Q1. Has the Japanese economy really recovered after the dot.com bubble burst? Did it really shake off the deflation of the 1990′s?
Emphatically yes! The pent-up demand from the 1990′s for IT infrastructure has fueled a sustained spending boom. By the third year of the recovery in 2006, over 40 companies reported profits in excess of $855M (Y100B), lead by Toyota which had a 17% profit increase to $12B on sales of $171B. The Ministry of Finance reported that business spending was up 12% and pretax profits up 16%. The government announced an eight-year low in unemployment and 2.1% annual growth marking the end of deflation.
Softbank bought Vodafone Japan for $15B, kicking off a string of mega-mergers such as Toshiba-Westinghouse nuclear, Daikin-Oyl, etc. Recof Corporation reported 1,409 M&A deals in 2006, with five of the top ten transactions involving an overseas business. Mixi, a Social Networking Service (SNS), staged an IPO and rose to a market cap of $1.9B just four days later with only $16.5M of revenues.
Q2. Isn’t doing business in Japan too expensive, and too time-consuming to get payback?
Japan Entry’s projects are self-funding because we perform demand creation so partners can close customers early, and partners typically make an upfront purchase of inventory upon signing a distribution agreement. Getting the initial reference account is the biggest hurdle to success. The partners do the heavy lifting and rapidly become self-sufficient. Within two years, companies should expect 10-40% of worldwide revenues to be derived from Japan.
Q3. Isn’t it difficult to become profitable in Japan because of the high cost of doing business in Japan and local competition?
Western products can typically be sold at a premium of 10-100%, thanks to superior performance, features and customizability. Because partners bear the burden of marketing and support costs, the profit margins are extremely high.
Q4. Aren’t Japanese companies too conservative to adopt new technologies?
Japanese companies tend to be followers as technology users, and leaders as technology producers. Success stories and technical differentiation therefore have an enormous impact on the purchase decision. Japan Entry has successfully made the first-ever sale of our clients’ technology anywhere in the world.
Q5. Do Japanese expectations about quality and service make it difficult for Western companies to succeed?
Western companies must calibrate quality and delivery levels to meet Japanese norms. Often, a Japanese partner is the best way to successfully “buffer” cultural differences.
Q6. What is the difference between Japan Entry and JETRO?
JETRO, the Japan External Trade Organization, is a government agency with offices around the world. JETRO’s mission is to increase foreign investment in Japan. JETRO provides basic information and support in identifying the names of top distributors, and offers temporary office space. In contrast, Japan Entry provides a proactive and aggressive business development campaign and closes deals.