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To identify a particular business activity in one of Asian countries is a quite difficult job considering a big number of ongoing issues such as the Global Financial Crisis and circumstances connected to this phenomenon. They certainly have to be taken into consideration when one is going to establish a particular business activity in this day and age.
The Global Financial Crisis has undoubtedly reached all economies in the world and has left behind very serious consequences such as many bankrupted private companies, financial institutions and even one bankrupted government in Iceland (Telegraph, 2009). Not only the most developed countries suffer from low demands for their products, decreasing their stock market and cutting down job positions. This ongoing issue makes doing business internationally even more complicated. However, potential for doing business in Asia is really enormous due to its huge population of approximately 4 billion people (Asian Development Bank, 1998). Hence, there are many viable chances to do business and one has to realize that even a small piece of success in this huge population can represent a tremendous profit for a certain company.
Nowadays, on the one hand, economies in Asia are skyrocketing, their potential is tremendous and represents a huge and significant market for the rest of the world, whereas, on the other hand, it also needs to be noted that even these highly developing or developed countries have a certain number of their concerns.
This work is going to delineate what business activity can be established in Japan by an Australian company. This particular activity is based on concerns, mentioned below, which are currently an issue in Japan.
A brief description of business background and environment in Japan
Japan is a very remarkable country of crucial importance to the world's trade. Japanese car and electronic manufacturers in the United States, Asia and Europe make a lot of people dependant on their employment and other providing services (Course: Doing Business in Asia IBUS7312, notes from lecture, 16 March 2009). Japan is for Australia a very lucrative business destination, however if one intends to set up a particular business activity in Japan, a whole number of issues have to be considered such as different culture, different way of doing business and tremendously different business relationships.
Japanese companies are also known to be the world's most inventive and aggressive in their business behaviour. They continuously produce new products and improvements on their old products. Consequently they enter other markets easily and are getting a bigger proportion of local sales (Genzberger Ch., 1994).
However, Japan is dealing with two major concerns which are crucial in terms of future business. They are going to be explained below.
Japan's two major concerns
Firstly, it needs to be emphasized that there is a huge lack of land in Japan, where only 13 percent of Japan's 375 000 square kilometers of land is suitable for agricultural (Ministry of Land, Infrastructure, Transport and Tourism, 2007). Moreover, flat part of this land is vastly limited so that there is almost no new land available for new farmers. This very small availability of flat land causes another alarming problem. It is nearly impossible for farmers to obtain new farmland in Japan, hence if a farmer wants to enlarge the size of his land, he has to purchase or borrow farmland from other farmers (Flath D., 2000). Very important organization is The Agricultural Committee Law (Mulgan, Aurelia G., 2006), which is responsible for making decisions regarding farmland issues such as looking after farmers who are going to purchase or rent land from other farmers and looking for farmers who are not interested in farming any more in order to offer this potential land to other farmers. It is seen that farming issue is treated very seriously in Japan.
Secondly, Japan is nowadays facing a very alarming issue. It is Japan's rapidly aging population which is predicted to be made up about 39% of the people who are older than 65 years by 2050 (Pacific Bridge Incorporated, 2008). In 2004, the age group 65 and over reached a new record of roughly 21% of Japan's population (Ouchi M., 2005) (see appendix 1). It is going to cause very serious consequences such as significantly shrinking workforce, retiree policy, health and pension system (Pacific Bridge Incorporated, 2008).
A business opportunity considered in Japan
As the result of two aforementioned concerns in Japan, it is concluded that Japan's population is becoming more concerned and aware of healthy food and healthy life style. Japan is one of the biggest food importers relying on about 60% (Organic Consumer Association, 2003) of all its food needs. Thus food, especially organic food (see appendix 3), is more and more important aspect for Japanese people in terms of quality of life and thus distribution of organic food in Asia has the biggest proportion right in Japan (Australian Business, 2006) (Kuhlmann H., Everett J., 2006).
Furthermore, this opportunity is further supported by the fact that in April 2001 Japan's new law regarding organic food production went in effect. This law essentially meant very strong adherence to new national standards which made distribution and production of organic food even more difficult for Japanese and this fact often put them off this sector (Rodale Institute, 2003).
As it was mentioned above, Japan suffers from a lack of land plus rapidly aging population which is not willing to go through a really complicated process in terms of getting various regulations and certifications. Moreover, potential to succeed in this sector also highlights (see appendix 2) the fact that Japanese are fairly aware of organic food. A significant part of Japanese population said that they might buy this sort of food, whilst another part of Japanese population said that it was very likely for them to occur. As it is seen, there is much room to penetrate Japanese market with this intention of organic food and under these circumstances it seems to be of a high viability.
However, it needs to be noted that it is dealt with a different culture which is in favour of different habits, different approaches and tremendously different needs. Therefore a proper research needs to be done before contacting a business partner or institution in Japan (Course: Doing Business in Asia IBUS7312, notes from lecture, 9 March 2009).
Further in this work it is mentioned what product particularly it is focused on in terms of distribution and production of organic food.
