Monday, September 17, 2007

Doing business in Japan

Searching for something else, I discovered a fascinating article on how to succeed as a foreigner in small business in Japan. Although the article was written in 1996, much of it still appears relevant.

The author, Steve Porrit, wrote the story for the American Chamber of Commerce Japan Journal. It basically concludes that the deck is stacked against foreigners running businesses in Japan.

Here’s how the article starts: “It's tough doing business in Japan. But if you're a lone entrepreneur with a product or service from overseas, the going is especially hard. It takes years to build relationships with your Japanese customers. Meanwhile, banks won't lend you money. Startup costs are horrendously high. Landlords demand exorbitant deposits and outrageous rents. Language and culture are round-the-clock challenges. And customs regulations, while a bureaucrat's sweet dream, are an importer's nightmare.”

So how do some business owners succeed? “For the most part, by doing things the Japanese way, patiently building trust and good will with Japanese customers.”

The story interviews about a dozen American business owners working in Japan. It found one of the biggest problems is financing: “Banks generally won't lend money to foreigners or their companies without collateral, yet most small entrepreneurs have very few qualifying assets, such as product or property. Sometimes it takes a Japanese national – often a spouse – to become a guarantor for what essentially becomes a personal loan.”

But it’s not all gloom and doom. One entrepreneur said that foreign business people can often penetrate deeper into a customer’s organization than a Japanese salesperson. And client loyalty is such that once a Japanese customer gives you their business, “they will remain with you for a long time.”

One software entrepreneur offered another incentive for doing business in Japan. "Japanese companies are terrible at predicting the future, so there are plenty of opportunities for a foreign company to find and exploit niches that no one here is yet aware of."

For the full story, click here.

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