project

Each criterion was given a percentage weight (out of 100%) to demonstrate its importance when determining which market is the most optimal option for SureShade. The awarded scores for each country were then multiplied by the percentage weight to come up with a weighted score. A sum of the weighted scores were then taken to come up with a total weighted score for each country. A higher number conveys better market opportunities.

Based on our analysis in the table above, Japan achieved a score of 7.73, Singapore achieved a 7.25, South Korea achieved a 6.8, Indonesia achieved a 5.48, and Malaysia achieved a 4.7. Thus, the best option for market entry seems to be Japan because of its high score of 7.73 out of a possible 10. As a result of our analysis, our team finds that it will be best to perform further in-depth country and market research on Japan in place of our client’s initial request to focus on South Korea. This was discussed with and approved by our client as well.

JAPAN

1.B COUNTRY EVALUATION

1.B.1 Geographic Situation

Japan, also known as Nippon Koku, is an island nation of East Asia. It does not share borders with any other country, but is a neighbor to Russia, China, North Korea, and South Korea. The four main islands, called the “Home Islands”, are Kyushu, Honshu, Shikoku, and Hokkaido. However, there are 6,848 smaller islands and islets that make up the country as well. Thus, this is a prime location for both recreational and commercial boating leading to open markets for firms like SureShade who specialize in boating products. Japan spans over 377,915 square kilometers of land and water, and has 29,751 kilometers of coastline. Japan is surrounded by main bodies of water including the Sea of Japan, to the east of the Pacific Ocean and the East China Sea to the southwest (All information in this section obtained from the CIA World Factbook, 2017)

The five major ports are Kobe, Nagoya, Osaka, Tokyo, and Yokohama which offer considerable opportunities for direct exporting SureShade’s products and for trade in general (CIA, 2017). In regards to volume, the Keihin and Hanshin Ports are ranked 20th and 28th in the world respectively (WSC, 2015). These ports handle imports and exports through the Tokyo Bay which includes major cities in Japan like, Yokohama, Kawasaki, and Tokyo (WSC, 2015). Tokyo with a population of about 13.49 million is the capital city of Japan and the most populated metropolitan area in the world (Tokyo Metropolitan Government, 2017). In regards to marinas, Japan is home to 175 of them (TachibanaKaiji, 2017). There is at least one large marina for visiting in the Tokyo area in addition to several smaller ones circa the Miura Peninsula (Noonsite, 2017). Several marinas have also been built on the opposite end of Japan in Nagasaki, Yokohoma, Sasebo, and Fukuoka (Noonsite, 2017). One major attraction is the Inland Sea; it is connected by three passes to the ocean and allows for yacht access to the heart of Japan (Noonsite, 2017). There are many anchorages, small fishing harbors, marinas, and yacht clubs in the Inland Sea (Noonsite, 2017). The marinas there are generally expensive, but foreign visitors can find some that offer free berthing for a few days (Noonsite, 2017).

The climate in Japan is categorized as temperate and is mostly influenced by the ocean. The seasons are very distinct. The summer temperatures are generally high with an abundance of rainfall. Whereas, in the winter, the temperature difference between north and south Japan is large. For example, in January, the northern Sapporo average temperature is below zero, while the southern Naha average temperature is 15 degrees or more. Most of the Japanese archipelago is located in the Tropical monsoon climate, which is mild and humid throughout the year with no cold winters and summers without serious heat. (All information in this section obtained from the JMA, 2016.)

Japan is described as slightly smaller than the U.S. state of California (CIA, 2017). The landscape is mostly rugged and made up of mountainous terrain with a high altitude which makes it difficult for urban living and farming (CIA, 2017). Thus, most of the population is located along the coast. Japan is also a part of the “Pacific Ring of Fire” where about ten percent of the world’s active volcanoes are located (CIA, 2017). This results in about 1,500 seismic occurrences annually which includes volcanoes, earthquakes, typhoons, and tsunamis (CIA, 2017). Although typhoons are a consistent threat, weather forecasts are considered reliable, a five to ten-day warning is usually given, and almost every port has a typhoon shelter (Noonsite, 2017).

All in all, the abundance of marinas and ports within Japan provides a positive outlook and great opportunities for SureShade’s products to be very successful. However, one risk the country cannot remedy is the weather which does not typically encourage cruising due to the strong winds, currents, and frequent natural disasters (Noonsite, 2017). This could have a direct impact on the success of SureShade’s products, and we will have to consider such conditions while exporting the product to Japan. Fortunately, the various attractions that Japan offers for both foreign and local sailors make up for this.

1.B.2 Demographic Situation

Japan is the 11th largest country in the world with an estimated population of 126.7 million. The population is decreasing at a rate of .19% annually; this will not cause a significant impact on our client’s target market since the rate is so low. The largest age segment which accounts for approximately 37.68% is between the ages of 25 and 54 years old with a median age of 46.9. This can be considered a benefit towards SureShade’s success since older populations are more likely to have the means to buy luxury items like SureShade’s luxury boating products. This optimal statistic boasts an opportunity for a large consumer market and is shown by the CIA World Factbook age distribution graph below.

Source: CIA World Factbook

Of the total population, 93.5% are considered to reside in urban areas and this urbanization is increasing at a rate of .56% annually (CIA, 2017). There are roughly 348.3 people per square mile making the population density ideal for reaching many people at one time (CIA, 2017). According to the UNESCO Institute, for all those over the age of 15, the literacy rate is approximately 99% for both females and males (UNESCO, 2002). It is estimated that Japanese citizens spend about 15 years in educational institutions from primary to tertiary education (UNESCO, 2002). The National Center on Education and the Economy estimates that 93.83% have some secondary education while only 47% move on to tertiary education. With such positive literacy and education rates it will be easy for our client to market their products on a variety of platforms.

