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Industrial Machinery Market Overview in Japan


 As in consumer electronics industry Japanese companies such as Sony, Panasonic and Sharp are not doing well recently, while other machinery industries such as automotive, construction machines, medical devices, factory automation, plant engineering,etc. have been growing steadily by expanding their business to all over the world.

  Actually, Japan experienced a serious economic recession from 2008 to 2012 by the effect of financial crisis, devastating earth quake and too strong Yen. However, Japan economy, the 3rd largest in the world, is recovering now, especially in the industries mentioned above.

 In addition, Companies in such industries, namely Japanese manufacturers, usually prefer to have a centralized decision making system. In this hierarchical operation, a subsidiary in another country usually does not utilize foreign products without the headquarters' approval, especially if they are essential to their business, such as key components or core manufacturing equipment.

 If you are a supplier of components, parts, and machine tools, looking to expand your business with large Japanese manufacturers operating globally, you need to prove your ability in the Japanese market, which requires their suppliers the strictest quality control.

Consumer Products - Market Characteristics

 You can find descriptions of Japanese products or Japanese consumer behavior on social networking sites or blogs written by visitors. You may have encountered comments made regarding anything from the small food portions to the elaborate functionality of household consumer electronics.

 Such seeming quirkiness aside, in reality, your products would most likely need to make some adjustments to the Japanese market. Even if the concept of the product is well accepted, improvements on specifications will be required mainly in terms of quality. For example, even if you designed fashionable clothes, the choice of zipper manufacturer not being YKK could easily discourage Japanese consumers. This type of problems regarding details happens so often.

 In addition, consumers, retailers, and distributors often show strong concerns about product safety of imported goods. For example, if you sell items, such as food or health care products that may affect consumer health, distributors or retailers will require you to do tests in Japan even though you have already done the same tests in your home country. They are extremely cautious and expect perfect quality.

 These kinds of customer needs drive up the prices of goods in Japan. In other words, if you prove the quality of your products, it can be sold at a high price. This can be interpreted that the entry barriers of this market are very high, but the profit can also be large.




Issue of Distribution Channel in Consumer Goods Market in Japan

 You may suppose that distributors are always searching for new products all over the world in order to expand their businesses. However, that expectation does not fit Japanese distributors. In most of cases, they actually do not have enough power to sell new products to major retailers.

 Here is a schematic of a typical distribution channel in the Japanese consumer industries. The winner of the game in which manufacturers compete to take a larger share on retailers' shelves is determined by sales activities of the manufacturers, not distributors.


 The main functions that distributors undertake are settlement of accounts and logistics. After a basic agreement to adopt new products is reached between manufacturers and retailers, distributors adjust the details of the transactions such as delivery and payment. The reason for this division of labor is thought to be the number of products that distributors sell, which is very large.

 The another reason comes from the geographical characteristics of Japan; its limited territory and high population density allow manufacturers to have at least several sales offices in cities such as Tokyo, Osaka, Nagoya, Sapporo, Sendai, Hiroshima and Hakata. Therefore, they do not need to rely on distributors for sales; as a result, distributors have been gradually reducing the number of sales staff.

 Furthermore, most distributors do not have an importing function, which means you need to find an importer. The reason distributors do not import goods directly is that they have not needed to do so. There are so many Japanese manufacturers with some outsourcing production to other Asian countries, and they have been enough. Through this additional layer of distribution, your product may lose the competitive edge in pricing.

 Of course, we can support your distributor search in Japan, but we highly recommend you to have your Japanese office run by us. This will also give you peace of mind that you hired highly experienced sales representatives for a reasonable price.

Trend of Japanese manufacturers' global procurement

In these years, we see some trends of Japanese manufacturing companies on their procurement from overseas companies. This is becoming great opportunities for overseas suppliers to enter Japanese market.

Trend of Japanese manufacturers' global procurementRead More

Entry Strategy - You need your Japan office and Japanese Staff

 We recommend that you consider establishing a Japan office for your market entry. Our rationale for recommending this is as follows:

 If your products are considered to be commodity type products, meaning that there is no need for any customization to meet the customer's needs and the products have a high brand value, the Japan market entry strategy could be very simple, and that is to find the best distributor which has the strong relationship with your target customers. However, if your potential customers require the products to be customized or there is a need to provide significant technical support, another market entry strategy would be needed. In this case, the Japanese distributors will require you to provide extensive technical support by your Japanese staff in order to sell their products. There are three main reasons for this.

