Considerations for Japanese companies when considering overseas expansion

Cash Planning Consideration
Precautions for securing human resources
Market Considerations
Other Country Risk
And what you need to be careful about after you get into orbit,
Summary

Cash Planning Consideration

When Japanese companies consider expanding overseas, the first thing to consider is financial planning. Overseas expansion often requires huge amounts of money, and failure is unacceptable.

For this reason, it is necessary to carefully consider a plan for the recovery of investment funds in advance. I would like to pay particular attention to the personnel costs of each country and the rate of increase.

It has generally been thought that securing local employees can reduce labor costs, but rising labor costs in emerging countries can make this difficult. Even at the planning stage, it is necessary to consider the rise in personnel costs as an assumed risk and take countermeasures.

Foreign exchange risk is another issue that we would like to consider in our financial planning. There are cases where the profit was made at the rate at the time of closing, but the loss is made at the time of shipment due to the fluctuation of the rate. For example, in the case of export and import transactions, one measure is to enter into an exchange contract that prevents exchange losses from fluctuations in exchange rates.

Precautions for securing human resources

Securing human resources is also an important issue when considering overseas expansion. It is necessary to consider various options in advance, such as dispatching employees from Japan and securing human resources in the field.

When dispatching personnel from Japan, it is important to give consideration so that people do not feel uneasy about their local life and safety. Dispatch of personnel to emerging countries in particular tends to be accompanied by anxiety about various dangers and inconveniences. It is also important to use your prior business trip to imagine life in the local area and to let them know about safety and lifestyle.

In securing human resources in the field, it is necessary to find a way to proceed smoothly, from subsequent training to labor management, after understanding the differences in labor consciousness and working styles.

If it is still difficult to secure human resources in the end, we will review the structure by reinforcing human resources and strengthening the organization.

Market Considerations

Market research for overseas expansion needs to be conducted more carefully. Market research is often more difficult than domestic research.

Due to the physical distance from the site, preliminary research will be conducted using the Internet. However, some information on the Internet is not reliable, so it is necessary to investigate whether it is true or not.

We will conduct SWOT analysis in accordance with the local market, and utilize it for current profitability, future prediction, and business planning. In some cases, we may need to review our basic strategy, review our markets and products, and restructure our purchasing and sales channels. As a result, it will be necessary to fundamentally reconsider our overseas expansion in terms of financial planning and profitability.

It is also necessary to pay attention to the different distribution situations in each country. Differences in transport safety, cost, and duration could lead to a lack of speed in the process from procurement of raw materials to sales of products, or a loss of sales opportunities as a result.

Other Country Risk

Overseas, there are local conditions. In addition to political issues such as terrorism, revolution and war, there are also risks that cannot be addressed by individual companies, such as crime and disease.

To prevent such risks, it is necessary to choose a country based on political stability when considering overseas expansion. If the difference in cost or profit is small, focus on safety rather than small differences. Another way to diversify risk is to spread it across multiple countries.

There are legal issues to be aware of depending on the country. Overseas, each country has a different legal system and rules. The first thing to notice is whether you can actually start a business in the country.

In addition, 100% foreign companies may not be able to enter some countries. It is important to think about entering the market after understanding how foreign capital regulations are. Depending on the regulations, it may be necessary to consider the option of joint ventures with local companies.

Differences in business practices may cause unexpected deterioration in cash flow. It is important to know the trend of each country’s business practices and make a contract with a collection method that does not worsen the business situation.

For example, consider whether it is possible to deal with advance payment, whether to deal with accounts receivable, and how to collect accounts receivable.

And what you need to be careful about after you get into orbit,

When expanding overseas, there are things to be careful of even after the business gets on track. This is the same in Japan as well, but the business environment is constantly changing in other countries and it is necessary to review appropriate markets and business strategies in light of these changes.

Even those who make decisions in Japan have to calmly assess the real situation in the country and respond flexibly without being caught up in past success stories. Overseas operations often require faster response than domestic operations.

Summary

As mentioned above, there are many points that need to be checked, but I would like to reiterate that the decrease in profit margin due to the rise in personnel costs should be noted. Not only in the manufacturing industry, but when you go overseas in search of cheap labor, you need to judge the situation calmly and sometimes make a big decision. In the case of unprofitable businesses, we would like to consider a major change in the business structure itself, withdrawal or shift to other bases.