Doing Business in Japan Term Paper

Pages: 7 (1855 words)  ·  Bibliography Sources: ≈ 13  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

¶ … Business in Japan

In today's hyper-competitive, globalized world, doing business in Japan is a logical step for many organizations. Add to this the fact that over the past five years there has been an economic shift of focus away from the United States and Europe and towards Asia, and the decision to do business in Japan becomes even easier. However, before embarking on this potentially rewarding journey, there are certain aspects that organizations need to be familiar with in order to help ensure their success in the Japanese marketplace.

Overview of Japanese Economy:

As mentioned, the global economy has been dramatically shifting over the course of the past five years. The 'center of economic gravity' is moving away from the United States and Europe and towards Asia, including Japan. This process is projected to continue over the course of the time, however many see it as inevitable.

A generation from now India, China, Japan and Korea will be the world's major consumers of technology and, to a large extent, its major producers as well. The shape of this new regional economy is forming rapidly Japan, China, India, and Korea have a total population exceeding 2.4 billion people, a combined GDP exceeding $13 trillion (the U.S. figure is $10.5 trillion) and growth rates ranging from 3 to 9%.

With a population exceeding 125 million people, Japan is the world's largest market, competitor and partner. 15% of the global economy occurs in Japan, in addition to 25% of the high-tech products manufactured in the world are manufactured in Japan.

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The Japanese market is well established, as opposed to the rapidly emerging markets of other Asian countries, such as China and India. Japan has a lengthy history of technology and product development and acquisition and is enjoying slow to moderate growth, with the end of a 12-year recession.

Term Paper on Doing Business in Japan Assignment

Despite this recession, the Japanese economy is still larger, in real terms, than China. Add to this the benefit of a modern and comparatively legal system, financial markets, governance systems, patent laws, and a business code that is both highly ethical as well as predictable. China does not offer these benefits, in their economy. There is still much work to be done to China's legal and financial systems to be of similar value as Japan.

Advantages to Doing Business in Japan:

There are many advantages to doing business in Japan. These include:

multitude of sophisticated customers that have a large and consistent consumption history of innovative technology.

The ability for organizations to partner with Japanese firms that have advanced technology development capabilities.

There is a low cost of doing business in Japan, despite beliefs to the contrary. This is due to the high concentration of the number of businesses in areas such as Tokyo.

Japan also has a vast population of highly educated, and very capable human resource personnel, with a very strong work ethic.

As the Chinese market develops, Japan is becoming a more significant gateway to China, with their exports to the country growing rapidly.

Lessons that are learned while doing business in Japan can be easily transferred to other Far Eastern marketplaces. However, the reverse is not true, according to Patrick Scully, Vice Chairman of EDS Japan.

There are significant opportunities available in the Japanese market, for a variety of reasons. Over the last decade Japan has achieved zero or negative growth. There has been almost zero return on capital in must industrial conglomerates, during this same time frame. Government finances have deteriorated, globalization has increased, and the Internet has changed the face of industry forever. With the end of the recession in Japan, these factors mean that there are significant openings and exceptional opportunities in the Japanese markets.

Disadvantages of Doing Business in Japan:

Despite the numerous advantages to doing business in Japan, there are certain disadvantages that an organization must be aware of.

The Japanese thoroughly evaluate any new products and technologies. This thoroughness often leads to lengthy assessment periods and slow decision-making turn around.

Organizations are expected to have similarly devoted customer service ethics. Japanese organizations pride themselves in their customer service.

The Japanese are sometimes more conservative when it comes to certain forms of risk taking.

Documentation is critical in Japan. They expect quantity, quality and consistency in how their documentation and the real product or service match up.

There are language and cultural barriers that may impede the transparency, for foreigners. It is estimated that less than 5% of Japanese people speak good English, which often hinders entrance by foreign countries.

Large financial conglomerates, such as the Keiretsu, dominate large industry. And although this structure is gradually breaking down, it is still often difficult for foreign companies to do commerce across the boundaries of these Keiretsu.

Japan is also a very bureaucratic country. They have "a dense network of regulations, permissions, certifications, procedures, offices and authorities with approval procedures for many things, which don't need approval in UK or U.S.. Many of these restrictions are designed as entry barriers against newcomers to existing industries. Slowly these regulations are "eased" and seldom eliminated."

The question then becomes, why exactly is doing business in Japan so difficult? The answer to this question lies in several areas. It begins with the fact that Japan was never a Western colony. For this reason, Japan was never forced to assimilate into Western business practices.

In addition, Japanese consumers can be more demanding then Western consumers. They have different needs and different tastes then those in the West. Because of this, many organizations find they have to redesign their products or services to meet these unique needs and desires.

Market entry typically requires large financial investment, due to the size of the Japanese market. This kind of risk leads to two scenarios. Businesses either succeed in a big way, or they fail utterly.

There is typically significant local competition already established in the Japanese market. These strong, local organizations know the Japanese market better than an entering foreigner and will take every possible step to ensure a new entrant fails. "If you do not thoroughly understand your competition in Japan, you have little chance to win. In order to win in Japan you must understand and must be prepared and able and willing to compete with local competition." Western organizations have the unique challenge of not being able to completely know the Japanese competitors until they are fully in the marketplace.

Lastly, Western managers often enter the Japanese market ill prepared for the unique challenges and opportunities that they will discover. Doing business in Japan often means an organization must make dramatic changes to the way they think and the management strategies they employ. These include facilitating personnel changes to ensure success in Japan. However, few organizations make these radical changes, and suffer because of it.

Mistakes Often Made When Doing Business in Japan:

Organizations often make many common mistakes when doing business in Japan. By understanding the most common, organizations can hope to avoid them. Many of the mistakes made can be avoided with common sense. However, once one studies the unique facts and customs in Japan, they often discover that some assumptions they've made are wrong.

Sometimes the most common mistakes lie in the organization of the company doing business in Japan. This includes having the wrong people in place within the corporate structure. As mentioned earlier, an organization should be willing to change personnel and restructure their organization, in order to ensure success.

The most common mistake is lack of preparation and research before entering the Japanese market. If partnering with a Japanese organization, they are certain to have done their preparation, however if the foreign company has not fully developed their strategies, costly mistakes can occur. Lack of preparation, lack of planning, and lack of information are the biggest mistake organizations make when entering the marketplace in Japan.

Other common mistakes include:

Trying to manage all Asia operations from one location in Singapore or Hong-Kong.

Hiring the wrong people, including placing too much emphasis on English.

Organizations are often either too optimistic or too pessimistic about the market in Japan, because they have not gathered the required information.

They often make assumptions about the Japanese market that are not true.

Relationships in Japanese Business:

Building and maintaining relationships are an important facet in an organization, no matter what country they do business in. In a "high context" country, like Japan, these relationships are even more important. These relationships are seldom often simply defined by business contracts. and, it's often difficult to anticipate what a Japanese partner is thinking or feeling, and as such the Western organization may read a situation completely different.

Etiquette in Japanese Business:

Etiquette is an important part of Japanese culture and this reflects in their business transactions as well. As such, being in tune with the various etiquette aspects are important. Simple things like ensuring that an employee has enough business cards can make or break a business deal. Japanese business people exchange… [END OF PREVIEW] . . . READ MORE

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