Japan business: how to avoid well known mistakes – don’t be a loser in Japan

There is a large range of well-known mistakes foreign companies have been making over and over again in Japan for many years. Surprisingly foreign companies continue to repeat these well-known mistakes over and over again!
Don’t make such well-known mistakes! (We can help you avoid them….)

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 that not everybody (Japanese and foreigners) tells you everything they know ;)

Japan is one of the most important telecom and data markets globally, currently Google, Microsoft, Amazon/AWS, Facebook, Apple make large investments in Japan’s data infrastructure. Japan had packet switched mobile data networks earlier than any other country, and as a result the global mobile internet (mobile phones/smart phones with internet) was born in February 1999 in Japan.

Vodafone wanted to be part of this, and acquired Japan’s second largest fixed and mobile telecom operator, Japan Telecom. Vodafone always saw this as a financial investment, and in 30 or more financial transactions first increased its investment step by step, took the publicly listed Japan Telecom private, then sold bit by bit to SoftBank. Vodafone renamed Japan Telecom’s mobile unit J-Phone to Vodafone-Japan, which it finally sold for about US$ 15 billion to SoftBank, withdrawing totally from Japan. Today there is essentially no Vodafone business in Japan.

Why did Vodafone withdraw from Japan? Essentially Vodafone took a long list of decisions which together led to its failure in Japan, eg not enough investment in the telecom infrastructure, so that customers’ mobile phones did not connect to the network.

Learn from Vodafone’s decisions leading to Vodafone’s withdrawal from Japan in detail:

• Vodafone Japan fail: Why did Vodafone lose the opportunity of US$ 83 billion value, and help jumpstart the growth of SoftBank https://www.eurotechnology.com/2006/03/17/why-did-vodafone-fail-in-japan/
• Vodafone Japan could have been a business worth US$ 50 billion today! Why did Vodafone Japan fail and sell to SoftBank? https://www.japanstrategy.com/2014/11/25/vodafone-japan-failure/
• SoftBank turned around Vodafone Japan within a few months https://www.eurotechnology.com/2006/05/21/softbank-mobile/

Volkswagen was attracted by Suzuki Motor’s know-how to produce small sized and low priced cars, and by Suzuki’s position as No 1 market leader in India, where Volkswagen had low market penetration. Volkswagen essentially attempted a hostile take-over of Suzuki Motors and failed.

• Volkswagen on 9 December 2009 announced a “comprehensive partnership” and mutual investment in Suzuki Motors.
• Two years later, on 1 July 2011: Suzuki Chairman, Osamu Suzuki, publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから （鈴木修氏の経営者ブログ）” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
• 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
• 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
• 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
• Mr Suzuki (Chairman of Suzuki Motors), wrote in his Japanese blog, that “ending the partnership with Volkswagen (Wagen-san as he calls VW) was like the relieve I feel after having a fishbone stuck in my throat removed”

Learn more from the failure of the Suzuki – Volkswagen “comprehensive partnership”:

• Mr. Suzuki didn’t want to be a Volkswagen employee, and that’s understandable (Prof. Dudenhoeffer via Bloomberg) https://www.eurotechnology.com/2015/09/20/suzuki-volkswagen/
• Was Osamu Suzuki first to understand Volkswagen’s Diesel issues? https://www.eurotechnology.com/2015/12/13/suzuki-volkswagen-diesel/
• Suzuki Volkswagen “Wagen-san” divorce: a teachable moment https://eu-japan.com/2015/09/volkswagen-suzuki-divorce/

Lessons to learn from the Suzuki Volkswagen divorce: communication & respect

• “Comprehensive partnership” without meeting of minds does not work
• Partnerships are hard when CEOs on both sides don’t have any language in common, thus can’t talk to each other
• Hidden agendas destroy trust
• Without trust partnerships don’t work
• Processes and methods (e.g. acquisitions of minor players all over Europe) successful in Europe often don’t work in Japan
• Partnerships without respect both ways don’t work

Japan is one of the world’s largest and most vibrant financial markets. Both NASDAQ and London Stock Exchange via AIM wanted to be part of Japan’s financial markets.

