International business success stories Characteristics of Successful Japanese SMEs
release 2024.02.14 update 2024.3.27
Nowadays, small business owners around the world want to know about international business success stories, don’t they?
Today, I would like to ask you to share with us the characteristics of Japanese SMEs that succeed in international business.
Yes!
First, we would like to look at four common characteristics of successful Japanese SMEs.
Chapter 1: Common Features of Successful Japanese SMEs
１ Only one product or service is available.
The first common denominator of Japanese SMEs that succeed in international business is that they have one-of-a-kind products or services and have a sufficient track record in their domestic business.
If a company has a good track record in its domestic business, it can “fix” its international business development, but if the company has no track record in sales of its products or services, it will have to “start from scratch” to expand its business overseas, which will take a considerable amount of time and money.
Another key point is the perspective that the company is not turning its attention to international markets because its domestic business has lost momentum, but rather, because it is now that its domestic business is strong, the company is promoting international expansion in preparation for the shrinking domestic market.
A note that is often overlooked is that domestic achievements are not about the past, but about one-of-a-kind products and services that are “well matched to the current era”.
For products and services with declining sales, it is better to prioritize the recovery of performance, such as re-branding in the domestic business before international expansion, to reduce trial and error and costs when expanding internationally.
In the case of entrepreneurs and start-ups, they may have just started their business and may not have much experience. However, this is not the case if the company has other advantages, such as experience in starting up a new business or having highly skilled personnel who can establish an international corporation in the U.S. or other countries and simultaneously develop the Japanese market.
The Japanese market is said to have the most demanding consumers in the world. Our track record of gaining sufficient support from our customers for our one-of-a-kind products and services in the Japanese market is sufficient capability and ability to expand our business internationally as well.
２ Focusing on employee training
The second commonality among Japanese SMEs that succeed in international business is their focus on employee training.
International expansion requires a variety of new capabilities that have not been required in domestic operations.
Four abilities that will be needed to get your international business off the ground:
１ Ability to launch new businesses
２ Risk management skills
３ Cross-cultural adaptability
４ Business English Proficiency
Very few small business owners, much less those in charge, have these four abilities that international businesspeople already possess.
While attending English conversation classes, cross-cultural understanding workshops, and expatriate training are all part of the learning process, the shortest way to develop skills is to learn from professionals who support international expansion through actual international business and absorb their practical know-how.
There are various ways to utilize professionals, depending on your budget.
・Use the government’s free expert dispatch service and ask them to teach you only the parts you don’t understand.
・Contract a former trading company alumnus as an advisor for 50,000 yen per month to handle international inquiries on behalf of the company.
・Contracted with an international expansion consultant for 6 months for 3 million yen to set up an international business.
However, what is essential for the international business to run on its own after the introduction of professionals is for the person in charge to be able to reproducibly develop other distributors, develop other products, and distribute them in other countries, even when he or she is on their own.
Getting an international business off the ground involves a lot of expenditure, but if the people in charge are not capable, they will not be able to create a strategy that leads to the next step, and the manager’s hopes will be futile, and the business will not be able to turn around.
Small and medium-sized enterprises that have succeeded in international business know that only when employees are properly trained can international business really begin to take off.
３ There is a strong staff in charge of failure and trial-and-error.
The third thing that Japanese SMEs that succeed in international business have in common is that they have a strong staff member in charge of overseas business failures and trial-and-error.
The quality of the actual failures and trial and error that occur in domestic and international operations is different, and the direction of the flying ball will often be at an untested level and highly unexpected.
On the other hand, there are those who are able to focus on moving the business forward! On the other hand, there are those who can focus on moving the business forward.
Even if you have prepared an international business plan, identified risks, gathered information, and taken all possible precautions, it is rare that you can proceed without making any changes to your plan.
No matter how talented the person in charge may be, he or she cannot succeed in an international project without a single failure.
Even in the midst of many unstable elements, we will not give up on implementation and verification, and will move forward with the project one frame at a time, because it will lead us to the next door,
The presence of a person in charge who possesses not only English language and global communication skills, but also optimism without being too depressed, a tough mentality that somehow takes shape, and the ability to continue to work steadily will be the key to success in international business.
４ The company has the stamina to endure losses until it gets back on track.
The fourth common characteristic of Japanese SMEs that succeed in international business is that they have the stamina to endure losses for about three years until they get off the ground.
Below is an estimated budget for the first year of an international business that will take three years to get off the ground.
International business travel: 500,000-1,000,000 yen (assuming twice a year)
Participation in international exhibitions: 3-4 million yen (estimated twice a year)
Utilization of professionals such as international expansion consultants: 5 million yen
Even if we assume that the personnel in charge of international operations are recruited from within the company and retrained, the annual expenditure would be approximately 10 million yen, as described above.
