Asia is becoming increasingly attractive to investors all around the world. With a booming population, growing GDP and consumers who appreciate Western products and innovation, its a great market to get into. That said, there have been many a failed venture and company that have tried to enter Asia only to find out that it was not as easy as they thought.
In a recent podcast interview I did with a woman involved in market entry for Japan & Asia, we discussed some key components to being successful if you’re thinking about opening shop here. Here are three important points you should consider prior to doing business in Japan:
Point 1: Have a good handle on your Finances
Its important to have a firm understanding of your company`s current cash flow and how it relates to the sales and revenue stream of your product or service. If you’re selling a product and involved in business to consumer types of transactions, its easy to see and calculate how your net revenues compare to your expenses:
The good thing about selling products or commodities is that the accounting portion is fairly transparent. You can see when the cash comes in and when the cash goes out and can match that against your operational expenses. Business to business companies particularly ones in which are involved in services can be a bit tricky to calculate. Expenses are succinctly laid out; you know what your monthly costs are. However, revenues from some service companies can be based on completion of projects or milestones and not always timely. For example, if you’re involved in a consulting business where you create sales and marketing channels for Foreign Multinational companies overseas, you may have some companies who pay upfront, others who pay quarterly, and still others who are very late in paying.
This can affect the overall operations of your company and if you do not ￼plan accordingly, can put a serious damper on the outcome and viability of your business in Japan. The best advice is to understand your current model, maybe ask people and professionals who are running similar or complementary types of businesses, and emulate that model. Be aware that the sales cycles in Japan and Asia are much slower than most Western countries, you don’t want to go ahead and over invest in fixed costs and infrastructure only to find out your outspending your sales and have to close down your business.
Point 2: Tailor your products or services for Japan
Make sure your product or service makes sense for the Japanese. A good analogy is Ice cream. Go to your frozen food section at your local American supermarket and you can find gallon sized containers of Ice Cream. Westerners are conditioned to buy big and buy cheap. If you compare the refrigerator sizes of America to Japan you quickly realize that those gallon sized ice cream containers won’t fit into Japanese refrigerators.The key to successful marketing of your product or service in Japan is understanding the cultural nuances as well as the likes and dislikes of the local people. Companies that prioritise localisation have a better go to market strategy and easier time selling than organisations who don’t do the proper planning and due diligence.
￼￼Starbucks does a remarkable job of this. They provide quality products that cater to Japanese tastes. For example, Matcha is a high quality green tea dating back several centuries which the Japanese use in Tea ceremony, mochi, soba and wagashi (traditional Japanese confections). Starbucks went mainstream with this by creating a Matcha Latte which uses Matcha Tea, steam milk and coffee that would satisfy even the most discriminating coffee aficionado.
Point 3: Have a trusting Brand Image
Having a trusting brand image is very important in Japan. Trust is very hard to establish in Japan, once you lose it, its very difficult to regain. This would apply not only to Japan but Asia in general. Asians put high value on developing trust, which may have to do with the long history of feudal societies and warring factions; disgracing your family, tribe or group was said to lose face and trust, you were expected to commit suicide to save face.
Given the rich history which places trust at the forefront of many interactions and communications in Japan, having a business, brand or service with establishes and emanates trust is important. Carrefour and WalMart of two examples of companies that tried to enter Japan and failed. In fact, they tried 2 or 3 times. There is no one reason that we can attribute to their unsuccessful jaunt into Japan, it was probably a combination of factors including lack of proper planning with the distribution chain, insufficient study and planning of products for the Japanese market, etc. Suffice it to say, both those companies are making a go at it again. They may or may not have some future success (at the time of this writing WalMart has bought out Seiyu and branding itself as Seiyu which may go a long way in re-establishing trust) but, the Japanese will remember, and they just may pick up a competitor`s product next time they’re in the shopping aisle.
Howard Ichiro Lim is the President and CEO of Incredible Consulting Group, a firm focused on helping Foreign Multinational companies develop and grow their businesses in Asia. He is based in Tokyo and San Francisco, splitting his time equally between both countries. You can reach Howard through his Linkedin profile here.
[featured image via Shutterstock]