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Foreigner’s Guide to Japan Market Entry

Are you interested in expanding your business to Japan? Whether you’re an international company looking to broaden your reach or a foreign entrepreneur aiming to establish a presence in the Japanese market, this article is tailored to your needs.

Japan boasts the world’s third-largest GDP, offering abundant opportunities for startups and established businesses alike. To succeed in this market, it’s crucial to understand its nuances.

In this article, we’ll guide you through the essential factors and processes required for a successful entry into the Japanese market. Let’s uncover the key strategies for effective Japan market entry that will propel your business to success.

Entering the Japanese market

What is Japan Market Entry?

Understanding Japan market entry is a multifaceted journey, particularly for startups venturing into the Japanese market. As highlighted in our podcast episode Intro To Japan Market Entry With Maor Shwartz, acquiring information about Japan market entry online can be challenging due to the market’s unique dynamics.

Intro to Japan Market Entry with Maor Shwartz

A critical aspect of successful market entry is establishing realistic expectations. Maor outlines a comprehensive market entry timeline spanning three to five years, notably longer than typical timelines in other markets like the United States. This extended timeframe is influenced by various Japan-specific factors.

Understanding Japan market entry also requires insight into the distinctive Japanese corporate culture and Japanese business etiquette. Japanese companies often take a flexible approach to hiring, training individuals from diverse backgrounds for roles that may differ from their original majors, reflecting a commitment to lifetime employment and social responsibility.

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Why Should I Target Japan As an International Business?

When contemplating international expansion, Japan stands out as a compelling destination for a wide range of businesses. The potential for successful Japan market entry is amplified by several key factors:

World’s 3rd Largest Market with 125 Million People

Japan boasts not only a rich culture but also a massive market. With a population of 125 million people, it ranks as the world’s third-largest market. This demographic strength alone is a compelling reason for businesses across various industries to explore opportunities in Japan.

Adaptive Japanese Cities and Corporations

Japan recognizes the need for adaptation in the face of global changes. This creates an environment ripe for international businesses to contribute to and benefit from Japan’s ongoing evolution, regardless of their industry.

To learn more about how Japanese Cities help foreign founders, check out our articles on Japan Startup Cities.

Mature Corporate Environment with High Purchasing Power

Japan boasts a mature corporate environment with companies that wield significant purchasing power. Entering this market can lead to lucrative partnerships and access to discerning consumers who value quality and excellence.

Revenue Potential for All Industries

The potential for growth in Japan extends beyond tech companies. Businesses from various sectors, including manufacturing, consumer goods, and services, find their niche in this market. Opportunities are diverse, and success stories abound for those targeting Japan.

Access to Talent and Resources

Japan’s advanced technological and industrial ecosystem provides international businesses, irrespective of their sector, with access to a vast pool of talent and resources. Collaboration, innovation, and resource availability are promising facets of entering the Japanese market. To get the latest tips on hiring Japanese and expat talents, see our Top 5 HR Tips in Japan.

Stable and Established Legal Framework

Japan offers a stable and well-established legal framework that fosters a secure business environment. Strong intellectual property protections, reliable contract enforcement, and a transparent regulatory system contribute to investor confidence and reduce business risks.

How to do market entry in Japan

What are Some Factors Behind Japan Market Entry Success?

Understanding Japanese Consumers

Appealing to Japanese consumers as an international company operating in Japan has shown success in the past decades. To gain valuable insights into understanding Japanese consumers and fine-tuning your Japan market entry strategy, we invite you to watch our podcast episode Understanding Japanese Consumers with Polina Oba.

Brand Loyalty: Japanese consumers, especially the older generation, are known for their strong brand loyalty. Targeting this demographic may pose challenges as they prefer sticking to familiar brands.

Advertisements in Japan: Younger Japanese consumers are more receptive to online and billboard advertisements compared to Western markets. Social media and YouTube ads can be seen as annoying by Japanese consumers. Digital marketing plays a pivotal role in your journey to conquer foreign markets, especially in a dynamic landscape like Japan. Explore our comprehensive guide on Digital Marketing in Japan, tailored to assist foreign market entrants.

Queues as Marketing Tactic: Japanese consumers are intrigued by queues. 88% express curiosity when they see a queue, and 60% stop to investigate. Successful examples like Starbucks in Japan demonstrate the effectiveness of queues and advertisements.

Price Sensitivity: Japanese consumers, particularly in dining, are price-sensitive. Offering competitive prices is essential to gain their trust and encourage them to try your products or services.

