Entering the
Japanese Market
A Reassessment of Foreign Firms’ Entry
and Distribution Strategies
Michael R. Czinkota
Masaaki Kotabe
Business executives outside of Japan have complained for
decades that Japan’s distribution system is essentially closed
and does not permit easy access. The Japanese government and
Japanese business executives, in turn, highlight the continuous
introduction of distribution opening measures in their efforts to
appease foreign critics. Globalization has made major inroads
in distribution activities of firms, and the burst of Japan’s bub-
ble economy and the subsequent Asian crisis have brought ma-
jor changes to the business environment. In follow-up to a 1991
meeting, in 1998 we reconvened the leading distribution think-
ers and doers in the policy, business, and research communi-
ties from 12 countries. In this meeting, 70 participants with a
high level of distribution expertise, held, for three days, discus-
sions that focused on the complexity of distribution and trade
Address correspondence to Michael R. Czinkota, The McDonough School
of Business, Georgetown University, Old North G04, Washington, DC 20057.
Tel: (202) 687-4024; fax: (202) 687-4031; E-mail: czinkotm@msb.edu
Industrial Marketing Management 29, 483–491 (2000)
© 2000 Elsevier Science Inc. All rights reserved.
655 Avenue of the Americas, New York, NY 10010
practices, on impending changes and on future opportunities.
© 2000 Elsevier Science Inc. All rights reserved.
INTRODUCTION
In the early 1990s, Japan’s economic relations with its
major trading partners had become increasingly acrimoni-
ous. In times of major economic uncertainty in most coun-
tries in the world, Japanese firms seemed to be blessed
with continued economic growth, ongoing trade successes
and able to accumulate apparently never-ending trade sur-
pluses. In 1989, Japan had a trade surplus of $43 billion
with the United States, $19 billion with the European
Community, and $21 billion with Southeast Asia. At the
same time, Japan appeared to assert itself in new ways,
perhaps most clearly seen in the book co-authored by
Shintaro Ishihara entitled The Japan That Can Say No [1].
0019-8501/00/$–see front matter
PII S0019-8501(00)00123-1
 Globally, there was much public and private discus-
sion about the alleged economic danger originating from
Japan. Opinion polls in the United States showed that
over two-thirds of the American people regarded Japan
as more threatening than the former Soviet Union [2],
and 63% of U.S. consumers indicated in a Washington
Post/ABC news poll that they made a conscious effort to
avoid buying Japanese products [3]. High level U.S. pol-
icy visits were the order of the day, as were discussions
of radical embargoes and a call for government pro-
grams which would finally work in fighting back the
Japanese tsunami of success. While many non-tariff bar-
riers were blamed for keeping foreign firms out of Ja-
pan, the structure of Japan’s channels of distribution was
seen as a key reason for the apparent failure of foreign
firms to establish major market participation in Japan. A
report by the U.S. International Trade Commission con-
cluded that “the end result of the close, sometimes over-
lapping relations and practices in Japan’s distribution
chain is that it may be unusually difficult and expensive
for foreigners, including U.S. exporters, to break into the
system [4].”
According to the study conducted in 1991 and reported
by Czinkota and Kotabe [5], the following factors were
identified as the major market entry problem areas in Ja-
pan during the last decade. Among Japanese trade barri-
ers, distribution and cultural impediments, such as exist-
ing close business linkages and high entry cost were the
most important barriers, followed by government trade
barriers, very demanding customers and bureaucratic
practices. With the exception of governmental trade bar-
riers, little change was anticipated in all the other dimen-
sions, since they were seen as being deeply rooted in the
political, social, and economic institutions of Japan.
Trade negotiations were seen as playing some role to im-
prove foreign firms’ ability to penetrate the Japanese
market. Much more important, however, were changes in
business strategy such as market research, product adap-
tation, service orientation, willingness to collaborate and
long-term orientation. The experts foresaw that Japanese-
type practices were likely to emerge in more countries,
MICHAEL R. CZINKOTA teaches International Business and
Marketing at Georgetown University.
MASAAKI KOTABE is the Washburn professor of International
Business and Marketing at Temple University.
484
and that it was mainly foreign direct investment that
would facilitate entry into Japan’s markets. Overall, the
consensus emerged that it was at the corporate level,
where the greatest potential for improved competitive-
ness would come from. It was recommended that firms
and governments in all nations strengthen information
flows and their interaction with customers, encourage
collaborative efforts, overcome export reluctance and en-
hance human resources in order to present a level playing
field for the success of international business.
A DECADE LATER
At the threshold of a new millennium, many Japanese
market conditions have changed. The country has been
racked by low or even negative economic growth rates.
Major problems festering in the financial sector have
brought fear and uncertainly to domestic Japanese mar-
kets and have curbed the willingness of consumers to
spend. Even though large Japanese firms continue to be
leading innovators and their employees continue un-
abated in their dedication and devotion to the tasks at
hand, not too many Japanese success stories are heard
today. There is mainly talk about Japan’s highest level of
unemployment since the end of the war (at 4.5%), and
