The Hidden Benefits of a Representative Office in Japan
- santen01
- Oct 31
- 6 min read
There are different ways of starting and developing business in Japan for foreign companies and depending on who you ask, you'll hear one or the other preference. But there is one important prerequisite that almost all experts in this area will agree: your company needs to be present in Japan. Without feet on the ground, close to your customers, and communication in Japanese language, it won't be possible to built sufficient relationship and trust to working together. If you come to Japan only occasionally, for example, to visit exhibitions, you'll probably meet friendly Japanese people and they will politely appreciate your products and services. But eventually, they will "forget your name before you are back in the aircraft" - as one other market entry expert put it a couple of years ago in a private conversation.
Being a consulting firm specialized in supporting foreign companies developing their business in Japan and as outlined in our services pages, we typically work as the Representative Office of our clients in Japan. There are obvious advantageous compared to other ways of entering the Japanese market, namely, working with a distributor or establishing an own subsidiary. In brief: the Representative office gives our clients control over the activities in Japan (as they usually don't have when working with a distributor), but for much lower cost in contrast to funding a subsidiary, that can easily cost up to 1 million Yen in the first years without generating sufficient revenues. In addition, market access and high flexibility in staffing are provided by the Representative Office. The following table summarizes the main differences:
But there are also hidden, not very obvious benefits of working with a Representative Office in Japan that we want to give an overview here and in the following part:
Negotiation and Conflict Mediation
Of course, being the Representative Office for our clients in Japan, we will always negotiate with customers in Japan in their best interest. At the same time, San-Ten Consulting is also seen by the Japanese companies as a third party that is different from the actual business partner. As most readers will certainly know, keeping harmony is one of the major cultural backgrounds and "rules" in Japan and giving direct negative feedback and confrontation is avoided as much as possible. This is where the third party mediator becomes very helpful:
We can negotiate more open and frank and most Japanese companies will reply to us with their real intentions than it would be possible in a direct negotiation between the Japanese customer and our clients. As a third party, we can use direct phrases like "our client cannot accept this payment term", and can convey messages more directly without harming the business relationship. In the other direction, we can also give a better understanding of hidden messages in the customers' reply and what might be a more practical way in Japan than in the home market of our clients.
In this respect, San-Ten can also mediate in conflict situations that would otherwise bear the risk of endangering the business relation. Knowing the expectations of the Japanese customers and understanding the red lines of our overseas clients, we will be able to offer practical and acceptable solutions in an amicable fashion.
Translation of the Real Meaning
It can often be heard, that speaking Japanese is a must when doing business in Japan. And while we absolutely support this view (but for different reasons), just literal translation with or without AI tools can often fail. We regularly talk to confused foreign companies where the communication with a potential Japanese customer suddenly stopped although the last messages received had been very promising.
Unfortunately, the Japanese language isn't as explicit as English or other European languages and very often the real content and key message is hidden "between the lines". As mentioned above, Japanese companies shy away from conflicts and anything that could destroy the harmony. Therefore, negative statement are wrapped in friendly statements and not expressed explicitly. A literal translation of the Japanese text can thus lead to confusion and misunderstandings because the real meaning isn't conveyed.
At San-Ten we have a lot of experience with this phenomenon and will always translate messages and statements together with an assessment of the real meaning to avoid confusion and misunderstandings at our clients. Just recently we had the case where a literal translation and understanding lead to a misunderstanding in the intentions and time lines of a possible joint investment with a Japanese company. While the intention of the Japanese company was to have a joint investment in the far future and meant as a goal of further cooperation, based on the way it was expressed, our client initially understood that the investment could happen very soon. By recognizing these differences in connection with the cultural background, it is possible to explain it to our clients and avoid confusion and misunderstandings.
Besides translating the meaning of messages that maybe are not visible by a literal translation, we also have the right set-up to know where the cultural differences are and which gaps need to be addressed. While a Japanese person even with extensive experience in other cultures might have difficulties to identify differences, for our staff with mixed cultural background it is very obvious to recognize cultural pitfalls and causes of misunderstandings. This enables us to always give a heads up to our clients about real intentions and hidden information in communications as well as differences in behaviors.
Long-term Commitment to the Japanese Market
As it is widely known, the Japanese companies are always interested in long-term business relationships that should last decades. While in other cultures profit maximization is the top priority, and changes in suppliers and customers frequently happen, the Japanese customers prefer stable, long-term oriented partnerships with well-know and reliable vendors. Relationship, trust, and harmony are more important than a few bucks higher profit and also foreign companies will be rewarded with this loyalty if they show their commitment to Japan in the long run. In particular in B2B business, the vetting, testing, sampling, second testing, and so on business development process can be very lengthy, but are essential to gain the trust of the customers. To publicly express this commitment to the Japanese market, of course, establishing an own subsidiary will be the ultimate sign. But it comes with a significant investment that also Japanese business people understand can be too much for SME.
Having a Representative Office and with that an official, dedicated "own" hub in Japan is a great option to show the commitment for a long-term base in Japan (that may become a subsidiary later) but for a much lower price than an own entity. The Representative Office can guide and be present all the way the Japanese customers need to test and try the products, can answer questions, communicate on your behalf and meet in person anytime, if necessary.
A couple of weeks ago, we inquired about a product of a Japanese company for one of our European clients. After a few emails, the sales manager asked for an in-person meeting, that we could arrange the next day. At the meeting he explained to us, that he wanted to see for himself who we are and who our client is - putting a face to the name. For many Western business people, this sounds like a big waste of time. For the Japanese, it is essential to build trust and essential to do business. Without the meeting, we couldn't do any business with them.
Body Leasing
It may sound obvious, but in our experience, it is easy to forget about this. When working with us as your Representative Office, we are not only waiting for your instructions and execute them in Japan. We actively plan and organize all necessary tasks and measures in Japan for our clients.
As mentioned above, we are working like a part-time sales and marketing department and with that, our clients have dedicated personell in Japan without the hassle of actually hiring them. We can start with our internal staff in the beginning, covering the first tasks of marketing, websites, and exhibitions. If workload increases, we can hire dedicated part-timers with a specific background and network. We can also hire a full-time sales manager that is entirely supporting your company in the Japanese market. In this respect, you can outsource not only the tasks but also the workforce to us and all the peculiarities that come with the probably unknown labor laws and mandatory insurances in Japan.
Trading Support
When looking at the definition of a Representative Office, many times it is cited, that it is not allowed to be involved in actual sales or activities other than marketing and business support. While this is of course correct since a Representative Office is no legal entity
and thus, cannot enter into any contract including sales contracts, San-Ten Consulting is a registered company in Japan that can do all these activities.
In the case a Japanese company doesn't want to do direct overseas business (which is the form we would always prefer in the first place), San-Ten can act as a trading house and import the products or services from our clients and sell them domestically to the Japanese customers. In this sense, our clients get two in one: their Representative Office for the marketing and business development and San-Ten in the background as a possible trader.
