Business Relationships In Japan

Written by Erich Ahorner Nov. 25th 2019

The Japanese business culture can seem very formal and rather task oriented than relationship focused, but it still attaches a high degree of importance to personal relationships and these take time to establish and nurture.

A strong network of personal contacts is vital in the Japanese market. It is also advisable to understand the network of relationships which your partners and competitors work within.

It can be difficult to guess the real thoughts and intentions behind the politeness of Japanese people. It is a common mistake for Western companies to return from negotiations with Japanese businesses to celebrate success while in time, it becomes apparent that the Japanese are in fact, not interested in doing business with your company.

This is where a local representative who has experience of doing business in Japan can be invaluable as they will be able to read between the lines of the behavior and language used by your Japanese counterparts and interpret them for you to minimize your chances of misunderstanding and miscommunication.

The pace of decision-making in Japan is generally much slower than in the western business world, specifically the US. Patience and repeated follow-ups are typically required to successfully close a deal. However, once the Japanese have decided to do business with you, things then move usually very quickly.

Keiretsu: a corporate structure in Japan

Japanese companies have traditionally operated within informal business groups known as Keiretsu. A Keiretsu is a group of companies with interlocking business relationships and shareholdings.

The member companies own small portions of the shares in each other’s companies, centered on a core bank; this system helps insulate each company from stock market fluctuations and takeover attempts, enabling long-term planning in innovative projects.

The Keiretsu structure has conditioned Japanese companies to only do business with member companies. However, high levels of M&A activity in Japan in recent years brought about by challenging economic conditions caused a slight decrease in the influence of the Keiretsu.

In today’s Japan, you will find both competitive bidding and cases where traditional business relationships take priority over achieving the best price. Therefore, we advise companies to research and understand the Keiretsu structure in their targeted business sector or industry and construct their business plan accordingly.

Questions about doing business in Japan?

Erich Ahorner

Erich Ahorner helps people enter the Japanese market and grow their businesses. He is an expert at helping people with market entry using online and offline methods and trying to break down necessary steps to make things simple to understand. If you're interested in growing your business or entering a new market to and increase sales then definitely reach out and request a free strategy session today.