the increasing “Americanization” of Japanese corpora-
tions, which often consists of announcing major down-
sizing plans.
In the last decade, Japan’s trade surplus with other
countries has continued to grow. In 1998 it amounted to
$51 billion with the United States, $32 billion with the
European Union and $29 billion with Southeast Asia [6].
Japan’s overall trade relations with its major trading part-
ners were quite harmonious. Controversial thinker Ishi-
hara, after serving as a member of the Diet, had by now
become the governor of Tokyo but with much less visi-
bility in the West. While there had been some spectacular
high profile trade cases and actions, such as the Kodak-
Fuji case at the World Trade Organization (WTO) and
the brief U.S. port closure by the U.S. Federal Maritime
Commission to Japanese vessels during 1997, Japan’s
trade performance was met with major apathy around the
world. Even though President Clinton’s 1999 State of the
Union Address contained a brief warning to Japanese
steel exporters, regular visits to Japan on the topic of
trade were no longer de rigueur for policy makers. In part
this may be explained by other, non-economic problems
which were seen as more urgent than trade matters, such
as the crisis in the former Yugoslavia. In part, non-Japa-
 Many traditional barriers to entry into the
distribution sector still persist in Japan.
nese trade matters took on more of a center stage, partic-
ularly with the banana wars and the beef hormone dispute
between the United States and Europe, and the overall
economic malaise in Southeast Asia. Perhaps, in light of
Japan’s sputtering domestic economy, its continuing stra-
tegic importance, and its influential global financial posi-
tion, policy makers abroad recognized the limits of gov-
ernmental capability. The latter thesis is supported by
revealing calls from the outside that Japan’s government
needs to take on more responsibility within the domestic
economy and intervene more directly on the firm level
which represents quite a contrast to the old calls for more
free market activity. Or perhaps it is simply the fear that
an exacerbation of Japanese economic problems may
place an unbearable strain on the openness of the world
trading system [7].
The relative quiet on the policy side is contrasted by
major changes within Japanese distribution systems. For-
eign firms are successfully penetrating Japanese niche
markets. L.L. Bean and Eddie Bauer, which began their
entry into Japan via catalog mailings, are now firmly
present with their stores, which, in the case of L.L. Bean
helped sell merchandise worth $60 million [8]. On the
services side, auto insurance by AIG is now sold directly
to Japanese consumers, while McDonalds corporation,
which entered the Japanese market 27 years ago has now
2,000 outlets and annual sales of $2.5 billion [9]. Morgan
Stanley announced its entry into the Japanese financial
services industry by opening retail branches in Japan [10]
and Charles Schwab, the U.S. discount brokerage,
planned to revolutionize personal finance in Japan by of-
fering Japanese customers their own Schwab account to
log on and trade U.S. stocks and overseas mutual funds.
[11]. At the same time, the Tokyu Department Store
Group announced the closure of its Nihonbashi store af-
ter 337 years, in part due to the greater price conscious-
ness of Japanese consumers [12].
Many of the traditional barriers to entry into the distri-
butions sector still persist in Japan. Real estate prices,
though lower, are still high, labor cost and freight charges
are far greater than in most other nations, and the need
continues to offer channel members very high levels of
service and substantial financing. Yet, new forms of do-
ing business abound. Mail order and non-store retailing
are rapidly becoming part of the daily consumer land-
scape. Likely to be even more prominent are the capabili-
ties to do business in market space rather than the tradi-
tional marketplace. The global emergence of electronic
commerce offers alternatives that bypass many of the ef-
fects of these impediments. It is here where U.S. firms
are thought to be better positioned than Japanese mem-
bers of the distribution system, since Japanese industry
lags behind the U.S. in its approach to information tech-
nologies and their utilization [13].
On the other hand, a recent study by the Washington-
based Council on Competitiveness [14], led by Michael
Porter of the Harvard Business School and Scott Stern of
Massachusetts Institute of Technology depicts an oppo-
site picture. They statistically show that if current techno-
logical trends continue, by 2005 the U.S. will trail Japan,
particularly in such areas as advanced-materials science
and solid-state physics, because of inadequate spending
on basic research and education and a shrinking percent-
age of technical workers. Those areas are key to a host of
information technologies. The study reports that software
is equally vulnerable. This prognosis is not entirely diffi-
cult to understand. While still considered inefficient by
many U.S. observers, for example, the Japanese retail in-
dustry has undergone a quiet revolution at the hands of
major retail and convenience store chains, such as Seven-
Eleven Japan, which boast world-class efficiency and
profitability despite Japan’s current recession [15]. Taken
together with ongoing major shifts in manufacturing and
established linkage practices, of which the restructuring
of Nissan is only one highly visible example [16], Japan
may well reposition itself to strive for world economic
leadership in this new century.
Corporate survival in the next century is said to be pred-
icated on the successful application of digital technology
[17]. Clearly, Japanese firms have some weaknesses and
485
 The long-term competitiveness of Japanese
firms cannot be ignored.

