Blog | Friday 15 May 2015
Henry Tan, Representative Director of Tricor K.K. shares his thoughts on some of the hurdles to market entry that any foreign national with experience can relate to. Here are the most common barriers and what can be done about them.
Lack of a Start-up mentality: No matter if you’re a billion-dollar company abroad, when you come to Japan, basically you’re a start-up. Start-ups, as we all know, require a certain personality to work in. You can be the CEO one day negotiating a sales deal and the administrative assistant the next day booking your flight to sign the deal. Japan isn’t really a start-up culture, and joining a major corporation for a lifetime is still a goal of many. Don’t automatically expect your first hires to do whatever it takes to get it started. People here tend to be focused on roles and sometimes age / gender comes into play as well (for example, women may sign up to be OLs or office ladies with particular expectations).
Tip for FMN start-ups: Make sure your Japanese hires know at the interview stage that your company is a start-up and explain what is expected clearly. Don’t assume they will naturally get it.
Lack of Western/English proficiency and knowledge. For modern economies, Japan is one of the worst in the world in terms of English. Despite the mandatory six years of formal education in English, simply put, Japanese workers’ English proficiency is terrible. In a 2013 EF (Education First) survey of English in the workforce in 24 countries, Japan ranked 18th in proficiency and employees in Japan scored five points below the Japanese population overall.
Furthermore, Japan has seen a decline in exchange students in Western countries, while Korea, China and India are exporting students. As a result, anyone that combines strong English and bi-cultural abilities will be hard to recruit, and even if available, will be expensive. The reason? They know they are rare commodities.
Tip for FMNs entering the Japanese market: Hire employees in their 20s with a lesser resume but more ambition, and assign a company mentor for the first year. In particular, hire returnees (Japanese that have lived abroad returning home). They likely wouldn’t fit in a regular Japanese company anyway.
Deadline challenges: Your “we need it today” is “we need it in ten years” in Japan. You expect to make immediate gains because you’re entering the third largest economy, especially when the HQ in London, Houston or Toronto is banking on overnight results. For any company you want to deal with, keep in mind that making connections and decisions in Japanese (another article in itself!) and meeting time frames are different. For example, to train to be a Jiro Ono (the famous sushi chef) takes five years before you can even make the sushi rice blend under supervision. Patience is a cultural virtue (and expected) in Japan, but when you’re burning cash every month, patience tends to fade quickly. Manage your expectations entering the market.
Tip for FMNs: Take your timeframe for success and double it. If after that time frame you still want to enter or truly believe you can achieve your success in lesser time, then go. Afterwards, getting that first deal is critical because it creates momentum in a market of followers. As such, for that first win, if you’re a B2B business, consider targeting foreign companies if possible.
Higher cost, expensive mistakes. Things are expensive here, and mistakes aren’t tolerated well financially and time-wise. If you make a wrong hire based on a resume, be prepared to pay a lot of money to get rid of someone if you don’t know how - or expect court cases of 2.5 years with the threat of reinstatement into the company. If you miss a tax payment by a day, there’s no grace period, you’re flagged and you pay a penalty.
Tip for FMNs: Whatever you budget for your business in Japan in terms of cost, add twenty percent to it. Know the bureaucracy in Japan—it helps to have a local ally. What’s said, what’s written and what’s done is often different.
Distributor probably won’t prioritise your product. If you decide to go through a distributor, let’s call them Company Z, the biggest issue is making sure the distributor prioritises your product, especially if you are not well-known. Everything is relationship driven, so a distributor may give a priority to a competitor simply because of a good relationship. Most deals are done outside the meeting room, so those meeting rooms are really there to confirm what’s already known.
Tip for FMNs: Having someone local, such as a marketing office or an appointed contractor, to manage the distributor and serve as a customer rep along with the distributor is a big help. This helps police the distributor and provides a local presence, which lends more credibility in the eyes of the people buying the product. Furthermore, it gives the Japanese
distributor someone to talk to in the native tongue to complain about the foreign head office.
- Do your homework on the culture.
- Build relationships with Japanese.
- Realise that you are a start-up here.
- Clearly spell out your expectations when hiring.
- Manage expectations on costs/timeframes.
- Hire young and hungry
The views and opinions expressed herein are solely the views and opinions of the author and are not in any way a guarantee or definitive conclusion on the subject. Any actions taken by the reader based on the information presented in this document are solely the responsibility of the reader and not the responsibility of Tricor Group, Tricor K.K. or any other affiliated companies.
To find out about your chances of doing business in the Japanese market, please fill out our Free Market Assessment form. Our expert trade advisers will be in touch to help you on your export journey.