Why can business in Japan be difficult?
Japan business difficulties: Japan was never a western colony
… and that is not a coincidence, but largely due to Japanese people’s strong will and traditional abilities.
(Thailand is another Asian country which was never a western colony…
To my knowledge Japan and Thailand are the only Asian countries which have never been colonies…)
Japan business difficulties: demanding customers
Japanese customers can be very demanding, and often have quit different tastes and needs than Western customers, and in the case of B2B – industrial customers – standards in Japan are often different, and quality, response and service requirements are typically (not always) higher than in other countries. Therefore in many cases Western companies must redesign or redevelop products in order to succeed with Japanese customers, and develop higher levels of service and response and quality. Examples where this is the case range from baby napkins, to tooth brushes, cars and components.
Japan business difficulties: Business in Japan often (not always) needs large initial investments
Because of Japan’s size, substantial investments are necessary, and therefore the inherent risks are also large: you either win big, or lose big.
A common reason for failure of foreign companies in Japan is that investments are too low. A prime example of failure in Japan because of too low investment is Vodafone’s failure in Japan.
Japan business difficulties: strong local competition
Japan has many very strong local companies. As an example, eBay lost in Japan against local competition (YAHOO!-Japan) 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.
Sounds obvious and trivial advice – however we can name you a long list of Western companies which in the worst case lost about US$ 10 billion and completely destroyed their brand in Japan because they did not read and act on this advice.
Japan business difficulties: management resources and training
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 management 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. Often a battle ensues to make a Japanese subsidiary more Western – however, that naturally only achieved to some extent, and often leads to catastrophy.
Download Gerhard Fasol’s lecture slides at Stanford University: “New opportunities vs old mistakes – foreign companies in Japan’s high-tech markets”
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- Why can business in Japan be difficult?
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- What can we do about the difficulties of Japan business?
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