Value for Quality: Japanese consumers highly value quality, given Japan’s technological advancement and reputation for high-quality local products. As a foreign company, prioritizing high-quality products and services is crucial to win over Japanese consumers. For a deeper exploration of aligning your product with market fit, be sure to check out our podcast episode Product Market Fit in Japan with Timothy Connor.

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Business Model Strategy

Adapting the business model to the local market’s unique dynamics can be a key success factor. For example, UberEats in Japan effectively navigated regulatory challenges by aligning its business model with local needs.

Effective Hiring

Recruiting the right country manager or salesperson is crucial. This individual should possess a robust network, sales expertise, and a deep understanding of the Japanese market. Utilize the expertise of an advisor who possesses a deep understanding of Japan and your industry to participate in the interview process. Be sure to stablish a clear employer persona and job description, and aim to identify candidates who closely align with these criteria. 

Networking and Partnerships

Networking is a vital aspect of any career field, but it holds even greater importance for foreign businesses seeking to establish themselves in Japan. Effective networking can unlock various opportunities essential for a successful Japan market entry. To enhance your understanding of business networking in Japan, refer to our Guide to Business Networking in Japan.

Networking can help you

  • Acquire new business leads
  • Identify business strategies
  • Spot business trends 
  • Connect with influential figures

Effective networking platforms

These three groups are general networking groups in Japan to meet other foreign entrepreneurs:

Networking with successful foreign companies in Japan

Successful companies like Moneytree and Japan Coca Cola K.K. have demonstrated adaptability to the Japanese market. Leveraging online networking sites such as Meetup and Internations provides ample opportunities to connect with expats, foreign business owners, and entrepreneurs.

Utilizing market entry programs

Participating in market entry programs such as 500 Global and Station AI introduces you to key stakeholders in the Japanese market, facilitating valuable connections. Collaborating with global partners who have established connections in Japan or forming strategic partnerships with local companies can expedite your entry process and unlock new opportunities.

Product Localization and Improvement

Effective communication with the headquarters ensures the localization of products to meet Japanese market needs. Swift product improvements based on user feedback and local insights are crucial for success. Adopting a product-led growth strategy, where Japanese users are already engaged with your product, can expedite market entry success.

Factors on successful Japan market entry

Strategies to Boost Your Japan Market Entry

Seeking Help from Japan Market Entry Specialists

When venturing into Japan market entry, it’s crucial to understand that things often take three times longer compared to other markets. Establishing trust with Japanese consumers, clients, and partners is a gradual process, requiring patience and strategic insights. That’s why it might be useful to seek help from market entry specialists who understand the intricacies of this market.

In our Guide to a Market Entry Specialist in Japan, we recognize the complexities of Japan’s business landscape and the importance of expert guidance. Our interviews with professionals in the Japan market entry space also reveal the significance of being well-prepared for this endeavor. Watch our podcast episodes on entering Japan market.

Conducting Market Research for Japan Market Entry

Japan market entry demands not only expert guidance but also a deep understanding of the market’s dynamics. Success hinges on comprehensive market research, encompassing competitive analysis, regulatory insights, and an understanding of consumer preferences. This knowledge informs strategy and decision-making. This understanding begins with thorough and comprehensive Market Research in Japan

Incorporating data-driven decisions and market intelligence into your Japan market entry plan can significantly enhance your chances of success. In our podcast episode about Japan Market Research with Andrew Edsall, he emphasizes that by analyzing market trends, understanding consumer behaviors, and assessing competitive landscapes, you gain a competitive advantage and a clearer path forward. 

Startup Cities

Consider utilizing Japan’s vibrant startup cities as your introduction point into Japan market entry. Each city in Japan has unique specializations and strengths. To learn more about the specializations of each city and how they can align with your business goals, check out our comprehensive Japan Market Entry eBook here. These cities not only provide access to local networks but also serve as hubs for innovation and growth.

Strategic Marketing

Skillful execution of both online and offline marketing, along with effective public relations, is essential. Thought leadership and respect within the industry can bolster a foreign company’s image.

In a digital age, influencer marketing in Japan can be a game-changer. Gaining traction in the Japanese market might require the firepower of influential personalities. Consider launching a paid ads campaign on platforms like Instagram and Facebook to increase your brand visibility. 

Crowdfunding

Crowdfunding can be a clever trick for Japan market entry, allowing you to gauge the demand for your product without extensive investments. To learn how to navigate the Japanese crowdfunding landscape, tap into investor sentiment, and successfully fund your projects, dive into our article on Crowdfunding Products in Japan: How does it work?

What are Some Reasons for Japan Market Entry Failure?

