Overseas businesses have many advantages that cannot be obtained only in Japan. The decline in domestic operations has led to an increase in the number of companies seeking to expand overseas. Considering future trends in Japan and the rest of the world, overseas expansion is an option. However, the reality is that there are disadvantages to overseas business. If you make a mistake in how to do it, you will suffer a big loss, so you should understand the advantages as well as the disadvantages, and make it a better way to avoid falling down.
Benefits of Overseas Business
Some of the benefits of doing business overseas include:. While the benefits vary depending on the company’s products and services and how it operates overseas, many companies seem to be attracted by the reduction of manufacturing costs, mainly in large global markets and emerging countries.
Personnel and raw material costs
The low cost of labor and raw materials in emerging countries has long been a major attraction in the overseas business of Japanese companies. In recent years, labor costs have soared due to educational measures in emerging countries. However, we can still find bases where production costs are low, and even though the costs have risen, they are still low compared to those in Japan, so we can say that there are cost benefits.
Opportunity to expand sales channels
The advantage of overseas business is that you can do business with the world. Companies whose sales have stagnated due to the shrinking domestic market are trying to find markets overseas where there is still room for growth. Emerging economies, whose GDP is rising steadily, are particularly attractive targets. Even in countries where the benefits of being a production base are diminishing due to rising personnel costs, finding new sales channels can help discover new attractions.
China and other countries are attracting attention as one of the largest markets in the world, although labor costs have increased. Also, made in Japan is drawing attention around the world, and Japanese products are suitable for overseas business.
Concentrating Management Resources to Achieve Global Value
Another benefit is hidden in overseas markets. Most Japanese companies offer multiple products and services, but some overseas companies offer a single service. This is because the scale of overseas markets is very large, and one service is sufficient for management. The Japanese market is small, and there is a limit to the maximum sales of one product or service.
If Japanese companies are to compete in overseas markets, one strategy is to concentrate management resources on specific products and services and to raise the value of products to the global level. Focusing on a limited set of services can simplify your business and allow your employees to focus more on their work.
Acquire overseas technologies and know-how
Although Japanese technology is highly appreciated, it lags behind in terms of know-how and advanced technology to compete with the global market. Therefore, it is important to take advantage of overseas business opportunities to introduce technologies and human resources to make up for the shortage. Also, new overseas experiences may inspire new business ideas.
Business entry methods include joint ventures and franchises as well as independent local branches.
Disadvantage of overseas business
Overseas business is not only good but also has disadvantages. We need to deal with it carefully because we can be greatly hurt by going abroad without considering the demerits.
Difficult to train and manage human resources
In overseas business, local human resources are hired to train and manage the employees hired there. Japanese employees dispatched from Japan play this role and sometimes work together, but this can cause problems due to differences in culture, customs, and communication. Especially for Japanese who are diligent, and fussy about time, they can’t understand the sense of time and working style of people overseas, and they have trouble with local employees, or they retire right away.
High political risk and country risk
When Japanese companies expand overseas, emerging countries have cost benefits and are attractive. On the other hand, in some countries, politics and the economy are not stable, and unexpected problems can occur at any time. This situation is a risk, but it is also an attractive place for cost benefits and future market development. This is a very difficult management decision, and there is a great dilemma between merits and demerits. However, it is better to consider the safety of expatriates and the stability of management as the first priority, and not to make high-risk choices.
Summary
Overseas business has advantages that are not found in Japan. It is a very attractive business, but there are some disadvantages that occur because it is overseas, so it is dangerous to enter easily. It is important to find ways to avoid disadvantages and find ways to develop products and services that are appropriate for your company.
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