george plesu

24.02.2010

D O I N G B U S I N E S S I N J A PA N

Cultural Aspects

1. To do business in Japan one would need a local partner in Japan. Trying to enter into the
Japanese market on self will generate no results in most of the cases. Also, to set up a branch
office / subsidiary company, the parent company needs to have at least one Japanese in the Board
of Directors.

2. A company might piggy bank on a bigger company with a global presence to get into the
Japanese market but a local partner is needed for effective communication and handling of local
cultural issues.

4. All business is based upon relationship. Trust / commitment is everything. It takes good time
for the trust factor to build up but once the trust factor has been built, one might get away with
occasional blunders.

5. Trust and integrity are of utmost importance while doing business in Japan.

6. Japanese companies don’t practice any Employee Agreement.

7. Once a commitment has been given from their side, the same is definitely executed. They
may not always issue a Work Order, sign an Agreement etc. to initiate a business.

8. Outsider company needs to start small and grow the trust of the partner company as well as
the principal client. This usually needs an investment of at least couple of years. The initial ROI will
be significantly small but business will be secured for years to come. Quick returns from this market
is not feasible.

9. Decision making is usually through group consensus. A lot of research is done internally prior
to reaching a decision. If an email is sent and its taking sometime for the reply to come – there is
no need for panic. They would not be sitting over the mail, they would rather be having an internal
discussion / decision making prior to sending the needful reply.

10. Japanese usually practice – nema washi. The decision has been already taken before they
come to talk across the table. To clinch a deal, one needs to get behind the scene and influence the
decision makers in advance. No decision is taken on the table.

11. They also practice – honne tuttamai – wherein the stated reason and the actual fact would
be different.
 12. They would not put all the things in black and white. Would definitely leave some vagueness
in the clauses etc. One would need a local partner to interpret and convey the vagueness to avoid
getting stuck up in business practices.

13. They are extremely polite and extremely honest. They would never break trust.

15. Typical Japanese aspects – high quality levels, sincerity, extremely hard work and honesty,
extremely patriotic and very conservative, hold back to their traditions very strongly.

20. They are very loyal to their companies. Usually one individual works for 10-15 years in a
particular organization. Till recently, they practiced “Employment for Life” concept in their
organizations. Screening process is too rigorous. They would screen 100 people before selecting
one individual. Attrition rate is as low as 5-6% inspite of Japanese companies not being good pay-
masters. They believe in the philosophy that “Salary is only a bonus”.

21. Although Japanese people are very proud deep inside about their national, abilities, skills,
quality level, processes etc.; still they rate themselves very modestly to the extent of being overtly
modest.

22. They seek humility and are themselves humble too. Arrogant and bold characters will not
be able to connect with them.

23. They are conformist. They don’t like to stand out in a group. They don’t want to do things in
a conspicuous manner.

24. They are usually very polite and very conservative. Although US invasion in terms of fashion
and music is happening but they are still deeply rooted to their nation and are highly patriotic.

25. They are very well organized individuals. Highly justify their time and respect the time of
others. They perfectly align their actions to the allocated / available time.

Inputs for Software Projects

27. A local Bridge Software Engineer is always needed for efficient execution.

28. Software Development Cycle remains almost similar to the standard methodology.

29. Usually a lot of translation from : Japanese >> English and then from English >> English is
definitely need in due course of the project.

IT Business Notes:

30. Banking, Insurance, Telecom and Pharma are hot sectors

 31. System integration companies have a good scope of business there

32. Companies into Embedded Systems can also work provided that they maintain high quality
levels.

33. Building up Channel partners will take a lot of time

34. Agreements may not be always available / Verbal commitments holds

35. Japan gets a lot of work done in China because of cultural closeness and physical proximity.

36. A software engineer is paid around USD 3000 / month whereas European nations pay
around USD 7000. Hence the transactional man-hour rates in Japan is on the lower side.

37. Partnerships done should be continued for as long as its possible in the Japan market. “Its
marriage not dating”.

38. If you have an office in Japan, you need to pay about 31-40% as corporate tax. Even for
outside vendors, 20% taxation is levied on the billing done as taxes to the Japanese Govt.

39. They don’t pay any heed to Quality Standards like ISO; CMM SEI etc. They don’t go by any
benchmarks in quality. They have huge pride in their own quality standards.

40. “Don’t commit until you know that you can meet your commitments.”

41. Face of the outsider company may not be able to help much. Its only the existing quality in
deliveries and commitments met which holds important for them.

42. They don’t move beyond a point / clause / sticky note until they have reached a consensus
or have been convinced about the matter.

43. They are very less articulate. Won’t react / question positively / negatively during a
presentation or speech / talk or at the end of the same.

45. Meetings take place sharp on time. They usually reach 3 mins prior to the meeting time and
are never late. They feel that reaching prior to the meeting wouldn’t be proper and as they respect
time of others, they are never late. They may even end up at the entrance of the office but will not
enter the office until they have 3 mins to the actual meeting time.

46. Smaller size businesses can start on verbal commitment itself.

 Tips for doing business in Japan
The global financial crisis has also hit hard by Japan as one of the world’s major countries –
business closures, layoffs and a partial reconsideration of previous strategies are the lasting
consequences. But even under these new auspices Japan remains a vitally important factor in the
global economy and a very attractive partner for the European countries. Moreover, Japan looks to
a unique history and a unique development back.

