This document provides information and advice about doing business in Japan. It begins by explaining why Japan is an important market, as the world's 3rd largest economy. It then discusses some common mistakes made by foreign companies, such as lack of preparation and market research. It describes differences between "Old Japan" and more open "New Japan". Relationship building is important in Japan. Proper etiquette and cultural understanding can help business success. While opportunities exist, thorough planning is needed to take advantage and avoid pitfalls when operating in Japan.

1. How to do Business in JAPAN
DBe-WS11/12
DI Heinz Oyrer MBA

2. Japan 日本 Nihon/Nippon
DI Heinz Oyrer MBA 2DBe-WS11/12

3. Agenda
• Why is Japan Important?
• Some Typical Mistakes
• „Old Japan“ vs. „New Japan“
• Relationships
• Japan Business Etiquette
• Opportunities
• Summary
• References / Literature
• Appendix
DI Heinz Oyrer MBA 3DBe-WS11/12

4. Why is Japan Important?
• Japan is the world's third largest national economy,
accounting for around 1.9% of the world population and
around 9% of world GDP
• Some (by far not all!) important technologies come from
Japan: LEDs and Lasers, G3 next generation mobile
phone/computing, SONY Playstation or similar
• There are enormous potential trade opportunities for
European business in Japan.
– With exports in 2010 to Japan of €44 billion, 3.2% of total EU
exports, Japan is the EU's sixth largest export market after the USA,
Switzerland, China, Russia and Turkey.
– EU exports to Japan are mainly in the sectors of machinery and
transport equipment (31.3%) , chemical products (14.1%) and
agricultural products (11.0%).
– High-level products and components in Japan are vehicles, aircrafts,
Robots and fine chemicals, carbon fiber respectively
Over the past four
decades, Europe and
Japan have emerged
together as leading
world economic
powers
DI Heinz Oyrer MBA 4DBe-WS11/12

5. Some Typical Mistakes
• There is a large range of well-known mistakes foreign companies
have been making over and over again in Japan for many years.
• Surprisingly foreign companies continue to make these well-known
mistakes!
Don't make such well-known mistakes!
• Most "well-known mistakes" lie within the organization of your own
company!
– Manage Asia from Singapore or Hong-Kong (that’s like managing All-Europe
operations from Tel-Aviv…)
– Hire the wrong people (wrong Japan–CEO, wrong personnel, e.g. too much
emphasis on English etc)
– Partnerships or joint–ventures with wrong partners
– Enter Japan, build R&D labs etc without first working out strategy and aims
DI Heinz Oyrer MBA 5DBe-WS11/12

6. Some Typical Mistakes cont‘d
• Forget to do the homework (there is Gigabytes of information you better
learn about Japan…)
• Be too fascinated by cherry blossom & be too optimistic or too pessimistic
about Japan
• Take things for granted in Japan, which are not: Brand recognition,
Japanese consumer & customer habits and needs.
• Why should you chose a traditional Japanese organizational form for your
subsidiary in Japan when many successful Japanese corporations are
trying to leave the traditional pattern?
Tuning into the “New Japan” may be a better idea to use young Japanese
talent !
• Chose the right partner in Japan or go alone
DI Heinz Oyrer MBA 6DBe-WS11/12

7. Some Typical Mistakes cont‘d
A big ‘No-No”: Lack of market research and lack of preparations
• The biggest "no-no" is not to do proper preparation, or to start
without a strategy.
• Market research in Japan often looks expensive, however
expensive, good market research is almost certainly far cheaper
than failure and withdrawal from Japan.
• You will be surprised how many time consuming and expensive
failures of Western companies are largely due to lack of preparation,
lack of market information, and lack of planning.
.
Sept. 12, 2011 (Bloomberg) -- Suzuki Motor Corp. will seek
to dissolve its 20-month-old alliance with Volkswagen AG
after the German carmaker’s 222.5 billion yen ($2.9 billion)
investment failed to yield a single project.
DI Heinz Oyrer MBA 7DBe-WS11/12

8. “Old Japan” vs. “New Japan”
Foreign companies should avoid these issues in their subsidiaries
• Over-aged and top-heavy “management”, which avoids risks
• Over–competitiveness: Focus on competition instead of creating
own ideas
• Excessive hierarchies: focus on power & control, not on results
• Decisions taken by people who don’t understand the technical
issues.
• “Management” (senior people) had to wait many frustrating years to
reach positions of some influence.
• “Ashi o hiparu” (=pull back by the legs). A common Japanese social
phenomenon in traditional Japanese organizations.
DI Heinz Oyrer MBA 8DBe-WS11/12

9. Relationships
• You need to carefully plan your relationships in Japan, and you
need to understand your relationships
• You need to be aware that, as anywhere else, your business
partners in Japan will not tell you everything they know and
everything they think and feel and plan for the future.
• Keiretsu relationships are still enormously important in Japanese
business and economy. For many foreign companies it is essential
to understand the Keiretsu structure and to plan your business
taking account of this knowledge.
DI Heinz Oyrer MBA 9DBe-WS11/12

10. Japanese Business Etiquette
• Take enough ("enough" often means a couple of hundred)
professionally prepared "meishi" ("meishi" = business cards).
• Impress with facts and achievements, or the fame and power and
size of your corporation. Bring documentation of your company in
Japanese language.
• Be on time and well prepared for meetings.
• There is a sophisticated protocol how seating is arranged at
meetings, at dinners or in cars etc.
• There are a number of unwritten rules in daily life in Japan, which
everybody observes, but nobody talks about, and which don't exist
in Europe or USA.
DI Heinz Oyrer MBA 10DBe-WS11/12

