Japan is the world's second largest market, competitor, and partner.
With 125 million people it's a large and important country. Technologically
it is very advanced: there are about 20 million internet users, and 50 million
mobile phone users for example. A large proportion of internet users also use e-commerce. 15% of the world's economy is in Japan 25% of the world's high-tech products are made in Japan
Business in Japan.
Why can it be so very difficult?
Quick answer:
Japan was never a western colony - and that is not a coincidence, but largely due to Japanese people's strong
will and traditional abilities. Some (not all) western companies find it difficult to succeed in Japan.
Reasons are:
Japanese customers can be very demanding, and often have quit different tastes and needs than Western customers.
Therefore in many cases western companies must redesign or redevelop products in order to succeed with Japanese
customers. Examples where this is the case range from baby napkins, to tooth brushes, cars and mobile phones.
Because of Japan's size, substantial investments are necessary, and therefore the inherent risks are
also large: you either win big, or lose big.
Japan has many very strong local companies. As an example, eBay lost in Japan against local competition and withdrew from
Japan. Japanese companies also will not usually welcome a new competitor, but develop strategies to
compete hard against new entrants. You must be prepared for such competition with very thorough market research and
strategy development. If you do not thoroughly understand your competition in Japan, you have little chance to win.
In order to win in Japan you must understand and must be prepared and able and willing to compete with local competition.
Management methods and the actual managers at headquarters in US and EU have certainly won many achievements in
the US and Europe and elsewhere. In many cases, however, Western managers and Western management teams are ill prepared
to succeed in Japan. In many cases, drastic changes in thinking and manaagement methods and personell changes at
headquarters would be necessary to succeed in Japan. However, there are not many Western companies, which act on this knowledge.
Because of (1) 10 years of zero or negative growth, (2) almost zero return on capital in most industrial conglomerates,
(3) deteriorating government finances,
(4) unavoidable globalization because of internet and end of communism and (5) internet & ecommerce,
there is now change and restructuring of industry. Some people speak about a new opening. These changes
present exceptional opportunities.
There is a whole range of well-known mistakes foreign companies have been making over
the years. Don't make any of these well known mistakes!
Much of it is common sense. However, you also need to study a lot of facts about Japan, and
customs. You will find that some assumptions you made are wrong!
You'll also find (surprise, surprise...) that not everybody (Japanese and foreigners) tells you everything they know.
Some "well known mistakes" lie in the organization of your own company!
Sometimes problems in a Japanese subsidiary are best solved by changing
responsibilities in the main office at home! We would be delighted to discuss such issues
with you and work on a solution using our large range of experience.
A big "No-No":
The biggest "no-no" is not to do proper preparation,
or to start without a strategy.
You can assume that normally your Japanese partners will do their preparations and they will have a big advantage,
if you are unprepared. You will be surprised how many time consuming and expensive mistakes (sometimes costing
US$ 100s of million) are just due to
lack of preparation, lack of information, and lack of planning. You will also need to learn a lot of basic facts.
It can save a lot of time and money to use an experienced consulting company
(such as Eurotechnology Japan for example :)
Here are examples of some common mistakes - but there are many more:
Why is doing business in Japan difficult, and what can we do about it?
You may often hear that doing business in Japan is very difficult - but you may have experienced
that everybody was incredibly friendly when you visited... So what's going on?
Here a few facts:
There is no other advanced industrial country with so little foreign investment.
This is because for a long time foreign investors have been kept out.
This policy has recently changed, and foreign investment
is increasing rapidly. Increasing foreign
investment [Stanford Slide No. 17]
Very few Japanese people (less than 3% - 5%) speak good English and as a consequence
there has been a certain amount of intellectual isolation from
the rest of the world.
Traditionally financial conglomerates (historically: Zaibatsu, now: Keiretsu) dominated the
traditional large industry. It was difficult to do any commerce
across the boundaries of these Keiretsu, and these barriers were even stronger
against foreign companies. However, the old Zaibatsu/Keiretsu structure is
now gradually breaking down.
It's a very bureaucratic country in many ways, with a dense network of
regulations, permissions, certifications, procedures, offices and authorities
with approval procedures for many things, which don't need approval in UK or US.
Many of these restrictions are designed as entry barriers against newcomers to existing
industries. Slowly these regulations are "eased" and seldom eliminated.
With professional help, for example by lawyers or experienced management consultants -
depending on what needs to be done -
you can often find ways to do work - particularly in new industries.
However, internet, e-commerce, and the present "opening" may bring many changes,
and evaporate some of the traditional difficulties...
Relationships
Relationships are important in every country, and even more so in a "high context" country as Japan.
You need to build relationships, take care of your relationships, understand why and with whom you
build relationships, and avoid certain kind of relationships. You also need to understand the
network of relationships which your partners and competitors work under.
Here a few facts:
You need to carefully plan your relationships in Japan, and you need to
understand your relationships. You need to be aware, that relationships in Japan
are seldom defined by legal contracts alone, you need to work on your relationships
and take care of them.