All in all, there seems to be little to no risks of entering Japan’s market in regards to demographic factors. The population as a whole, the population of pleasure craft users, the urbanization rate, and literacy rate all contribute to a positive outlook.

1.B.3 Cultural Situation

In Japan, majority of the people are Japanese people who solely speak Japanese; this is the only official language in Japan. In terms of ethnic or national composition, Japan is one of the most homogeneous countries in the world (The Translation Company, 2017). Current Japanese culture is a multifaceted and fascinating combination of modernity and tradition. When you visit Japan, you will see the most modern technology and fashion trends, but you can also experience the traditional culture with thousands of years of history. Shinto and Buddhism are the two major religions in Japan (CIA, 2017). However, for most Japanese people today, religion does not play a big role in the everyday life (Kwintessential, 2016). “The average person typically follows the religious rituals at ceremonies like births, weddings and funerals” (Kwintessential, 2016).

Source: geert-hofstede.com

On the Geert Hofstede country comparison scale, Japan scores high on the Feminine vs. Masculine dimension, with a score of 95. A society with a high score on this dimension indicates that this society is driven by competition, achievement and success (Hofstede, 2017). With such a high score of 95, Japan is one of the most masculine societies in the world. However, in combination with their mild collectivism, you do not see assertive and competitive individual behaviors which we often associate with masculine culture. What you see is a severe competition between groups” (Hofstede, 2017). With this masculine culture, Japanese firms can be very competitive.

Japan also scores high on the Uncertainty Avoidance dimension. With a score of 92, Japan is one of the most risk averse countries in the world. Due to the constant threat of natural disasters, the Japanese people have become a cautious and prepared society (Hofstede, 2017). As a result, the Japanese people do not like change. This may cause some difficulties for new companies that are trying to enter the Japanese market.

Japan has a relatively low score on the Indulgence dimension. With a low score of 42, the Japanese society does not put much emphasis on leisure time and control the gratification of their desires (Hofstede, 2017). This may cause difficulties for SureShade when the company is trying to sell the boat shade systems to recreational boats.

In Japanese society, there are a lot of etiquette and rules. Japanese people are “usually forgiving to outsiders that show an effort to understand the Japanese business etiquette” (Japan Business Resource, 2017). Japanese people care about manners a lot. A conservative demeanor is advisable when doing business in Japan (Japan Business Resource, 2017).

Here are a few key points that should be remembered when doing business in Japan:

· Seniority is important in Japanese society. Elder people should be respected more when having business meetings. When greeting your Japanese business partners, remember to greet and give your business card to the most senior person first (OPEN Forum, 2013).

· Do not ask questions about your business partners private issues because Japanese people are notoriously private and reserved. It is very rude and pushy to ask a lot of personal questions at the beginning of the relationship (OPEN Forum, 2013).

· A business card is an extension of their identity for Japanese business professionals. To show your respect and politeness, accept the business card with both hands from your Japanese business partner, and briefly read it. If you are sitting far away from the person in a group, do not toss the card across the table. Get up and walk over to that person (OPEN Forum, 2013).

· When entering the room, always wait to be seated, and never be the first one to sit down. Seating positions indicate status in Japanese business etiquette. The highest-ranking person of the group sits at the head of the table furthest away from the door (Japan Business Resource, 2017).

1.B.4 Economic Situation

Japan has reached a stable economic outlook after a couple years of uncertainty over its domestic economy and a decrease in GDP. Japan’s economy is heavily reliant on exporting and its biggest cause for concern is the protectionist policies of the Donald Trump presidency and his issues with the Trans-Pacific Partnership (TPP). According to the WorldBank (2017), Japan has the 3rd largest economy in the world with a nominal GDP of 4.383 trillion in 2015 and a GDP per capita of $32,484. In 2017 and 2018, Japan is expected to have a real GDP growth rate of 1.2% and 0.9%, respectively (CIA World Factbook, 2017). Inflation rates were worrisome in 2014 and 2015, as they were at 2.7% and 0.8% annual rates, respectively. In 2016, inflation rates leveled out and actually decreased 0.1%, giving consumers more confidence (CIA World Factbook, 2017).

A weakening in the value of the yen and an increase in global trade has recently added value to Japan’s export economy. Japan is the 4th largest export and import economy in the world and its two largest trade partners are China and the United States (OEC, 2017). According to the CIA World Factbook, the major exports for Japan are motor vehicles (14.9%), iron and steel products (5.4%), semiconductors (5%), and auto parts (4.8%). Japan is the United States 4th largest trading partner and has imported a total of $67.5 billion of goods and services while exporting a total of $128 billion to the United States in 2014(OEC, 2017). The top 5 imports from the United States are gas, planes/spacecraft, corn, packaged medicaments, and medical equipment, all of which are between 3.3%-4.6% of total imports from the United States. The most common products exported to the United States are motor vehicles, at 26%, and vehicle parts at 6.5% (OEC, 2017). With a total of $714 billion total exports and $754 total imports billion, Japan has a negative trade balance of $40 billion in 2014(OEC, 2017).

According to the CIA World Factbook, Japan is mostly comprised of two sectors: Services, at 71.1% of GDP, and Industry, at 27.1% of GDP. Major services include banking, insurance, retailing, transportation, and telecommunications. The industry sector includes automotive, electronic equipment, machine tools, steel, textiles, chemicals, and processed foods (EUBusiness, 2017).

