Finding Success in Japan

Written by Sterling Content

As global trade grows more complex, exploring new markets has become increasingly important. For many firms, Japan is a compelling option, with over 125 million consumers and high demand for quality supported by strong disposable incomes. However, the geographic distance, distinct culture and unique business practices often make the country a challenging market to enter, particularly for SMEs and entrepreneurs.

With this in mind, the BCCJ hosted an interactive webinar designed to provide a market overview, with key entry strategies and support options, as well as insight into the cultural nuances that can make or break business success.

Event speaker Ralf Mayer, owner and executive consultant of San-Ten Consulting, began by introducing the cultures that influence human interactions. The dominant one is national culture: the customary beliefs, social forms and characteristic features of everyday life shared by people in a place or time. Another is corporate culture: the set of shared attitudes, values, goals and practices of an institution or organisation.

Mayer reminded attendees that people are socialised through culture from a young age and, as a result, tend not to be aware of their own unique behaviours. Furthermore, culture is neither right nor wrong. He then went on to introduce aspects of Japanese culture that tend to differ from Western practices.

Decision making

In Japan, a decision is usually made not by an individual, but by all impacted by it, which can mean involving several departments such as procurement, design, engineering or R&D. The decision-making process is consensus-driven and hierarchical-based, with the person at the top usually making the final decision.

Mayer noted that it’s important not to ask for any changes once decision-making has started as it could set the process back to the beginning. Typically, a decision can take weeks, if not months; if an answer hasn’t been received, it means a decision has not yet been reached. He added, however, that once a decision is made, implementation is usually smooth.

Trust building

“Trust is necessary all over the world for doing business,” he continued. “In Western countries, trust is built by common goals, tasks and contracts, and is rather short-term orientated. In Japan, trust is based on knowing the individual or the company on a deeper level. It means relationship-building first, and is long-term orientated.”

When considering engaging with a Western company, Japanese companies sometimes prefer to wait for signs of its commitment to the Japanese market. The time required for a Western company to achieve sales in Japan is therefore often longer than in Western markets. Furthermore, several interactions may be required to do business, including social meetings like lunch and dinner, making a local presence advisable, he said.

Handling feedback and conflict

Although Western people typically consider “direct and frank feedback,” even if negative, as “honest and solution-orientated,” Japanese people prefer subtle or “hidden” messaging coupled with the use of facial expressions and body language to convey meaning, he continued.

One example is a Japanese phrase translated literally as “It is difficult but we will try very hard.” It is commonly used to convey to the other party that their desired outcome is unlikely. Japanese companies understand the intended meaning but their Western counterparts can be disappointed when they don’t see the desired outcome, even believing the phrase was misleading or dishonest, he said. On the other hand, the direct communication used by Western companies is often considered rude in Japan as it “destroys harmony.”

To overcome these differences, a high level of language and cultural understanding is required to translate not just the literal meaning but also the intended meaning, he added.

Selecting products

Mayer noted that because Japanese companies are long-term orientated and loyal to their suppliers, a new market entrant will not gain business simply by offering a cheaper price. If possible, products should be previously unavailable in Japan or offer a different USP to products already on the market.

Cultural and country-specific peculiarities should also be considered, including whether it is possible to use the product due to regulations, the climate and so on. As Japan has frequent natural disasters, products should also be robust and relatively easy to maintain. Mayer also noted that high-efficiency products and solutions likely to lead to staff reduction can be hard to sell in Japan, but companies are more open to automation than they were five or six years ago.

Providing great service 

“Excellent service is expected from all vendors and suppliers in Japan, so it’s often necessary to have a service partner in Japan who can handle problems quickly in Japanese,” he said, noting that English proficiency is “very low” and English language interfaces are unacceptable.

A local partner will be mandatory in some sectors, such as medical devices, while a local importer or distributor might prove necessary as many Japanese companies don’t want to handle international trade or financial transactions, he added. Market entrants should also consider the roles of the local partner, including if or how they will support service, sales or importing.

Starting a business

Mayer explained there are, in principle, three ways to start a business in Japan: using a distributor, establishing a subsidiary or using a representative office.

With a distributor, control is limited as “it can be difficult to persuade them to enter other markets,” he said. They decide whether to market the products and tend to recommend products only if their customers ask for them. However, they can handle international business, usually pay on a commission basis and are flexible regarding staffing.

A subsidiary, meanwhile, is dedicated to the needs of the parent company. Costs tend to be very high, partly because there may be a long lead time until full market access with products and services is achieved. The subsidiary also needs to consider Japanese labour laws when hiring staff.

Mayer recommended using a representative office, which typically acts as a part-time sales and marketing department in consultation with the company. In exchange for a monthly service fee, the company gains market access and works with the representative office’s team to grow the business.

Further information

In closing, Mayer introduced the services of San-Ten Consulting, a management consulting firm specialised in market entry and business development support that he runs from Tokyo.

“For a reasonable price, we can help a company gain access to different markets through one point of contact,” he said, adding that his experience of the market also aids in negotiation and conflict mediation. “We usually get more direct feedback from companies in Japan than they give our clients directly, and we’re aware of cultural differences in communication.”

San-Ten Consulting also offers project-based services, market studies and business plans for firms interested in the Japan market.