While it is rare for an international business to have no sales at all during the first three years after its launch, if it had no sales at all, it would be in the red by approximately 30 million yen.
Whether or not the company has the capital strength to withstand this is also important.
Only if the domestic business is doing well will there be an opportunity to take on the challenge of international expansion with the extra strength of the domestic business.
In addition to the above costs, the following additional costs of approximately 2-8 million yen over the three-year period may be required, depending on the number of countries in which the company operates and the product or service in question.
・Building an international website
・Localization costs for presentation materials and other internal templates
・Obtaining international intellectual property rights (patent, trademark, and design applications in foreign countries)
・Legal maintenance for international clients (risk assessment and maintenance of instruction manuals, contracts, privacy policies, etc.)
・Compliance costs in international markets
５ Finally, there are managers who can make their own decisions.
The fifth commonality among Japanese SMEs that succeed in international business is that they have managers who can make their own decisions at the end of the day, even while using outside professional personnel.
International expansion consultants and other professionals can offer the following and more to business owners when expanding their businesses internationally
・Specific instructions on how to proceed with international business
・The risks of doing business internationally and how to deal with and implement them.
・Presentations of past successes and failures in international business and measures taken by the company
・Provide human networking and project team formation and direction necessary for international business.
In response to these issues, managers must make decisions on a weekly basis about what they want to do and how they want to do it with regard to international business, which is moving on a daily basis.
What is particularly painful is that the decision-making process is much more difficult than for domestic operations, and managers who are usually solitary will suffer from even greater loneliness as they begin their International expansion.
However, there are nearly 80,000 pioneering Japanese companies alone that have successfully conducted international business.
In other words, there are 80,000 different ways to do the law of success.
Even if they do not have direct contact with their predecessors, many managers learn to make their own final decisions by following in their predecessors’ footsteps overseas, listening to what they hear and see, and reflecting on what they see and hear.
These are five common features of successful Japanese small and medium-sized enterprises (SMEs) that we have run through.
Next, we move on to the three common features of successful, world-class businesses.
Chapter 2: Commonalities of World-Class Successful Businesses
１ Develop products and services that capture the characteristics of the market
The first common denominator of successful, world-class businesses is that they develop products and services that capture the characteristics of their markets.
For example, let me give you a case study of Company A.
Company A was developing and selling a certain unique measuring machine used in the construction industry.
Although the technology was so advanced that it was designated as a recommended technology by the Ministry of Land, Infrastructure, Transport and Tourism, sales were sluggish in comparison to its reputation due to industry conditions that made it difficult to switch to newer technology.
What about the international market? We have exhibited at international trade shows and responded to inquiries from international companies, but the situation remained the same as in the domestic market for some time.
However, in an effort to somehow break out of the current situation, he had an opportunity to make a technical proposal to a foreign company based in Japan, but the company insisted that it would be difficult to do so, citing the policy of their home country.
We knew that we would not be able to spread our technology if this situation continued, so we managed to obtain the names of key persons and visited the European headquarters directly.
We even visited the factory of the European headquarters in a certain country and visited each department and had useful discussions, but the key person still did not shake his head.
We could not imagine that the transaction would be beneficial to our company.
However, here, we have just made a presentation weighing the advantages of handling our equipment with that major European manufacturer against the market damage that would be caused by a competitor of that major European manufacturer (a manufacturer from a neighboring country) starting to handle the equipment first,
They asked us to give them a month’s grace, whereupon we were promised serious consideration for the first time by them. After our return, we received a formal contract and over the next few years we were able to expand the product to 22 countries around the world.
International markets have their own distribution and industry correlations.
One of the key factors in our success in international business was the fact that we carefully studied the characteristics of these businesses in advance, and were able to take advantage of the opportunity to visit them directly to propose mutually beneficial business solutions.
２ Business model and price localization strategy
The second common denominator of successful, world-class businesses is that they have a localization strategy for their business model and prices.
For example, let me give you a case study of Company B.
Company B was an OEM manufacturer, producing and selling transportation-related equipment for use in its factory.
Although the brand names were different, more than 70% of the equipment in a major domestic factory was actually manufactured by Company B.
Normally, in such a case, there are few competitors, so the company may consider raising prices, developing its own brand, or starting direct cross-border EC sales, but Company B’s strategy was different.
In the domestic business, we did not change our business model or prices, and we sold our products only to OEM customers, and we made steady efforts to maintain the top market share at all times.
On the other hand, the company has made a turnaround from being an OEM manufacturer conscious of standing out like a black player by choosing the U.S., a challenging market, for its first international expansion.
