Business Venture in Japan

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Executive Summary

Japan is considered as one of the developed economies of the world with large trading facilities both for local and international players. Cultural factors surrounding foreign investments in Japan are majorly noted in mannerisms considered as good practices within the nation. The initial aspect relates to dressing while the rest concern meeting behaviors as noted between business officials and employees. The latter aspect is defined by healthy greetings, conversation and socializing behavior in Japan. The economic aspect has been measured by the income, consumption and deflation conditions with the initial two notably within a progressive nature while the latter continues providing a considerable inhibitor for the expansion prospects. The political and legal environment is plagues with corruptive tendencies with regard to decree formulations due to the negative impact of the political players. Consequently, the politicians have dominated most of the businesses, directly or indirectly, leading to a notable problem.

Japan’s infrastructure is well advanced with the high cost of maintenance creating a direct impact on businesses. A SWOT analysis concerning the three identified environs is also accorded. The commercial sector has a limited level of success in the Japanese market attributed to the local venture in the nation and the high competitive forces evidenced by mature companies. The agricultural field however is more flexible due to the high populace necessitating an unrelenting demand for food supply. The Kansai area having a populace of twenty four million offers the best area for the business venture with less perishable items being the best for the piloting period before subsequent expansion can be realized. With Kansai being a commercial economy, the agricultural venture has a high success probability and low level of business rivals.

Business Venture in Japan

Marketing Environment

Cultural Environment

Business principles and attitudes are marked by majorly by mannerisms accorded in meeting sessions. Dressing regulations are highly inflexible with business players mandated to official wear at all instances with the colors maintained as dark hues. Slip shoes are most preferable. Meetings warrant use business cards that should be printed in both Japanese and English as the two most used languages in the regions. Greetings have to conform to the oriental bowing with the senior individual liable of the initial introduction. Eye contact during meetings is considered as a discourteous gesture (Scagliotti and Bahaudin 65). Promptness is required in meetings and employees are never allowed to leave the work prior to their superiors. Offices comprise of a common area to enforce proper behavior and group activities.

Social ideals dictate the sitting and dining patterns are very significant elements in official meetings with the host bearing the sole mandate of distributing both in accordance to own pleasure. The supreme leader takes a central position in the panel board, with superior officials being accorded positions in close proximity to the business head. Upon the entry in the conference room, all individuals have to remain standing as the head takes the seat and only follow suit after the permission is accorded. Alcoholic beverages must be taken from glasses and not the bottle and rejecting such offers is termed as impolite (Scagliotti and Bahaudin 66). Gift exchanges in a conference are considered very thoughtful and appreciation is mandatory for such. As business head requiring foreign labor, the outlined principles are very helpful in forms of the appropriate etiquette.

Economic Environment

The Japanese economy was negatively impacted by the 2008 depression but notable improvements have been noted in the trading periods ending in 2010. Unemployment caused in the nations attributed to the economic downturn was significantly reduced in the period 2009 with the third quarter of the same period having an unemployment rate of 5.5 percent with the closing rate dropping by 0.4 percent (BNP Paribas 2). The unemployment reduction is a tangible evidence of the economic improvements. Incomes however, have reduced as marked by minimal wages owing to overhead reduction strategies applied by most companies during the depression. Consumption patterns are usually marked by the propensity to consume that is an indication of the income fractions spent in expenditure, while the remnant is directed to investment activities.

Within the second last quarter of the 2009 trading session, the consumption level was marked at 67.4 percent while at the closure of the same period and owing largely to the reduction in unemployment, the rate increased to 70.5 percent (BNP Paribas 2). The nation of Japan has been negatively affected by its unrelenting deflation that has caused large losses in terms of revenues. Market prices between the third and fourth trading quarters of the period 2009 fell by a margin of 1.7 percent. Economists believe that deflation will continue being a considerable constraint in the nation within the short-run. The economic overview acts as an indication of the economic situation for the assessment of business success.

Political and Legal Environment

Corruption in form of legal bureaucracy is highly noted in Japan with the Diet according political influences in areas like licensure in ensuring domination in the trading sector. Leading business organizations in Japan tend to be managed by individuals bearing a level of relation with associates of the Diet ensuring a tightly construed business structure. Consequently, law formulation is based on micro needs of the business and political leaders, with societal needs suffering for the sake of the minority. Decrees governing intellectual properties in terms of trademarks, trade secrets and patents involve the inclusion of a Japanese attorney with the requirement for legal form fillings that tend to be time intensive. The process is also very costly especially with the bureaucratic nature of the judiciary (U.S. Department of Commerce 95). The political and legal environment offer information for the challenges in the Japanese market.

Infrastructure

Japan is a highly developed nation with a well-advanced form of infrastructure as evidenced by superior road networks, railway, air and marine transport systems. Product storage facilities have wide coverage in Japan enhancing the distributive function. Communication infrastructure is highly developed with cell phone coverage in the entire nation. Road transport is notably very expensive with containerization practices being charged up to four hundred dollars for a distance of three hundred and seventy miles. Alternative transport in form of passenger vehicles for the same distance is accorded one hundred and sixty dollars (U.S. Department of Commerce 6). Air transport is ranked as the costliest mode of product channeling, with Japan’s airfields being ranked as the most expensive on a global scale. Custom clearance ports are termed as inefficient for a developed economy as such, and this has had an adverse effect on import clearance in terms of duration.