The influx of FDI in Japan over the last 20 years, along with an older population of consumers make Japan a stable country to invest in. According to a 2015 UENCD report, Japan was ranked as the 10th most attractive country in the world for foreign direct investment (FDI) for 2015-2017 (Santander, 2017). There are many advantages to investing in Japan, including a strong business environment and infrastructure built off of economic freedom and a welcoming business environment (Santander, 2017). According to JETRO (2017), Japan has an easy environment for business as the country is ranked 1st in the world for business sophistication and number of patents registered. Net inflow of FDI in 2014 was 18.41 billion but decreased to -$41,885,910 (WorldBank, 2017). While net inflows are inconsistent, Japan is still considered one of the friendliest countries for foreign investors. According to the Ease of Doing Business report, Japan ranked 2nd for resolving insolvency, 48th for enforcing contracts, and 49th for trading across borders (WorldBank, 2017).

In Japan, the average household net disposable income is $27,323 per year, about $2,000 less than the OECD average for all countries. The per capita average of net financial wealth of households, which is the total value of a households financial worth, is $92,818, higher than the OECD average of $84,547 (OECD, 2017). There is a considerable income distribution gap in Japan, as the top 20% of the population earn 6.1 times that of the bottom 20% of the population. In addition, the top 40% of population owns 63.3% of the income share of total income of the country. In Japan, the total poverty rate is at 16.1%, while 73% of the working age population (age 15-64) have a paid job, higher than the OECD average of 66% (OECD, 2017). Overall, according to the Better Life Index, Japan performs better on average in terms of income and wealth, education and skills, and jobs and earnings, while performing below average in terms of housing, work-life balance, and civic well-being (OECD, 2017).

Some key risks with Japan are the uncertainties of its trade relationship with the United States and the devaluation of the Japanese Yen. President Trump has rescinded the United States from the Trans-Pacific Partnership, which has caused concern because of the major trade relationship the United States and Japan have. While it is hard to make a determination on how trade will be affected because there is no set plan in place, there is a strong possibility that trade regulations, tariffs, and quotas could all be changed. Over the years, the Japanese Yen has increasingly devalued, which has in turn increased the demand for Japan’s exports. Currently, one yen is equal to .0087 dollars, while in 2010 one Yen was equal to .0123 dollars (Exchangerates, 2017). The issue with this is the continued devaluation creates uncertainty for other countries that do not know how the currency will continue to act, as well as making it harder for American companies to make money in Japan because of the exchange rate. Some of this unease over the Japanese Yen has already taken place, as President Trump called out the country in January for manipulating its money markets to lower the yen and playing the United States like “dummies” (Japan Times, 2017). Japanese officials continue to dispute Trump’s comment, calling his comments “totally incorrect” and “off the mark” (CNN, 2017). What will come from the Japanese Yen is still to be determined, but with Trump’s opposition to the devaluation, there is sure to be a standstill in opinions. Until President Trump enacts a new trade plan with Japan, uncertainty of the future relationship of the two countries will be high. There is also a strong possibility that Trump continues to push the idea that Japan is devaluing the currency, making it impossible to judge what is going to happen in the near future.

While there is uncertainty, there is still a sophisticated market to export to in Japan, as the country has the third largest GDP in the world as well as a population of 126.7 million people. Recently, Prime Minister Shinzo Abe and President Trump met at the White House for a conference. By all accounts, it seemed as if it could help to continue a positive working relationship between the two countries and its leaders, keeping Japan as a great trade partner with the United States and a safe place to export American products (NY Times, 2017).

1.B.5 Political Situation

Japan is ranked as one of the least corrupt countries throughout the world and companies entering the Japanese market will face minimal risk of corruption. Similar to the United States, the Japanese government is divided into three branches: the judicial, the legislative, and the executive branch. In addition, Japan is founded under the structure established by the Constitution of Japan adopted in 1947 (CIA, 2017) and is a single unitary state with the Emperor as its head of state and forty-seven other administrative divisions. The role of the Emperor is strictly ceremonial, and he does not have powers related to government. Instead, government leaders are composed of the Ministers of State, which includes the cabinet, and the Prime Minister, whose primary role is to direct and control the Government (Global Edge, n.d.). The power source of the executive branch is the cabinet, which is selected by the Prime Minister. The Prime Minister, designated by the National Diet (Japan’s legislature) is assigned to office by the Emperor. The National Diet makes up the legislative branch, which is a bicameral system consisting of two houses: the House of Councilors and the House of Representatives. The members of the two houses are selected through a sovereign election by the Japanese people. The Supreme Court and other inferior courts are independent of the executive and the legislative branches, and make up the judiciary branch (CIA, 2017).

As mentioned earlier, the Japanese judicial system has a very low risk of corruption. Judicial independence is respected in practice (Kerry, 2014), the rule of law is well established, and the courts operate fairly in Japan (CIA, 2015). Companies report that informal payments to obtain favorable judgments in court rarely occur, and businesses find that the legal system is efficient in settling disputes and challenging regulations (World Economic Forum 2015-2016). In Japan, Enforcing a contract takes around 360 days on average, which is less than in most other OECD countries (Doing Business 2015). When there are issues regarding patents, almost a full year is needed to solve disputes, as there is a slow judicial processing system and costs that are slightly higher than average.

Important Japanese anticorruption legislation includes the Penal Code and the Unfair Competition Prevention Act. The Penal Code is in place to prohibit facilitation payments and bribery within businesses. Also, the Ethics Act limits gifting, as anything surpassing 5000 Yen ($45 US) needs to be registered through a system. The Penal Code and Ethics Act have helped to significantly limit facilitation payments and gifting throughout the country. In Japan, there are no reported cases of serious corruption within the police force or other divisions of law. The Japanese government has effective mechanisms in place to punish and investigate abuse and fraud, which has minimized its risks of police impunity (Kerry, 2014).

