Doing business in Japan has often presented cultural difficulties for westerners. However, as our expat entrepreneur living in Tokyo Jon Sparks reveals in this new series, Japan might be in the shadow of the emerging markets of China and India, but is still one of the best places in Asia for entrepreneurs to operate.
I have worked around Asia and the experience has been fantastic. On the business front, it has provided markets many times (or orders of magnitude) those I could access from Australia. In addition to shear size, these markets come with a population density that offers great opportunities around economies of scale and low distribution costs.
Having run operations in China, Japan, Malaysia, Singapore, Hong Kong and Taiwan has allowed for some fairly pragmatic comparisons of commercial codes, employment practices, access to funding and the like. Even better has been the opportunity to see the “softer” areas of business, such as the work-ethic of the labour force, the amount of red tape encountered when doing business and gauging how level the playing field is in a society where you operate as a outsider.
On all the countries I have done business in, none stands definitively head and shoulders above the rest — including both my native Australia and adopted home of Japan. Nevertheless, combinations of factors makes Japan, for my money, a better place to be an entrepreneur than anywhere else in Asia. So why do I see Japan as a paradise for entrepreneurs?
There are few entrepreneurs here
The Global Entrepreneurship Monitor is a country-to-country comparison of entrepreneurship. In Japan, adults involved in early-stage companies (startup to owner-operated 3.5 year businesses) comprise just 3.5 percent of the workforce. This ranks Japan the lowest of the 54 countries in the survey (in comparison, the rate in America is about two and half times higher).
This dearth of entrepreneurs will not last forever, for changing social attitudes toward Japan’s lifetime employment and labour mobility will encourage seniors and women with personal savings to invest in creative business ideas. Even so, for today’s entrepreneurs there is a decade before the percentage of entrepreneurs in the market reaches the level of other countries.
The place is wired!
Japan’s population density supports some great IT infrastructure (even my home among rural paddy fields to the north of Tokyo has super high speed fibre optic cable). And this infrastructure is widely used — Japan has 94,000,000 internet users (about 75 percent of the population), easily overshadowing China (about 27 percent internet penetration). Not only is the reach there, but it also gets a lot of use with Japanese sending four times as many messaged per capita as Americans. Things do not get much better than this for businesses that want an efficient online environment capable of reaching a broad market and all demographics.
Customers, customers everywhere
If online is not for you and you want physical customer relationships, then look no further than some of Japan’s major cities. The population of greater Tokyo for example is around 12 million swelling to over 16 million on a working day. Compare this to Australia’s 21 million spread out across a continent and it is easy to see that if you need physical access to customers, moving even 10km around my office in Tokyo will provide me with a far greater volume of logistically-efficient customer opportunities than I could reach in Australia in my working lifetime.
China might be growing rapidly but…
At purchasing power parity per capita income in Japan stands not far behind Australia at around US$34,000. Compare this with China where PPP per capita income is US$6,500. If you want to live in rural China, US$6,500 may be fine, but if you are looking to use your earnings overseas, then there is little point in having customers who cannot afford to pay an amount that generates meaningful spending power for you.
A workforce who cares
“Kaizen”, or the drive for constant improvement, permeates the Japanese workforce. This means that your employees are constantly looking for how to better serve your customers and how to more efficiently operate your business. In Japan I take this degree of engagement as normal and thus I am amazed when I am overseas that service standards continue to centre on what employees want to provide rather than being customer-centric.
In terms of having an engaged workforce, Japan stands head and shoulders above anywhere else I have worked. As an entrepreneur, what more could you want for your businesses.
Don’t get me wrong, I am not saying that Japan is an easy place to do business. Rather, Japan is renown for its complexities and unique cultural and social norms. If you can get on top of these unique aspects of doing business and building relationships, Japan has all the elements that an entrepreneur needs to thrive.
In my next letter from Japan I’ll will be taking a look at some of the unique aspects of life and business in Japan.
Jon Sparks is an Aussie entrepreneur and long-term resident of Japan, where he has founded, grown and sold two businesses. He also helps Australian entrepreneurial businesses build relationships and enter the Japanese market, ensuring that they don’t make the same mistakes he made. http://sawayaka.biz