strengths in their technological applications. The long- icy analysis by “only” 36 U.S. Senators. It is the analysis
term competitiveness of Japanese firms cannot be ignored. of trade and distribution issues of these experts, which
was carried out with detachment if not disinterest that is
THE RESEARCH reported here.

What then are the changes that have taken place, and RESULTS
how are they affecting the Japanese distribution system
and U.S.–Japanese trade relations? To discuss and exam- Japanese Market Impediments to Foreign Firms
ine this issue, the American Marketing Association and the
Initially, 16 problem areas were identified for foreign
Japan Marketing Association co-sponsored a global meet-
firms doing business in and with Japan. Respondents
ing on the Japanese distribution system in 1998. Participa-
were asked to rate the importance of the problems and
tion was solicited. Eventually, 70 participants—business
then to rate their assessment of the improvement of those
executives, policy makers and researchers with a high
problems in the past five years and the expected improve-
level of expertise and interest—were brought together for
ment in the next five years. Because we searched for the
three days of meetings and discussions that focused on the
main impediments, we looked for consistency, depth and
complexity of distribution and trade practices, on impend-
consensus in the responses. Factor analysis showed that
ing changes, and on future opportunities. Participation by
11 of those 16 problem areas consistently converged into
current and former high-level policy makers, representa-
four discrete categories of barriers to entry. In order of
tives of major corporations, and leading researchers en-
importance (as rated by our expert observers), they are:
sured important discussions and insights into the process
(1) unique Japanese business practices, (2) rigid quality/
of trade and distribution policy and practice.
standard expectation and regulation, (3) high operational
This study is based on a survey conducted at the end of
cost, and (4) preference for Japan-made products.1 Sum-
the meeting of those key participants who were asked
mary findings are reported in Table 1.
either in interviews or via a questionnaire to impart their
Unique Japanese business practices, represented by
views and perspectives. Due to the unique configuration
close business linkages (known as keiretsu), are consid-
of participants, in terms of expertise, diversity, and orien-
ered the most important market impediment to foreign
tation, it was expected that the input would shed light on
firms. Although the age-old Japanese business culture is
the road to change. The findings reported here are based
unlikely to change drastically in a short period, our ex-
on a total of 36 interviews and questionnaires. Thirty-
pert observers believe that there will be some improve-
nine percent of the respondents worked in Japan, 50% in
ment. It is primarily due to Japan’s eight-year battle with
the United States, 8% in Europe and 3% in Australia.
the worst postwar recession during the 1990s when many
Seventy percent of the respondents were academic re-
keiretsu companies have experienced severe asset defla-
searchers, 20% were business practitioners, and the re-
tion and could no longer hold on to their member compa-
maining 10% were government officials. Although the
nies’ shares in a tightly knit cross-shareholding relation-
number of individuals who participated may seem low by
the standards of traditional quantitative research, the fact
1
that each respondent was one of the few global experts in Principal components analysis with varimax rotation was employed to
identify the number of problem dimensions. As a result of the scree test, four
the field under analysis makes the collective insights ob-
dimensions were identified. These four dimensions were represented by 11
tained quite meaningful. In terms of pool of expertise, a problem areas in the questionnaire. The mean rating of the problem areas with
possible analogy might be found in the input to U.S. pol- a loading of ⬎0.5 was computed to represent each of the problem dimensions.