They did not need to develop sales agents or establish sales companies. Instead, they suddenly established a local production base, hired not only manufacturing site operators but also sales reps and sales managers one after another, and made a grand debut at an exhibition to expand their business in the United States. The way in which the company was solidified was also brilliant.
First, even before the factory was established, we contracted with legal, labor, and U.S. business professionals as advisors to accurately grasp possible problems and anticipated risks in advance, and took individual measures to deal with them.
During the two years between the actual launch of the business and the time it took to get off the ground, Company B’s management traveled back and forth between Japan and the U.S. every month, providing strong leadership while also establishing the local structure.
As for pricing for the U.S. market, which is the biggest concern, we have been able to maintain price competitiveness that is competitive with Chinese products since our domestic OEM days, which is rare for a Japanese company to be able to offer prices that are competitive enough even in the U.S., where prices are strict from the start.
Still Company B’s Japanese headquarters’ website is very modest, created more than 15 years ago, while the website of its U.S. subsidiary is, of course, in English and full of case studies and rich in content.
This is an example of a successful international business that has been achieved by accurately understanding the differences between the Japanese and U.S. markets, calmly determining what should and should not be changed in terms of the business model and pricing, and adopting a localization strategy that sticks to the respective markets.
３ Customization to meet local needs
The third common denominator of successful, world-class businesses is that they are customized to meet local needs.
For example, let me give you a case study of Company C.
Company C was an expert company in the education business that operated several preschools and kindergartens with a reputation for preparing students for elementary school entrance exams.
When we learned that a world-renowned Japanese company was making a major base move within a certain country, we saw an opportunity in a place where our competitors had not yet established a presence, and we launched an infant school for Japanese expatriate families.
International expansion in the service industry often requires major changes in operations to suit local conditions after expansion, and Company C was no exception.
We had just started operations and could not say that the business was on track, so we had to go beyond the framework of moving from face-to-face to remote, changing the content of the classes, hiring new instructors, and reorganizing the classes on different days of the week.
Company C’s strength lies in its ability to prepare students for elementary school entrance examinations, and it had entered the market in anticipation of seamless entrance examination preparation needs for expatriate families who frequently return to their home countries for postings.
However, thanks to the bold and continuous changes in our service offerings, we were able to avoid withdrawal from the business and now succeed in attracting a wider range of students than before the Corona disaster.
When expanding a successful business in Japan to an international location, it is difficult to determine the extent to which local needs should be reflected in the company’s services.
There is also a concern that too much adaptation to local needs may result in services that are too far removed from the original business.
What do you think contributed to the success of your international business this time around?
It is easier said than done, and management’s judgment is never easy to make, as a single slip-up here can cause profits to plummet and local operations to cease to exist.
Chapter 3: Key points for successful international expansion by industry
１ International Business Successes Manufacturing Industrial Products
The key points for successful International expansion and export of industrial products are as follows
１．Sell the convenience of adopting the technology, not the product technology.
２．explain logically and numerically the opportunity loss of not implementing our products
３．promote the fact that the product complies with local regulations and that there are no distribution issues.
４．In addition to trade and contract documents, all English-language correspondence such as product specifications, drawings, and instruction manuals should be completed prior to the start of sales.
５. reply accurately and within 24 hours so that the customer does not feel that he/she is dealing internationally or crossing a border
２ Successful examples of international business Manufacturing Food
The key to successful international expansion and export of food products is as follows
1. revamp the website (especially new images and videos if possible)
2. local food standards, labeling, food packaging, and food additives, Heavy metals, pesticide residues, and the effects of the nuclear power plant accident. Regulatory checks and compliance, such as whether there is an import suspension designation (on a county-by-county basis), are Finish before business hours.
3. promote FDA food facility registration, HACCP certification, etc.
4. at least 6 months for processed foods, preferably more than 9 months
Ensure the length of the consumption period
5. if merchandising proposals are unskilled
Selling through food trading companies instead of direct trade.
３ International Business Success Stories IT
The key to successful International expansion and export of IT products is as follows
1. make English the official language of the company (including forms) if possible
2. to provide a bridge between the engineering side and the business side Put him in charge of international operations.
3. international legal maintenance should be complete at the start of the project.
４ Successful examples of international business Service industry
The key points for successful international expansion and exporting in the service industry are as follows
1. to seek service development that will be accepted in international expansion destinations, and Try things you have no experience with.
2. not competing with international competitors for a piece of the pie
Be aware of new market (potential needs) formation
3. be aware of and be prepared for the fact that local labor management overseas differs from that in Japan
Chapter 4: Learning from Case Studies to Avoid Failure
１ Management’s commitment to international business is essential.
The first point to learn from the case study to avoid failure is that management’s commitment to the new business is essential, and that it is strictly forbidden to throw the project entirely to the staff in charge.
