Sell to Japan

US-Japan Investment Initiative

Author: cyberradical (Guest Blogger)



  I attended the "US-Japan Investment Initiative 'Investment Seminar in Yokohama'" yesterday.
  Yasu, the owner of the Sell To Japan, told me about the existence of JETRO (Japan External Trade Organization) some while ago. This was the first time for me to attend the seminar organized by JETRO. It was a really interesting event for me to understand what kind of policies and business plans each related parties are thinking about to promote business relationship between Japan and US.
  Firstly, let me quote the agenda of this seminar.

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Date/Time : 13:00-17:30, October 6, 2006 (Cocktail 17:30-19:00)
Place : Yokohama SYMPOSIA
Organizers : City of Yokohama, JETRO,
Kanto Bureau of Economy, Trade and Industry, Ministry of Economy, Trade and Industry,
US Embassy in Japan
Sponsers : Kanagawa Prefecture, Kanagawa Trade Promotion Corporation, Yokohama Chamber of Commerce and Industry,
Yokohama Industrial Development Corporation

Agenda :
1. Greeting Remarks 13:00-13:10
1) Message from the Mayor of Yokohama
Toshiharu Nagashima, Policy Planning Director for Life Science & New Business Attraction, Economic and Tourism Affairs Bureau
2) Hiroshi Tsukamoto, President, JETRO

2. Presentation by Japanese and US governments 13:10-13:30
1) Tsunehiro Ogawa, Director-General, Multilateral Trade System Department, Trade Policy Bureau, Ministry of Economy, Trade and Industry (METI)
2) Hans G. Klemm, Minister-Counselor for Economic Affairs, US Embassy

3. Presentation 13:30-13:40
'Business Environment of Yokohama'
Masayo Hoshizaki, Manager, Business Development Division, Economic and Tourism Bureau, City of Yokohama

4. Presentation 13:40-13:45
'Yokohama's Business Environment from the Foreign Company's Perspective'
Mr. Yoji Toi, Managing Director, Federal Mogul KK (Japan)

5. Presentation 13:45-14:30
'Future Automobile Technologies for Environment and Safety'
Mr. Minoru Shinohara, Senior Vice President, Nissan Motor Co., Ltd.

6. Presentation from Participating Companies 14:45-17:30
1) TSUNAMI Network Partners Corporation - Mr. Masatoshi Go
2) SatCon Technology Corporation - Mr. Leo Casey
3) Zyvex Corporation - Dr. Patrick Y. Howard
4) Fortemedia Inc. - Mr. Fumihiko Ishii
5) GESAC, Inc. - Mr. N. Rangarajan
6) BigFix, Inc. - Mr. George Billman
7) Coherix Inc. - Mr. Kim Chia
8) InternetSpeech - Dr. Emdad Khan
9) Endtone, LLC - Mr. Brock Muir
10) MACRONETICS - Dr. Vinh Nguyen
11) Televital Inc. - Mr. Deepak Bangalore

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  During the these presentations, companies and registrants had opportunities to talk to individual companies to make business networks with them. I had a chance to talk with two companies, and one of them was quite fruitful for each other to build a partnership from now on.

  There are the following three points I want to mention about this seminar.

1. Government Policy
2. Yokohama City as Business Environment
3. Venture Capital

1. Government Poilcy

  I didn't know this, but this investment seminar is the PR body of the US-Japan Investment Initiative, a forum for discussing various economic issues that lie in the way of investment to each country. The initiative was established between former Japanese Prime Minister Junichiro Koizumi and U.S. President George Bush in 2001. One of the key policies is Mr. Koizumi's commitment to encourage foreign direct investment (FDI) to Japan from the current 2% per GDP to more than 5% by 2010. Foreign investment is believed to be a catalyst for economic growth and innovation in both Japan and the United States, because it creates jobs, transfers technology, revives corporations, and supplies risk-taking capital. It also helps the two countries develop deeper political and social understanding.
  You can find out more detailed information with interesting policies in the media note titled "US-Japan Investment Initiative Report 2006" by the US Embassy. Full report (PDF) is also available.