11. Japanese Business Etiquette cont’d
There are some things you should definitely not do:
1. Don't blow you nose in front of other people!
2. Don't kiss anybody as a greeting!
– You'll thoroughly embarrass your "victim"!)
3. Never throw objects at somebody asking them to catch!
– Books, papers, documents, meishi, presents, and other important objects are
given with both hands and a bow of the head.
4. There are a couple of other "no-no's" (gestures, comments etc)
which will provoke embarrassment, or even hostility in Japanese
people, and you might be unaware of them.
– You better ask for them and avoid them.
Be prepared for surprises! Everything is changing rapidly recently!
DI Heinz Oyrer MBA 11DBe-WS11/12

12. Japanese Business Etiquette cont’d
Relax! Don't overestimate etiquette!
• Although your Japanese business partners may look dead serious
(and Japanese people usually take work dead-serious...), they also
are human and know to laugh... Here is a famous story (not sure it's
a true story though...) demonstrating what can happen with
exaggerated cultural adaptation:
DI Heinz Oyrer MBA 12DBe-WS11/12
An important US-Japan negotiation is scheduled in Hawaii - midway between the
American continent and Japan. The Japanese party and the US negotiation party
both have done their preparations well: they studied the material, the facts, prepared
strategies, fall-back positions, read up on how to negotiate with the Japanese (or the
Americans) and read about cultural differences, and learnt a few polite word's in the
other party's language. The doors open and in come the Japanese and the US
negotiators. The Japanese negotiators - all experienced senior managers - trying
their best to adapt to American culture and to create a good atmosphere, enter the
conference room dressed in Aloha shirts, sandals, shorts while on the other side of
the room the American delegation enters: dressed in stiff white starched shirts, dark
tie, dark blue business suits, polished black shoes …

13. Opportunities
• Foreign inward investment welcome
• Foreign corporations can hire top performing Japanese employees
• There seems to be a (slow) trend in the direction of opening Japan
up to foreign services and management principles
• Japan seems to start caring about global standards, slowly…
hesitatingly… in some areas...
– Mobile communications G3
– Ericsson, Nokia, Lucent, opened R&D labs to develop future
multimedia/broadband mobile communication equipment in cooperation with
NTT-DoCoMo
– Internet (first ISP was foreign – easier to shut down…)
– Environmental (car exhaust standards etc)
– Health/Pharmaceuticals: NOT YET
DI Heinz Oyrer MBA 13DBe-WS11/12

14. Summary
• Japan is important as the third largest market, as a competitor, partner,
creator of technology and for global standards
• I see an “Old Japan” and a “New Japan”.
– Some of the “Old Japan” cannot be repaired, and must be replaced by “New
Japan” for growth to resume.
– Foreign companies are advised at least to keep in touch with the “New
Japan” or even be part of the “New Japan”.
• Foreign companies are advised to prepare their business in Japan
thoroughly.
– It saves much time, money, brand-image to avoid well-known mistakes.
Preparation is worth every cent.
– There must be a clear target for any business activity in Japan, including
R&D.
– One critical difficulty, which often is the primary reason for failure in Japan,
is simply that not enough - or not the right - market research is done
DI Heinz Oyrer MBA 14DBe-WS11/12

15. References / Literature
• International Monetary Fund - www.imf.org
• European Trade Commission - http://ec.europa.eu/trade/creating-
opportunities/bilateral-relations/countries/japan
• Eurotechnology Japan KK - www.eurotechnology.com
• Japan’s Manufacturing Industry, July 2010, Ministry of Economy Trade and Industry
• Dealing with Japanese companies; Isn’t there a better way to do business? Kiyoko
Naish, Qi Concepts Limited - www.qiconcepts.co.uk
• Doing Business in Japan, Japan External Trade Organization (JETRO)
• Gert Hofstede - http://geert-hofstede.com
• Praxisführer Japan
• Japans Zukunftsindustrien
• Japan’s Business Renaissance
• Global Trends 2025: A Transformed World
• Heinz Oyrer - www.linkedin.com/in/oyrer
DI Heinz Oyrer MBA 15DBe-WS11/12

16. Appendix

17. Definition Keiretsu
• Grouping of large Japanese financial and
industrial corporations through historical
associations and cross-shareholdings.
– „Kei“ = Gruppe, System, Clique
– „retsu“ = Reihe, Linie
– Keiretsu = Verbindungslinie (Vgl. Dolles 1994, 27-28)
• In a keiretsu each firm maintains its operational
independence while retaining very close
commercial relationships with other firms in the
group.
DI Heinz Oyrer MBA 17DBe-WS11/12

18. Galapagos Effect !
• The “Galapagos Effect” is
used to describe Japan’s
unique culture of technology
that has not expanded
beyond Japan’s borders, in
the same way that the
Galapagos Islands exemplify
unique evolutionary
developments in nature.
DI Heinz Oyrer MBA 18DBe-WS11/12

19. Hofstede‘s Cultural Dimensions
• Power Distance Index (PDI)
– the extent to which the less powerful members of institutions and organisations
within a country expect and accept that power is distributed unequally.
• Individualism (IDV) vs collectivism
– the degree of interdependence a society maintains among its members.
• Masculinity (MAS) vs femininity
– The fundamental issue here is what motivates people, wanting to be the best
(masculine) or liking what you do (feminine).
• Uncertainty Avoidance Index (UAI)
– has to do with the way that a society deals with the fact that the future can never
be known: should we try to control the future or just let it happen?
• Long-Term Orientation (LTO) vs short-term orientation
– the extent to which a society shows a pragmatic future-oriented perspective
rather than a conventional historical short-term point of view.
What about Japan?
DI Heinz Oyrer MBA 19DBe-WS11/12

20. Thank you for your Attention !