Japan is a strange place, especially when it comes to doing business. On the surface, it looks like an easy place to do business. The restrictions from the government around setting up a company and getting a visa have been loosened. If you’re trading something that can’t be bought or manufactured in Japan, then you’ll usually have an easy time. The country has an excellent infrastructure and processes for shipping, emergency recovery etc, so there aren’t any of the risks that you have when you look into the developing world. And, of course, it’s the world’s third biggest single economy, and it only slightly lags behind the combined GDP of the EU.
If you’re selling something that the Japanese want, there’s no doubt you’ll make a lot of money.
And yet, I can almost assure you that your business growth won’t be what it is when you compare it to other developed economies such as Germany, the US or the UK. On paper, these countries should be pretty similar, with roughly equal GDP growth rates, GDP/Capita, bank interest rates etc… but there is something else that holds you back as a foreign company in Japan. There’s an invisible set of rules that you need to follow. If you don’t know about these rules and follow them, you’ll have mild growth at best, or a worst your investment will run out in a few years and you’ll head back home.
To explain what I mean, I’d like to talk about two probably related cases. I say probably because I’m not 100% sure if this is going on or not, but I have recently seen the similarities. The first is about TV stations.
If you are to build a TV station anywhere in the world, you’ll usually do a lot of research, come up with some plans, engage a consultant to help with the design, speak to manufacturers to share ideas and learn about the latest and greatest technology, and then build your facility, train your staff and operate your TV station. You’ll hammer down the pricing everywhere that you can, and (in most cases) you’ll be pretty careful not to look like you’re playing favourites or doing anything under-the-table.
Not so in Japan.
If you want to build a TV station, you’re only talking to one of two companies; NEC or Toshiba. That’s it. In a very distant third place is Sony Business Solutions, and after that Ikegami. But those are usually for smaller systems, like an individual TV studio, not a full-blown station.
The average cost of a Japanese TV station would be at least 25% more expensive than a system of the same specification in the US or EU. I know of systems that are much more than that. For example, a system clock for a TV station can be bought for about US$10,000 (for a mid-range model), whereas the only system clock that is in use in Japan will cost you US$300,000.
But herein lies the rub. Welcome to the Money Washing Machine.
Whilst there is nothing explicitly written in the contract, if you win a project to build a TV Studio for, say, US$10 Million, then you will be expected to buy at least US$1M of advertising on that station. This works if you are a manufacturer of consumer and business goods, like Toshiba or NEC (or Sony), but not so much if you are only manufacturing business goods. I know of one person who had to buy airtime for his audio codec service (something used in pro radio) during the middle of the night else he wouldn’t get the contract.
On paper, this looks like a total impact of US$11M; Toshiba gains $10M, and the TV Station gains $1M. But, in reality, the impact should only be US$9M. That’s a problem when you look at the official figures and decide to invest in Japan.
So this brings me to Nisshinbo.
Almost everyone in Japan knows the name “Nisshinbo”. They run huge marketing campaigns, under the slogan A necessary company in today’s age.
And yet no-one knows what they do, to the point where their TV ads are literally pop singers making up songs with the lyrics:
Nisshinbo, Nisshinbo, I’ve heard the name
Nisshinbo, Nisshinbo, I don’t know what they do.
At the end, instead of saying “We do X…”, the two dog executives basically say “Damnit, she doesn’t know either,” and they show the A necessary Company tagline. Here’s a link if you don’t believe me.
Nisshinbo is a massive Business to Business company, selling things like power, batteries, automotive brakes, chemicals, and precision instruments. None of these things are directly sold to the public, so why do they need such a massive (and constant) advertising campaign.
It’s really quite simple.
Many of the businesses in Japan are owned by massive holding companies, or Zaibutsu. An example are the train groups, like Tokyu, who not only own and operate some trains, but have a line of supermarkets and department stores that are conveniently located near their stations.
When you get a little more esoteric, you have a housing construction company that shares its branding with one of Tokyo’s main TV stations.
And then there is Dentsu, one of (if not the) world’s biggest advertising agencies and broadcast rights holders. About 80% of the advertising in Asia goes through Dentsu. So, if you want people to know what you do, or you want to make TV or movies in Asia, you need to do what Dentsu tells you. I think I might write another post about Dentsu, as it really is about as close to the Illuminati as you can get in the modern world.
So, if you try and move in Japan and don’t follow the invisible rules, you’ll get chewed up and spit out before you even realise what is going on. And the public happily accepts this, enjoying their cheery “Nisshinbo” jingles and laughing whenever you ask them what Nisshinbo actually does (I originally thought that it was a securities and insurance firm before writing this). Just think about that for a moment; millions of dollars have been invested in an advertising campaign with the main aim to tell people that your company is important to them without actually ever saying what you do.
Now that is some serious level bullshit.