San Jose, CA—January 12, 2006—EDAC emerging companies committee held a panel meeting on "Launching and growing your business in Japan". The impetus for the panel was the amount and rate of change in Japan, and the need to find new recipes for successfully doing business in that country. The panel tried to describe experiences and resources available to small companies who plan to expand into Japan. You can see the slides from this panel at http://www.edac.org/events_presentations.jsp - 06JanECC.

Stephen Pollock, VP, marketing and sales, JEDA Technologies, Inc., organized the panel. Alan Neuman, CEO of CoWare moderated the panel. Jan Goodsell, president of Coware K.K., Jim Girand, president of Technology Strategies and Investments, and Mokoto Abe, Japan business advisor of the Japan External Trade Organization (JETRO), a non-profit agency sponsored by the Japanese Ministry of Trade, made up the panel. All of the panelists agreed that the culture and business practices in Japan differ significantly from those in the USA. Even as some elements of Japanese taste are becoming more westernized, the underlying structures still hold sway.

In the cultural arena, Japanese take a much more formal view of personal interactions. Thus, practices such as getting introductions through others and presenting your business card by holding it in both hands are important symbols to develop a relationship. Follow-up and social graces, like thank you notes and invitations to social events after the meeting, generate more than just expense account line items, and indicate a willingness to understand and work within a different culture.

At the same time, it is important to know the other sides of the slow dance to business interactions. It is important to be on time to meetings because everything runs on time in Japan, even when the very rare infrastructure malfunction occurs. Business cards are symbols of the person, not just pieces of paper with contact information, so you should not write on the back of the cards (Which isn't that easy, since most cards have printing on both sides, one side in Japanese and the other in Roman characters). It is important not to push too hard for the order, it will come when the company is ready and not before. Urging a company to come to a decision before they feel ready is in fact a sign of mistrust that must be avoided.

Business functions follow a structured development process that seems slow to short term goal oriented US companies. Most Japanese companies have a step-by-step business development process that can take a very long time by US standards, up to a year for major purchases. The general practice of getting consensus within the company for any changes means that you must meet with all of the various constituents and managers.

This slow process results in strong loyalty to vendors, but at the cost of high levels of support and quality of deliverables. Vendors become business partners through the demonstration of sincerity and hard work. All of this work is in addition to overcoming the time, distance, and language barriers.

The trading companies are the least costly and offer the quickest access to the market, since they have existing relationships, acceptance by the end users, and domain expertise. The downsides are low direct visibility and minimal control. The US company must acknowledge that the trading company is the local sales expert and the US company is just there for technology development, non-local support, and high-level marketing.
The business channels are undergoing a structural change, driven partially by the EDA companies merger and acquisition behavior. It is difficult for a trade company, representative, or distributor to maintain a steady cash flow when a a larger company purchase the partner and the sales force changes to the larger companies' direct sales force. The trading companies, those companies that sell and support products from a select vendors base, are reducing their commitment and backing to EDA suppliers because of the human infrastructure costs.

The other extreme is to create your own K.K., your corporate presence in Japan. This alternative provides the ability for good local support and a sense of permanence, a highly valued consideration. Headquarters control is very expensive and very time consuming. In addition, it is very hard to hire good local people to work for a foreign company. Start-up costs would include not only the space and communications infrastructure, but also must address legal and tax issues.

Successful organizations transcend the structure. The key is a management focus on local tactical efforts and local technical support. It is very important to have many visits from the factory (at least once a month) to demonstrate commitment and support for local efforts. The investments should go to the chosen structure through training, formal sales, strategic partners, and replicated marketing functions. A company needs to have a good match between its core values and its operating structure to achieve a level of 20 percent of total revenue from Japan, a benchmark for success.

All of these functions require a long term commitment, predictability, and consistency of effort and focus. Due to the long-term horizons within Japanese companies, frequent changes in strategy and business conditions are considered unstable and make the company unworthy of consideration for any significant purchases. Unlike US companies, where a person with a couple of years in the company is an old-timer, many engineers in Japan have been with their company for over 10 years, and even longer for managers. A poor opinion of your company or its personnel is not something you can wait out until the next generation of engineers takes over.

Within the various possible structures, marketing and technical support communications are very important. The local media and press have different focus and content requirements than those of US-based media, so someone with direct access to those media is important.

Support must be immediate and, if possible, face-to-face. The Japanese engineers work long hours, and expect their suppliers to have similar work efforts. Email responses are acceptable except for Fridays when the answers don't get accessed until Monday (Sunday our time). A better response is to have phone and personal interactions, followed by an email follow up. The language issues make the follow up much more important, to ensure that the problem and solutions are clearly understood by all.

In addition to internal expertise and outside consultants for help in getting started in Japan, companies can avail themselves of governmental structures. The Japanese government has an organization that offers assistance to companies planning to do business in Japan. JETRO provides mostly free services in establishing offices and facilities in Japan. These services include research, business matters, Japan study trips, helping to set up seminars and trade shows, locating local tax and business incentive contacts. The organization can even provide short-term location in a support center for little or no cost. The local office for JETRO is in San Francisco.

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