Difficulties doing business in Japan: what can we do about it?

Difficulties doing business in Japan: which action should we take?

by Gerhard Fasol

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 Japan… So what’s going on? Here are 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.
  • 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. Note however, that there are also industries, where Japan is more open than the US and Europe to outside investment. An example is Japan’s telecommunication industry: Vodafone had no difficulty at all to acquire almost 100% of Japan’s No. 3 telecom operator.

    That Vodafone failed had nothing to do with the closed nature of Japan or any Government intervention – Vodafone’s failure in Japan was largely due to three factors:

    1. insufficient market understanding,
    2. Vodafone did not invest enough into the network infrastructure
    3. Vodafone did not offer the mobile phone handsets which Japanese consumers prefered, so they defected to competing operators.
  • In fact, after acquiring Vodafone-Japan, SoftBank succeeded to turn around the company within about 6 months by giving customers the handset and the tariffs they wanted, and by investing at the levels required in Japan for network coverage etc.
  • However, internet, e-commerce, and the present “opening” brings many changes, and evaporate some of the traditional difficulties…

Read in more detail why Vodafone failed in Japan and sold Vodafone-Japan to SoftBank.

Japan business: how to succeed? Detailed answers:

  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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