Selling to Japan
Despite tough economy, Japanese market offers huge potential to Canadian firms

When Canadian companies export, they typically look south. But the strengthening loonie, the softwood lumber dispute and the Progressive Conservative party's pledge to review NAFTA, have made local executives increasingly aware of how many eggs they have in the American basket.

More than 85 per cent of our exports end up south of the border. And while Canadian firms will never be able to do without their U.S. clients, more diversification is a must. The Japanese market provides an attractive option, which remains substantially underdeveloped.

Although Japan's $4.5 trillion economy is half that of America's, Canada's $12 billion in exports to Japan, are barely one thirtieth of what we ship to the U.S.

"Japan is filled with opportunities," said Charles Kamei, general manager of Alcan Asia Limited, which ships between U.S. $80 and $140 million to Japan each year. "But companies that want to do business here have to play by Japanese rules. The North American way of doing business won't cut it."

Canada and Japan should be natural trading partners. Canada is resource rich, and Japan has 127 million hard-working, industrious people that for all intents and purposes are living on a rock. Yet, for variety of reasons these trading opportunities haven't panned out.

Alcan provides a big exception. Kamei has been involved in importing and reselling of aluminum ingots, sheet metal and building products into Japan for years, and has overseen many tough deals with Japanese managers.

"It's a tough market to crack," admits the veteran marketer. "The Japanese have high quality standards. Close is not good enough. You either meet the standard or you don't."

Among Alcan's achievements in Japan are a recent technological partnership with Nippon Light Metal, which will see the latter produce aluminum coil for the Japanese automobile industry starting in July of 2004. But in recent years, slower Japanese housing starts have put a dent in exports, and Alcan, like many companies, has had to fight for every nickel's worth of business.

Canadian exports to Japan tend to be concentrated in primary materials, building products and agricultural goods, but in recent years increasing efforts have been made by trade officials to boost more value added exports such as high-tech products.

One company that has seen a lot of success is St-Hyacinthe based Olymel, which exports about $250 million worth of pork products to Japan each year, notably choice filet and loin cuts, which are used in Tonkatsu, a Japanese dish.

According to Sakugi Takeshita, Olymel's agent in Tokyo, the Japanese are extremely demanding in their quality standards, but they are often willing to pay a higher price to get the best cuts of meat.

"The Japanese have a philosophy of continuous improvement," said Takeshita. "In other markets, a quality standard is a minimum target that has to be met. The Japanese expect you to beat the target."

As a result of Olymel's tough quality standards, and aggressive marketing, shipments to Japan have risen from 7,000 tons of meat twelve years ago when Takeshita started with the company, to 55,000 tons last year.

According to Greg Giokas, a food and consumer products counselor at the Canadian Trade Commissioner Service in Tokyo, Canadian companies are not exploiting opportunities in the Japanese market as well as they could.

"Japan's GDP is equal to that of all other Asian countries combined," Giokas said. "Canadian companies that export here are doing a tremendous job here in terms of quality and service But there could be a lot more of them."

How much more could exports rise? "One is tempted to say double. But it's hard to give a precise number," Giokas said.

But marketing to Japan is not like marketing to the U.S.

"When a Canadian company wants to sell in the states, they just pick up the phone and make the sales. It's not that simple here, you have to take the time to get to know the market and build relationships" Giokas said. "You don't sell to Japan, you export to Japan."

Giokas advises exporters to hire local agents or staff, who are familiar with the Japanese language and who know the country's customs and business practices.

There are many reasons that Canadian firms have shunned the Japanese market is past years. Distance and language have formed powerful psychological barriers. Japanese red tape, and non-tariff barriers are also all too real.

Nevertheless, Japan continues to be Canada's second largest trading partner, and if experts are to be believed, there appears to be a lot off room left for growth.


Photo caption: According to Charles Kamei, general manager of Alcan Asia and Sakugi Takeshita, an agent for Olymel, (shown here in front of the Imperial Palace in Tokyo,) the Japanese market has enormous potential but is tough to crack.

Sidebar: Selling to Japan

Experts say that selling to the Japanese market is far different than doing business in North America.

o Targeting the Japanese market requires a long-term commitment both in terms of time and money. It's rare to see someone make a fast buck in Japan.
o Relationships are very important. It's better to hire local people who know the language, culture and players, to handle Japanese operations.
o The Japanese are quality conscious and demanding, yet are often willing to pay more for a better product. However the Japanese philosophy of "continuous improvement," means they rarely satisfied for long, and are constantly setting higher targets.
o Exporters should take the time to learn Japanese standards, and manufacture products to meet them. Companies that try to force Japanese companies to accept products built to North American standards and measurements will be sorely disappointed.




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