The Japanese market opens up unimagined opportunities and new development potential for medium-sized companies in the capital goods sector. In view of the high purchasing power and economic size, the business options are diverse:
- The demand for superior technology is high in the Japanese market. This makes it an ideal sales market for German companies.
- Due to its technological capabilities and high quality standards, Japan is also an interesting technology partner.
- The Japanese market is a stepping stone to Southeast Asia and the APAC region. Experience shows: If the product has proven itself in Japan, acceptance in other Asian markets is guaranteed.
Cultural characteristics play a role
However, the common perception is that Japanese companies prefer to be supplied by large companies and that they favor local products. I don't agree with this, because ...
- The size of the company is not the decisive factor for market entry, but the product itself. However, it is true that for the Japanese the entire value chain is important. They therefore tend to assume that corporations are better able to ensure this than SMEs. Medium-sized companies looking to enter the market can meet the expectations of Japanese customers more easily, as they are still independent in terms of sales and service.
- I cannot confirm the opinion that imports hardly stand a chance against Japanese products. The Japanese want products that represent good value for money, are technically superior and offer added value. However, it is true that they feel they are in better hands with Japanese companies. Complaints processing and technical and logistical issues are dealt with more quickly and reliably. Medium-sized companies have to face up to this.
In both cases,
- it is important to ensure performance and technological superiority,
- to bridge cultural differences and
- to have a local presence by involving a local business partner.
Working with a local cooperation partner who also ensures the necessary services is therefore an important guarantee for a successful expansion strategy.
The right preparation counts
Entering the Japanese market can be extremely lucrative, but it also requires patience to build up the required trust in the market. Once you have done so, however, you can be sure of a long-term partnership. Ask yourself in advance whether your company is already well prepared to enter the market:
- Is there a suitable website? A website in Japanese is not necessary, but a website in English is mandatory.
- Can you ensure that logistical and/or technical questions will be answered within 24 hours?
- Are the machines equipped with remote maintenance?
- Can you guarantee that your own service personnel for assembly, commissioning and validation (FAT) will be available on site in a timely manner?
If these internal requirements are met, you could seriously consider entering the Japanese market. Many questions arise in individual cases, also with regard to possible cooperation partners. If you want to answer them, you need industry-specific and regional know-how. It is helpful to have a partner at your side who is familiar with Japanese culture and business practices.
For many years, I have been solving complex business challenges in Japan for medium-sized companies in the industrial technology sector. Thanks to my in-depth knowledge of the market, I can directly address all important questions and requirements, develop targeted answers and implement the necessary measures effectively and efficiently.
The following guide will give you an idea of what is important in this regard.
1. Acquire knowledge of the market and requirements.
Insufficient knowledge of the market and culture will lead to the failure of your Japan strategy. This does not mean that extensive and expensive market research is always necessary. However, you should have a very good understanding of the target market and be sure that your product can fill a niche, is accepted in the market and offers the customer added value. For companies that do not yet have any contacts or presence in Japan, it is therefore advisable to work with a partner with regional expertise.
Example
A manufacturer of IoT products for the gas and oil industry learned from market-leading companies in the sector that its products for this industry were generally in demand in Japan. A business case and market entry strategy were created, and the company was ultimately strategically built into a leading supplier in Japan.
2. Understand the competitors' portfolio.
Make your competition in the specific market segment transparent: Gain an understanding of your competitors' portfolio as well as their respective product strengths and weaknesses. It must be clear which weapons you can use to beat the competition and what "ammunition" is required to do so.
It is generally advisable to enter the market with a single product or a smaller range so that you can adapt it more easily later if necessary.
Example
A manufacturer from the industrial technology sector recognized its strengths compared to the local competition and positioned itself accordingly. It initially targeted a specific market segment and gradually added other products. Today, the company is firmly established as the market leader in this segment.
3. Offer a product with clear performance advantages.
Your product should be sophisticated, technically mature and adapted to the expectations of the Japanese market. It should offer Japanese customers obvious added value with clear performance benefits and unique selling points. The aim is quality leadership: Avoid entering the market with comparable but inferior products. The cost of these so-called "me-too" products, whose USP can only be the price, is high and rarely leads to the desired goal.
