Emerging Destination: Japan
11/01/2008
NASSCOM recently hosted a special event as part of its Emerging Companies Forum-Marketing, to discuss the ways and means that Indian SMEs could tap the business opportunities offered by the Japanese market.

Finding a cultural fit

Things you did not know about the Japanese market

* Japanese predominantly use Excel sheets in their documentation. They are very meticulous about these Excel sheets and they practise perfection in formatting and accuracy on these sheets. Even a busines plan or proposal can be sent through an Excel sheet.

* Hard sell doesn't work with Japanese companies.

* In order to set up a business in Japan, companies need to follow the mantra of "being local, starting small and focusing on building trust."

* Trust and integrity are of utmost importance while doing business in Japan.

* Japanese are conformists and don't like to stand out or be conspicuous

* While the initial ROI from the Japanese market is small, business is normally secured for years to come. Indian companies should not expect a quick return from this market.

The 30th meeting of NCR companies was held earlier in December and featured a talk by Ashoke Ghosh, President, Delivery Services of GrapeCity India on "Doing Business in Japan." Ghosh attempted to answer questions related to the challenges faced by companies foraying Japan and how these concerns could be overcome.

Ghosh pointed out that cultural and attitudinal differences were the key impediments to building business relationships between Japanese and Indian companies.

The Soft side

Things to know about software industry and how it works in Japan

* A local Bridge Software Engineer is always needed for efficient execution

* The Software Development Cycle remains almost similar to the Indian scenario

* Banking, Insurance, Telecom and Pharma are hot sectors

* System integration companies have a good scope of doing business

* Companies into Embedded Systems can also work provided that they maintain high quality levels.

* Building up Channel partners will take a lot of time

* Japan gets a lot of work from China because of cultural closeness and physical proximity.

* A fresher software engineer is paid around USD 3000/month whereas European nations pay around USD 7000. Hence the transactional man-hour rates in Japan are on the lower side.

* If you have an office in Japan, you need to pay about 31-40 percent as corporate tax. Even for outside vendors, 20 percent taxation is levied on the billing

* Small-sized businesses can begin projects based on verbal communication

Addressing the attendees at the Forum, he added that the following steps could be taken by Indian IT-BPO companies to find a foothold in the Japanese IT market:

* Tie-up with a local partner: Indian companies could enter into a relationship with a local partner to overcome the language barrier, establish communication and handle the cultural issues. While it was feasible to work with large Indian companies with a global presence, it was imperative to involve a Japanese company to achieve the best results. After all, even setting up a branch office/subsidiary in Japan required at least one Japanese to be on the Board of Directors. In order to connect with the right local partner, companies could contact JETRO (a government-related organization working to promote mutual trade and investment between Japan and the rest of the world ) or the Japan External Trade Forum (a specialist trade body and match maker between global companies and local organizations).

* Build trust to engage with Japanese companies: According to Ghosh, since it took time to build relationships with Japanese organizations (where decision-making and RoI was slow), Indian SMEs needed to remain patient and invest in forging trust to strengthen their business relationships. Japanese companies appreciated humility and sincerity and expected those qualities in their Indian business partners. At the same time, they were also cautious about issues such as attrition and preferred to pen deals with Indian companies that held on to their talent. Interestingly, Japanese companies did not always sign an agreement, issue a work order or initiate a business. Once a commitment was given from their side, the same, it was expected, would be executed.

* Understand the Japanese decision-making process: Indian companies needed to understand that decision making in Japan was usually through group consensus. Typically, companies did a lot of research internally prior to reaching a decision. If an e-mail was sent and the response was slow in coming, it only meant that the Japanese team was discussing the matter internally before sending a reply. It was also pertinent to remember that Japanese companies practiced nema washi. Where they made their decision even before coming to the table. In this situation, Indian companies needed to get behind the scenes and influence the decision makers in advance, in order to clinch a deal.