Negotiations and pricing

In negotiations it is not advisable to start with increased demands in order to pursue a degree
at a lower level. Bazaar mentality is foreign to the Japanese company. Rather, signs should be added
that an interest in long-term, trusting relationship exists, and not only its own profit-making in the
foreground. Production of trust is one of the main objectives of the talks. Loyalty discounts for the
Japanese business partners are a legitimate and attractive tool for building long-term business
relationships.

Still an active pricing strategy of particular importance should be attached. The enforcement of
delivering adequate prices, especially in times of recession, can only succeed if it takes place under
negotiation rules. Here are some ideas about this:

It can not be avoided, while talking about the business negotiation on the price. In the first
place you should communicate with Japan, especially in the added value for the customer because
Japanese tend to "value-oriented".

Rename functions or applications of your products / services, which differ significantly from
those of the competition. Japanese often tend to compare most similar products and choose the
cheapest alternative.

They split the added value of the product or service into multiple components have distinctive
character and make them consecutively (not simultaneously before). In general, the selling price of
the product is set lower than the sum of the individual components. Your Japanese business
partners want to know exactly what he pays his money and what components are composed of
the price where appropriate.

Find out what practical value attaches to your comparison with the individual product
characteristics and negotiate accordingly. Japanese are often very brand conscious. Therefore, you
should always discuss the value property. Here may indicate a considerable price potential.

Price concessions should be made should you politely return ( "tit for tat" offering), eg higher
order quantity, bundling with other products, earlier order / delivery.

The Japanese negotiators will want to save face. They should therefore give something to him,
so he deliberately lost and position to be accepted in other areas can. This may be an offsetting
transaction, following the motto "Give and Take".
 It is important to know the price-makers in the Japanese customers. Each of these decision-
makers will be discussed with the relevant arguments from his perspective. For a technician certain
technical characteristics of the product of interest may be. For the controller, the economy plays a
big role. Because of the group-think in Japan it is important to achieve with each individual
decision-makers to the match.

Learn more competitive prices accurately. Japanese customers will be familiar to every last
detail. An effective argument is only possible if the seller should have at least the same level of
knowledge.

Make sure that you communicate clearly. Misunderstandings due to language and cultural
barriers are very high. Ask your dear once more to whether a statement was truly understood, as
to take the risk of misunderstanding.

Summarize after the vote once again: To make sure you clear up possible misunderstandings in
spoken dialogue. And do not forget: "A picture is worth a thousand words". Help yourself why this
advice in the negotiations . Visualizations on the table to help the audience, your information and
discussion during the process better and it saves you from complicated descriptions.

Forget about all this is not: it never comes at the price alone. The characters and their
relationships are always of the party. The personal relationships and trust play a crucial role in the
business. This is reflected ultimately in the price.

Contract and closing

In Japan, the identification with the task and the ability to respect and trust will win, given a high
priority. New business relationships are only worthwhile if the business partner is reliable and
longer-term and trusting relationship can be built. A formal contract is concluded, therefore, usually
means only that the basis for good business relationships and long-term co-operation is
established. The Japanese side will keep the contract for this reason rather short. According to
Japanese view is not the contract but the relationship in the foreground. For this reason, it has to
also pay the Japanese business partners at least once a year, a visit to consolidate the trust once
created or maintain.

In Japan there is also not always the prevailing attitude in Western Europe, a treaty of
Constance, which contracts generally observed after the signing are ( "pacta sunt servanda").
Japanese negotiators do not see the treaty as a separate entity, but rather as part of an overall
system that can change at any time. If circumstances change significantly, for example, as currency
exchange rates or other parameters ¬ after contract signature, it may well be that the Japanese
partner to the Treaty Ver ¬ not regarded as binding or mandatory, but rather has a flexible attitude
towards it.
 The way forward – the follow-up

In this context, it may well lead to potential conflict, if one occasion, despite all the way forward
boldly defined. On the other hand, it wants to avoid that the silt in the talks agreed steps and make
sure that nobody feels responsible for the way forward and we thus lose much time. Here it is
important to observe the rules of intercultural communication with Japanese and better, "to appear
not too hard" to follow with a polite but at the same consistency, the agreed targets and to call on
the Japanese side and with it offered skill. It is important to define for both realistic and recent
milestones. Take this all due time, to confirm the resulting trust, but you also define the milestones
as stages, the achievement for both sides is important.

Of community groups

In Japan not apply what we know as a priority of the individual, but rather the group and
community. As men ¬ framework of negotiations means that it is usually not an individual, but
rather spoke with several Japanese partners. Decisions are not alone, but taken by the group.

Therefore, it is advisable to inform the course of negotiations, the Japanese side on new
factors, so that they can vote internally and discreetly. In any case, avoid unexpected surprise during
the negotiations with new aspects. If this happens, you expect that the hearing was postponed.

The society in Japan is much more vertical than horizontal structure. Therefore, a group with
which we negotiated in Japan, a team does not necessarily equate to Western understanding.
Although the need is to find a consensus within the group in the decision, "Zen-in-ambulance
called. However, within this group are also unique hierarchical rules that determine who is the
highest ranking and thus ultimately has the final say.

Social etiquette and some rules

The social component, social interaction is very important in Japan. Again, you should be briefed
by a local liaison officer or by the interpreter in the specific habits.

The body language is extremely important in Japan, both in negotiations and on social
occasions. Bodies are barely touching as appropriate. You should know that Japanese e.g. the
physical proximity or even slap on the back would rather make them feel uncomfortable. Be sure
also to nonverbal communication: no longer, and direct eye contact, put a break between your
speeches, so that the other side can follow your presentation.