Example
A German machine manufacturer offered the most powerful machine for the production of respiratory masks (FFP2/N95/KN95). The unique selling points of the machine were just as demonstrable as the resulting benefits. The USP of the Chinese competitors, on the other hand, was the 50 percent lower price. However, the Chinese manufacturer was unable to assert itself with this. Ultimately, the decisive factors for the customer were the technical innovation, the higher production output and the quality itself.
4. Adapt your product to local needs.
Even if you are already a global market leader with a product, you must expect that you will have to localize your product for Japan. By this I mean providing the Japanese market with solutions and services exactly tailored to this country. Reasons for this can be
- legal regulations (certifications),
- technical conditions (voltage),
- consumer habits (touch panel) and
- other market conditions
. Face the individual needs of the market and adapt to them.
Example
In its early days in Japan, a manufacturer of conveyor belts adapted the color of its belts to the needs of the market. This company now produces in Japan and is the market leader there. The Japanese color scheme has established itself in the product portfolio worldwide.
5. Pay attention to high quality.
Not only the products themselves, but also the value chain as a whole should be of high quality. This also applies to packaging and shipping, for example. Even minor defects in the packaging can damage trust in a brand. What we in Germany would consider to be of secondary importance is taken very seriously in Japan. The overall service package must be right. See this as an opportunity and expand your market position accordingly.
Example
A manufacturer of mobile industrial cranes was threatened with the loss of its Japanese business because the goods were not sufficiently protected against superficial scratches during transportation. In response, the products were provided with a protective film. Sales doubled within just two years.
6. Meet the high expectations for service.
As everywhere in the world, service, especially for capital goods, is essential for success. However, the requirements in Japan are high. What we would rate as very good in Germany is only considered sufficient in Japan. Although service is only one part of the overall service package, it is considered an integral part of the customer relationship. Japanese customers not only expect on-site services, but also
- professional support after the sale,
- response within 24 hours and
- remote support and remote maintenance.
One way to ensure local service performance is to involve a local business or cooperation partner.
Example
An existing Japanese customer complained about the workmanship of the delivered goods. The German manufacturer could not understand the complaint and processed the case with the appropriate priority. As a result, the retailer did not feel sufficiently well looked after and ultimately ended the partnership because he had to answer to the Japanese end customer.
7. Involve a local retailer.
Distribution channels in Japan are long and lined with special features that need to be taken into account. Even if you can recognize a trend towards opening up distribution channels: Japanese companies still prefer the involvement of a local retailer. When selecting your distribution partner, you should therefore at least consider the following aspects:
- The partner has the necessary contacts in the market.
- He can bridge the different business cultures very well.
- He should primarily represent the interests of the German company - and not just see the interests of his Japanese customer.
- Ideally, he can cover the service.
Example
An innovation leader in materials testing entered into a cooperation with its most important Japanese competitor as an alliance partner: a perfect symbiosis in which both partners expanded their own product portfolio and gained access to an already mature sales and service network.
8. Sound out the higher price willingness
The higher prices that can be achieved in Japan reflect customer demands for an extended service package. Customers' expectations of
- logistics,
- Verpackung,
- Produktmehrwert,
- Availability of spare parts,
- ensuring the processing of complaints and
- the overall service
is therefore already priced in by the manufacturer. It is important to remember that Japanese customers look at the entire price-performance ratio. Therefore, any deficiency within this value chain leads to dissatisfaction. You can see this as an opportunity to push through higher prices.
Example
One manufacturer, whose FMCG products were more or less comparable to those of foreign competitors, highlighted its entire service package, in particular its sophisticated packaging and extended retailer support. The 25 percent higher price compared to the competition did not prevent it from further expanding its market position.
Conclusion: Japan is just the beginning
The Japanese market opens up new development potential with unimagined opportunities, especially for medium-sized companies. In order to exploit these, market proximity and cultural openness are essential.
Japan is just the beginning, however.
After your first sale at the latest, you should expand your activities to Southeast Asia and the APAC region and refer to your Japanese references. Because experience shows: Once a product has proven itself in Japan, its acceptance in other Asian markets is certain. In addition, the strong presence of Japanese companies in Southeast Asia and the APAC region has a so-called pull effect: selling to Japanese people in these countries helps you to open the doors in Japan even further.
If you want to increase your sales: I will be happy to support you!
