This article on Japan market entry was written by Niina F
Are you looking to expand your business to Japan? Are you a foreigner in Japan wanting to start a business? This article will cover important details and factors to consider for International companies looking to enter the Japanese market.
International Companies whether it’s a start-up or office branches, foreign companies can thrive in Japan when they understand the needs of the Japanese market. Japan has the world’s 3rd largest GDP allowing for both mass and niche markets to be profitable.
This article will guide you through the important factors and processes that need to be considered for a successful Japan market entry.
Why should International Companies start a business in Japan?
Hospitality
In Japan, the term omotenashi is the idea of providing genuine hospitality. Omote means public face. Nashi means nothing. When combined this term is used for Japanese hospitality to describe the attentive service of Japanese people. This term is rooted in sado, a traditional tea ceremony, whereby hosts must wholeheartedly look after their guests.
The hospitality and service led by Japanese people allow for tourists to be attracted to Japan. This can also apply to business in order to strengthen relationships between your employees and clients to create a long-lasting relationship.
Technology
Japan is a highly technologically developed country, this can be seen with the high-speed bullet trains, bidet toilets, vending machines for almost anything, and robots seen in everyday life. On that note, Japan has ranked 1st as the most Innovative cities for 2021. This is important to consider as we live in a digital world now. The technological advancement of Japan will allow foreign entrepreneurs and businesses to access an abundance of high-tech resources that may not be as accessible anywhere else in the world.
Infrastructure
In addition to the technological advancement of Japan, Japan’s infrastructure is highly developed, railways, roads, highways, airports, and telecommunications of goods and services are highly developed. Railways are foreigner-friendly as there is an English app (Japan Travel) for the railway system, providing convenience to those who are not yet fluent in Japanese. Traveling within Japan is convenient with the ability to travel anywhere by train, car, or by plane.
Traveling in and out of Japan is made easy with access to shuttle buses to airports. Tokyo has two main airports, the Narita Airport (NRT) and Haneda Airport (HND) providing numerous flights daily from the Tokyo area which can be beneficial to avoid large crowds and long waiting times.
Environment
While Japan is seen to be a technologically advanced city, this country also provides a plethora of scenery for you to enjoy. The variety of scenery from blue skies and beaches in Okinawa, snow in Hokkaido during the winter, sky-high skyscrapers in Tokyo, and a plethora of historical temples and shrines in Kyoto allow for endless experience and inspiration when changes of scenery are needed!
On the topic of temples and shrines, Japanese amulets called omamori, also known as Japanese Lucky Charms are sold at Buddhist temples and Shinto Shrines located all over Japan. Omamori translates to “protection”, as these amulets are said to provide luck and protection.
Despite being sold at shrines and temples, omamori are not religious items and can be purchased by anyone despite their own religious beliefs. These Japanese lucky charms are popular amongst students during the exam period. There are six main types of Omamori: ward away evil, safe travels, education, love, money, and health protection charm. These Japanese lucky charms could be beneficial to foreign entrepreneurs wanting to build a successful business while connecting to the Japanese culture.
Disclaimer: Japanese people do not blindly believe in the power of these omamori lucky charms, the owners are ultimately responsible for their own actions, the omamori may help with encouragement when facing daily challenges.
How can you make your Japan market entry more appealing?
Appealing to Japanese consumers as an international company operating in Japan has shown success in the past decades. There are numerous factors of the Japanese market to consider when looking to plan a successful Japan market entry strategy.
Japanese Consumers are Brand Loyal
To begin, it must be noted that Japanese consumers are very brand loyal. This applies to the older generation more so than the younger generation. This is important to consider as targeting the older generation in Japan may be a challenge as they would like to remain loyal and stick to what they know works for them.
Advertisements in Japan
Countering the older generation, research has shown that young Japanese consumers are more inclined to purchase products that have been advertised online or on billboards. This differs from the Western market, as they find advertisements on social media, articles, and YouTube ads to be annoying and bothersome.
Digital marketing plays a pivotal role in your journey to conquer foreign markets, especially in a dynamic landscape like Japan. Explore our comprehensive guide on Digital Marketing in Japan, tailored to assist foreign market entrants.