You need to be aware that, as anywhere else, your business partners in
Japan will not tell you everything they know and everything they think and
feel and plan for the future. In that regard Japan is really not that different
from other countries. However, in your own country it will be easier for you
to make guesses about what your partner could think and fell, while in Japan
this might be more difficult for you. There are many examples, als in this
day and age, where Western top management returns from negotiations with Japanese
partners, celebrating success, while two days later a relationship breaks up.
There are many cases where the Western side view and the Japanese side view
of one and the same partnership are dramatically different, and one or both
sides do not even know about this difference. Be warned, and do your homework.
Traditional big industry in Japan tends to be organized and structured in historically
grown industry groups. These used to be called "Zaibatsu" (= financial groups), and
today these groups are usually called "Keiretsu" (= industrial groups). Until recently
there were six such large groups, each grouped around a large bank and a large trading company
at the center with a large number of companies in many different areas ranging from
transportation, ship building, cars and electricals to insurances and department stores and beer
factories. Recent bank mergers and other economic difficulties mean that the importance
of these Keirets has somewhat decreased, but Keiretsu relationships are still enormously
important in Japanese business and economy. For many foreign companies it is essential to
understand the Keiretsu structure and to plan your business taking account of this knowledge.
The figure below shows an up-to-date mapping of todays Keiretsu structure taking account
of recent Bank mergers, including the announced Mitsubishi-Tokyo-Bank and UFJ merger.
You will find a more detailed discussion and a large scale image (for printing) of our
Keiretsu map here: "Best practice for foreign
technology business in Japan"
There are many books claiming to prepare you for Japanese etiquette. Don't believe
everything these books say, and don't make the mistake that you believe you are well prepared to do business in Japan
after reading a book about "Japanese etiquette"!
Still, here are a few essential tips:
Take enough ("enough" often means a couple of hundred)
professionally prepared "meishi" ("meishi" = business cards). For Japanese people (as else where in Asia-Pacific)
exchanging "meishi" are like shaking hands. It is very awkward not to exchange "meishi"
when you first meet - few people will think this is funny. So make sure you have
enough. Not to have "meishi" has the meaning of being unemployed.
Impress with facts and achievements, or the fame and power and size of your corporation.
Bring documentation of your company in Japanese language.
Be on time and well prepared for meetings.
There is a sophisticated protocol how seating is arranged at meetings, at dinners
or in cars etc. The seating protocol depends on seniority, guest-host relationship,
the position of the door, decorations in the room, etc.
If you are arranging important meetings or dinners at high level, it will impress
if you follow these seating customs. Most foreigners who have not worked a long time
in Japan will need advice from Japanese
professionals to select the correct seating order.
At dinners there are also customs about
filling glasses etc.
There are a number of unwritten rules in daily life in Japan, which everybody observes,
but nobody talks about, and which don't exist in Europe or USA.
For example: no eating and drinking and no baby's perambulators
(except folded up) on short-distance commuter trains.
It's your choice in a way, but you'll make more friends
if you observe these little rules.
There are some things you should definitely not do:
(1) Don't blow you nose in front of other people!
(2) Don't kiss anybody as a greeting! (You'll thoroughly embarrass your "victim"!)
(3) Never throw objects at somebody asking them to catch! Books, papers, documents, meishi, presents, and
other important objects are given with both hands and a bow of the head.
(4) There are a couple of other "no-no's" (gestures, comments etc) which will provoke embarrassment, or
even hostility in Japanese people, and you might be unaware of them. You better ask for them and avoid them.
Be prepared for surprises! Everything is changing rapidly recently!
Relax! Don't overestimate etiquette! Although your Japanese business partners may look dead serious (and
Japanese people usually take work dead-serious...), they also are human and know to laugh... Here is a
famous story (not sure it's a true story though...) demonstrating what can happen with exaggerated
cultural adaptation:
An important US-Japan negotiation is scheduled in Hawaii - midway between the american continent and Japan.
The Japanese party and the US negotiation party both have done their preparations well: they studied the
material, the facts, prepared strategies, fall-back positions, read up on how to negotiate with the
Japanese (or the Americans) and read about cultural differences, and learnt a few polite word's in the
other party's language. The doors open and in come the Japanese and the US negotiators. The Japanese
negotiators - all experienced senior managers - trying their best to adapt to American culture and to create
a good atmosphere, enter the conference room
dressed in Aloha shirts, sandals, shorts while on the other side of the room the American delegation enters:
dressed in stiff white starched shirts, dark tie, dark blue business suits, polished black shoes...
What can we do for you?
Our methods and our experience:
Over many years (since 1984) we have developed methods, experience and a wide network of professional cooperations and
contacts so that we can quickly and efficiently reduce your risks of entering new business areas in Japan. Actually,
most of our customers are corporations with long years of experience in Japan, where we work on expansion into
new business areas.
Market research and strategy development:
We believe that it is essential to reduce risks through thorough market research, planning and developing
a sound strategy. It essential for success to understand your competition and why your products have a
competitive advantage.
Top-down versus bottom-up business development:
We believe that top-down business development is more efficient than bottom-up business development.
Eurotechnology
Shinagawa Intercity Tower A 28 Floor
2-15-1 Konan, Minato-ku
Tokyo 108-6028
To visit us:
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(Please phone before visiting us.)
