruct
effective feedback exchange and hinder constructive conflict resolution in
cross-cultural contexts.
Differences in the ways people communicate in Japan and the Western
can create significant difficulties in cross-cultural understanding and
collaboration. It is crucial to be aware of cultural norms, sensitive to cultural
differences, and develop effective communication strategies to overcome
these challenges and foster positive relationships between people and
organizations from diverse cultural backgrounds. By acknowledging and
respecting each other's communication styles and cultural perspectives,
individuals can bridge the gap and build stronger connections in today's
increasingly interconnected globalized world.
5.2. CASE STUDY: Walmart’s Exit from Japan – A Failure to Adapt to
Local Business Culture
5.2.1 Overview
Walmart tops the list of the most valuable retail brands in the U.S.
Every week, over 100 million people shop at Walmart — equivalent to one-
third of the U.S. population. Each year, 93% of American households shop at
Walmart at least once. These figures highlight the brand strength and market
responsiveness of Walmart — a retail empire with no equal.
5.2.2 Walmart's Market Entry and International Strategy in Japan
Before entering Japan, Walmart had expanded into markets like
Mexico, Brazil, and China, following an opportunistic and flexible approach. It
emphasized standardized product selection, market targeting, entry
strategies, and agile global expansion.
In Japan, Walmart pursued a global strategy, leveraging its financial
strength and low-cost supply chain. The company offered standardized
products worldwide and used low prices as a key competitive tool, with
centralized control from its U.S. headquarters.
- Corporate-Level Strategy
Walmart aimed to operate in the broad retail sector, offering
everything from food and pharmaceuticals to clothing and electronics —
without focusing on any single core product line. To expand globally, Walmart
often acquired local retailers to minimize entry costs and leverage existing
brand trust. In Japan, Walmart gradually acquired Seiyu, a major Japanese
retailer, to reduce competition and gain market presence. By June 2008,
Seiyu became a wholly-owned subsidiary. In March 2009, Walmart
established Walmart Holdings Godo Kaisha and fully integrated Seiyu under
it. Walmart also invested in expanding store operations — opening 24-hour
stores and upgrading long-established retail locations — aiming to increase
efficiency and local reach.
- Walmart’s Initial Strategy in Japan
When entering the Japanese market, Walmart implemented its
signature “Everyday Low Prices” strategy by aggressively cutting operational
costs and eliminating inefficiencies. The company streamlined its supply
chain through global sourcing, bulk purchasing, and centralized logistics
operations. This approach was designed to undercut competitors on price
and offer consistent affordability to consumers — a formula that had proven
successful in many other developing markets.
Additionally, Walmart adopted a centralized, efficiency-driven
management model. Operations in Japan, particularly those of its subsidiary
Seiyu, were tightly controlled from the company’s U.S. headquarters. Key
decisions regarding pricing, inventory, logistics, and store layout were made
centrally, based on the assumption that success in other countries could be
replicated in Japan with minimal localization. The company also relied heavily
on performance metrics and efficiency benchmarks to manage its operations
and drive results.
Walmart brought with it a hierarchical, top-down management style
typical of American corporations. In this model, strategic and operational
decisions were primarily made by executives at the U.S. headquarters, with
little to no input from local teams. Japanese managers and staff were often
informed of these decisions only after they had been finalized, leaving them
with limited opportunities to contribute or adapt the strategies to local
conditions. The overall approach prioritized speed, efficiency, and centralized
control over dialogue, collaboration, and grassroots participation
5.2.3 Walmart mistake
- Management Mistakes
One key reason behind Walmart’s failure was its management
approach. Most successful American companies in Japan, such as
McDonald’s, entrust their local branches to experienced Japanese senior
leaders, allowing them a certain degree of autonomy. However, Walmart did
the opposite by assigning management control to a group of foreign leaders.
In 2000, Walmart appointed Ed Kolodzieski to manage Seiyu supermarkets,
but he did not speak Japanese and had little understanding of Japanese
consumer preferences. His role at Seiyu was essentially to follow directives
from Walmart’s U.S. headquarters. This management style caused Walmart
to become disconnected from Japanese consumers.
- Japanese Public Opinion
Since entering Japan, Walmart faced pressure from both the Japanese public
and Americans. Before gaining majority control of Seiyu in 2004, Walmart
persuaded Seiyu’s board to lay off 1,500 employees. Such large-scale layoffs
are very rare in Japan. Moreover, the layoffs were carried out at the
insistence of foreign shareholders, which further worsened the Japanese
public’s perception of Walmart.
Japanese critics accused Walmart of trying to impose the American business
model on Seiyu, aggressively cutting intermediary distribution staff, which
made life harder for store managers who had to keep stores open all day.
They also complained that Walmart introduced products from China and
other countries that did not fit Japanese consumer tastes and failed to meet
local quality standards. According to domestic magazine evaluations, “Seiyu
has been completely transformed under Walmart’s management.”
5.2.4 The Outcome
Despite Walmart’s significant investments and efforts to transform
Seiyu, the company continuously lost market share to domestic and other
international competitors. Walmart’s standardized low-cost model failed to
resonate with Japanese consumers who prioritized quality, service, and local
preferences over just low prices. Consequently, Seiyu incurred ongoing
financial losses, struggling to achieve profitability.
Finally, in 2021, after nearly two decades of disappointing results and
cultural clashes, Walmart fully exited the Japanese market by divesting its
remaining shares in Seiyu. This marked the end of Walmart’s direct presence
in Japan and underscored the difficulties global retailers can face when
entering markets with distinct cultural and consumer expectations.
