Doing business in Japan information
by Venture Japan
Starting business in Japan is not difficult and neither does it need to be expensive. If you have a unique and good quality product or service then by carefully controlling your starting costs you will be profitable in your first year in the Japanese market. It's that simple. The trick is understanding Japanese business and the mentality of Japanese businesspeople well enough to be able to control your costs.
This is a great time to make a decision to start doing business in Japan, especially if you are a European company that can benefit from the investment edge offered from the presently strong Euro and for US companies that will benefit from the new US-Japan tax treaty. The costs of starting business in Japan have reduced dramatically due to the domestic recession and resulting price deflation of the past 8 - 10 years. Office rents are significantly lower as land values have continued to decline since the bursting of Japan's property bubble at the end of the 1980s. Japanese salaries have reduced in real terms as many companies have used the recession as rationale to decrease the summer and winter bonuses traditionally paid to most Japanese employees and for many employees guaranteed annual salary increases have become a thing of the distant past. Having said that, the Japanese economy is now (July 2004) rebounding at an astonishing rate and it was just announced that summer bonuses are back to near-record levels with some companies paying as much as ¥1million (US$9,260) to each employee. While good for the consumer markets it is also an indicator of potential pent-up salary demand which will make it much more expensive to establish in Japan for companies that delay the decision to enter the Japanese market. At this time it is still true to say that Japanese employees' previous expectations of regular annual salary raises, jobs for life and other former obstacles to foreign companies setting up a Japanese office or Japanese company have been radically reduced in the past 10 - 15 years. Given Japan's aging and declining workforce though, and government predictions of severe shortages of labor in certain industries well before the end of this decade, the market climate for new entrants may soon change. My advice is to start now, get established at relatively low cost so that future revenues are stable before any inflationary pressure emerges. Those companies that do not start now will find it much more difficult to start in 3 or 4 years time.
Given the presently low cost of entering the Japanese market, there is no reason why a foreign company with a competitive product or service and a winning attitude should not make substantial profits in Japan within their first year of operations here and, depending on industry-specific factors, be contributing 30% to your global profits within 3 years.
So where do you start?
The first and maybe most obvious advice to give any foreign company that is thinking of doing business in Japan, is to be properly prepared and thinking as a team from frontline sales-marketing to Board director. A properly prepared entry into the Japanese market will generate substantial levels of revenue, profit and all the glories that go with them. Success doing business in Japan will also significantly enhance a company's valuation because investors will correctly perceive that a company able to succeed in the Japanese market is a company that will succeed everywhere. Conversely, a failed attempt at Japanese business is not only soul-destroying for those involved but can cost a company heavily both in cash and credibility.
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