However, local public safety commissions agonize from a lack of sufficient authority or independence over agencies (Kerry, 2014). There is a traditional practice “Amakudari,” meaning "Descent from Heaven," which is transferring retired government officials to a top position of Japanese companies. Amakudari employees are mainly shared in the construction, pharmaceutical, transportation and financial industries. This phenomenon creates problems in the Japanese business system. Officials use a network of bureaucratic societies built at the time of their public service, that help to represent the interests of the institution, and includes massive amounts of government investment. This practice can make it harder for small businesses to start up and expand as they do not have the advantages or connections that the government officials do. Corruption, especially bid-rigging, called “KanseiDango,” is a risk in Japanese public procurement (USDS, 2015). The government, companies, politicians, universities, and organizations are frequently connected, and superior treatment between local stakeholders can be a difficult challenge to foreign corporations (USDS, 2015).

Japan has major economic power both in Asia and throughout the world. Japan is an active participant as a member of the United Nations and has diplomatic connections with nearly all independent nations. Japanese foreign policy has aimed to promote prosperity and peace for their people by supporting the United Nations and working closely with the West. Japan has close ties with the United States and protectionist policy for the two countries include the Mutual Security Treaty, which focuses on strategic protection (CIA, 2017).

When exporting and importing products at Japan’s border, the Japanese border administrations are transparent and efficient. Non-tariff customs barriers and burdensome import procedures are the most problematic factors for importing goods into Japan (GETR, 2014). The entire import and export process is administered under the Japanese Ministry of Economy, Trade and Industry. The custom service of Japan is very strict, but it has not been known to disturb any legal international commerce that takes place. When exporting goods to Japan, the local logistics systems are well developed and on average, it takes 11 transportation days for distribution. With its developed system, advantages on shipping costs for companies are common. In addition, when dealing with the Japanese tax administration, bribes and irregular payments very rarely occur when companies make their tax payments (World Economic Forum 2015).

2.A MARKET ANALYSIS

2.A.1 Market Size, Trends, and Growth

SureShade has created their own market niche within the boating industry and as such the sectors for the product are very specific. These sectors include, boat builders, boat dealers, and yacht service professionals. In Japan, out of the total population of 126.7 million, it is estimated that 70% (about 2.1 million) are pleasure craft users with 99,985 registered pleasure crafts (MarineTraffic, 2017). In comparison, there are 18 people per boat in the United States and 450 people per boat in Japan. This means that there are approximately 283,555 boats in use including the 99,985 that are registered. “The size of Japan’s boating market which includes sailboats, inboard/sterndrive, motor boats, other rigid boats, inflatable boats over 2.5 m and 20 kg, and PWC, increased across the board in 2012 compared to the previous year” (Pleasure Boat International Resource Guide, 2014). Figures for each type of boat are in the chart below. This boost was a result of Great East Japan Earthquake and the tsunami; many people needed to replace their boats that were damaged (Pleasure Boat International Resource Guide, 2014). Marinas that were previously built exclusively for fishing were also rebuilt to appeal to recreational users as well post-duel disasters (Pleasure Boat International Resource Guide, 2014). Correspondingly, Japan was ranked the 11th largest boating market in the world 2014. While the natural disasters may affect consumers negatively, it seems that SureShade could potentially benefit from them in this market.

Source: (Laaksonen, 2012)

According to the International Trade Administration (ITA), Japan is the fifth largest destination for U.S. exports which makes it a strong potential market for recreational marine exports even though there are some structural impediments. Japan also ranked fifth through 2018 for U.S. recreational transportation exports specifically. Japan used to be ranked second in this sector however, due to long-term economic stagnation, a decline in disposable income growth, and a saturated market, opportunities have been harder to find. With that being said, Japanese consumers have shown an affinity for U.S. recreational products which has led to enough demand to keep Japan in fifth place. Even though Japan produces a vast array of recreational transport products, they often produce low quality goods and at a cost disadvantage which is why the demand for U.S. products is so high. (All information in this section retrieved from the ITA 2016 Top Markets Report)

2.A.2 Sales

Unfortunately, most of the recreational marine parts and accessory market is not available statistically. Marine furnishings and marina accessories, like boat lifts and trailers are included in this sector. Nevertheless, the ITA predicts that by 2018 there will be a 5% increase in U.S. exports of recreational marine products annually. While this forecast is on a global scale, Japan is fifth out of thirty countries in the ranking of markets for U.S. recreational marine product exports through 2018. Opportunities for further export sales are said to be fostered by a strong partnership between the US. Government and the private sector. (All information in this section retrieved from the ITA 2016 Top Markets Report)

Source: (Laaksonen, 2012)

While finding sales figures in the boating industry in Japan is hard, finding them for the United States is quite easy. Shipbuilding remains low in Asia compared to 2007-2008 levels and the OEM market has been down since 2012 (Group, 2013). The low figures for shipbuilding in Japan can be seen in the table above. However, marine aftermarket sales grew significantly in 2013 (Group, 2013). More information could be found on this subject through the purchasing of market research reports from the International Council of Marine Industry Associations (ICOMIA), the National Marine Manufacturers

Association (NMMA), and Euromonitor International.

2.A.3 Consumer Spending

The graph above depicts Japan’s Consumer Spending over the past 10 years. Trading Economics (2017) gives a predicted forecast of the future Consumer Spending in Japan: 298498.58 JPY (2612.7581 US Dollar) Billion in 2017, to around 302477.82 JPY (2647.5884 US Dollar) Billion in 2020. Although the overall trend of Consumer Spending is increasing, current Japanese consumers are not willing to spend a lot. According to MarketWatch (2017), “despite the best jobs market in more than 25 years, Japanese consumers are still reluctant to spend, presenting a continued obstacle to the country's policy makers” (MarketWatch, 2017). The Japan Times (2017) gives two major reasons for current economic situation in Japan: first reason is aging and declining population; second reason is people are anxious about the future economic situation.

