Comparing How Japan Measures Performance

MostU.S.companies still use some form of return on investment as a primary measure of financial performance. This method is intended, obviously, to bring together both profit and investment management in order to yield a satisfactory return on capital and, ultimately, a return to shareholders. A number of scholars and some business people have argued, however, that obsessive adherence to the ROI objective results in a bias toward short-term results at the expense of the long-term future of the business. Prices are raised to increase profits, products are cheapened to reduce costs, and strategic expenditures are avoided. On the investment side, investments in capital with long payback periods are avoided.

As mentioned earlier, Japanese companies use return on sales as a primary measure of financial performance, but it should be understood that they do so in the context of a competitive market viewpoint that effectively assumes no price increases. The goal of no price increases, then, necessitates both cost savings and volume increases. Obviously, price reductions should drive volume increases, all other things considered, but it appears as though Japanese managers also understand that in a competitive environment a steady stream of new product introductions of higher quality and more features, especially if offered at lower prices, will increase volume. Those new products with additional features obviously cannot be provided without appropriate levels of strategic expenditures for new product development. Thus, the Japanese view declining prices, increased product capabilities, lower costs, product development, and increasing return on sales as fundamental components of long-term profitability.

Even though Japanese companies are not utilizing ROI specifically as a primary measure of financial performance, they do manage their investments. For example, the levels of inventory being carried by leading Japanese companies are far less than the levels of their American counterparts. We have seen Japanese companies turn their inventories more than 100 times a year. ComparableU.S.companies do not achieve 10 inventory turns annually. Similarly, Japanese companies use space and equipment very prudently because they recognize the high cost of space in their country. As a result, when one walks through a Japanese plant, one is impressed with the tightness and absence of excess. Many Japanese executives do not have elaborate offices; rather, managers frequently are located in “bull pen” arrangements close to the action on the manufacturing floor. The absence of high inventories eliminates the need for large warehouses and manufacturing space committed to work-in-process inventories.

Sports and Training Coming to Japan: Baseball

Sony Walkmans, Toyota cars, and Nintendo video games are all Japanese exports that Americans have come to know and love.

But in Japan, there is an American import that inspires more passion than all of those: baseball.

Officially, Japan’s national sport is sumo wrestling. But baseball is unquestionably number one in the people’s hearts. The Yomiuri Giants, Japan’s most popular professional team, play to standing-room crowds nightly–not only in their hometown of Tokyo, but all across the country. Organized rooting sections, led by cheerleaders and bands, rival those seen at U.S. college football games. And every summer, the whole nation tunes in to the national high school basball tournament–one of the biggest amateur sporting events in the world.

Some people find it surprising that Japan is taken with such a quintesentially American game. But the Japanese approach baseball with their own methods, psychology, and strategy. The result is a game that looks the same and is played with identical rules, but is uniquely Japanese–a mirror of the Japanese soul and mind. “I don’t know whether the Japanese system is better or not,” said Bob Horner, a former Atlanta Brave who played one season with Toyko’s Yakult Swallows. “I just don’t understand it.”

Japan first took to baseball in the late 19th century, when it began importing Western technology, methods, and ideas as part of an all-out effort to catch up to the U.S. and Europe economically. At the time, the Japanese had no team sports; sumo wrestling and martial arts, such as kendo and judo, were their main athletic activities. In fact, no word for “sports” existed in the Japanese language, so they took the English word and made it suppotsu.

The team concept of baseball was perfect for the Japanese, whose society puts the group ahead of the individual. At the same time, the game’s pitcher-versus-batter confrontation retained the one-on-one form of competition the Japanese liked about sumo wrestling and the martial arts.


From the outset, the Japanese saw the game differently from Americans. Suishu Tobita, known as the “God of Baseball” in Japan for his success as a manager in the early 1900s, brought a martial-arts philosophy to the diamond. The game, he said, should be a quest “to attan the truth, just as in Zen Buddhism.”

Japan’s greatest home run hitter, Sadaharu Oh, used a samurai sword to practice his batting stroke. During games, he would imagine that his bat was a sword cutting the ball in half. (Oh hit 868 home runs in his career, surpassing the records of U.S. stars Hank Aaron and Babe Ruth.)

Most Japanese players, like the Japanese people themselves, believe that success is linked above all to hard work. From high school to the pros, teams train year-round, with pitchers throwing more than 100 pitches a day, even when their arms hurt.

Many American ballplayers who go to Japan think the Japanese train too hard, causing injury and fatigue. Professional leagues in Japan limit the number of gaijin (foreigners) to two per team, in part because the talents of American players still exceed those of the Japanese. Out of respect for their talent, the Japanese often excuse American players from participating in rigorous workouts. But when Americans question the value of such hard practice, the Japanese reply, “If Americans trained harder, they would be even better.”