In fact, it is quite common for busy executives to leave the actual management of their international operations to the people in charge.
However,
How do you want to compete in international markets?
What do you want to gain from the international market?
To what extent can we challenge ourselves in international markets?
What is really the acceptable level of risk in international markets?
We must remember that “only management can answer these questions.
Since business moves on a daily basis and the optimal goal for international expansion actually changes rapidly, only management can make decisions at key points and steer the ship accordingly.
By aligning the management and the person in charge of the project with the same goal at the end, we can bring international business closer to success.
２ Internal cooperation other than international personnel is also essential.
The second key to avoiding failure, learned from the case study, is that internal cooperation other than that of the person in charge of international affairs is also indispensable.
When starting an international expansion, be careful when the following atmosphere exists within the company.
・Only management and executives start going international in secret.
・before I knew it, an international representative was hired mid-career.
・before you know it, international expansion consultants are visiting every month.
・There’s a rumor going around in the company that he’s doing international business.
・I’ve received samples and e-mails from overseas and have been forced to deal with them without any background knowledge.
Successful international expansion requires leveraging the invisible sources of competitiveness that make a company stand out from its competitors, such as the company’s internal organizational and operational know-how, systematic service and product knowledge, and the tacit knowledge of its front-line employees.
It is necessary to explain in detail to the entire company at the outset how the decision to expand internationally was made and what the new challenges are, including how they relate to the work of each department.
Especially in the early stages of international expansion, the workload of each domestic department will certainly increase, even without international sales. The stress of not knowing what additional work is being “done” for will manifest itself as a windfall to those in charge of overseas operations, creating a “negative mood” toward International expansion itself, which is a process of trial and error, and undermining the speed and flexibility required for overseas operations. For example, it is possible to increase the number of people who understand the concept by explaining it in the following way. In order for the company to survive in an era of shrinking domestic market and to keep the current employees employed, we have decided to launch a new business.
Since this is our first international expansion and there may be more than one correct answer, it will be a process of trial and error for the time being, but since we have made the decision to make an International expansion, I hope that the entire company will cooperate with us.
Until international expansion gets underway, the company will increasingly ask each department to conduct research, prepare English-language materials, and otherwise cooperate with the company, but the company will postpone any improvement in treatment until the international business is profitable.
Nevertheless, we want to be able to look back five to ten years from now and say that we have developed a new pillar of business by launching international expansion with the cooperation of the entire company, and that we are now able to give back to our employees.
The international business will be managed directly by the president for the time being, and the company will first consider appointing a person from within the company to be in charge of this business.
I will keep you informed of our international operations as appropriate, but if you have any questions, please feel free to contact me directly at any time.” Gaining understanding within the company when expanding internationally may be the first barrier to international expansion that needs to be cleared.
３ Withdrawal criteria are determined at the outset.
The third key to avoiding failure, learned from the case study, is to decide on the withdrawal criteria at the beginning.
When developing an international business plan, that is, before investing any money in international expansion, it is important to determine some exit criteria.
If you start an international expansion project without having exit criteria, there is also a sunk cost effect (i.e., the effort, money, and time spent up to that point will affect future decision-making), and you will be unable to face the option of “withdrawal” calmly because your self-evaluation of the return range of trial and error will be underestimated.
For example,
・If we do not achieve sales of XX million yen by 20XX, we will withdraw from the market.
・If the amount of deficit exceeds XX million yen for three consecutive terms, the company will withdraw from the business.
Or,
・If it is found that there is no need for the product or that market expansion cannot be expected for any of the following reasons, the company will withdraw from the market.
・If it takes more than XX million yen or more than XX years to solve distribution problems, we will withdraw from the project.
By making specific decisions at the beginning, such as the following, you can logically make the right decision when the plan is changed in the middle of the project.
If there is an objective rationale for the withdrawal, even if the company withdraws once, as long as the headquarter business continues to communicate its appeal and continues to be sought after by customers in the market,
It is not uncommon to have the opportunity to try again in a different country at a different time in the future.
Summary: For a successful international expansion
Well, I see that companies from many different industries are successfully doing international business.
It also reaffirmed the importance of management’s commitment to international business.
We felt that the shortcut to successful International expansion is for all parties involved, including management, those in charge, and consultants, to work together as one.
I am very, very, very nervous by myself……,
Yes, it is,
It is disconcerting at first.
But instead of forever asking the president for details or leaving it to consultants to check red pens and create a slate,
I tried it, and it came out this well naturally. (smug look),
I am truly looking forward to a future of
That’s right, smug, I’m counting on you.
(…Yes, sir!)