2.A.4 Consumer Habits

Correspondingly, consumption trends have been changing as well. E-commerce sales have been increasing drastically over the past few years. A survey by the Research Institute of Industry and Regional Economy indicates that e-commerce services have been well received by Japanese consumers (“NARI Surveys,” 2016). The reasons Japanese consumers chose online shopping included "easy selection of products," "low prices," "being able to order from smartphones and tablets," and "reduced shipment time" (“NARI Surveys,” 2016). Moreover, Japanese customers can be very demanding, and often have entirely different tastes and needs than Western clients. Many cases show that Western companies must redesign or redevelop products to succeed in the Japanese market (“Japan Market Entry”, 2016). Therefore, to promote sales and brand awareness, SureShade needs to keep this in mind and adapt its promotional methods according to local tastes.

According to Mckinsey&Company (2010), Japanese consumers’ attitudes and behavior are shifting dramatically, presenting opportunities and challenges for companies in the world’s second-largest retail market.

Here are a few important points according to Brian Salsberg (2010), a principal in McKinsey’s Tokyo office:

· Hunting for value

Japanese consumers are reducing costs and questioning their famous inclination to pay for convenience. Additionally, sales of private-label products are booming.

· Spending more time at home

Because of the economic crisis, Japanese people are spending more time at home. This may cause increase of online shopping.

· Buying products differently

Japanese consumers are now more willing to travel to shopping; they also preferring to spend their time in malls and stand-alone specialty shops instead of department stores. Online shopping is getting more popular.

· Being health and environmentally-conscious

Japan is perceived as one of the world’s healthiest societies, and Japanese consumers are increasingly conscious of their health.

2.A.5 Gross National Income per Capita

Currently, Japan is ranked 37th out of 216 countries throughout the world in terms of Gross National Income per Capita (World Bank, 2017). The graph above shows data on Japan’s Gross National Income per Capita since the year 2000 compared to the world average. According to the World Bank (2017), in 2015, Japan’s GNI per Capita was $38, 840. While this remains $28,293 more than the world average, it indicates a decrease of over $10,000 since Japan’s all time high of $49,510 in 2012 (World Bank, 2017). While a decrease in GNI per Capita is not a positive note, this type of fluctuation is normal for Japan, as the average GNI per capita has fluctuated anywhere from $30,190 to 49,510 since 1992 (World Bank, 2017). The current decrease in GNI per Capita is in line with the uncertainty of the Japanese consumer market.

2.A.6 Consumer Sectors

Japan represents a large consumer market with a population of 127.3 million people. Traditionally, Japan has been known as a market with tremendous potential but a hard to reach consumer base for foreign investors looking to enter the market. Much of this can be blamed on Japan’s traditional values that do not often mirror the westernized style of buying products (Japanese Psychological Association, 2001). Japan’s consumer base can be segmented into a few different age groups. The Cluster Generation, those over 60 that were born during the time of the post-World War II baby boom, represents 6.9 million consumers in the Japanese market. This generation is full of accumulated wealth and newly retired individuals who are estimated to hold over 10% of Japan’s total individual assets (The Carter Group, 2007). The “baby boomer juniors” represent a second demographic segment of those born between 1971-1980. There are around 18 million consumers from this generation, who have gone through the economic downturns of the 1990s and are now enjoying a more stable lifestyle (The Carter Group, 2007). This particular segment represents the group of people who were able to get rich after the economic bubble of the 1980s, the IT bubble, and the retirement of the baby boomer generation before them. While this segment represents a large portion of the Japanese luxury consumer market, many of these consumers are not as aggressive in terms of luxury consumer spending as the younger generation of consumers that follow them (Academia, 2017).

The new generation, or the “parasite singles,” represents around 9-11 million consumers, made up of 60% of single men and 40% of single women ages 20-34. This group consists of high-income workers who still live at home without many expenses, and can use their income to buy luxury consumer products (The Carter Group, 2007). This “consumer rich” segment has become the target of the luxury market and has adapted a new consumer mindset that is more open to spending income on luxury goods (Academia, 2017). The remaining segments are the fuyu-so segment and the mass retail market. The fuyu-so segment has anywhere between 3-11 million people and refers to household’s that are wealthy and educated and have anywhere from 10 million yen to 10 billion yen, or $88,000-$888,000, in savings (The Carter Group, 2007). The rest of consumers can be defined as the mass retail market and contains around 40 million of the remaining consumers. These mass retail consumers are buying affordable products and are not known to be luxury consumers. The image below depicts the luxury consumer market in Japan and breaks it down into the three main luxury consumer segments.

One thing in common with consumer segments of all ages is the up and coming use of the digital market for luxury consumers. According to McKinsey&Company, mobile usage in luxury spending has nearly double between 2014 and 2015 (2015). This new reliance shows the opportunity presented by selling luxury products through the internet and not just through retail stores. The image below shows a survey taken by McKinsey&Company on the mobile usage of buying luxury products. The drastic increase of mobile usage to buy products from 2014 to 2015 shows a new mobile market of luxury consumers that is available.

2.A.7 Competitors

Competition for Sureshade is limited since no similar products are available in Japan. Yet, it is still necessary to worry about exporting companies who could potentially copy SureShade’s product if precautionary measures are not taken. However, there are some competitors that export through third party sellers to Japan. These competitors offer similar products with less advanced designs such as Taylor Made, Riga Marina, and Pro-techt. These companies use third party seller such as Amazon to distribute the product to Japan, and they do not work with dealers or boat manufacturers. However, Sunbrella is a leader in performance fabrics for many outdoor applications including marine. The company exports worldwide and they work directly with boat dealers and professional boat users to increase customer awareness. In terms of material, they have the best shade fabrics that are certificated with the seal of recommendation, a symbol of safe and effective sun protection, and are water resistant (Sunbrella, 2017). In terms of design, Sunbrella Plus and Sunbrella Supreme are specifically built for marine enclosures, and they provide solutions for all marine application. (Sunbrella, 2017) They also offer personalization which customers can choose the color of the shade fabrics for all kinds of marine applications (Sunbrella, 2017), Some of the products that these companies offer are shown in the chart below.

