Doing Business Effectively In Japan

Introduction A fluent Japanese speaker, David Syrad has been working with Japanese business partners since 1979 . He has lived and worked in the country for a total of 15 years and has led, facilitated and interpreted for numerous negotiations, and commercial /technical discussions. He has set up and managed JVs and subsidiary companies and successfully developed commercial relationships in Japan, Korea and China. Current projects include: • Customer relationship improvement and commercial negotiations - European manufacturing company starting up in Japan • Commercial and technical negotiations for a European company selling into Japan • Negotiation support for two Japanese companies selling into Europe. • M&A support – UK company looking for acquisition in Japan Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Introduction (Cont’d) This brief paper sets out some basic guidelines for discussions and negotiations with Japanese organisations. It does not pretend to cover this very wide subject completely but gives some pointers on where to focus and how to prepare. The reader should bear in mind that an intellectual understanding of differences in the Japanese business culture will not necessarily make him or her comfortable with them. Some mental tricks are needed to help us convince ourselves to alter our behaviour and feel comfortable with the change. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Cautionary Notes Before studying the unique characteristics of the Japanese business culture, it is important to note that: • There can be nearly as much cultural difference between two Japanese companies as between a Japanese and a non-Japanese company. It is important to understand the culture of the company you are working with and avoid a one-size-fits-all approach based on some study of Japanese business culture. • Business and negotiation styles vary from person to person in Japan, just as elsewhere. It is important to recognise the background and style of your counterparts. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Cautionary Notes (Cont’d) • The parties involved have to understand each other’s cultures – your counterparts also need to understand where you come from in terms of company culture. • You should not be intimidated by the differences in business cultures but at the same time should not ignore them. You can use them to put your counterparts at ease. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

A Few Basic Points • Adjust your stance to suit your position. This will vary depending on whether you are selling, buying, proposing a JV, proposing a merger or discussing a license agreement. • Human relationships are very important in Japan. Discussions are unlikely to succeed if you do not build and maintain a relationship of trust. • Use your knowledge of Japanese business etiquette to demonstrate your flexibility and sensitivity. Small touches help – bring small gifts to your first meeting. • Expect discussions to take a long time spread over many meetings. This gives you the opportunity to build the trust needed to go forward together so don’t rush the process. • Create opportunities early on to go out and eat together – this helps build a relationship more rapidly. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

A Few Basic Points • Avoid bringing lawyers to meetings unless the content is highly legal – this just complicates the relationship building process. Generally, the agreement is reached and then the paperwork is sorted out. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Preparation • Your counterparts will usually arrive at meetings very well-prepared – make sure you have prepared equally well with product, competitor and market data as well as financial information. • Bring the right people – generally you should bring your top people to important negotiations. • Know your counterparts’ titles and positions – these dictate how to speak to them. Many Japanese organisations remain very hierarchical. • Brief your team on how to speak and behave in the meeting and how to address your counterparts. It is no good if the boss behaves perfectly but the team gives a different impression. • If possible organise a few preparatory sessions with an experienced consultant. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Preparation (cont’d) • Remember that building trust and confidence is an essential precursor to success with the business proposition – many a good proposition has failed because this step was ignored – in Japan the logic of the proposition is not necessarily the first consideration. Remember, the Japanese are considered one of the most risk-averse nations in the world. • Prepare yourself mentally for a different pace of negotiation and bear in mind that some Japanese negotiators use your own time –pressure against you to extract concessions just before closing a deal. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

The Meeting • It is best to prepare an agenda/visit schedule and make arrangements well in advance. • Meticulous preparation of documentation helps to demonstrate that you are a serious organisation. • To create the right impression, it is usually best to wear a formal business suit. • It is essential to arrive on time (slightly early). If you are even slightly late, you should apologise. • Bring business cards with Japanese translations and present and receive them with both hands. • Observe the correct order in exchanging cards – the top people first and then continuing in descending order of importance. • Seating - visitors normally sit on the side of the table farthest from the door. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

