Ann: Mitsubishi Funding & MoU Update , page-39

Hi Guys,

Just a brief overview so you can perhaps get a better understanding of why business in Japan takes forever.

Japanese companies make decisions based on the cultural value of group orientation. Decisions tend to be made by group consensus rather than individual authority. In the process of forming a group consensus, all the possible repercussions of a decision are examined and taken into account, a holistic approach which maintains harmony within the organization.

This collective, holistic, harmonious decision-making process has a formal manifestation called the ringi system. The ringi system consists of a written proposal which is circulated among all the people who will be affected by the decision. It is circulated by a predetermined route based on hierarchy,
starting lower in the organization and working its way up. When the ringi proposal reaches each person's desk, they read it, sometimes make a few minor adjustments or suggestions, and then put their personal seal on it (in place of a signature in the West). By the time the ringi document has "made the rounds" and received everyone's seal, all the people involved in the decision have had a chance to give input and are in agreement on the decision.

The ringi system is often used by large, traditional Japanese
corporations for big decisions. However, even if the actual ringi system is not used, decision making in Japanese organizations will often follow a similar process. The end result is that the responsibility is spread out among many
individuals and not left with one or only a few. This has the advantage of more people feeling responsible and "owning" the decision; the drawback is that sometimes no one really is accountable for the decision or the results.

Before Japanese company members "sign off" on a proposal,
whether as a formal ringi document or more informally, consensus building starts with informal, face-to-face
discussions. This process of informally making a proposal, getting input, and solidifying support is called nemawashi.
The word nemawashi(root-binding) comes from gardening. It is the process of preparing the roots of a plant or tree
for transplanting, protecting the roots from damage. Nemawashi in a Japanese organization protects the decision making process from "damage" such as disagreement or lack of commitment.

Differing attitudes toward contracts lead to difficulties for many foreign businesspeople who do business with Japanese
companies. One of the main complaints seems to be that Japanese contracts are "vague," brief documents that don't spell out details sufficiently to avoid disputes at later stages; on the other hand, Japanese often complain about
how "detailed" Western contracts are. Another common complaint is that Japanese do not necessarily stick to the terms of a contract. In a high context, relationship-oriented culture such as Japan, a contract has traditionally been viewed as a piece of paper that summarizes an
agreement, and is considered more an expression of willingness to do business rather than a specific set of promises and limitations to be rigidly abided by despite changes in circumstances.

In general, Japan has been a much less litigious society than many Western countries for the following reasons. First is the Japanese desire to maintain harmony and avoid open conflict through the nurturing of strong relationships. Taking a business partner to court would in essence signal the end of a relationship. Secondly, litigation in Japan is slow and expensive.

Contracts take time and are usually abided by. Yes there are changes during the contract and this is seen as an organic growth aspect rather than a hinderance. It allows the companies to grow together. Let me tell you that if you have a Japanese contract favouring your business, then you have a key to success, because Japanese like lifelong relationships and will build their partners up rather than see them fail. You can google more info on the nature of Japanese contracts if you like, but having lived with them, under them and been happy to been involved with the drafting processes, I am telling you CNQ have this in the bag and we all have to wait. Simple as that.

Now remember also that Mitsubishi has not agreed on 100% offtake, and rightly so. It is up to CNQ to find their feet and get other buyers onboard, and that should be the next part of the journey. Not a problem, not a bitch session...but a journey!

I am holding and look forward to completion of contract details soon. I am still waiting for someone to call the office and verify my guesswork, but seems no takers for that 5 minute job. So if that is the case, sit back and relax and let the cultural ties build between OZ and Nippon.

BE POSITIVE!