2.A.8 Products

Per our research and private conversations, finding identical products to SureShade in the Japanese market is hard; this is shown in the table above (Kento & Cho, 2017). However, there are many similar products for Japanese customers. The products sell as boat tents, boat tops, bimini tops, and boat covers through Rakuten (Japanese eBay), Aliexpress, Amazon Japan, and local retailers. Some of the goods are portable so sellers and manufacturers have been marketing them for boating, camping, and picnicking. In addition, many local stores are offering customized sunshades, and offer installation for an additional fee.

2.A.9 Distribution Channels and Promotional Methods

Japanese distribution channels have changed substantially over the past two decades. Many of the traditional channels and systems are streamlined. Recent technologies are being supplied and have significantly improved channels with efficiency issues. The channels used vary between industrial products and consumer goods substantially. The reason for this involves two aspects: changes in the distribution systems themselves and distribution-related situations. Firstly, the industrial structure is modified; some of these changes are the deindustrialization of the domestic manufacturing industry caused by an increase in imported products. The increase in imports is due to the yen appreciation, a decline in local competitive production sites caused by the increase in imported goods, and the overseas deployment of the secondary industry in pursuit of low-wage labor (GS1, 2016). Secondly, the population trends are reversed. The population composition has changed drastically because of a reduction in overall population. This reduction is because of the progressing aging of society coupled with a declining birth rate, which has never been experienced at such an overwhelming speed.

Japanese manufacturers depend on wholesalers for a host of services to other members of the distribution system. Wholesalers provide payment collection and financing for the physical distribution of warehousing inventory and promotion to other channel members. Wholesalers and all other intermediaries are bound to manufacturers by a set of practices and incentives designed to create powerful marketing support for their products. It is also important to exclude rival competitors from the distribution system (Export.gov, 2016). Japanese wholesalers typically act as agent intermediaries and extend the manufacturer’s control through the channel to the retail level. Specifically, the control is maintained through four elements, which are inventory financing, cumulative rebates, merchandise returns, and promotional support.

Furthermore, changes in the distribution system include the following: First, there has been growth in large-scale businesses and shifts in primary business forms. The number of family-owned businesses, which mainly include small-scale petty businesses, have drastically reduced while big business have grown. Also, department stores and wholesalers used to be the leading large scale businesses, but were replaced by chain retail stores. Chain retail stores aimed for a clearer target, such as fast fashion, electronics, and drug stores. Most of these business styles have expanded their sales with the high impact of low prices. Therefore, to start SureShade’s business expenditure in the Japanese market, it would be beneficial to create contracts with wholesalers.

In addition, the center of businesses are shifting from city centers to suburbs. In 2000, the "three acts" on city planning, including "Large-Scale Retail Stores Location Law," and "Central City Invigoration Law," were established. Due to the new laws, the process of opening a store is tightened, which accelerates the trend to open large-scale retail stores in the suburbs where there are fewer restrictions (GS1, 2016). In contrast, businesses have diminished in urban areas. Therefore, the Japanese administration revised the laws and is currently trying to reinvigorate city centers. Even with this, the deterioration has continued to progress (Export.gov, 2016). Per our research, most marinas and ports are considered as suburbs; thus, SureShade can take advantage of this situation and benefit from this shift.

2.B Export Plan

While the current method of direct exporting works for SureShade products due to their uniqueness, we find it beneficial to consider all options when entering the Japanese market. We begin with a review of the import and product regulations in Japan followed by calculations for total landed costs. We then provide analysis on various entry modes which include licensing, franchising, and foreign direct investment. In addition to an overview of these options we provide discussion on exporting, both direct and indirect.

2.B.1: Export and Product Regulations

Understanding the import requirements and documentation necessary for doing business in Japan is one of the most important aspects when exporting there. Having a local representative in Japan and working with a customs specialist or freight forwarder is helpful when shipping products. To start exporting products to Japan, SureShade must obtain an import permit after required examination of the goods, and then declare them to the Director-General of Customs (Export.gov, 2016). After the process then starts with the lodging of an import declaration and ends with the issuance of an import permit and payment of customs duty (Export.gov, 2016).

All shipments from the United States are regularly assessed using “temporary” rates without a certificate of origin or WTO (Export.gov, 2016). All additional documents are applied, such as proof of compliance according to Japanese regulations, standards, and laws at the time of import. Other required documents for U.S. exporters may include an Import Declaration Form (Customs Form C-5020) ("Import Procedures: Japan Customs", 2017). Moreover, if the products are entitled to favorable duty treatment determined by WTO or preferential rates, a certificate of origin is needed. Also, a declaration by SureShade that describes the quantity and value of the goods, as well as any other required information should be made. Afterward, a Japanese customs broker can file the statement as a proxy for importers ("Import Procedures: Japan Customs", 2017).