The Meeting (cont’d) • Unless otherwise stated, inter-company meetings are not usually for brainstorming or problem solving. They are for an exchange of information and to take decisions. These will usually be based largely on information presented before the meeting. It is not a good idea to come up with radically new items for immediate discussion, but they can be raised and taken away for later consideration. • Sometimes brief meetings are held simply for the purpose of introducing the parties (aisatsu) and allowing an exchange of business cards . Business is not discussed seriously at such meetings. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Communication – Key Points • If the meeting is to be interpreted, bring your own interpreter or facilitator. Don’t hire a cheap one - you generally get what you pay for. The interpreter can be a useful etiquette guide. A good facilitator can understand and express things that the Japanese side might not normally say directly and can correct misunderstandings at an early stage. • If the meeting is in English, adjust your style of speech to make it easy for your counterparts to understand you and check frequently that you have understood what they want to convey to you. • Avoid the use of humour until you are sure your counterparts will understand you. • In presentations try to use a lot of graphics. Wordy slides are hard to follow in a foreign language. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Negotiation – Key Points • The approach taken to discussions will vary according to the situation and the experience of your counterparts. • In discussing a JV or a merger, initial impressions are very important. We have seen many discussions fail at the initial contact stage due to an approach which is perceived to be arrogant or insensitive . • An aggressive negotiating style is unlikely to produce positive results, however, it is possible, in my experience, to succeed using a style which is more direct than the “standard” Japanese approach while still maintaining a very good relationship. • As mentioned previously, it is important not to set too tight a time scale for negotiations as this can lead to you putting yourself under pressure. • It is also important to build in non-task-related activities to help the parties to get to know each other. If possible, meet for dinner before opening formal discussions. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Negotiation – Key Points • The approach taken to discussions will vary according to the situation and the experience of your counterparts. • Emphasise long-term cooperation and mutual benefits rather than cold business logic. • Don’t assume that knowing other Asian countries means that you know Japan. I recently heard a prominent foreign CEO speak in Tokyo and he told the audience how he had spent his first two years in Japan telling people that Japan was just another cultural variation, but was now beginning to see that as a culture, it is “more different” than others. • Be clear about the objectives, but accept that from the Japanese side not all issues will be immediately clear. Often, difficult, but important issues are left for later. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Negotiation – Key Points • Discuss long term issues – often Japanese management will not go ahead with a deal because they cannot see clearly how the partners can integrate effectively or because they feel their organisation lacks the global experience to achieve integration. PMI planning at an early stage can help to remove this obstacle. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Preparing the Team • Ideally, the negotiating team should include someone experienced in bridging Japanese and non-Japanese cultures. This can be a Japanese or non-Japanese person, but the experience factor is very important. Simply including a Japanese speaker or a Japanese executive often does not work. • Coaching the team beforehand will help to avoid involountary cultural reactions – it is easy to misread expressions, tone of voice and body language due to unfamiliarity. It will also help them to familiarise themselves with different ways of working and reasoning. Even Japan- experienced executives can find themselves reacting negatively to a line of argument during discussions because it is “just not the way we do things at home.” Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Conclusions • It is not necessary to become Japanese to negotiate with Japanese organisations, but an understanding of the cultural differences can help to avoid derailing negotiations at an early stage and facilitate successful communication. • Negotiations take place between organisations so it is important that all members involved in your team are aligned with the objectives, have a clear understanding of the negotiating style to be used and have an understanding of the cultural issues. • Establishing personal rapport is very important. • An emphasis on the long-term and on mutual benefits is also very important. • It is perfectly possible to negotiate successful partnerships with Japanese companies and cultural differences can be used as a positive factor in the process. Copyright AKI Japan Limited - All Rights Reserved November 2nd 2008

Doing Business Effectively In Japan

by David Syrad on Aug 08, 2009

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Doing Business Effectively In Japan — Presentation Transcript