486
TABLE 1
Japanese Market Impediments to Foreign Firms: The Past and The Future

Importance Expected Improvement in the

(Not at all important ⫽ Improvement in the Last 5 Years Next 5 Years
1 . . . 5 ⫽ Very important) (Not at all ⫽ 1 . . . 5 ⫽ Very Much) (Not at all ⫽ 1 . . . 5 ⫽ Very Much)

Japanese business practices 3.90* 3.04 3.28**

Cultural barriers
Close business linkages
High quality/standard expectations
and bureaucratic practices 3.37** 2.86 3.04
Inadequate import infrastructure
Excessive quality expectations
Unreasonable standards
Delay in patent processing
Delay in trademark processing
High cost of doing business in Japan 3.11 3.19 3.30**
High retail prices
Lack of economies of scale
High entry cost
Preference for Japan-made products 2.19* 3.47** 3.53*
Unwillingness to purchase foreign products

Note: Hypothesis: Mean response ⫽ 3.

* p ⬍ .001.
** p ⬍ .01.

ship. This is a significant change in light of the fact that
less than 10 years ago, keiretsu relationships were con-
sidered the most unlikely aspect of the Japanese market
impediment to change.
Consumers’ high quality and standard expectations
and government’s bureaucratic practices are considered
somewhat important. Consistent with Czinkota and
Kotabe’s [5] survey results seven years ago, these two as-
pects of market impediments are also perceived not to
have changed much in the last five years. In our current
survey, no further significant changes are expected.
While the high cost of doing business in Japan is no
longer considered as important as in the past, our expert
observers believe that the situation will improve in the
next five years. This is due primarily to the continued
weakness of the post-bubble deflationary Japanese econ-
omy. Finally, Japanese preference for Japan-made prod-
ucts is considered much less important than in the past.
This is another significant change from the past survey
results. More improvement is expected in the next five
years.
What Will Bring About the Change?
Overall, very optimistic perceptions by the leading dis-
tribution thinkers and doers in the policy, business, and
research communities perhaps reflect some fundamental
changes in the nature of the Japanese market mechanism
that will facilitate entry by foreign firms. However, con-
sumers’ high quality expectations and government bu-
reaucratic practices appear to remain unchanged.
How, then, should foreign firms and policy makers
cope with Japan’s bureaucratic inefficiency and high
quality expectations, among other obstacles in order to
improve their ability to penetrate into the Japanese mar-
ket? If the market does not change, are there perhaps
some areas where outside firms and governments can
become active to succeed better in Japan? We asked the
respondents nine questions on this score. As shown in
Table 2, our analysis2 suggested that there are two princi-
pal ways to enhance the ability of foreign firms to enter
the Japanese market: (1) trade negotiations and (2) better
business strategy. These findings are essentially identical
to our earlier study findings seven years ago.
Although respondents acknowledge that trade negotia-
tions with the Japanese government may be of some help,
they see the use of seasoned business practices as the key
elements which make market penetration possible. Such
practices consist of the willingness and ability of foreign
firms to conduct thorough market research, adapt prod-
ucts whenever necessary, be more service-oriented, enter
2
The same procedure was used as described in footnote 1.