The import declaration by SureShade must be made after the goods have been taken into a customs bond area. Sometimes, for specific items that need the approval of the Director-General of Customs, the declaration can be made while they are a barge, aboard a ship, or before they are taken into Japanese customs bond area (Export.gov, 2016). However, SureShade products might not be considered an item that needs approval. Furthermore, import (Customs duty payment) declaration form (Customs form C-5020) should be prepared with the documents shown below:

1. Invoice

2. Air Waybill or Bill of Landing

3. The certificate of origin (where a preferential or WTO rate is applicable)

4. Generalized system of preferences, certificates of origin (Form A) (where a preferential rate shall apply)

5. Packing lists, freight accounts, insurance documents, etc.

6. Certificates, licenses, etc. which are required by laws and regulations other than the Customs Law

7. Detailed statement of reductions of, or exemption from Customs duty and excise tax (when such exemption or reduction applies to the products)

8. Customs duty payment slips (when the goods are dutiable).

There are other import regulations for particular products, but they are not relevant to Sureshade products ("Import Procedures: Japan Customs", 2017). Also, a detailed price chart is shown below, provided by a U.S. provider (ClearFreight, 2017). The cost will differ due to weight, cost, the size of shipment, and vendors.

Above information in this section retrieved from (ClearFreight, 2017)

TOTAL LANDED COST Estimation

Table: Landed Cost of a shipment of SureShade RTX Pull-Out and MTF Manual Products from Philadelphia, USA to Tokyo, Japan

RTX Pull Out

MTF Manual Shade

~~ Shipping information on SureShade’s larger products was hard to find. Due to the heavy weight of the two larger products (ATF Automated Shade & M3 Automated Mega Boat Shade), FedEx and UPS shipping estimates were not available from Philadelphia to Tokyo. Rates for Duties, Sales Tax, and International Insurance would all remain the same for the larger products, but the international shipping cost would potentially vary. ~~

DutyCalculator: https://www.dutycalculator.com/hs-lookup/1306351/hs-tariff-code-for-660191000000/

Shipping Estimate: https://www.fedex.com/ratefinder/standalone?method=goToResultSummaryPage&isPrevFlag=false

Shipping Estimate: https://www.fedex.com/ratefinder/standalone?method=goToResultSummaryPage&isPrevFlag=false

2.B.2 Labeling & Packaging Requirements

There are no specific requirements for labeling, but correct packaging and marking are critical to smooth customs clearance in Japan. Also, the average time of customs clearance is 0.7 hours for air cargo and 5.6 hours for sea freight (USA International Business Publications, 2015).Packaging restrictions include the use of straw material when shipping products. Labeling is not required for most imported products at the customs clearance stage, but the labeling is necessary at the point of sale. Also, in Japan, English is permitted to use for labeling and packaging purposes. Furthermore, all air shipments which value greater than ¥100,000 (about $900) must also include a commercial invoice and the commercial invoice must be as descriptive as possible for each item in the shipments ("JAPAN: PACKAGING AND STANDARDS", 2017). The Japanese Measurement Law requires that all measurements and weights on a packing list be reflected in Metric System values. Therefore, the packing list has to include the exact size and contents of each container, including the net size and weights of each package in metric values ("JAPAN: PACKAGING AND STANDARDS", 2017). The Japan's Ministry of Finance maintains a website which describes customs clearance and import procedures, as well as other detailed information. Contact information for this can be found at http://www.mof.go.jp/english/index.htm. Also, SureShade may need to consult with the international shipper of the company for specific details regarding the shipments since the international carrier should be up-to-date on Japanese import requirements.

2.B.3: Entry Mode Methods

Exporting (direct or indirect)

Direct exporting means “a company deals directly with an agent/distributor in the foreign market it is looking to enter, whether or not that entity takes title to the merchandise”, while indirect exporting means “a company turns over the market entry process to a third party who manages the associated functions” (Foley, 2014).

The table below shows the advantages and disadvantages of direct exporting and indirect exporting per Laurel Delaney (2016, 2017), the author of Start & Run a Profitable Exporting Business:

SureShade’s preferred strategy for entering foreign markets is direct exporting which is mostly centered around dealers. SureShade locates and enters contracts with dealers who then add a factory-installed option or feature to new boat designs or retrofit. This poses little risk to SureShade as the dealers do not take title to SureShade’s product through this. Boaters may also purchase SureShade DIY products directly from them. Private boat owners can make shade inquiries on SureShade’s website and make online orders by themselves. SureShade provides all necessary mounting components and full installation instructions for Manual Shade buyers. Automated Shades are a factory or dealer installed product and SureShade would work directly with boat dealers and service technicians to help customers with installation.

Franchising

Franchising is another option when entering a new foreign market. Franchising is “a legal and commercial relationship between the owner of a trademark, service mark, brand name, or advertising symbol (the franchisor) and an individual or organization (the franchisee) wishing to use that identification in a business” (Hansen).

According to Charles Internicola, a national business and franchise lawyer, there are pros and cons to franchising your business:

Benefits for franchisors

· Cost-effective expansion – Franchisees handle the research and funding for outlets in your chain, which means you do not have to spend your own capital or request additional funding from banks or investors to grow your business.

· Marketing support – Every franchise location uses the same tried and true marketing plans, which helps eliminate the costly guess work when starting an independent business. You will also have the power of a national and/or regional advertising fund.

· Additional sources of revenue – As the franchisor, you will receive additional income in the form of on-going royalties paid by your franchisees, depending on your franchise agreement. Royalties typically include a monthly fee including a percentage of the franchisees gross sales.

· Acquiring talented managers – The managers chosen to run each franchised location will have a vested interest in its success, unlike a salaried employee, and will be responsible for handling any issues related to employees, workers’ compensation, etc.

· Scalability – Depending on your needs and goals, you can customize your franchise agreement to focus on large volume national growth or low volume regional growth.

Obligations and shortcomings for franchisors

· Capital investment – Establishing a franchise requires investment of time and money in business development, a flagship store, legal document preparation, marketing and packaging plans, and recruiting franchisees.

· Less control – The franchisees will agree to follow your training and instructions, but you may not be able to make changes without running into disagreements. Your franchisees are still independent businesses and negotiations may be necessary.