There have been several cases where present-day successful companies, some of which are featured below and in our articles American Companies in Japan and European Companies in Japan could not successfully penetrate the Japanese market. Read more about how to mitigate these challenges from our Insider Guide on Selling Products in Japan.

Insider Guide on Selling Products in Japan

Below are some of the common challenges when it comes to Japan market entry:

Hiring 

  • Underestimating the importance of responsive customer service, often using timezone differences as an excuse
  • Failing to hire staff with lead generation abilities or a substantial local network, undermining the importance of building relationships
  • Hiring of Japanese individuals solely based on their Western appearance or English language proficiency
  • Hiring individuals who are either overqualified or underqualified for your specific stage of market entry and investment can lead to misalignment and inefficiencies in your strategy.

Product-related 

  • Launching a product when the market is not yet prepared, resulting in low demand.
  • Offering products that do not integrate seamlessly with Japanese counterparts, especially in electronics and software
  • Lacking a “dramatic” add-on value that addresses urgent needs, failing to stimulate product demand

Sales-related

  • Overemphasizing the sale of existing products without first understanding the market’s preferences
  • Granting exclusivity to partners who cannot effectively sell enough products, limiting growth potential
  • Prematurely announcing new product versions, particularly problematic for hardware companies
  • Overprioritizing innovation and novelty at the expense of reliability and trust
  • Underestimating the time required to establish a presence in Japan, moving too hastily and facing potential failure

Industry-specific

  • In food and electronics industries, not adhering to the approved list of ingredients or electronic guidelines can lead to regulatory roadblocks
  • Treating regulators as adversaries and underestimating the interests of local stakeholders can result in regulatory obstacles for companies like Uber, Airbnb, and OFO

SAAS-specific 

  • Offering yearly contracts without considering cash flow challenges
  • Facing competition from copycat competitors
  • Neglecting collaboration with third-party technical integrators
  • Navigating these challenges and thoroughly understanding the Japanese market is crucial for a successful Japan market entry
  • Proper research, adaptability, and a strategic approach are essential to mitigate these potential pitfalls

If you’re considering Japan market entry or looking to enhance your strategy for success, Scaling Your Company can be your trusted partner. Our coaching services and expert guidance can help you navigate the complexities of the Japanese market and develop a winning strategy. Contact us through this form to explore how we can assist you in achieving market entry success in Japan.

What is the legal process of Japan market entry as a foreigner?

There are multiple pathways for foreign-affiliated businesses and entrepreneurs to thrive, and for more in-depth guidance on incorporating your business in Japan, don’t miss our informative articles: Setting Up a Company in Japan and How to Start a Company in Japan.

Obtain a 4-month Business Manager Visa

If you already have a Japanese Visa, be sure it is eligible for starting a business. In order to obtain a business manager visa, the individual must prove that they are in the process of starting a company in Japan written in Japanese, have invested more than 5 million Japanese Yen for Capital, have a business partner in Japan (in the case of an applicant living abroad). After approval by the government, the individual can obtain a residence card, open a bank account and register their business. More details can be found on the Continental Immigration Law Website.

Obtain a 6-month Start-Up Visa

A start-up visa is open for application in selected municipalities of Japan. Allowing entrepreneurs from overseas to stay in Japan for six months to establish their company with the ability to extend their stay by an additional 6 months when legal requirements are met. More information on the Start-up Visa can be found on the Ministry of Japan Official Website.

Open a Branch Office in Japan

Registering a pre-existing company is another method to obtain a visa to enter your business into the Japanese market. The idea of the Japanese Branch Office is to allow for foreign companies to engage in the Japanese market, this can be done after completing the legal requirements which can be found on the JETRO Website.

For those who are currently residing in Japan, be sure to check if your visa allows you to start and register a business, in the case where your visa does not allow for you to establish a business in Japan, the above steps can be followed to obtain the correct visa for your situation. The process of getting a work visa in Japan is significantly easier compared to getting one in other countries.

Lastly, it is important for foreigners to have access to a translator, business partner or to be able to understand Japanese at a business level. This is because the legal paperwork will require business owners to respond in Japanese. Please be mindful of this to avoid delays and trouble for your company!

Final Thoughts

Entering the Japanese market as an international company can present various challenges, which may vary from person to person. Fortunately, these obstacles can be effectively overcome with the right resources and time investment.

For those aiming to enhance their Japanese language proficiency before embarking on business endeavors in Japan, Japan Switch provides comprehensive lessons available both online and in person.

Best of luck to all individuals and organizations planning to kickstart their Japan market entry!

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