Japanese Consumers and Queues
Other than advertisements, another marketing tactic that is successful amongst Japanese consumers is queues. Japanese consumers have been proven to be intrigued by queues. 88% of Japanese respondents said they would be curious when a queue is formed, 60% said they would stop to investigate and 3% said they would queue in line without knowing why. The success story of American based coffee chain, Starbucks, proves the impact of both advertisements and queues despite the cultural differences in Japan.
Starbucks opened their first branch outside of North America in Ginza, Tokyo in 1996. Despite the cultural difference, the company succeeded due to the “respect for the culture of the local community” said Norio Adachi, a director at Starbucks Coffee Japan Ltd.’s corporate affairs department. “Japanese consumers like to try new things…so when something new comes from a foreign country, it often gets attention on TV. And people will stand in a long line in front of the store without hesitation,” quotes Adachi. This led to the success of the American coffee chain in a country with a prominent tea-drinking culture.
Japanese Consumers are Price-sensitive
It is also important to consider that Japanese consumers are price-sensitive. This is especially the case when it comes to dining. Japanese consumers can easily identify what is considered a rip-off to them and will continue to remain loyal to the brands they already know and trust. In order to gain consumer trust in Japan, it would be recommended to keep prices lower for Japanese consumers to be willing to try your goods or services.
Japanese Consumers value Quality
Lastly, while all the above points are important, Japanese consumers value quality at the end of the day. With Japan being technologically advanced, it should be kept in mind that their local products and services are of high quality. In order to win over Japanese consumers as a foreign company, producing high-quality products and services is a priority.
If you’re looking to bring your business to Japan, be sure to consider using high-quality eye-catching visuals and earworm jingles for advertisements, as well as creating a sense of curiosity by creating queues to hype up your products and services!
How International Companies failed to enter the Japanese Market
In contrast to international companies that have succeeded in Japan, there have been several cases whereby successful companies could not successfully penetrate the Japanese market.
Walmart
Walmart has failed to succeed in Japan after they failed to provide the demands of Japanese consumers after 18 years of attempt. On top of that, Walmart had faced fierce competition with Japanese competitors who better understood the market and satisfied the Japanese consumers’ needs. In this case, Japanese consumers preferred fresh and locally sourced produce over frozen foods. Following their inability to penetrate the Japanese market, Walmart has now sold the majority of their stake to the Japanese group of supermarkets, Seiyu.
Vodafone
Another example of an International Company failing in Japan is Vodafone, a multinational telecommunication company from Britain that failed to expand their market to Japan. The failure of Vodafone was due to insufficient investment funds combined with insufficient planning for a successful Japan market entry strategy. With the inability to succeed in Japan, Softbank Group acquired Vodafone Japan.
IKEA
Lastly, IKEA, the Swedish self assembling furniture company has faced both major failure and success in its Japan market entry strategy. It took two attempts and a two decade hiatus for IKEA to succeed in Japan. IKEA first attempted to enter the Japanese market in 1974, but the lack of success caused them to withdraw from the Japanese market in 1986. This failure was due to the fact that the Japanese market was not ready for the “do-it-yourself” approach of IKEA furniture. Twenty years later, IKEA reenters the market after thoroughly researching the living conditions of Japanese households such as the sizing of furniture, routines of Japanese people and using experiences from successfully entering other markets to apply to their expansion to Japan.
With the consideration of the failure of International companies in Japan, it is important to keep in mind there are other actions that can be taken to further develop the planning stages of your business to succeed in Japan.
What is the importance of networking in your Japan market entry strategy?
The Importance of Networking
Networking is important for any career field, but it may be even more crucial in Japan as a foreign business. With the power of networking, you can achieve these factors that’ll allow for a successful Japan market entry.
Acquire new Business Leads
Business leads is the term to describe potential clients, using the contacts from networking to meet new people and acquire them as your client. When doing this, you must be careful to remain professional in order to prevent driving them away. In Japan, it may be important to acquire the right clients who can understand your business objectives and services as there is a cultural difference between foreigners and local Japanese people.
