The first 3 months of business in Japan
So, you have confirmed the free JETRO or O-BIC office space discussed in the previous section, have the green light on budget from your CFO, and have made the necessary hotel or other accommodation bookings. Now you can start your structured approach to understanding Japanese business and decide the most tax and business efficient way to start business in Japan. It’s time to head for the airport and your first 3 months of doing business in Japan!
So what went wrong?
Maybe too much credibility was given to those infamous myths of Japanese business and the Japanese market, while not investing enough time in the first 3 months at the JETRO free office researching every aspect of the Japanese market to form a hands-on opinion of the real situation on the street. Those 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, including paying outrageously high 35% recruitment agency commissions, to hire prestigious bilingual executives and lease prestigious offices in some of Tokyo’s glamorous glass-clad office towers. Sadly, there are many large companies, including two of the world’s largest PC vendors in the past two decades, who did all those ‘correct’ things, including US$600k a year executive salary packages, but still failed and withdrew from the Japanese market.
Coming to Japan and trying overnight to recreate 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. Control your costs, start small, build as your sales build. Unless you are in a market with huge untapped demand and no domestic Japanese competitor, hold back on making expensive investment decisions early on, especially when it comes to hiring an expensive country manager and other executives. It makes best financial and business sense to make a relatively low-profile but profitable entry into the Japanese market and then aggressively build to a substantial but cost-effective presence over a 3 – 5 year period while maintaining profitability and steadily increasing market share as you go. That is what Yahoo! did through its Yahoo! Japan joint-venture with Softbank and in so doing, Yahoo! Japan quietly achieved an enviable first-mover advantage in Japan’s online auction market. More than a decade ago I wrote that eBay missed the boat and was effectively blocked out of the market; that’s still true today. Can eBay win back in Japan to mirror their dominance of online auction markets elsewhere? Yes they can, but it would take time, commitment and perseverance to succeed.
In fact, it is very possible for a company to dramatically change its the Japanese market strategy late but still win through. One of our former clients did just that. It had been in the Japanese market for more than 15 years with minor distributors but could not recreate its dominance of the global 3D analysis software market. Then, working through a joint-venture with Venture Japan, it achieved a staggering level of market awareness and quadrupled its Japanese sales in less than 18 months!