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.