Identify Business Strategies
Networking can be beneficial to identify business strategies and practices used by other firms in the same field as your business to apply to your own business. Business and marketing strategies may differ from culture to culture, networking can benefit your understanding of the Japanese consumer’s habits to ensure business success in Japan.
Identify Business Trends
Business trends change as social trends change, networking can help you to identify the current trends as well as the digression of trends. As the trends in Japan may differ to trends in your home country, it is important to continuously network as an International company in Japan with other International companies that can help you to understand what is favorable in the Japanese market.
Make connections with influential people
Networking can open doors to connections with highly influential people in the industry. These connections can lead to greater opportunities and expand your horizons as a business owner. It would be recommended to take advantage of the networking sites for expats in Japan as these connections are exclusive to expats living in Japan only.
General Business Networking for Foreigners in Japan
These three groups are general networking groups in Japan to meet other foreign entrepreneurs:
The links above are community based networking sites for expats in Japan to connect with likeminded people, these sites are recommended as it can open doors to opportunities.
For those interested in developing your own start-up, Venture Cafe, Plug and Play and Google Campus are good places to start as these are communities made for entrepreneurs and start-ups in Tokyo to network in English!
Networking with Successful Foreign Companies in Japan
Moneytree is an example of a start-up by foreigners in Japan. Founded in 2012 by three foreigners living in Japan, Moneytree is an iOS and Androidapp for personal financing with the ability to connect to credit cards and bank accounts to track spending and budgeting.
Another success story is Japan Coca Cola K.K. The Coca-Cola Company was founded in 1892 in the United States and made its way to Japan in 1957. The ability of the Coca-Cola company to adapt to the Japanese market is commendable as Japanese people do not drink as much Coca Cola compared to in the US. With that, the Coca-Cola company began to adjust their products to fit the needs of Japanese people. These products include Sokenbicha, Aquarius, Yakan no Mugicha and Remondo, a type of chuhai, a canned alcoholic drink. Understanding the importance of adjusting products to meet the culture of Japan, needs of Japanese consumers while maintaining the same vision.
With the help of online networking sites such as Meetup and Internations linked above, there are an abundance of opportunities to connect with expats, foreign business owners and entrepreneurs.
What is the legal process of Japan market entry as a foreigner?
There are several ways to become a foreign affiliated business or foreign entrepreneur in Japan. Below will guide both those who currently already reside in Japan and those who plan to come to Japan to open a Branch Office.
Obtain a 4-month Business Manager Visa
If you already have a Japanese Visa, be sure it is eligible for starting a business. In order to obtain a business manager visa, the individual must prove that they are in the process of starting a company in Japan written in Japanese, have invested more than 5 million Japanese Yen for Capital, have a business partner in Japan (in the case of an applicant living abroad). After approval by the government, the individual can obtain a residence card, open a bank account and register their business. More details can be found on the Continental Immigration Law Website.
Obtain a 6-month Start-Up Visa
A start-up visa is open for application in selected municipalities of Japan. Allowing entrepreneurs from overseas to stay in Japan for six months to establish their company with the ability to extend their stay by an additional 6 months when legal requirements are met. More information on the Start-up Visa can be found on the Ministry of Japan Official Website.
Open a Branch Office in Japan
Registering a pre-existing company is another method to obtain a visa to enter your business into the Japanese market. The idea of the Japanese Branch Office is to allow for foreign companies to engage in the Japanese market, this can be done after completing the legal requirements which can be found on the JETRO Website.
For those who are currently residing in Japan, be sure to check if your visa allows you to start and register a business, in the case where your visa does not allow for you to establish a business in Japan, the above steps can be followed to obtain the correct visa for your situation. The process of getting a work visa in Japan is significantly easier compared to getting one in other countries.
Lastly, it is important for foreigners to have access to a translator, business partner or to be able to understand Japanese at a business level. This is because the legal paperwork will require business owners to respond in Japanese. Please be mindful of this to avoid delays and trouble for your company!
Final Remarks on Japan market entry
Entering the Japanese Market as an International company may have some challenges depending on person to person. Luckily, these challenges are easy to overcome with the right resources and time!
For those who are looking to improve their Japanese before starting business in Japan, Japan Switch offers lessons both online and in person.
Good luck to all who are planning to start business in Japan!
