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.
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.