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This is a marketing plan for companies that are planning to venture into the Japan Market, coming from a reputable source from a company that is a leader in assisting technology-based ventures to be incorporated into the well established and competitive Japanese market. Japan owes its market stability to the business-making systems and economic policies that its internal players ethically adheres to. With greater oppoprtunities for a sophisticated and challenging market comes not much less bigger a test on a company's commitment to market in Japan. As the shift in economic impetus from Europe to Asia progresses, Japan has become increasingly known to exact quality procedure and products from businesses that brave to enter its market. Consistency in claims is a key factor in its assesment of the investors. It appears that technology-based or technology-oriented types of businesses are potentially bankable in this country. Japan has one of the most technology-educated citizens, and therefore sophistication is a way of life. There is already an established market for it, aside from its highly qualified human resources. But there are the cultural barriers to doing business in Japan - the language factor which may amplify a process or to create new processes to support it when it would have been simple if executed in an inter-racial community with a common language. This will add up to the cost of building a strong financial foundation based on the products ability to captuer the local mood of teh country. But compared to other oriental countries such as China, India and Korea which are the new emerging players, in the world economy, Japan offers a long-term engagement because of its inclination to contracting businesses of high quality, and not by the cheaper options.
Entering the Japanese market Triangle Technologies assists relatively • A plethora of sophisticated customers with a mature technology-based ventures in hefty and consistent appetite for the latest tech- penetrating the market in Japan. Dr. Daniel nology Isenberg, Triangle’s CEO, discusses the benefits • A very advanced technology development of doing business in the Japanese market and capacity enabling its corporations to serve as the steps that high-tech companies should take development partners to realize a successful market entry. • Laws to protect IP and a legacy of IP enforcement The economic shift to Asia • Segmental technology leadership (WLAN, O ne of the dramatic changes in the mobile data services, broadband, consumer global venture community in the past electronics, some medical devices, storage, five years has been a shift in the displays – and increasingly biotechnology and economic “center of gravity” from the drug discovery) US and Europe towards Asia. This is a • Low cost of doing business (despite impres- process that will take many more years, but it is sions to the contrary) due to high concentration inevitable and inexorable. A generation from now of businesses in the greater Tokyo area India, China, Japan and Korea will be the world’s (although human resources are expensive, major consumers of technology and, to a large roughly on a par with the US) extent, its major producers as well. The shape of • A large pool of capable, highly educated this new regional economy is forming rapidly. human resources with a very strong work ethic Japan, China, India, and Korea have a total popu- • Increasingly, a gateway to China, as Japan’s lation exceeding 2.4 billion people, a combined exports to China grow rapidly. GDP exceeding $13 trillion (versus the US $10.5 trillion) and growth rates ranging from three to Japan’s disadvantages nine percent. Japan’s many advantages should not cloud Although now increasingly recognized by VC objective consideration of the shortcomings. Its fund managers, this economic sea change initially disadvantages include: caught the predominantly Western VC community unprepared, since US (and, to a lesser extent, Israeli) • A high degree of thoroughness in evaluating VCs have been traditionally oriented toward US new products and technologies, which leads to institutions for fund raising, US financial markets long assessment periods and slow decision- Dr. Daniel Isenberg, and acquirers for fund liquidation, and US making CEO, Triangle customers and revenues for value creation. • A strong customer service ethic, which creates Technologies demands on venture firms to provide the same The Japanese economy level of service as their larger, domestic coun- Whereas the Chinese and Indian economies are terparts, including customized solutions with rapidly emerging, exhibiting dizzying growth little or no customer participation in the rates in the 4-9 percent range, the Japanese market necessary investment. is well-established, with a long legacy of devel- • An aversion to certain forms of risk taking, opment and acquisition of technologies and which impedes the uptake of really new and products, and (now that the 12-year recession is emergent technologies, particularly as they are officially ending) slow to moderate growth. And deployed in service industries. even while emerging from its long, painful • High expectations regarding documentation – recession, the Japanese economy is much larger quantity, quality and consistency between than China’s (in real terms), with modern and rela- documentation (e.g. spec sheets) and reality tively transparent legal systems, patent laws, (actual product features and performance) financial markets, governance systems, and a • “Followership” in certain key segments, such highly ethical and predictable business code. as networking and data security China, on the other hand, has a long way to go in • Language and cultural barriers that decrease modernizing its financial and legal systems, which transparency for the novice are riddled with problems such as non-performing loans and non-economic criteria for credit issuing. Insight into the advantages and disadvantages of doing business in Japan can help the entre- Japan’s advantages preneur or manager of high growth ventures In the context of the above macro factors, Japan mitigate the risk of doing business in Japan and tap IVC J has numerous advantages for venture-backed, into tremendous opportunities. early stage high technology companies: Israel Venture Capital & Private Equity Journal June 2004 Vol. 4, No. 2 34 Advice to foreign start-ups (and Use intermediaries. The prerequisite of inter- their boards) personal (and intercompany) trust for conducting Have a strategic rationale for entering Japan. business in Japan obviously poses a dilemma for Since decision-making and other processes take start-ups, which by virtue of their age have not had longer in Japan and require a commitment of the time to establish long-term relationships, cred- resources, it is important that Japan be a strategic ibility and reputation. In Japan, it is common to market and not only just another big market. “lend” or “broker” trust using formal or informal Typically, Japan accounts for 10-20 percent of a intermediaries – if A and B trust each other, and B technology-based company’s worldwide sales, but and C trust each other, then if B introduces A and if Japan is a strategic market, and if penetration is C, then A and C are trustworthy vis-a-vis each managed professionally, relative sales in Japan can other. be higher and more profitable. Moreover, the Commit to the market. Since processes tend to impact on a company’s reputation, product be long in Japan, it is important to both be planning and quality can be significant. committed to the market over a relatively long period, and also to signal this commitment. A Manage expectations and strive to improve. corollary to this is the need to show presence, with Since a company’s initial products are not frequent visits to Japan and, eventually, establish a completely mature in terms of performance and local presence. features, it is important to keep expectations Acquire respected customers. As a relatively accurate and not over-commit, even at the expense homogeneous and concentrated market, with of losing business. Once a reputation for accurately informal and formal channels for information communicating reality is damaged, it is very hard sharing among companies, success at a respected to restore. lead customer in Japan will be noticed and have a At the same time, the concept of continual relatively large impact on receptiveness to new improvement is fundamental to Japanese culture, products and technologies, and thereby reduce and partners and customers expect that suppliers marketing costs. will recognize any shortcomings, and continually Get support from the board. Penetrating strive to improve products and services. The Japan is not a frivolous affair. It requires significant notion of resting on one’s laurels does not have commitment of resources to generate the signif- currency in Japan. icant positive value. Therefore, it is important that Build relationships based on trust. Japan has a one’s board of directors be solidly behind the effort concentrated, relatively homogeneous population, and understands the investment required, as well with tight, long-lasting networks of relationships. as the level and timing of expected returns. s Collective memory is long, and one’s sins and Triangle Technologies, founded in 1989, has executed over virtues are ultimately recognized and accounted for. 100 transactions in the Japanese market. Dr. Isenberg, In short, it pays to invest in long-term relationships Triangle’s CEO was on the faculty of the Harvard Business built on interpersonal trust, which, once firmly School from 1981-1988 and holds a PhD from Harvard established, form the infrastructure for healthy and University. fruitful business relationships. 35 IVC J Israel Venture Capital & Private Equity Journal June 2004 Vol. 4, No. 2
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