Doing business in Japan information
by Venture Japan
When doing business in Japan (or any other foreign market) there is always a risk of being scammed by people, usually bilingual professionals and executives, who while purporting to be experts in the various aspects of doing business in Japan, China (or wherever you happen to be doing business) will, with a smile and a bow, happily help divert your precious cash into their corporate coffers while of course using those myths of doing business in Japan as justification for their failure to produce results.
Doing business in Japan will be extremely expensive if the costs are not properly controlled and your stockholders, especially private angel investors, will naturally expect that those costs of doing business in Japan will be tightly controlled.
I have been fortunate to deal with several private angel investors in the past 4 years and one, Bruce C. (a very successful business-litigation attorney and angel investor) who was considering an investment in a US software company of which I was then President, said to me "Chris, when I put my money into a company I expect that company to be miserly and scrape maximum value from every penny I invest" - that's a great philosophy and one (as I mentioned to Bruce C while pointing to my 'compact' US$20/day rental car in his parking lot) that I have followed for the past 20 years.
Lets face it, success when doing any business, not just when doing business in Japan, is not just about having a great product and an aggressive, intelligent and winning attitude - more often it is the ability to manage cash, deliver early successes on a shoestring budget and intelligently reinvest the proceeds of those surceases to build consistent growth. Those few venture capitalists whom I know have often mentioned to me that companies with otherwise great prospects failed "..because they simply spent too much too soon..".
So, if your company wants to be doing business in Japan, does not yet have the $billions cash reserves of Microsoft, Oracle or IBM but nevertheless wants to compete and succeed here and your President, Board and stockholders share Bruce C's cash management philosophy, just how do you set about getting maximum value from every penny you spend doing business in Japan - the country that has the reputation of being "..the most expensive place on Earth.."?
When doing business in Japan, just as when doing business in any other market you enter, you have 3 choices of how you spend your cash:
The first approach was tried by the US PC vendors mentioned in the section on your first 3 months doing business in Japan who, sadly for Japanese consumers, did not succeed. They clearly expected that by setting up large Japanese subsidiary companies, leasing expensive offices and launching nationwide advertising campaigns, they would be assured success doing business in Japan. They had bad advice because Japanese market habits are very different from those of the US and European markets and more than simply mass-marketing is required to break Japanese consumer habits.
The second approach is apparent in those foreign companies who (as noted in the section on deciding whether to use a Japanese distributor or office) blindly start doing business in Japan with a Japanese distributor and a year later are frustrated because "That damned distributor is useless! We should be doing 10x more business in Japan! XYZ Corp. did 30% of its revenue doing business in Japan last year!". Of course they will probably never commit to the investment to more effectively compete in the Japanese market with a subsidiary company - they wrongly perceive (through a lack of data) that it will cost too much.
The third approach, a securely funded Japanese subsidiary company that shares Bruce C's philosophy of extracting every ounce of value from every Yen it spends, is, as elsewhere you compete, the most likely to succeed in the Japanese market. So, sometime early in month 3 of those first 3 months doing business in Japan, after you have projected your potential Japanese market revenues for the next 3 years and decided the type of presence and entity you will have in the Japanese market, you can set about keeping Bruce C happy and making your Japanese subsidiary company a success without breaking the company bank in the process. It all starts with probably the single most important and influential decision you will ever make when doing business in Japan - who is going to be the President of your Japanese subsidiary company (or Representative Manager of your Japan branch-office)?
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