Doing business in Japan information
by Venture Japan
Once you have the free JETRO Tokyo office< space (discussed in the previous section) booked, have the green light on budget and have made the necessary bookings, you can start planning a sequenced approach to understanding the Japanese market, deciding on the most tax efficient way to enter the market and get ready for the first 3 months of doing business in Japan!
The first 3 months will decide your success doing business in Japan and the Japanese market for at least the next 3 years. Maybe that's an obvious statement but it's easily overlooked, as may be apparent from the costly ventures into the Japanese market by two major US PC vendors in the late 1990s. After setting up substantial and very expensive Japanese offices they withdrew after just 2 or 3 years of huge losses. Those PC vendors came to Japan with deep pockets: they were easily able to afford to lease large offices in prestigious locations and hire some of the most expensive bilingual executives and managers. So what went wrong?
Maybe too much credibility was given to the infamous myths of Japanese business and the Japanese market and not enough time was invested in the first 3 months at the JETRO free office researching every aspect of this market to form a personal opinion of the real situation 'on the street'. The myths (or rather the 'bilingual mafia' that foster them) want you to believe that foreign companies cannot possibly succeed in Japan unless they first spend huge amounts to hire prestigious bilinguals and lease/outfit prestigious offices. Well, the two PC vendors did all those things (including $600k/year executive salary packages) plus some and yet still withdrew from the market.
Those PC companies (and others like them) are very successful companies in the US and elsewhere - their fundamental business model was certainly not at fault. In fact, Japan needs far more exposure to the sales channel efficiencies achieved by successful US companies: those vendors could have succeeded in Japan and it was sad to see them go. The problem, as in any other international market, is that while doing business in Japan need not be expensive it will be extremely expensive, prohibitively so, if a company expands too rapidly, quickly moves into prestigious office locations and hires overly expensive executives and managers.
Coming to Japan and trying overnight to replicate your US or European market presence is not an easy task to succeed at. Rome, as they say, was not built in a day and neither for that matter were Toyota, Honda or Sony! Unless you are in a market with huge untapped demand and no competitor in the Japanese market, it is far easier and economically far more sensible to make a relatively low profile and profitable entry into Japan business and then aggressively build to a substantial and cost-controlled presence over a 3 - 5 year period maintaining profitability and steadily climbing market-share as you proceed. That is what Yahoo has done and in doing so Yahoo quietly achieved an enviable first-mover advantage in Japan's online auction market. eBay missed the boat and is effectively blocked out of the game. Can eBay win back in Japan to mirror their US online auction dominance? I guarantee they can but it will take time and most important perseverance to do it (notice that unlike many of my peers I did not say it will need huge amounts of cash!).
In fact it is very possible, if energy intensive, for a foreign company to enter the market late and win through. One of our clients, COADE, did just that in early 2008. Working through a joint-venture with Venture Japan COADE has achieved a staggering level of market awareness, quadrupled Japanese sales in 12 months and positioned itself to dominate the Japanese plant engineering market in the not too distant future.
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