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Six Critical Steps to Business Development in Japan

Published in the AEA Newsline

Japan is the largest market outside the United States—larger than those of Germany and France combined, and almost three times that of the UK. Yet it is generally believed that Japan is the most difficult place to do business among the industrialized nations. In spite of this, many companies have been successful in Japan, and many more can be. It does require the discipline to execute well—Japan can extract a high price from those that don't. In this brief article I will outline what my 18 years experience in Japan have shown to be the six most critical steps to success.

1. Connect Customer Needs Tightly to Your Home Office Staff

Since it is the people in your home office who determine your company's capabilities, it is crucial that they have the best possible understanding of your customers' needs. Every successful company learns to do this in their home market, but doing so in international markets can be far more difficult, especially as it must be done through a subsidiary or distributor. When this thin channel becomes a filter, sales and profitability usually suffer. Because Japan has such unique business practices, the Japanese office is often put in the role of funneling all customer information. This both limits information and delivers it in the form of opinion rather than fact. The problem is further compounded if only a few people in your home office deal with the Japanese office. Try this instead: have your Japanese office create and facilitate multiple independent, fact based channels of communication that transmit information as directly as possible from your Japanese customer to your home office. Such a model brings the needs of this huge market into clearer focus, and right in front of the people who can actually create and deliver solutions. A much more effective communication process for all parties.

2. Great Visibility Essential for Great Support

Japanese customers are among the most discriminating in the world when it comes to demanding excellent support. While many things are needed to deliver such support, it begins with having great visibility. You can't deliver appropriate support if you can't see what is happening and see it in the context of events viewed over a long timeframe. Frequent visits can help to develop understanding, but they will inevitably be spots of understanding rather than a complete fabric.To piece together a comprehensive understanding requires frequent and detailed activity reports. They should be done on a regular schedule and with a standardized format, and should report facts not opinions. Activity concerning customers, competitors, and products, along with financial results against budget, should constitute the core of these reports. When such a reporting system is used effectively it enables the capabilities of the home office to be much more proactively applied, and keeps top management much better informed and able to properly allocate resources.

3. Take a Proactive Role in Sales and Marketing

Because Japan is so unique, many foreign businesses believe they will never understand it. From that they conclude that they should turn their business over to Japanese business associates, and let them do things the "Japanese way". It is my experience that that this does not work, principally because it limits the use of the proven marketing and sales techniques that work best for their products.Better to use your time-tested home office marketing and sales practices (see "Using Your Home Office Marketing"). A few may not work well in Japan and can be modified or dropped. But marketing in the traditional Japanese way, which relies so heavily on relationships, usually produces a brief jump in sales, followed by very little growth, declining market share, and no apparent way to improve the situation.

4. Be a Superb Listener

Good advice in any market. But I state it here because it is usually tough to do in Japan. Because of the uniqueness and difficulty of getting things done, high frustration levels can build quickly. Once that happens the ability to listen goes. Frustration gets accusations flying—in Japan where maintaining face is so important—accusations are a surefire way to stop communications. Then even the best visibility programs can quickly cloud and your ability to use your marketing and sales activities diminishes. You may find that you have to delay a strategic push to gain your long-term goal, but believe me, it is a far better choice than cutting off communication!

5. Get the Pricing Right

Japan's unwieldy combination of heavy regulation and consensus management makes getting things done painfully slow. In a study done by HTM we found that starting a company in Tokyo took 12 times longer than in Seattle, registering a company to supply social benefits to employees took 8 times longer (see Dealing with the Bureaucracy). Multiply these times with a cost of living that is more than double that of Seattle and you begin to see what is meant by a very high cost to do business. These high costs are best dealt with when a company starts up in Japan, by creating pricing models that provide both competitive and profitable pricing.When the pricing is left to a distributor it is often set high and the products are sold only in narrow channels. Again, this keeps you from building significant market share. When sold by a subsidiary the price is often set high enough, but then it may be heavily discounted to meet sales quotas. Neither is a good approach. The long-term solution is much better up front financial business modeling that sets realistic pricing and expectations, and then adding the controls and marketing skills to protect the pricing.

6. Provide Excellent Training to Japanese Staff

Cultural differences as well as language differences make setting up separate training sessions just for your Japanese staff a necessity. In our experience the marathon international training sessions attended by staff from several countries simply do not work. What does work well are training sessions attended by just the Japanese staff, given in segments of one hour (maximum) followed by at least a 30-minute break. During the break the staff should be left alone so they can discuss what they don't understand and then bring it to the attention of the instructor at the next session. This process provides a much better opportunity to raise questions than the usual approach, which forces them to do so in real time, in a foreign language, feeling they are the only one who doesn't understand, and in a room with other nationalities that are much more forward under such circumstances and therefore dominate the questions.

In summary, do the things that work for you, coupled with a sensitivity to the cultural differences. Have a strategic plan based on your company's capabilities and practices, stimulated and monitored with sound communication and listening systems that keep you in contact with customers, and supported by a well-trained and profit-motivated staff. Taken in tandem, these will provide as close to a success guarantee as you can get anywhere in the world. When such efforts are devoted to the world's second largest market, they will be well rewarded.

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