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When to Start
As there are many different types of companies from a variety of industries planning to enter the Japanese market, it is impossible to recommend a common solution for all companies in regard to the timing and type of entity best suited for entering the Japanese market. The following may be useful for many product based companies to consider.
Most companies start their entry into Japan with a distributor and/or sales representative. This is a good way to penetrate target accounts and expand reach with the support of a local sales, marketing and technical team while keeping risk relatively low. When sales have reached approximately US$3 ~$5mio however, it is probably time to establish a direct presence, starting small and then growing the team.
Understanding your business and financial objectives in Japan will help you determine the size of your operation and how much investment to make. Depending on the industry sector, the Japanese office will account for a certain percentage of World Wide sales. For many companies in the technology or manufacturing industries for example, Japan usually accounts for around 10% of sales in a steady market and can sometimes be as high as 15%~20%. Depending on the cost of your products and customer demand, you may need around 8 to 12 staff to support US$10mio in sales. Supporting a team of 8 to 12 staff may cost around US$2~$3mio per year in salaries and other employee costs.
Depending on the volume of business, it can take a company several years to hire 8 to 12 staff organically, so it is wise to start off with the critical hires first even if good candidates in non critical areas become available early on in the piece. It is recommended starting with a supporting engineer or specialist and a channel development person, which in some cases may be the Country Manager. Securing good customer interface staff to support products, quality issues, localization and supporting the channel partners should be one of the first priorities. Over the period of a few years start up companies will probably have to hire the following key personnel: Country Manager, Business Development and Marketing, Channel Development and Management, Strategic Sales, OEM Sales, Customer Support (Post sales), Pre Sales Support for channels, Application Development and Administration.
Bear in mind that hiring a Country Manager early in the piece will certainly accelerate the hiring process and consequently costs. A Country Manager’s salary could be in the vicinity of US$200K~$250K, he will need an Assistant and will probably bring on 1 or 2 key staff. He will also be keen to establish channels and you will probably want to leverage his knowledge and experience to expand business. You could find yourself in rapid expansion!
One more expense to take into consideration is the communication between HQ’s and the Japan office. Some companies will dispatch a Manager, Specialist or Technician from HQ’s for 1 to 2 years to help launch the subsidiary office. Other companies will rely on the frequent commuting to and from offices of both the HQ’s and Japan management teams to keep up to date on strategies, product road maps and customer support issues. Whatever method the company uses, it should be noted that this communiqué between HQ’s and Japan can amount to significant time and cost for start up companies.
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