There are many strategic pitfalls of doing business in Japan.
Pitfall #1: Signing up the first partner that comes knocking on the door
Often a Western company will engage the first distributor that comes along, on a “temporary” non-exclusive basis. For the Western firm that doesn’t have the management time and attention to map out a coherent long-term strategy in Japan, this opportunistic “gravy” is hard to resist. Yet even a cursory background check on the distributor’s reputation, sales organization, and industry relationships might have revealed a mismatch in terms of market knowledge, commitment, or professionalism.
Once a distribution partnership has been established, other distributors in Japan will hesitate to approach your firm, and the non-exclusive distributor achieves a “de facto” exclusive relationship – often with no revenue commitments. Even in the best case, a Japanese partner will be under-motivated without a thorough business planning process and proper courtship.
Pitfall #2: Picking a strategic partner who lacks qualified management
The second pitfall is signing up a Japanese partner that lacks qualified management. People are a scarce resource in Japan. Permanent employment and the seniority system remain the ideal and it is difficult to recruit top-notch business personnel. Therefore the best distributor is the company that has the right people in place from day one, including strategic thinkers, sales people, and technical resources. Do not be fooled by the polished bicultural Japanese MBAs in the corporate planning office, but look deeper at who will be the “worker bees” needed to make your business successful.
Pitfall #3: Exposing your company to reverse engineering
The most highly qualified partner in Japan is also the company that has the greatest technical skills and relevant sales channels – not to mention the desire to enter your market niche. So be prepared to respond to your partner’s requests for new features, bug fixes, and price decreases. Only by staying one step ahead of market demands will you avoid forcing your partner into the arms of a competitor. Disappoint your partner with slow product or price improvements, and the partner may feel “forced” to develop competitive product offerings before others do.