Bus Law of Bangladesh

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CASE 44 National Office Machines—Motivating
Japanese Salespeople: Straight Salary
or Commission?

National Office Machines of Dayton, Ohio, manufacturer of cash registers, electronic data processing equipment, adding machines, and other small office equipment, recently entered into a joint venture with Nippon Cash Machines of Tokyo, Japan. Last year, National Office Machines (NOM) had domestic sales of over $1.4 billion and foreign sales of nearly $700 million. In addition to the United States, it operates in most of western Europe, the Mideast, and some parts of the Far East. In the past, it had no significant sales or sales force in Japan, though the company was represented there by a small trading company until a few years ago. In the United States, NOM is one of the leaders in the field and is considered to have one of the most successful and aggressive sales forces found in this highly competitive industry.

Nippon Cash Machines (NCM) is an old-line cash register
manufacturing company organized in 1882. At one time, Nippon was the major manufacturer of cash register equipment in Japan, but it has been losing ground since 1970 even though it produces perhaps the best cash register in Japan. Last year’s sales were 9 billion yen, a 15 percent decrease from sales the prior year. The fact that it produces only cash registers is one of the major problems; the merger with NOM will give it much-needed breadth in product offerings. Another hoped-for strength to be gained from the joint venture is managerial leadership, which is sorely needed.

Fourteen Japanese companies have products that compete with
Nippon; other competitors include several foreign giants such as IBM, National Cash Register, and Unisys of the United States, and Sweda Machines of Sweden. Nippon has a small sales force of 21 people, most of whom have been with the company their entire adult careers. These salespeople have been responsible for selling to Japanese trading companies and to a few larger purchasers of equipment.

Part of the joint venture agreement included doubling the sales force within a year, with NOM responsible for hiring and training the new salespeople, who must all be young, college-trained Japanese nationals. The agreement also allowed for U.S. personnel in supervisory positions for an indeterminate period of time and for retaining the current Nippon sales force.

One of the many sales management problems facing the
Nippon/American Business Machines Corporation (NABMC, the
name of the new joint venture) was which sales compensation plan to use. That is, should it follow the Japanese tradition of straight salary and guaranteed employment with no individual incentive program, or the U.S. method (very successful for NOM in the

United States) of commissions and various incentives based on sales performance, with the ultimate threat of being fired if sales quotas go continuously unfilled?
The immediate response to the problem might well be one of
using the tried-and-true U.S. compensation methods, since they have worked so well in the United States and are perhaps the kind of changes needed and expected from U.S. management. NOM
management is convinced that salespeople selling its kinds of products in a competitive market must have strong incentives to produce. In fact, NOM had experimented on a limited basis in the United States with straight salary about ten years ago, and it was

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a bomb. Unfortunately, the problem is considerably more complex than it appears on the surface.
One of the facts to be faced by NOM management is the traditional labor–management relations and employment systems in Japan. The roots of the system go back to Japan’s feudal era, when a serf promised a lifetime of service to his lord in exchange for a lifetime of protection. By the start of Japan’s industrial revolution in the 1880s, an unskilled worker pledged to remain with a company all his useful...
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