Memo to US execs: Doing business in Japan demands a company be the very best it can be

Editor’s note: Analysis: As Japan’s Prime Minister Shinzo Abe meets with President-elect Donald Trump in New York, it’s a good time to look at trade relations between the two countries. Note to U.S. executives: Better understanding the requirements of the world’s third largest economy and better preparing for them will enable more American companies to succeed in conducting business in Japan.

Robert Azar is a US-Asia business and cultural expert with thirty-five years of executive level experience. Since 2005 he is the founder and Chief Executive Officer of Global Medical Technologies, Inc.® (www.gmti.biz), which specializes in selling segment-leading, healthcare products from America and Europe in Asian markets. From 1990 to 2005, Mr. Azar developed and managed American companies’ business operations in Asia as the founder and president of Pacific Rim Management Consultants, Ltd.® (www.PacRimConsultants.com). His latest book is Negotiating Japan’s Business Culture. This article is published in partnership between the NC Center for Innovation Network (COIN) and WRAL TechWire.

Since the 1970’s Japan’s economy has consistently ranked as either the second or third largest in the world. Japan has been the most stable capitalist economy and democratic nation in Asia since the end of World War II. Its corporations are among the most innovative and successful businesses in the global economy. Given these favorable conditions, why haven’t more American companies not taken advantage of the lucrative opportunities that await them in Japan?

Some say that the answer lies in the fact that differences in culture and business practices present huge hurdles for foreign companies doing business in Japan such as the great importance given to relationships, the long-term perspective business is conducted with,Japan’s unique ways of communication, and the competitiveness of the Japanese market.

Importance of Relationships

Business in Japan is relationship focused. That means companies only engage in business with parties they have a relationship with. If they do not have an already existing relationship, then it is necessary to take the time to establish a meaningful one. Relationship building requires an investment of time, patience and effort – as does maintaining a relationship once established.

Negotiating

Negotiations in Japan are not simply designed for both sides to reach agreement on terms of business. Japanese take a much broader view of negotiating, seeing it as part of the process of establishing a favorable relationship. Therefore, negotiating takes more time in Japan than in other countries. The slower pace of negotiating is often misunderstood by foreigners as weak interest on the part of Japanese executives. On the contrary, it is a sign that they are desirous of a long-term, mutually beneficial relationship.

Long-Term Perspective

Companies in Japan approach business with a long-term perspective and commitment. Whether it is business planning, manufacturing practices, distribution methods, sales techniques, or customer service, all facets of business in Japan are engaged in with a long-term perspective. Monthly or quarterly results do not drive business decisions or practices in Japan as they often do in the U.S., so if sales results are not as was originally expected in the first few quarters – or even in the first few years – companies do not pull the plug on that project.  All parties involved pursue the business for the long term. More often than not, foreign companies do not equip themselves with this long-term perspective and commitment needed to succeed in the Japanese market.

Communication

Communication in Japan is very different. It is intentionally vague and it is impolite to disagree or say “no”. So how, you may ask, can one conduct business with a Japanese concern if you cannot disagree or say “no”?  Not to worry – the Japanese have more than twenty-six ways to say disagree or say “no”.  The challenge for foreign companies is that these expressions include the word “yes”!  You can see why literal translations do not lead to effective communication or correct understanding.  As a result, it is important for American companies to not only have on their team their own translator, but also someone who can help them navigate the cultural landscape of business in Japan.

Competitive Market

Japan is one of the most competitive markets in the world. Think: zero defect rates in manufacturing, just-in-time inventory management, kaizen (continual improvement), total customer service, etc. Based these and other factors, the World Economic Forum ranked Japan’s business environment number one in the world for Business Sophistication in its “Global Competitiveness Report 2014-2015”.

Doing business in Japan will demand a company be the very best it can be.

Conclusion

Better understanding the requirements of the world’s third largest economy and better preparing for them will enable more American companies to succeed in conducting business in Japan.