Japan business: how to fail in Japan….

sunset tokyo

by Gerhard Fasol

Treat Japan the same as any other country

“We have been successful in 25, 50, 170,… countries, why should we treat Japan differently?”

You’ll find that many globally successful corporations failed in Japan and withdrew from Japan because they insisted to use the same management principles and the same product specifications in Japan as in other markets.

Prioritize own company’s internals instead of Japan’s customers and partners

“Being respected within our complex company is much more difficult than succeeding in Japan. We must send an experienced seasoned manager/management team from within our company to Japan, no matter if its their first time in Japan, and know nothing about Japan, and it takes them 5-10 years to become effective in Japan”

Sure. And make sure you exchange your Japan leadership team every 1 to 2 years to expose fresh talent to the challenges of Japan.

Human resources at headquarters back home at our head quarters in US/EU decide

Are you sure, headquarters understand? There is a very well-known case of the (Japanese) Chief Executive of Japan operations for one of the most famous global corporations who was appointed by headquarters neglecting advice from Japanese advisors, who then later was arrested and sentenced. Don’t even think about the embarrassment and cost and brand-damage for everyone, and to have this global brand associated with an arrest of one of their (former) chief executives by Tokyo Police.

Still want to decide everything at headquarters?

Reduce Japan investment by eliminating Japan market research

“Market research? Understanding what Japanese customers think about our products? We have already done our focus group work and segmented Japan’s market. Our market research clearly shows that Japanese customers are the same as anywhere else in the world. They fit the same segmentation we have used in all other countries. We don’t need help to understand Japanese customers.”

Authentic statement from top management of a global company, which has been hugely successful in most markets except Japan – which has tried to enter Japan’s market for nearly 1/4 of a century, and has failed to succeed in Japan for each of these many years

Update: recently this company lost global market share dramatically, and much of the company was sold off at a fraction of its former value. Maybe failure in Japan was the “writing on the wall”?

Invest in Japan? All our investments go to growth markets, not Japan

“Invest more in our business development in Japan? Impossible. We have our global standards, and anyway all our investment recently goes to growth markets including China and India and Vietnam.”

You’ll find that most foreign companies succeeding in Japan have also made substantial investments in Japan. Although foreign direct investment in Japan overall is relatively low compared to other countries, there are many foreign companies which have made very substantial investments in Japan. Some foreign companies have invested US$ 1 to 30 billion in Japan. Also, you will find that the most successful foreign companies in Japan make huge investments in market research, strategy development, business planning. Success in Japan is almost never cheap, easy and quick. – Japan is not the place to make a quick buck normally.

Some current (2024) investments into Japan:

  • Amazon Web Services (AWS) planning to invest US$ 15 billion to expand AWS cloud computing infrastructure in Japan by 2027
  • Microsoft plans to invest US$ 3 billion in AI data centers in Japan (2024)
  • TSMC invests over US$ 20 billion in new semiconductor plants in Kyushu
  • Oracle to invest US$ 8 billion in Japan responding to rising AI demand

Case studies for failures of foreign companies in Japan to learn from – the mother of all failures: Vodafone-Japan

Vodafone acquired Japan Telecom including the mobile division J-Phone which at the time of acquisition by Vodafone was on third rank in Japan, but the fastest growing, and with some of the most interesting innovations, for example J-Phone brought the first camera phone to market globally – today its almost unthinkable to have a mobile phone without a camera, but J-Phone (before the acquisition by Vodafone) brought the first phone with a camera to market globally. However, after acquisition by Vodafone, Japan Telecom and J-Phone went slowly downmarket, lost customers at increasing rates, and finally Vodafone sold all operations in Japan to SoftBank, which turned the company around within a few months, and recently acquired SPRINT, and thanks in part to the acquisition of Vodafone’s Japan operations is now on the way towards the top global mobile phone operator.

Case study: London Stock Exchange AIM (and NASDAQ-Japan)

NASDAQ tried to build a business in Japan, failed and quit Japan.
Ten years later London Stock Exchange-AIM tried to build a business in Japan, failed and quit Japan.
For almost exactly the same reasons, and with almost exactly the same result.

Case studies- NOKIA mobile phones & Nokia Ventures & VERTU (NOKIAs luxury brand)

Nokia founded a subsidiary in Japan on April 3, 1989, and on November 27, 2008 announced to terminate selling mobile phones to Japan’s mobile operators, i.e. Nokia has tried for almost 20 years to build a business in Japan and failed. The i-Phone’s and Samsung’s success proves that Nokia’s departure is not because Japan’s mobile phone market was closed to foreign mobile phones – it is not.

Nokia’s sales figures in Japan were kept secret (Japan’s mobile phone industry insiders including us, of course had a very good idea about these figures), however in November 2008, Japanese newspapers reported that NOKIA sold 200,000 mobile phones during FY2007, equal to a market share of 0.39% – after 20 years of market entry.

Nokia-Ventures, and Nokia’s luxury division VERTU at different times also attempted to build businesses in Japan, and also terminated these efforts, however at different times than Nokia.

more here…. or contact us for much more details.

Here our CEO’s talk in this context, entitled “Help – my mobile phone does not work! Why Japan’s mobile phone sector is so different from Europe’s” at a lunch of the Finnish Chamber of Commerce at Tokyo’s Westin Hotel on March 16, 2007.

Note however, that NOKIA today is very successful and No. 1 in Japan’s mobile phone base station and mobile network equipment market.

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