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JAPAN: "Once exporting SMEs have internalized the values of sincerity and responsibility, they won't have to worry about their business manners"

As the world's third-largest economic power, Japan is an intriguing market for exporting Swiss businesses. But many remain reluctant to enter the Japanese market due to often-cited cultural differences. In the following interview, Masashi Nakazono, General Director of JETRO (Japan External Trade Organization) in Geneva, reveals these concerns to be unfounded. 

View on a skyscaper with a cherry blossom tree in the front.

After years of stagnation, Japan's economy has regained momentum and is attracting the interest of some Swiss companies. Which industries are currently in demand and why?

Masashi Nakazono: It's less about sectors and more about the characteristics of the products. In my opinion, Switzerland has the following market advantages: First of all, it produces luxury goods with very high added value like watches that go beyond functionality, placing an emphasis on aesthetics. Second, it manufactures niche products that can only be manufactured in Switzerland, including certain precision devices and medicines as well as Swiss cheese. If there are no substitutions, there's also no price competition, which is also the case with luxury goods. Third, the Japanese love innovative products. For example, Nestlé produces over 200 KITKAT varieties for the Japanese market and is known as a creative company in the saturated candy market. I see major potential for Swiss companies in the markets that are not based on volume or competition, but on high added value, niche products and innovative ideas.

Is there truth to the claim that the Japanese are more risk averse, and prefer products that have already been tested on another market?

No, Japanese people love new products! (laughs) If a product experiences a boom in Switzerland, they will love it. The country of Switzerland is, after all, a brand in itself that stands for reliability and high quality. In the production sector on the other hand, in the export of machines for factories for example, that statement may be true. Factories operate 24 hours a day in Japan. The risk of using a machine without proven success would be too high. But there are also exceptions: If a Swiss machine revolutionizes production productivity, it doesn't need any references.

Speaking of references: How important are personal connections for first contact?

Very important, but I don't think it's limited to Japan. Perhaps this obstacle appears greater, but Europeans and Americans also prefer people with recommendations. This doesn't necessarily have to be a common acquaintance; proof of a product's success can also be a reference.

English as the common business language continues to cause problems for many Japanese people in verbal interactions. What can Swiss people do to counter this problem?

This actually is a big problem. Despite having ten years of English in school, many Japanese people speak no English and Japan is the only place in the world where the CEOs of major international companies do not have sufficient English skills. Considering the different angles, we are very fortunate to have been surviving only with our own language. Because we have our own large domestic market, we have not been obliged to move companies abroad and emigrate, hence speak English. There are no other countries like that. But due to increasing number of Japan's aging population, we are currently in a transitional phase, including linguistically.

Currently, large companies are almost guaranteed to have English-speaking employees, and the same is increasingly true of SMEs. Just wait 10 more years!

We often hear that the Japanese are reluctant to say “no”. How can Swiss people know when the people with whom they are speaking do not agree with their proposal?

Over my career at METI (Ministry of Economy, Trade and Industry), I have found that Japanese people are more reluctant when it comes to saying “yes”. For Japanese, saying “yes” means the complete commitment to see something through to the end. Reluctance to say “no” has more to do with the internal dynamics of Japanese companies: it is not likely that employees contradict their superiors. But when it comes to business-to-business relations, especially with foreign companies, Japanese business people are more likely to give a definitive no so as not to create false hopes.

What does it mean when no answer comes?

This in fact means that there is currently no answer to give. Due to the structure of their society and companies, Japanese people usually take a lot of time to make a decision. And also, employees with decision-making powers usually aren't on the front line. So it is important for Swiss business people to set a clear deadline to get an answer, when they negotiate with Japanese counterparts.

In Japan, the customer is not just always right; the customer is God. In this regard, what should Swiss people change about their thinking in order to be successful in Japan?

The term God is perhaps somewhat misleading; it doesn't mean that we idolize customers and grant all of their wishes. It's about the common Japanese approach to providing the best service and highest quality products, thus giving benefits to the customer. They don't seek short-term profit; they want to make the world better place. It's something like the positive cycle of dedication. In Japan, CEO’s payments are very moderate, even in a large company, compared to those of US and European companies.

What do you mean by that?

If a company profits a lot, the consumer is meant to share in that profit, with reduced prices for example. This automatically leads to increased customer trust, better sales numbers and ultimately a bright future for the company. They are not seeking for one-time fortune, but for sustainable growth supported by the customer’s trust. This is precisely why Japan is home to the oldest companies in the world.

Is "NEMAWASHI" – the informal process of gaining initial support for a project through discussions with relevant individuals – a typical Japanese phenomenon?

This concept openly underlines the widespread image of Japan as a closed society; but in my opinion it is also universal. Important opportunities are also discussed in advance here in Switzerland, and people try to persuade other parties of their own ideas. Otherwise, no one would be able to make a decision in the meeting, with endless discussion. A good example is a shareholders meeting or lobbying for political votes.

Despite many commonalities, as you've emphasized, many Swiss businesspeople are worried about making a faux pas. Is their concern justified?

The concern is mutual because the differences are there. But unlike the Japanese, who have lived in a monoethnic society for thousands of years, Europeans, especially the Swiss, are much more adaptable to foreign cultures. Obviously, the challenge is much greater in the business world when deciding whether to expand into Japan. But once you're there and you work correctly, you shouldn't encounter any major problems.

Can you give us any examples of Swiss companies that have failed completely due to cultural differences?

Yes, an elevator manufacturing company. A high-school student died because of a technical defect in the elevator, but the company waited ten days to release a statement. In Japan, such serious accidents are apologized for publicly and such apologies do not equate to admissions of guilt. If the company had immediately apologized for the death with a press conference – or at least showed deep concern – and informed the public on the state of the investigation into the cause of the accident, it would have made a huge difference. Sadly, the company ended up losing the public's trust and was forced to largely withdraw from Japan.

Another example may not be the case arising from cultural difference. The case is about the pharmaceutical company whose employee intentionally provided the false data to the clinical study for new medicine. The company also donated a big amount of money to the universities in charge, possibly, expecting favorable outcomes. Although 4 years has passed since the incident was firstly publicized, the company is still a distance away from recovering the customers’ confidence. In Japan, we need to bear in mind that it will take a long time to recover the trust once it is lost.

Swiss companies have some catching up to do in risk management and damage control; it seems like that is where the greatest differences in mentality lie. Sincerity is extremely important to the Japanese and they always try to handle issues carefully and responsibly. So anyone who has internalized sincerity and responsibility won't have to worry about business manners, which in any case are not that different from the west. However, the way that the Japanese deal with damage control has to be learned before something happens.

 

Masashi Nakazono

Masashi Nakazono works as the Director General of JETRO Genève. His main mission is to promote the economic relationship between Switzerland and Japan. Before assuming the current position, he has worked for the Ministry of Economy Trade and Industry (METI) for more than 20 years. During his service at METI, he has been engaged in various policy makings including innovation, intellectual property and WTO related issues. From 2010 to 2013, he was also posted in Palo Alto, California, to monitor the latest innovation trend in Silicon Valley. Mr. Nakazono holds BEng from the University of Tokyo and MSc from Imperial College London.

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