487
TABLE 2 Japanese market and the internal and external forces that
Methods of Improving Foreign Companies’ Ability to Penetrate the
Japanese Market
could help mitigate entry barriers. The Japanese market
is changing constantly because of, or despite, the internal
Likelihood of Improvement and external forces at play. As in our earlier survey, we
(Very low ⫽ 1 . . . 5 ⫽ Very high)
asked our respondents to assess the same set of questions
Trade negotiations 3.33** regarding the degree to which various structural changes
Business strategy 3.77* are taking place in Japan. We also asked whether those
Product adaptation
Market research changes are attributable to Japanese or U.S. government
Service orientation initiatives, or to Asia’s financial crisis. Summary find-
Collaborative ventures ings are presented in Table 3.
Long-term orientation
Personnel training
It is to be noted that significant changes have oc-
Information systems curred in the way expert observers see the structural
Complaint responsiveness changes in Japan. In 1991, they believed quite strongly
Note: Hypothesis: Mean response ⫽ 3. that Japan would emerge as the leader of a Pacific
* p ⬍ .001. trading bloc. An increase in Japanese imports was seen
** p ⬍ .01.
as mainly occurring through increased import activi-
ties of Japanese firms, largely in the field of manufac-
turing, and, to a lesser extent in the agricultural sector.
into collaborative ventures, have a long-term orientation, On the other hand, little expectation existed that the
and be more responsive to changes in the market. It is in- complexity of the Japanese distribution system would
teresting to note that it is these very same business prac- be reduced.
tices which have been a hallmark of successful Japanese According to our 1998 survey, the reverse seems to be
companies around the world [18]. the case. Japan may or may not emerge as the leader in
the Pacific trading bloc. Nor are Japanese imports ex-
Structural Changes in the Next Five Years pected to increase significantly. Respondents apparently
So far, we have explored various market impediments attribute these structural changes more to Asia’s financial
to trade that foreign firms apparently face in entering the crisis than to Japanese or U.S. government initiatives.

TABLE 3
Structural Changes in Japan in the Next Five Years and their Key Change Agents

Change agents

Level of agreement Level of agreement Japanese government U.S. government Asia’s financial
in 1991a in 1998a initiativesb initiativesb crisisb

Foreign direct investment will

improve market penetration 3.32*** 3.50** 2.89 2.92 2.97
The complexity of the Japanese
distribution system will be reduced 2.85 ⬍⬍⬍ 3.39 2.86 2.78 3.36***
More exports to Japan will improve
market penetration 2.91 3.00 2.97 3.00 3.14
Japan will emerge as the leader of a
Pacific trading bloc 4.09* ⬎⬎⬎ 3.00 3.08 3.33 2.31*
Japanese competitiveness will decrease 2.77* 2.94 2.83 3.22 2.97
Japanese firms increase imports 3.86* ⬎⬎⬎ 2.83 3.08 3.17 3.03
Agricultural imports will increase 3.39** ⬎⬎⬎ 2.78 3.14 2.97 3.42**
The Japanese trade surplus will decline 2.59** 2.59** 2.72 3.59* 3.31
a
Strongly disagree ⫽ 1 . . . 5 ⫽ Strongly agree.
b
Not at all ⫽ 1 . . . 5 ⫽ Very much.
Note: Bold represents particularly noteworthy changes and implications.
Hypothesis: Mean response ⫽ 3.
* p ⬍ .001.
** p ⬍ .01.
*** p ⬍ .05.

