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Doing Business in Japan.

Byline: Wajiha Sagheer

Japan is the third-largest market in the world after the United States and China. For this and other reasons it is attractive for foreign multinational firms, large and small. It is also very different from other countries - politically, economically, and culturally - and these differences can present major challenges for market entrants.

1) Research the Japan Market:

Research the culture, the market, the competition, and the relevant network affiliations. It is a tough, competitive market, characterized until recently by relatively closed inter firm business networks and a unique political, legal, and institutional infrastructure.

2) Consider the Customer is First:

Understand that in Japan more than any other market "customer is king," quality is paramount, and a deep rooted service philosophy is required. Most Japanese firms had long-term relations hips w ith buyers and suppliers characterized by reciprocal trust rather than short term contractual or price - based arrangements. Breaking these ties by doing business with outsiders could affect these local relationships, so despite the potential for short- term gains, it tended to be avoided. A wide range of government- related obstacles, including binding red tape and uncertain regulations pertaining to foreigners and foreign companies, created additional constraints for foreign firms in Japan.

3) High Quality Products:

Be patient ("wait on the stone") and show long-term commitment; personal and corporate reputation is important and takes time to develop. The Large Retail Store Law still remained to protect small retailers and indirectly supported the tied distribution networks of large keiretsu, creating additional barriers for foreign firms. These are innate characteristics of doing business in Japan and key reason why Japanese firms themselves are so innovative.

4) Offer Set of Product:

Show sensitivity in all interaction: social gatherings are important and rituals and hierarchy have to be respected. More often than the direct actions of Japanese government agencies or collusion among corporate groupings, the above constraints for foreign firms in Japan simply stemmed from differences in Japanese business infrastructures, legislative mechanisms, management practices, and consumer preferences. Foreign managers have also cited competition with Japanese companies and the strictness of orders from Japanese customers in terms of quality, delivery, and after-sales service as key constraints in the past. Successfully developing a business in Japan is an excellent test of a firm's competitive advantages.

5) Attack and Counter Attack:

Invest to adapt products, services, marketing, and management style. More recently the continued downturn in Japan's domestic market has made it less attractive but easier to enter Japan. Government deregulation, the loosening of keiretsu ties, falls in distribution cost, improvement(s) in the availability of qualified personnel and changing consumer preferences have helped foreign investors. Foreign companies also cite falls in land prices, office rent, and utility costs as specific improvements in the Japanese business environment. are also seen as important factors.

6) Stay the Course:

Continually innovate, stay ahead of the competition. The Japanese government has taken steps to improve access for foreign firms, partly to increase consumer choice and stimulate spending and partly to expose local firms to outside competition. Policies aimed at tax reduction and favorable legal and institutional reforms alongside improvements in labor market flexibility, are helping increase FDI to Japan.

7) Use Japan as a Jumping off Point:

Use Japan to learn, to improve, and to access other Asian markets. The British retailer Tesco provides another indication of the renewed interest in Japan. In 2004 it increased its commitment to the Japanese market by acquiring the neighborhood supermarket business of Fre'c via its wholly-owned subsidiary, C Two Network Co. The sale of Fre'c was coordinated by the Industrial Revitalization Corporation of Japan (IRCJ), a government-affiliated body set up in mid-2003 to purchase the non-performing loans of viable but indebted companies.


Japan will, arguably, continue to be one of the most significant economies in the first quarter of the twenty-first century. It is quite obvious to be trained in traditional Japanese practices and social structure. Mutual understanding can only contribute to avoiding the many potential stumbling blocks and smoothing the way to mutual success.
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Publication:Insurance Journal
Geographic Code:9JAPA
Date:Mar 31, 2016
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