Quick answer:
Considering Japan is the 3rd largest economy in the world, there should be no surprise that more and more companies are entering Japan to expand their business in this country to tap into this remunerative consumer market.
Japan still offers outstanding business opportunities for foreign companies. Japanese market often exhibits a global outlook and willingness to enter and invest in the matter of sustainable and long-term business success.
Some surveys show that Japan is an attractive location as a test market for global businesses, also most companies believe that Japan offers a suitable environment for business expansion because of its R&D capabilities, business stability, high-tech industries, well-developed laws, and innovative market. Japan from 2013 to 2019 ranked 29th in the world in ease of doing business.
However, Japan is one of the most challenging countries for market entry. Japan obtains different regulatory hurdles and cultural factors and makes foreign companies some barriers to penetrating this market.
In this article, we explain Japan’s market entry barriers and the problems foreign companies might face to succeed, and we cover the solution to eliminate or ease these barriers.
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Japan Regulations and Rules
Japan has strict regulations and bureaucracy in both company establishments and importing products for foreign companies who intend to enter this market. Company establishment in Japan takes time and needs lots of preparation which is difficult for foreign companies to handle all the tasks by themselves. Also, exporting the product to the Japanese market faces customs regulations, and importing procedures, and rules for different products and specific industries. Also, considering Japanese law, lots of innovative services couldn’t be introduced productively to the Japanese market such as Uber which is illegal in Japan to ride with a person who doesn’t have a business permit. So, Uber has changed its business model in Japan to be a “taxi-reservation/calling app” and food-delivery service, Uber Eats.
Japanese business culture and etiquette
Relationships drive business in Japan, and Japanese business culture is followed by rules and etiquette of being polite and the right level of respect. Knowing the Japanese business culture is one of the necessities for foreign business units to become successful in Japan. Unlocking the Japanese business culture rules is difficult for foreign companies. One of the rules is being patient in business procedures and business relations. Of course, it follows by being respectful and being prepared before acting.
Japanese Business Language and Localization
Language and communication play a significant role in creating any business relationship, and very few Japanese people (less than 2%-5%) speak good English. The most obvious obstacle for foreign companies in the Japanese market entry is the lack of Japanese business level proficiency in conducting business relationships with Japanese companies, government entities, banks, and Japanese clients. Having a professional interpreter is helpful. In addition to the Japanese language barrier, localization of your product and creating a clear message about your service to convey your value proposition to Japanese consumers is an obstacle to entering the Japanese market. Japanese localization expert is necessary to mitigate Japanese market localization hurdles. Lots of companies applied productive localization strategies in the Japanese market such as Starbucks by providing suitable sizes and tastes of its drinks that fulfill customers' needs. Starbucks' example shows that it studied Japanese consumers’ insights and positioned its brand in the Japanese market excellently.
Build Trust in Business with Japanese party
Gaining trust with Japanese parties is difficult and takes time at the beginning stages of business and market entry. Japanese end-users and companies expect a high quality of products and services and identifying their expectations and providing products and services to fulfill their needs and expectations are necessary to gain trust.
Japanese Market and Industry Trends Shift
Japan has a fast-growing market, and industry trends shift frequently in this country. This rapidly changing market creates novel market needs. Fulfilling market needs is key to success for foreign companies that intend to enter the Japanese market. But the biggest hurdles for foreign companies in the Japanese market entry process are how to identify the market shifts and the way of analyzing the Japanese end-users needs as well.
Japanese Sales and Marketing Methodology
Japan has unique marketing and sales rules. A foreign company that has got excellent operating systems and products, and also provides outstanding services in its home country always has difficulties presenting and selling its services in the Japanese market. The reason is that Japanese sales and marketing methods are complicated, and it is not an easy task for foreign companies to penetrate the Japanese market. Japanese sales channels are different from all around the world, and foreign companies need to plan specific marketing funnels strategy and marketing messages concerning the Japanese market entry process. Commercial and ways of marketing are different in Japan. Even short video commercials on trains and taxis attract customers in Japan.
Japanese customers, and business partners’ expectations
In the Japanese market entry identifying Japanese customers' expectations is always a barrier for foreign companies because Japanese customers are very demanding and often have quite different tastes and needs, and fulfilling these expectations by foreign service providers or suppliers is a key success factor in a competitive market. Japanese customers and business partners expect stability and long-term commitment, a good track record, high quality of product or service, accessibility for contacting or aftersales services, quick and productive response to their expectations, also healthy and uniqueness in consuming products.
Japanese Market local Competition is High
Japanese local companies are one of the barriers to foreign companies’ market entry. Japan has many strong local companies in different industries, and they will not usually welcome a new competitor. Local competitors develop strategies to compete hard against new entrants. Foreign companies must be prepared for such competition by gathering data from market research analyses to identify their competitors’ business models. Uber is a good example that faces fierce competition in Japanese taxi and traditional transportation markets.
Identify right Japanese B2B Business Partner
One of the best Japanese market entry strategies is having the right B2B business partner who can buy, resell, and distribute your products in this market. However, identifying the right Japanese partners and dealing with them is one of the hurdles for foreign companies because the Japanese supply chain and distribution channels mainly for consumer products are complex. Japanese B2B business partners consist of Japanese buyers, importers, distributors, and trading companies. There are complicated hierarchal steps to deal with Japanese B2B partners and require self-preparation that foreign companies need to consider in terms of having business relationships with Japanese potential partners. Hiring Japanese market entry consultants and specialist is helpful.
Well-Known mistake that foreign companies make in Japan market entry process
The biggest mistake that foreign companies make in Japan market entry process is that they don’t prepare properly, and they rely more on their Japanese partners. In other words, they don’t have a proper market entry strategy, and the results of making this mistake are losing time, missing opportunities, increasing the risk of failing in entry, and creating unnecessary expenses by spending too much money. We mentioned some barriers for foreign companies in the Japanese market entry and the reasons for these problems. But the question here is
………… How foreign companies overcome the Japanese market entry barriers?
Of course, proper preparation before market entry is necessary for global companies such as designing the best possible entry strategy service and product localization, market research, etc. However, handling all the Japanese market entry preparation and procedures by foreign companies is time-consuming, costly, and may convey them in the wrong direction. So, the best solution for foreign companies is to outsource their Japanese market entry procedures by hiring Japan-based market entry consultants as their local partners. Japan Market entry consultants bridge foreign companies and the Japanese market, also have experience in planning the best possible market entry strategy considering mitigating risks and barriers, reducing the cost of entry, and enhancing the possibility of success in the Japanese market.
Don’t you know how to connect to the Japan market entry consultants? We are here for you.
DGC’s market entry experts with more than decades of working experience with big global brands in terms of supporting them in Japan’s market entry process are always happy to support global companies in breaking into the Japanese market and helping them to scale their businesses in this lucrative market.
In the next chapter, we will cover practical strategies for Japanese market entry. Stay tuned with us by subscribing to our newsletter.