488
 Unique Japanese business practices are
considered the most important market
impediment.
Despite U.S. government pressure on Japan to reduce its
trade surplus, it is not expected to decline as the Japanese
tend to increase exports and reduce imports as a result of
the recession in Japan. Expert observers recognize that as
a result of these fundamental economic forces brought on
by Asia’s financial crisis and Japan’s recession, Japa-
nese firms may need to streamline their distribution
systems in Japan to improve efficiency. It is clear from
these observations that the market mechanism apparently
works better than government interventions to bring
about much needed changes in the Japanese distribution
system.
In a similar vein, expert observers believe that foreign
firms will improve their foothold in the Japanese market
mainly through direct investment, rather than through ex-
ports. Lack of such investment may well serve as a self-
fulfilling prophecy. If being there sends the signals of re-
liability, long-term outlook, and corporate commitment
for foreign firms, then an export-only strategy may be
seen as communicating the damaging obverse. Again,
consistent with our earlier observation, it is seasoned
business strategy, rather than government interventions,
that seem to help foreign firms enter the Japanese market
successfully. Thanks to Asia’s financial crisis and Ja-
pan’s worst postwar recession, the Japanese business
practices and competitive environment are also changing
and becoming less culture-centric. The famed Japanese
business practices that heralded Japan’s postwar eco-
nomic growth in the last 40 years may come to an end at
last in the next five to ten years.
CONCLUSIONS AND IMPLICATIONS
In less than a decade, the expert observers have
changed their opinions about the competitiveness of Jap-
anese firms. It was once thought that Japanese firms
would be invincible and that the emergence of the Japan
era at the dawn of the 21st century was imminent. Now,
many of the Japanese market impediments to foreign
firms—close business linkages epitomized by the keiretsu,
high cost of doing business in Japan, and “Buy Japanese”
attitude—once thought to be so recalcitrant have waned
considerably due to Asia’s financial crisis and Japan’s
prolonged recession. The only areas that are not ex-
pected to change in any measurable way are the Japa-
nese government’s bureaucratic practices and Japanese
consumers’ high quality expectations. Despite some
fundamental changes in the Japanese economy, the
main road to success for foreign firms remains the same
as seven years ago: continued trade negotiations to re-
duce Japan’s bureaucratic impediments and sound busi-
ness strategy to better cater to demanding Japanese con-
sumers.
We believe that the impact of trade negotiations needs
to be seen in a new light. Traditional trade negotiations
may well lead to some success, particularly if they con-
centrate on bureaucratic impediments directly controlled
by the government. In doing so, however, they focus
mainly on issues which, although perhaps highly visible
and of key concern to a particular firm or industry, are
only of relatively marginal importance to overall busi-
ness success in Japan. This is not to say that traditional,
item- or sector-specific trade negotiations have no value,
but rather that they are unlikely to fulfill to any great de-
gree the expectations placed in them by government and
the public, and will not accomplish a major turnaround in
the trade imbalance.
An alternative strategy could, then, be to make negoti-
ations less traditional by elevating their aim abroad to ar-
eas that have historically not been considered part of
trade policy. Such areas included the distribution system,
the close business linkages, the persistent high savings
rate of the Japanese and perhaps even the high quality ex-
pectations. The Strategic Impediments Initiative (SII) of
the 1980s represented such a strategy. Whether the SII
489
 Seasoned business strategy, rather than
government intervention, helps foreign
firms enter the Japanese market.
was successful or not, Asia’s financial crisis and Japan’s
prolonged recession during the second half of the 1990s
have begun to alter the fundamental nature of Japanese
firms’ closely knit business linkages and practices.
The most likely alternative to be crowned by success
consists, then, of reorienting trade negotiations and pol-
icy by making them more domestic. Such an approach
would reduce the pressure on government to pry open
foreign markets through politics, and would instead con-
centrate efforts on the revamping of strategic skills of
firms combined with a refocusing from exports to direct
investment. This alternative, in essence, would require
foreign firms to become more Japanese, both in terms of
orientation and location. It would make foreign firms in
the Japanese market compete the Japanese way, bypass-
ing border barriers, heightening quality concerns, and
