Magna, Manga and the Rising Sun

Speaking of exporting… (see previous post), the Globe’s Marcus Gee has an eye-opening article today on Japan. Basically, he’s reminding Canadian business people that in their rush to make their fortune in China, they shouldn't ignore the opportunities in the land of the rising sun.

Marcus dug up these facts you may not have known:

* Japan is still the world's second biggest economy, bigger than China and India combined.
* Greater Tokyo alone has a larger gross domestic product than China.
* Canadian high-tech exports to Japan are growing 15% a year. More than 60 Canadian high-tech companies are now based in Japan - surpassing the number of companies in more traditional export sectors such as agriculture and resources.
* Between 1994 and 2006, the share of Japanese imports from Canada in non-resource areas - aerospace, pharmaceuticals, machinery, consumer goods – has risen to 9.5% of total trade from 4.5%.
* “Magna and other Canadian car parts companies are active in Japan, as are more than 20 Canadian software companies, some of them exploiting the thriving animation business around Japanese comic forms such as anime and manga.”

Gee says all kinds of opportunities beckon to Canadian entrepreneurs: in financial services (Manulife Financial is a winner there), medical services, elder care, and pharmaceuticals. And also in high-end fashion, outdoor wear and cosmetics, biotech and nanotech, aerospace, and environmental industries.

Rightly, he admits there are still many barriers to doing business in Japan. “Its efforts at reforming and deregulating the economy to make it more flexible and more open to foreign interests have been halting at best. Since the departure of reforming prime minister Junichiro Koizumi, they seem to have run out of steam altogether.”

Still, he concludes, as industrialized democracies, "Canada and Japan have lots in common - more, you could argue, than Canada and China. They should start showing it.”

Until it slips behind the dreaded pay wall, you can read Marcus’s column here.

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.