 First, the Japanese market is very mature, and so most Japanese distributors are trying to reduce their cost rather than invest to develop a new business. This is their rationale as the safer way to gain profit in the Japanese market. Many Japanese distributors have specialized their functions and perform only in logistics and settlement service while downsizing their sales force.

 Second, the business culture in Japan is such that there is a significant fear of failure. Japanese engineers are very cautious, so they ask distributors a very significant number of technical questions when distributors start the sales activities for their principal's products. Distributors need to have so much communication with engineers in the principal's company but most Japanese sales person usually can't speak English. This is a large deterrent factor for distributors to take on the distribution of new products.

 Finally, Japanese customers usually require a quick action if the products they bought have some defects. When this happens, they usually command distributors to "Come here with the manufacturer right now!" and "Check all the stock right now and report the solution to prevent the same problem occurring again!" If you don't have a Japan office, distributors won't feel safe to do business with you.

 For these reasons, we are recommending that you establish an office in Japan. However, you do not need to register an entity there or identify office space. We are recommending another option which is better in terms of cost efficiency.

Effects on Japanese industrial market by Tohoku Earthquake

Because of the effect of Tohoku Earthquakes on March 11, 2011, it is expected that economic activities will be limited and economic situation will be declined in the short term. However the size and range of damage by the earthquake was huge, it is expected the gradual economic growth from 2012 for several years. Followings are data which supports this.

Effects on Japanese industrial market by Tohoku EarthquakeRead More

The risk of NOT apologizing to customers

When you do business in global market, it is quite common understanding that it is risky to apologize to customers immediately after you have problems with your products. That is because apology means that you admit your fault. However, in case of the business in Japan, it is totally different. If you do not apologize to your customers immediately after the trouble, you will soon loose the business with your customers which is the biggest risk.

The risk of NOT apologizing to customersRead More

Merit of outsourcing your Japan office

Because of the current global economic situation, one of the most urgent issues is to reduce the cost as much as you can. Especially for foreign companies that have their own Japan office, it would be effective way to reduce its cost by outsourcing the operation of Japan office.

Merit of outsourcing your Japan officeRead More

Who is the key person to propose your products?

In case of Japanese industrial machinery or automotive market, it seems that there are misunderstandings among foreign companies about your future Japanese customer's decision maker (or key person) to purchase of your products. 

Who is the key person to propose your products?Read More

Typical failure when doing business in Japan

Before you start business with Japanese companies, it is important to know in advance what are typical failures of foreign companies when they are doing business in Japanese industrial market.

Typical failure when doing business in JapanRead More

First step to enter into Japan

There are several ways for foreign companies to enter into Japanese industrial market. Each of them has merits and demerits, and it is essential that you understand them before entering into Japan.

First step to enter into JapanRead More

Recruitment in Japan

Even if there are many foreign companies that consider entering into Japanese industrial market, it would be quite difficult for these companies to find appropriate sales engineers who can manage representative offices. The reasons are as follows.

Recruitment in JapanRead More

How to do effective sales activities

Japanese sales activity style can be sometimes strange for foreign people. However, it is essential to understand and do these differences, as your Japanese competitors have already been doing. So I will show you the typical difference of Japanese sales activities compared to overseas countries, which are followings:

How to do effective sales activitiesRead More

Why need Japan branch office?

You might think that it is possible to do business with Japanese companies even if you do not have Japan branch office. If you are an IT (Information Technology) company, it might be possible. However, if you are industrial products company, it is almost impossible to do business with Japanese companies without Japan office because of following reasons:

Why need Japan branch office?Read More

Complex distribution channel

In addition to severe quality requirements of Japanese customers, Japanese distribution channel in industrial market is one of the most complex and toughest things for foreign manufacturing companies.

Complex distribution channelRead More

Corrective action against defective products

When a defective product is found at your customer's site, Japanese customers would never accept go close this issue just by replacing with a new product. This is one of the differences from foreign manufacturing companies.

Corrective action against defective productsRead More

Severe quality requirement

It is often said that Japanese companies are very strict about quality. This might be one of the reasons why these companies, for example Japanese automotive or electronic companies are successful in global market.

Severe quality requirementRead More

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