2. Yokohama City as Business Environment

  I was surprised that there is a plan to change Yokohama to a Japanese-version of Silicon Valley. Even it will still take time for a while, Nissan Motors already decided to relocate its global headquarters to Yokohama in 2009. There are many other world-class companies who establish a headquarter or a branch office in Yokohama - Rohm, Macnica, Wipro, Tata, Texas Instruments, IBM and others, not to mention many small & medium sized companies. As a citizen in Yokohama, I can certainly say that Yokohama is much better than Tokyo in terms of cost, environment, density of population, internationality and other elements. Typical Japanese tend to gather in one place just to make themselves stressful ;-) As an aggressive investor and international business man (warning: full of exaggeration), I will take a totally opposite strategy. Stay in Yokohama as your home ground both for business and private life. If you agree with me, you're now my neighbor. So why don't we go Kannai or Isezaki-chojamachi for drink party or night clubbing?
  Sorry for my wandering from the main subject...
  There are many sophisticated business districts here in Yokohama. Population is second to Tokyo (3.6M people). It takes less than 30 minutes to go to Tokyo. Land price and office rent are much cheaper than Tokyo. Outstanding human capital is available such as researchers and engineers graduated from Keio University and Yokohama National University. Five business centers for foreign-affiliated companies exist, and they help to minimize start-up costs and streamline market entry when foreign firms establish a business in Japan.
If you're interested, I recommend you to contact either Business Development Division, Economic and Tourism Bureau, City of Yokohama (ke-yuchi@city.yokohama.jp) or New York Representative Office of the City of Yokohama (info@coyokohama.org).

3. Venture Capital

  Through the seminar, I found there are some venture capitals in Yokohama to assist start-ups. The company who had the presentation was TSUNAMI Network Partners (TNP). According to Mr. Go, President of TNP, the company was founded for the establishment of Silicon Valley type of ecosystem through planning and operation of the venture support organization "TSUNAMI".
  Mr. Go's presentation told me Japan's many weak points for nurturing start-ups in this country.
IPO normally used to take 33 years (!) until the late 1990s in Japan, compared to the less than 5 years for major successful US companies including Intel, Cisco, Microsoft, Oracle, Dell, Sun Microsystems and others. Growth of enterprises are clearly driven by Equity Finance in US, but most Japanese companies including start-ups still depend on indirect bank loan.
Balance of VC Investments in 2003 is 243 (USD billion) in US, 162 in Europe, but just 9 in Japan (!). Also the amount invested per VC investment is 2,373 (USD thousand) in US, 246 in Europe, but just 82 in Japan. What a big difference!!!
  Considering these facts, I can't help becoming the supporter of Venture Capitals in Japan, even if some of them are just money gamblers.

  To summarize, through this seminar, I found three big parties who involve in preparing a very important infrastructure for private companies including start-ups in Japan market.
  The Japanese government agencies (especially METI , JETRO and US Embassy) are constructing basis through policies and laws to nurture and promote business with US companies. A local city like Yokohama City also provides physical supports (namely, grants, facilities and others) to start-ups. The challenging plan to change Yokohama to be Silicon Valley in Japan looks very interesting and attractive. Lastly, local VCs and Cooperative Banks ('Shinkin Bank' which I don't have a chance to explain in detail this time) are supporting the finance of start-ups with their understanding of importance of local economies and industries.

* This article is licensed under creative commons:

Why Offshoring isn't Catchy in Japan

Author: cyberradical (Guest Blogger)

  So far offshore development (offshoring) trial in Japan market has not been successful. There are a couple of reasons why Japanese clients don't like offshoring. In this short article, at first I want to analyze this phenomena, and then discuss which areas of offshoring are feasible and effective.

  The following is the very interesting chart by "Nikkei Computer" (one of the major magazines on Japanese IT industry). Among the major system integrators in Japan, NEC, Fujitsu, Hitachi and NRI are the big four for utilizing offshoring. Compared to them, NTT Data, Hitachi-Soft, Unisys, TIS and even IBM Japan(!) are not yet successful in their utilization of offshoring.

(Click to enlarge)  * Source: "Nikkei Computer" 2006/07/10

  What makes the difference among these two parties?

  One clear reason is "embedded development (including hardware and software)". NEC, Fujitsu and Hitachi except NRI are all the provider of embedded device for cellular phones. On the other hand, NTT Data, Hitachi-Soft, Unisys, TIS and IBM Japan don't participate in this market at this point. We can think of embedded development as a highly standardized manufacturing method, which is similar to package-based development in the area of system integration.

  Another thing to point out is that they can use offshoring for their internal product development instead of providing services to external clients.

