Overseas markets are becoming increasingly important for Japanese companies. However, not all companies that have expanded overseas have been successful. This section presents an analysis of the current situation of companies operating overseas.
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Accelerating Overseas Expansion of SMEs
Japan’s population is decreasing and the future of domestic demand is in doubt. This has led many companies to seek overseas expansion. This movement is not limited to large companies. In particular, it is said that SMEs with a large number of manufacturing companies will not be able to survive the competition unless they expand overseas.
This is due to the entry of foreign companies with cheap and high technological capabilities. As foreign companies offer cheaper products in Japan, many SMEs face challenges in their business environment. On the other hand, the Asian market, where economic development is progressing, is a promising market. Companies that have already built up a track record in Japan with their own technologies now have an opportunity to challenge new markets.
Another reason for the increase in overseas expansion is the improvement of IT technologies such as the Internet. It used to be difficult to hold a meeting with overseas corporations. But now with tools like videophone and Skype, it’s easier to interact with your customers and partners. The ease with which these tools are available is also advantageous for small businesses.
Some emerging countries offer preferential treatment for foreign investment in order to actively accept foreign companies. For example, Thailand provides reduced import duties and taxes on key raw materials, partial exemption from corporate taxes, and exemption from corporate taxes on profits and dividends arising from encouraged industries. The tax saving effect of this preferential treatment system for foreign investment is also an advantage to expand overseas.
Current Status and Analysis of Issues Facing SMEs
The challenges faced by SMEs when entering overseas markets include securing customers, securing funds, and securing local advisors. The 28 Survey Report on Overseas Business Activities of Small and Medium Enterprises, published by the Organization for Small & Medium Enterprises and Regional Innovation, Japan, provides answers to the problems faced by exporting enterprises.
The most common response was “”Securing human resources capable of working in a foreign language or in a trade office””. This was followed by “”Cultivate local customers”” “”Developing and strengthening relationships with local sales partners”” and “”Product development to meet local needs (Functions, specifications, designs, etc.)””.
In fact, some said, “”Inquiries from Southeast Asia and the Middle East cannot be met due to a shortage of human resources”” and “”I am working to improve my language skills because it is impossible to negotiate without knowledge of the company’s products even though I can speak the language.””.
In terms of securing local customers, we have achieved significant economic growth in emerging markets through the continuous entry of foreign capital. “”Amid intensifying competition due to aggressive overseas expansion by developed countries other than Japan, the degree to which we can maintain our competitive edge will determine our future businesses.””.
How to resolve these issues is the key to success in overseas expansion. There are quite a few companies that are trying to find a way to expand overseas due to sluggish domestic business. However, it is difficult to successfully expand overseas due to the current business uncertainty and uncertainty about the future. It will also be important to create financial surpluses through public support and bank loans.
Reference: Organization for Small & Medium Enterprises and Regional Innovation, JAPAN
“”Fiscal 28 SME Overseas Business Activity Survey Report“”
What Causes a Successful Overseas Expansion?
The FY 28 Survey Report on Overseas Business Activities of Small and Medium Enterprises included a questionnaire about the success factors in establishing overseas bases. The most common response was “”With the acquisition of personnel to promote overseas operations””. This was followed by “”We have secured, trained and managed local employees.”” and “”Because local customers were able to develop””. As for the reason for achieving the export target, the most common response was “”The local customer was able to develop.””.
The key to successful overseas expansion is securing human resources. A specific example of the response “”With the acquisition of personnel to promote overseas operations”” is that the company hired excellent local employees who were able to recruit excellent local students through their own connections.
Global human resource development may be difficult for SMEs due to chronic manpower shortages and funding shortages. In such a case, you should consider looking for consultants who are well versed in overseas expansion and securing human resources for overseas expansion in the local area.
Summary
Overseas development is totally different from domestic development in culture and law. In addition, since lifetime employment is different from the general Japanese system, human resources tend to be more fluid. In order to successfully expand overseas, you should analyze the current situation of the company, prepare a detailed management plan, and secure human resources. There are many companies that use overseas expansion as an opportunity to expand their businesses, increase sales and improve profits. We should also use support for companies aiming to expand overseas.
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