strengthening their information systems to respond
swiftly to the ever-changing needs of demanding Japa-
nese consumers.
As a case in point we offer the results of a U.S. Gov-
ernment Accounting Office investigation of wood ex-
ports to Japan to illustrate the importance of customer
service. For more than a decade, the U.S. government ne-
gotiated with Japan for more market access. Building
codes were revised, product certification was delegated
from the Japanese government to foreign testing organi-
zations, and tariffs were drastically reduced. In addition,
the Foreign Agricultural Service spent close to $18 mil-
lion to promote U.S. wood sales to Japan. The results of
these U.S. government efforts were appalling. While
there were only marginal increases in U.S. exports to Ja-
pan, Canadian lumber companies have become the lead
importers in the Japanese market. The reason for this de-
bacle is that the U.S. effort consisted mainly of getting
Japanese buyers to agree to buy U.S. products. But the
products were not tailored to the Japanese market. Japa-
nese builders prefer post-and-beam construction, which
490
requires four-by-four-inch lumber and three-by-six-foot
modules to match the standard tatami floor mats. U.S.
companies were either unaware of those requirements or
unwilling to meet them. Instead, the U.S. producers fo-
cused on the standard two-by-four products used in the
United States, even though only 7% of new homes in Ja-
pan use that standard.
Furthermore, many of the U.S. exporters entered the
market with only limited enthusiasm and commitment. In
contrast to the Canadian firms, many companies paid lit-
tle or no attention to product quality and appearance and
did not deliver after-sales service. For example, only a
few U.S. firms translated their product information into
Japanese or wrote manuals describing the new type of
construction. No wonder the Japanese chose the Cana-
dian suppliers. The lesson here is that despite govern-
ment efforts at deregulation and market opening, cus-
tomer responsiveness and commitment remain primary to
success.
This lesson does not necessarily mean that there is
nothing the Japanese government can do to improve the
efficiency of the Japanese market environment. The sec-
ond issue has to do with the still largely underexplored
area of nonstore retailing in Japan. This form of retailing
already constitutes 30–40% of all the retailing sales in the
United States. The expansion of television, mail-order re-
tailing, and electronic commerce should offer significant
opportunities for importers to circumvent traditional
channel constraints in Japan.
Japan initiated HI-Ovis, an interactive cable television
experiment in 1976. At that time, home shopping was
revolutionary. Unfortunately, the initial promise of this
channel has not been realized, even though other nations,
most notably the United States, have achieved major
breakthroughs. Shopping by TV is a multibillion dollar
business in the United States today, but remains only a
minuscule business in Japan.
 Similarly, the mail-order industry lags in growth by in-
ternational comparison. Federal Express, which delivers
for L.L. Bean, has seen deliveries in Japan to rise from 6
per day in 1988 to over 1,000 per day in recent years.
Similarly, e-commerce has already become a mainstay in
the United States, while in Japan it is still in its incipient
stage of development.
In part, the lagging growth is the result of the Japanese
government’s on-going restrictive regulation of distribu-
tion technology. While technology is quite advanced in
Japan’s distribution sector, such advancements have
occurred mainly on the industrial side of channel man-
agement through enhancements of electronic data in-
terchange and point-of-sale (POS) systems. On the con-
sumer side, this technology has been sadly neglected or
restricted. For example, the prohibition of drug sales out-
side a pharmacy severely handicaps the pharmaceutical
industry. Service industries such as travel and banking
suffer from a Ministry of Transport prohibition on ticket
sales outside a registered travel office and a Ministry of
Finance restriction that limits banking business to bank-
ing hours. Similarly, the Ministry of Posts and Telecom-
munications still charges local phone calls by the minute,
thus making unbridled use of the Internet prohibitive to
most consumers.
Overall, some changes in the Japanese distribution
system have brought new opportunities for market entry
and penetration. However, many core features of Japa-
nese bureaucracy and distribution channels remain in place.
Even with substantial corporate commitment to this im-
portant market, many restrictions and regulations of tech-
nology and industries may still inhibit importers from
providing consumers with global choice.
REFERENCES
1. Ishihara, Shintaro: The Japan That Can Say No. Simon & Schuster, New
York, 1991.
2. World Policy Institute: World Policy Institute Survey, June 1989.
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