Introduction

Japan is always going to be a country that attracts several multinational companies that seek to globalize their operations (Corstjens, 2014). The country has a large population that excites all global organizations such as Wal-Mart and Tesco. However, this paper seeks to analyze some of the reasons behind Tesco’s entry and exit from Japan (Bei, Gielens, & Dekimpe, 2018). Tesco is a British group supermarket that was founded by Jack Cohen in 1919 (Bei, Gielens, & Dekimpe, 2018). It is currently the third largest retailer to announce its exit from the Japanese market after an unsuccessful stint by other global companies such as Wal-Mart from Japan (Bei, Gielens, & Dekimpe, 2018). Even though the Japanese market is attractive to all global companies such as Tesco, it is almost impossible to penetrate their market. Tesco ventured into the Japanese market for eight years but failed to endear and establish itself in the market. Foreign companies such as Tesco must conduct the right research before deciding to join the Japanese markets.

Japanese market

The Japanese market excites all global companies around the world (Bebenroth, Kshetri & Hünerberg, 2014). The more than 126million Japanese population represents a massive customer base for all global companies seeking to expand their operations to the Asian continent. The country has a good network of transport and communication that allows convenient movement of goods and services from one place to another. Japan is an industrialized country, but the vast of its population do not live in the industrial cities (Bebenroth, Kshetri & Hünerberg, 2014). It, therefore, implies that a significant number of people still live in rural areas hence making it difficult for the global companies to exploit the huge market base. There is also a lot of robust marketing strategies from the local companies and cultural differences that make it difficult for international companies to exploit.

Why the Japanese retail markets are so difficult to compete in

The Japanese market is challenging to penetrate global companies because people are reluctant to do business with international companies (Bebenroth, Kshetri & Hünerberg, 2014). There is significant evidence that most of the Japanese people do not speak foreign languages such as English. The limited ability to speak foreign languages has led to increased intellectual isolation of the country. It is also important to realize that the Japanese industry is dominated by financial conglomerates known as Keiretsu (Bebenroth, Kshetri & Hünerberg, 2014). The Keiretsu creates a strong barrier for the local people to do business with global organizations. The country’s retail market also proves challenging for the global companies because of the dense network of procedures, permissions and certifications that work against foreign companies (Bebenroth, Kshetri & Hünerberg, 2014). The Japanese restrictions formulated through policies provide a lot of difficulties for global companies. The country’s numerous restrictions bring a lot of professional burden for global organizations to compete with the local companies. It is, therefore, essential to realize that part of the reason why global companies such as Tesco fail to penetrate the Japanese market is attributed to the country’s government.

Why Japanese customers are reluctant to shop at foreign retailers

The Japanese Keiretsu traditional structure provides a stumbling block for global companies (Maclachlan, 2010). The Japanese conventional market industry is prepared around the Keiretsu arrangement where six large groups such as banks and a commercial company remain central with significant companies within various categories such as transportation, departmental stores, beer factories, insurance, electrical and cars businesses and more (Maclachlan, 2010). It is, therefore, essential to realize that doing business outside the traditional Keiretsu in the Japanese market is difficult because it discourages Japanese consumers from purchasing goods from international companies. Consumers consider mostly brand names before purchasing (Maclachlan, 2010). The Japanese people associate themselves more with the local brands and making a purchase outside the traditional structure of Keiretsu is difficult for the local people. The local people would instead prefer to purchase from brands associated with the Keiretsu even if the brands are more expensive as compared to those from the international companies.

Recommendations

The Japanese market is challenging to penetrate due to cultural factors such as the traditional Keiretsu (Corstjens, 2014). Therefore, for a global company such as Tesco to succeed in such a market, it is vital to comprehend the people’s cultural expectation before deciding to venture in their markets (Corstjens, 2014). The problem of foreign companies is that they want to take over the market so quickly, but this does not augur well with the local people (Corstjens, 2014). Global companies like Tesco should begin little by little to test the waters and consistently expand as long as the home base location is successfully tested (Corstjens, 2014). Any foreign company that quickly invests a massive chunk of its money into the Japanese market and still expects to realize instant benefits is in for a huge shock.

Conclusion

Companies wishing to expand their operations into the Japanese markets need to conduct a lot of research about the local people’s buying patterns, culture and geographical location of the country. It is also vital for companies to expand one time at a time with the right marketing strategies to attract local people.

References

Bebenroth, R., Kshetri, N., & Hünerberg, R. (2014). Foreign firms’ access to the Japanese market. European Journal of International Management, 8(1), 1-19.

Corstjens, M. (2014). Retail Doesn’t Cross Borders: Here’s Why and What to Do About It. Retrieved on April 15, 2019, from https://hbr.org/2012/04/retail-doesnt-cross-borders-heres-why-and-what-to-do-about-it

Maclachlan, M. (2010). Challenges of Doing Business in Japan. Retrieved on April 15, 2019, from https://www.communicaid.com/cross-cultural-training/blog/challenges-of-doing-business-in-japan/

Bei, Z., Gielens, K., & Dekimpe, M. G. (2018). Retail entry and exit. In Handbook of Research on Retailing. Edward Elgar Publishing.