Unquestionably, Japan is a very expensive place in which to do business. Distribution is incredibly complex. Relationships are very important. Building market share is more important than profits. These truths underlie the typical advice that one receives concerning doing business in Japan: that one must be prepared to invest (i.e., lose money) for a long time before making money in Japan. At the end of this advice comes the encouragement that the rewards can be great.
It is easy to follow such advice if one is truly prepared to forego profitability. But there is a serious long-term problem built into this approach. It builds a staff with a culture of losing money, a staff without the drive and experience to build a profitable business, a staff that believes it is more important to build market share, and knows that this takes time as relationships s-l-o-w-l-y develop. Following this advice is thought of as doing business "the Japanese way". But once this style has been in existence for a few years, the culture becomes so entrenched that it usually requires outside help and considerable time to correct—it is far better to commit to profitability from day one
A particularly insidious problem can be created when the home office leans on the Japanese office to increase sales, which in turn leads them to discount to get business. When the home office has set a high transfer price, profits at home may look fine, even though the Japanese operation is not profitable. But this approach builds a culture in the office that believes they are responsible for volume alone—that profitability is someone else’s responsibility. Such thinking discourages developing the discipline to differentiate products except by price.
Many companies are finding it is better to select products and market segments where they can build a business—even a small one—that is profitable. Once a profitable business is up and running, and the staff understands the discipline involved, then other, more difficult, products can be introduced; and other, tougher market segments can be developed.
When your salesperson in Japan says, "I can really sell this product, because I know lots of people in this business"—be careful! Seldom can one individual know enough people to build a profitable and growing business. That requires the same things you did in your home country market: that is, developing a comprehensive marketing program that goes well beyond what an individual sales person can do. This is not to say that good sales people are not critical to the process. Of course they are. It is only to say they are not enough. A system is needed that will differentiate your company and its products, along with a clear pricing policy, high quality sales leads, first-rate Japanese collateral material, a well-trained support staff, and an excellent, well-trained sales staff to manage the customer relationship.
Creating an organization that can design and implement such a program requires a lot of hard work and disciplined effort. It simply doesn’t get done unless there is a culture that clearly says "This is a profitable and growing business and everyone is hired, trained, and measured against that standard".
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