NASDAQ withdrew from Japan in 2002 (NASDAQ-Japan’s CFO even offered us their used furniture when he remained to shut down operations and finally the office), and London Stock Exchange withdrew from Japan in 2012, almost exactly 10 years later, for very similar reasons, with the same results:

In each case, NASDAQ and London Stock Exchange brought their know-how and technology to Japan and created a market platform via a joint-venture partner. In each case, they withdrew from Japan, while the markets they created remain and thrive without them.

Learn more from London Stock Exchange AIM’s and NASDAQ’s transfer of know-how and technology Japan, followed by withdrawal from Japan:

• NASDAQ quit Japan in 2002, and London Stock Exchange quit Japan in 2012 for similar reasons. Read why. https://www.japanstrategy.com/2014/03/02/nasdaq-london-stock-exchange-withrawal-from-japan/
• Tokyo AIM became the Tokyo PRO market, and London Stock Exchange quits Japan. Here is why! Tokyo AIM: LSE sells its share in the Tokyo AIM joint venture to Tokyo Stock Exchange and leaves Japan https://eu-japan.com/2014/03/london-stock-exchange-withdrawal-from-japan/
• Tokyo PRO: LSE’s Tokyo AIM stock market rebirth under TSE alone? https://www.eurotechnology.com/2012/03/26/tokyo-aim-stock-market-rebirth-under-tse-alone/

Nokia founded a subsidiary in Japan on April 3, 1989, and on November 27, 2008 announced to terminate selling mobile phones to Japan’s mobile operators, i.e. Nokia has tried for almost 20 years to build a mobile phone business in Japan and failed. The i-Phone’s and Samsung’s success proves that Nokia’s departure is not because Japan’s mobile phone market was closed to foreign mobile phones – it is not, today iPhones are Japan’s top selling phones by market share.

Nokia kept sales figures in Japan secret (Japan’s mobile phone industry insiders including us, of course had a very good idea about these figures), however in November 2008, Japanese newspapers reported that NOKIA sold 200,000 mobile phones during FY2007, equal to a market share of 0.39% – after 20 years of market entry.

Nokia-Ventures, and Nokia’s luxury division VERTU at different times also attempted to build businesses in Japan, and also terminated these efforts, however at different times than Nokia.

more here…. or contact us for much more details.

Here our CEO’s talk in this context, entitled “Help – my mobile phone does not work! Why Japan’s mobile phone sector is so different from Europe’s” at a lunch of the Finnish Chamber of Commerce at Tokyo’s Westin Hotel on March 16, 2007.

Note that today NOKIA is very successful in Japan with mobile phone base stations and network infrastructure. NOKIA pivoted successfully from mobile phones to network infrastructure following the sale of its mobile phone division to Microsoft and the acquisition of Nokia-Siemens-Networks.

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

Does your company invest what’s needed in Japan?

Does your Board know enough about Japan’s markets and size?

Is your CEO a Japan champion? Is your CEO the champion for your Japanese customers? Do you know your competition in Japan?

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. If you do not prepare well you certainly weaken your position. Lack of preparation cannot be compensated by macho behaviour or self-confidence or even arrogance.

You will be surprised how many time consuming and expensive failures of Western companies are largely due to lack of preparation, lack of market information, and lack of planning. A very well-known Western company lost US$ 10 Billion or more in Japan and severaly damaged the brand because of lack of market knowledge. Market research in Japan often looks expensive, however expensive, good market research is almost certainly far cheaper than failure and withdrawal from Japan

1. Why can business in Japan be difficult?
2. Changes and new opportunities
3. Avoid well known mistakes
4. What can we do about the difficulties of Japan business?
5. Relationships
6. Japanese business etiquette
7. Japanese business meetings

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