Products exported from Australia to Japan
Nowadays there are a big number of products exported from Australia to Japan such as:
- Beverages, cosmetics - low alcohol beer, mineral and spring water and health drinks.
- Cut flowers
- Education - this sector has been rising significantly.
- Fruit and vegetables - onions, pumpkins, carrots, asparagus, broccoli and mushroom.
- Furniture, jewellery
- Meat and livestock:
- Beef: Australian's market share of beef in Japan is roughly 50 per cent.
- Pork: Japan is the world's largest importer of pork and roughly 40 per cent of Japan's requirement is satisfied by imported pork.
- Horses (racehorses and leisure riding horses) and chicken
(Australian Government - Austrade, 2009)
All of those commodities mentioned above have had a long history in trading between Japan and Australia, some commodities are in higher demand and vice versa. For instance Australia is Japan's number two in supplying beef behind the USA. Australia has also a very good position in terms of being a supplier of wine, processed food and beverages (Australian Government - Austrade, 2009).
Business opportunity of exported organic food to Japan
One way or another, organic food sector is being more discussed nowadays, as the popularity of organic food has influenced many sectors across all industries. It creates new places for production and also creates new links with distribution and obviously customers. Moreover, nowadays society is demanding healthier life style and also considers responsibilities towards our well-being to be more important than it used to be. Especially Japanese people are more concerned about quality food and do not mind paying even higher price, since this is the case of organic food.
The Japanese organic food market increased by roughly 28% in 2006 at total value of approximately $670million (see appendix 4) (Organic Food Industry Profile, 2006), however its market value prediction says that it is going to grow to value of about $2,500 million in 2011, which represents a skyrocketing increase of incredible 270% (see appendix 5) (Organic Food Industry Profile, 2006). To be focused on a specific product, one has to recognize what the Japanese organic market is comprised of. As it is seen from Japan's market segmentation (see appendix 6), the biggest viable opportunity is in supplying of fruit and vegetable as this sector represents approximately 36% of all Japan's organic market value (Organic Food Industry Profile, 2006). There are a big number of other issues what else has to be considered such as packaging (Japanese are particularly concerned about a quality of packaging), weight, dimensions and it certainly has to be easy to operate with and most importantly all communication with our Japanese partners (follow up emails, phone calls, gifts, business habit and behaviour) (Course: Doing Business in Asia IBUS7312, notes from lecture, 16 March 2009).
Throughout this paper it is seen that even though Japan is the second largest economy around the globe, there are still a lot of opportunities available. Despite the fact that Japanese market used to be quite limited for the rest of the world, this situation has slightly changed especially after a heavy influence of the Unites Stated of America (Course: Doing Business in Asia IBUS7312, notes from lecture, 16 March 2009). The Japanese etiquette of doing business is remarkably different from that of Australian etiquette, however Japan is becoming more and more open to other approaches of doing business and nowadays is willing to cope with other nations more often and willingly.
Nowadays two major problems, currently occurring in Japanese society, influence this country dramatically and on the top of that Japan imports roughly 60% of all its food needs. Japanese rapidly aging farmers have to face high competition coming from abroad and vastly strict restrictions regarding production of food in Japan. All these facts contribute significantly to this business opportunity.
All this aforementioned issues lead to one very obvious conclusion. Japan is becoming more dependent on a food supply from the rest of the world. Particularly organic food sector is seen as very viable and profitable in future terms due to Japan's very rapidly aging population which is very strict about a healthy life style. The amount of imported organic food to Japan is going to shot up in three digit numbers over a next few years. This opportunity means a huge space for Australian companies which are considering producing and exporting these commodities to Japan. The main products which should be focused on are fruit and vegetable due to the biggest market share of consumed organic food.
A few more relevantly significant questions need to be asked, is any Australian company ready and determined to challenge Japanese market with this merchandise? Where should be this organic food planted? Is it more convenient to outsource this production? If not, is Australian environment suitable enough? Is Australian reputation well established in Japan?
Well, as far as these questions are asked, a comprehensive research needs to be done, however the most important issue here is, the Japanese market is going to be very hungry for organic food particularly for fruit and vegetable. If it is not an Australian company who will satisfy this increasing demand in Japan, another company from another country might take an advantage of this fact, since Japanese companies are generally deemed not to be able to catch up on this increasing demand due to reasons mentioned in this work.
Hence Japan represents a tremendous chance for the other economies to expand. However a proper and prior research has to be done not only in relation of what commodity is expected to be sold successfully but at the same time with great respect to considering how to penetrate this remarkable market, what person or institution should be contacted in the first place, how to maintain these valuable contacts and how to keep business-friendly relationships between one partner coming from Australia and the other partner coming from Japan.
Despite all this initial trouble, it is definitely worth giving a go, since once a company succeeds in Japan, valuable business cooperation is going to be maintained in long-term period of time, as Japanese are mainly in favour of well established relationship.
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- Changes and predictions in Japan's population
- Experience with organic food in terms of Japanese
- What is organic food?
- Growth of organic market in 2006
- Predictions in growth for Japanese organic market
- Market segmentation