Four Mistakes U.S. Companies Make When Entering Japan
by Steve Pollock

(Originally published in the Nikkei Weekly as part of the Japan Business Seminar column.)

I've talked with many U.S. companies that would love to build strong businesses in Japan. However, those same companies often hesitate to enter the Japanese market because they think it will be too difficult and costly. Although doing business in Japan has its challenges, U.S. companies often make things more difficult on themselves. Here are four common mistakes of U.S. companies seeking to enter the Japanese market.

Mistake #1: Flying blind. Most companies would never launch a new product without a thorough understanding of the potential customer and the competition. Yet many American firms seem to think they can be successful in Japan by outsourcing all the ground-level work to a local partner.

True, a great partnership can produce great results. However, the more the U.S. company knows about the Japanese market, the more likely it will select the right partner – and negotiate the right deal. And that starts with the U.S. company doing some of its own homework.

Mistake #2: Contracts not relationships. Americans often seem to believe that if only they can negotiate an excellent contract with a partner, then everything will move forward as planned.

In my experience, however, long-term success in Japan results from great relationships not great contracts. Great relationships in Japan require a strong bond of trust. More frustratingly, some of the typical steps a Japanese company might take to build a great relationship can seem pointless to the American team.

I recall sitting through many meetings with senior delegations from Japan that seemed amazingly substance-free. However, the Japanese side often sees such visits as a necessary step on the path to a great partnership.

Mistake #3: One foot in. Many U.S. companies use a disciplined "run the numbers" approach to evaluating and pursuing new opportunities. While this may make perfect economic sense, it can lead to an incremental approach that ends up killing the company's chances in Japan because it communicates a halfhearted commitment to the market.

A U.S. software company I know consistently refused to prioritize product enhancements for the Japanese market. For the U.S. company it was simple math – why spend money on a feature that had little demand? Unfortunately, this communicated that the company would not provide the kind of support that Japanese customers require. Far better to dedicate sufficient time and resources to being successful – even if the short-term payback is uncertain.

Mistake #4: Lost in translation. Few American companies have people that understand the Japanese market well. As a result, they often misread signals that could help them better understand customers, competitors and partners.

To cite just one example, there's a fine line between knowing when a delay on the Japanese side comes from a need to secure necessary internal approvals, and when it comes from lack of interest – but the appropriate responses are entirely different.

Companies that are able to gain entry to the Japanese market stand to reap significant rewards. U.S. firms can make the process easier for themselves by avoiding these common mistakes.

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