Japanese business myths

 

The myths of profits and Japanese market share

2.  the myths of profits and Japanese market share

In the previous section introducing the myths of Japanese business, I noted that the myths were originally used as excuses for poor performance - here are some of those related to profit and market expectations for foreign companies doing business in Japan:

  1. Myth - Japan is the last foreign market you want to enter - wait until you have $$$millions in the bank and then try.
    Fact - In my experience Japan (especially if you are a technology company) should be #1 on your list of international priorities because for a properly structured and efficiently run business your Japanese margins will far exceed those of other markets.
  2. Myth - Japanese corporate customers move very slowly and do not use quarterly business periods so forecasting quarterly revenue is meaningless and Japanese distributors just don't do it.
    Fact - Japanese corporate customers do tend to move slowly and operate on half-yearly budget cycles (April 1 - September 30, October 1 - March 31) but you need accurate revenue forecasts and a quarter-to-quarter focus in your Japanese business, especially if you are in the run-up to an IPO or already publicly listed.
    I managed a US pre-IPO high-tech for 16 quarters prior to its IPO and my team provided the head-office executives with accurate revenue forecasts and delivered profits every quarter. In the words of their Chairman, "We completed our IPO because of our Japanese revenues." If my team can do it so can others.
  3. Myth - No Japanese company makes profits in its first year.
    Fact - Any Japanese company with a good product or service and a committed, motivated and hard-working team, properly structured and funded can be profitable in Japan from year 1.
  4. Myth - A foreign company needs to be in Japan for 5 years before it can make profits.
    Fact - Sounds like a nice relaxing first 5 years for somebody! As noted above it does not take 5 years to make your first profit in Japan (unless of course you first need to build large manufacturing facilities).
  5. Myth - You need to be spending at least $$millions each year for the first 5 years doing business in Japan.
    Fact - Not only do they want a 5 year vacation, they want to be paid like kings while they take it! Again, unless you are in a very capital intensive industry you do not need to spend $$millions to make your first Japanese profits.
  6. Myth - No matter how good your product or service, no foreign company can exceed x% market share in its sector in Japan.
    Fact - I could not believe this one - it actually originated from the Japanese President of a US PC vendor as recently as 2001!
    Go ask Microsoft, Cisco, IBM, Yahoo, Dassault Systemes. Chanel, Prada, Bulgari, Cartier, Tiffany & Co., Louis Vuitton, Gucci, BMW, Mercedes-Benz, Adobe, Macromedia.. all of whom dominate their market sectors in Japan!
    In the late-1990s, I was managing a very small US 3D software company's Japanese subsidiary and we took on and soundly thrashed a major Japanese company (Ricoh) to the extent that they eventually withdrew their product from the market because they could not compete with us - its called attitude!.
  7. Myth - selling in Japan is more expensive than elsewhere so Japanese distributors are justified in demanding 50% - 70% of your Japanese revenues.
    Fact - in the software industry (other industries will of course vary) by selling direct you can probably earn $2m revenue for the first $500k/year of cost and an incremental $1m revenue for each $200k incremental cost. Project your revenues, know your costs and negotiate winning terms in your distributor contracts.

3.  the myths of bilingual Japanese employee pay >>


Japanese business myths

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