SWOT Analysis

The cultural ideals and conducts are very varied from the Western practices and act as a threat to the business success accruing from improper practices. Reduced minimal wages are an opportunity as it reduces income overheads to the business. The enhanced employment fractions and advanced infrastructure are strengths as they indicate economic progress while unrelenting deflation is a weakness in terms of condensed profits. Bureaucracy, corruption, high transport overheads are a threat to trading success.

Strategic Planning

With regard to industry, the agricultural sector offers a high level of attractiveness with regard to export practices for American citizens with the nation holding 25 percent of the same to Japan. Notable rivals have been noted as Chile, China, Australia, Brazil and Thailand as the 2009 period saw a reduction of the same by 8.8 percent (U.S. Department of Commerce 66). The commercial segment as noted by areas like health, electronics, engineering, tourism, amongst others has also been identified as attractive practices in terms of trade. Japan has six major local blocs for its various trades namely Tokyo, Kansai, Central Japan, Okinawa, Northern Japan and Kyushu. The mentioned regions vary in terms of demand for commercial products. For instance, technology in the health and agricultural components constitute to the highest export for Northern Japan. However, with all regions faced with dense populations, the agricultural (food) exports are widely applicable in all regions.

Alternative Directions for Action

To ensure a balance in the personal ventures, it would be prudent to have one investment action in the agricultural area and the other in the commercial area. This will create a 0.5 probability for the success or failure of either ventures. Further analysis of the same would however accord the best alternative due to the capital factor.

Recommended Course of Action

The agricultural venture would be the best alternative since it is compatible with each of the identified regions. The Kansai region would be the best for the agricultural exports supporting a population of 24 million individuals, thereby creating a higher market for the products. Agricultural products that are currently in high demand in Japan include lettuce, desiccated fruits, asparagus, nuts, broccoli, tomatoes and celery (U.S. Department of Commerce 66). However, before product expansion, it would be prudent to begin with, the less perishable items marked by the nuts and the desiccated fruits and upon market actualization; the venture could expand to the other food items. The mode of entry best suited for the venture would be the limited partnership, commonly referred to as the go-shi gaisha, with only two members: my spouse and I. This would be very advantageous in terms of cost reduction, as the burden imposed by the initial business setting would accord limited overheads in terms of salaries. Additionally, with limited liability, intellectual property is partially safeguarded.

Other forms of avoided costs are the notary and revenue stamp charges, accorded to corporations, amounting to ninety thousand yen. To impart a competitive edge, the venture shall initially focus on the elderly with the projected statistics, which assert that 29.2 percent of Japanese native will be the aged in the period 2020. This aspect will widen the demand for healthy food products for the aged, with nuts and fruits being featured in the given category (World Bank 1-22). The target markets will therefore be elderly homes and health care institutions for expanded consumer bases. With the Japanese culture recognizing gifts, each procured sale would be accompanied by a prize that reflects the American culture. This would be highly esteemed by the consumers. The gifts would be a short-term promotional practice, with long-term practice being a yearly participant in the food shows organized by International Food Ingredients & Additives Exhibition and Conference (IFIA), Foodex and Health Ingredients (HI) organizations located in Japan (U.S. Department of Commerce 66).

Domestic food suppliers within the Kansai market are notably very strong with the leading company being Asahi Shokuhin with 35.7 percent of the Kansai region. Other top rivals are Kato Sangyo with 27.2 percent, Itochu Shokuhin with 25.4 percent, Nihon Access having 18.2% and Ryoshoku with 14.2 percent. On the national level, America’s notable rivals are Canada and Australia. Canada is the leading nation in terms of exports amounting to 32.8 percent, and this is divided in the Kansai and Tokai regions. America has maintained its market in Japan as 25 percent though this has reduced considerably since the 2009 trading period into 16.2 percent (U.S. Department of Commerce 66). This has created an advantage to Australia whose current market is an overall 20 percent aiming at the Kansai location. Therefore, although the market is naturally attractive due to the high populace and industrial sector, the competitive forces are strong incorporating a level of business risk.

The first threat presented is the high probability of price wars, a notable adverse consequence noted in oligopolistic settings. These wars result from unhealthy competition leading where a given player reduces the price to a very basal level that is unprofitable. The rest of the market players are therefore compelled into a similar action or rather face market share losses that are very costly to an organization. However, with the exclusion of some trading barriers the capability of affordable goods has been enhanced. Transport costs have to ensure the application of the cheapest techniques to overcome unnecessary overheads that would only result into expensive product pricing. Therefore, only domestic producers bear the significant threat to the initiative. This presents the second risk noted in language barriers and ability of the Japanese companies to accord a higher trading advantage due to their conversancy with the trading outlets and market niches. This can be dealt with by hiring a local marketing firm to ensure vigorous yet effectual marketing for the products within the piloting phase. Additionally, marketing agents will also be Japan natives, as they possess knowledge that enhances the distribution element in a cost effectual manner.

Works Cited

BNP Paribas. Japan: Improving economic environment but persisting deflation problems. 29 Jan. 2010. Web. 30 March 2011. .

Scagliotti, Giuliana and Bahaudin Mujtaba. “Take a bow: culturally preparing expatriates for doing business in Japan”. Journal of Comprehensive Research 8.1 (2008): 56-72. Print.

U.S. Department of Commerce. Doing Business in Japan: 2011 Country Commercial Guide for U.S. Companies. 2011. Web. 30 March 2011. .

World Bank. (2005). Agriculture investment sourcebook: agriculture and rural development. Washington, DC: World Bank Publications. Print.