  On the other hand, the latter vendors (NTT Data, etc.) focus on system integration rather than embedded development, and their Japanese clients prefer custom development (highly customized development really) to package-based development. In Japan, you should remember that almost all the clients stick to custom development with eagerness. This put these vendors in difficult position to utilize offshoring.

  Custom development normally doesn't fit in offshoring well. It requires to set seats right next to a client (which ask you to cover expenses for Indian/Chinese bridge project managers and system engineers to come to a customer site for long term), understand their special requirements, develop customized system and test again and again until production release. This model is totally different from offshoring and it makes offshoring nonsense (no profit is expected). These are the major reasons why offshoring has not been successful in Japan market so far.

  However, there are still even more benefits offshoring can provide to clients, even to Japanese 'domestic' clients. The following is the estimated sales by major India-based offshore development companies. Total sales of top three players, Infosys, Wipro and Tata Consulting Services(TCS), are over 150M$ in 2005.

(Click to enlarge)   * same source

  Major Japanese clients for top three players are shown below. There are many international companies including Vodafone, GE Capital, Merrill Lynch, etc. Pure Japanese clients are Sony, Toshiba, Sanyo, Matsushita etc., all of which belongs to the manufacturing sector.

* same source

  In my opinion, there are some criteria that test whether offshoring option will meet your requirement or not.

1. Package-based approach
  The first criterion is whether your project can take advantage of package-based approach rather than custom development, like SAP, Oracle for instance.

2. High requirement of standardized documentation
  Second is whether your project requires to leave documentation through and after development. If your project needs standardized documents for maintenance, system extension and others, offshoring matches well. As you know, offshore vendors put weight on documenting with standard method represented by Rational.

3. Global operations
  The third criterion is whether your company is built on global operations, i.e., an international company. Major offshore development companies have branches all over the world to provide support globally. This is not available when you use a domestic integrator.

4. Profit-driven
  The last criterion may still need more validation, and current pricing model (time and material) need to be changed, but if your project seeks high profit, offshoring matches well because of its low cost service fee.

  So if your company meets these criteria, you'd better try out offshoring as a pilot project quickly. For offshore development vendors, they should primarily focus on clients which meet these criteria.

* This article is licensed under creative commons:

97% of major companies expect economic expansion

  Last week, I had a conversation with my customer in Osaka and we agreed overall Japanese economy was getting better. Today, I also chatted with a taxi driver in Kobe, and he told me he felt the local economy was improving. (I like to ask taxi drivers about business conditions, because they always have concern about how many "taxi tickets" are used by corporate customers and how often they are taken after the last train. Generally they are good economy wathcers.) I, however, was wondering if only people around me and I felt that way.

  Then, I saw this article on IHT/Asahi today:

97% of major companies expect longest postwar economic expansion

"The companies are growing bullish because of increasing corporate capital investment and rising consumer spending.

Ninety-two (of 100 leading companies) said capital investment in all industries will increase in fiscal 2006 from the previous year.

Twenty-five companies said consumer spending will remain strong for another year, a sharp rise from 11 in the previous survey."

  The fact that 97% of major companies are bullish should not be neglected. Well, it's quite remarkable.

  Isn't it time to sell YOUR products to the buoyant market?

Even desks go high-end in Japan

At a time when the government and some business sectors fret over the nation's falling birthrate, makers of high-quality desks see a business opportunity.

With fewer children per household, there is more money to spend on each youngster.

In the past, the majority of desks sold for new students were priced between 60,000 and 80,000 yen, but many desks are now priced above 100,000 yen, with desk sets sometimes going for more than 200,000 yen...

http://www.asahi.com/english/Herald-asahi/TKY200602160135.html

An interesting story about a market trend in Japan. Families with fewer kids (one is the norm) are willing to spend more for their kid. A $2,000 desk set for a kid! Wow.

How would you apply this theory to your business in Japan?

Upturn in Japanese economy

Ninety percent of the senior executives from 100 leading companies are bullish about the (Japanese) economy, saying it is either expanding or at least recovering.

Of the companies surveyed, 87 indicated a belief that the economy is gradually recovering, up from the 49 that stated the same view during a survey conducted this May and June.

Poll: Firms predict an upturn in economy, the Asahi Shimbun

This is an encouranging news. These days I really feel 2006 will be an exciting year to do business in this country.

An NY Times article on Japan, "New Optimism About the Japanese Economy After a Bleak Decade" mentioned by Gen Kanai is also interesting.