· Costly legal action – If a franchisee refuses to cooperate or proves unprofitable, legal action may be required, which can be both costly and damaging to your reputation among other franchisees.

· Regulation – Franchises are regulated by state and federal laws, requiring the development of a Franchise Disclosure Document (FDD) and other Regulatory Documents with the help of an attorney.

Licensing

Licensing is a business agreement in which the licensor gives the licensee permission to manufacture its product for specified royalties (Staff, 2017). SureShade would sell licenses to other companies to use its intellectual property such as, brand, design, or programs (Worth, 2015). Through licensing SureShade would be able to instantly tap into the existing production, distribution, and marketing networks that licensee(s) potentially spent years building (Staff, 2017). SureShade would receive a percentage of the revenue from the products sold under their license (Staff, 2017). There are fees associated with licensing which generally amount to a small percentage of the sales price, however they may add up quickly (Staff, 2017).

Japan is the world’s third largest market for licensing ("Licensing Expo Japan”, 2017). “Brand licensing is common within the Japanese market, and foreign companies establish contracts with Japanese companies all the time” ("Licensing in Japan | Export to Japan", 2017). LICENSING JAPAN is Japan’s largest licensing trade show and an ideal venue for companies to effectively launch and seek out potential licensees ("Licensing Expo Japan”, 2017). Through licensing products, companies can raise awareness of their brands. The majority of licensing is of brands and characters in the area of consumer products ("Licensing in Japan | Export to Japan", 2017).

Some benefits to licensing include (Worth, 2015):

· Very little to no capital investment- You do not have to shell out for manufacturing start-up costs and do not have to build marketing, sales, and distribution networks.

· Licensee’s market knowledge and experience lowers product performance risk.

· Royalty payments can be substantial.

· Frees up time and cash to focus on the most profitable markets.

Some negatives to licensing include (Worth, 2015):

· Little to no control over your product- You lose control over intellectual property (especially if the licensee is based overseas).

· Licensee can choose to never put your product into production which still blocks you from doing so on your own.

· Licensee may refuse to validate or let you audit their royalty statements for accuracy- Legal action can be taken, but it is very expensive.

· If you have multiple licensees in different markets and one does poorly it could affect the performance of other licensees.

All in all, licensing saves a lot of time and money while also diminishing risk. However, the deals are typically complicated. SureShade should budget for an experienced licensing attorney if it decides to go this route.

Foreign Direct Investment: Wholly-owned Subsidiary

A wholly owned subsidiary is a company in which the parent company owns 100% of its common stock ("Wholly Owned Subsidiary", 2017). SureShade could obtain a subsidiary through acquisition or it could create its own. There would be no minority shareholders because SureShade would own all the shares of the subsidiary. The subsidiary would operate under the permission of the parent company if the parent company has provided direct input into the subsidiary’s operations and management ("Wholly Owned Subsidiary", 2017). In Japan, subsidiary companies are established once registered with the Legal Affairs Bureau ("Investing in Japan", 2017). The documents required will be determined on an individual basis for each company. However, some of the documents that may be needed to complete the procedures for certifying the subsidiary company's articles of incorporation in Japan are as follows ("Investing in Japan", 2017):

· Document(s) certifying the profile of the foreign company.

· Document(s) certifying the representative authority of the foreign company's representative.

· Document(s) certifying the authenticity of the signature of the foreign company's representative.

· Certificate(s) of signature for the person(s) to be appointed as director(s), etc. (if any) of the subsidiary company.

· Document(s) certifying that the foreign company has decided to establish a subsidiary company may also be needed when requesting a financial institution in Japan to take custody of the subsidiary's capital and issue a capital custody certificate.

The Government of Japan explicitly promotes inward FDI and has established formal programs to attract it. “Some of the regulatory roadblocks that had hindered foreign companies from coming to Japan to do business have been reduced or removed” (Thomas, 2014). There is a strong history of international business cooperation between the United States and Japan. This would be the preferred option for a company that is not willing to give up control over the operations.

Some benefits include (Basu, 2017):

·  Reduces the liability of obtaining a new or risky business- The parent company is responsible for securing financial obligations which reduces the risk and separates the financial responsibility of each entity.

· The parent company can implement common data access and security protocols which lessens the risk of losing intellectual property.

· There is less risk of losing intellectual property to the competition because the parent can implement common data access and security protocols.

·  The parent company has control over the assets of its subsidiaries and can invest these assets as it sees fit.

Some disadvantages include ("Wholly Owned Subsidiary", 2012):

· The parent company is completely reliant upon the subsidiary’s performance in business processes especially if they are in another country- The subsidiary would be responsible for hiring workers, recruiting sales representatives and basic day-to-day operations.

· It may be very expensive for the parent company to acquire the assets required.

· Risk may increase for the parent company when local laws differ significantly from the parent company’s home country- The parent company takes on all the risk involved by owning the subsidiary.

Overall, wholly-owned subsidiaries can be advantageous for both parties because the subsidiary retains its brand name while the parent company can expand to new markets.

Foreign Direct Investment: Joint Venture

A joint venture can be used to mitigate the complexities associated with an outright purchase of another company. In Japan, joint ventures are permitted under Japanese law which enables companies to combine their knowledge and resources to work towards a common goal as a team. There are two types of joint ventures. First, both parties remain independent businesses and enter limited length contractual agreements. Second, a separate joint venture company is created to complete a specific project or contract. This allows both partners to own shares of the company and direct operations. Advantageous joint ventures are achieved when the strengths and weaknesses of one partner complement the other. Joint ventures are an effective mode of entry because they allow the company to grow and generate profits faster than other modes. Some benefits include:

· Gain access to new knowledge and resources (capital, staff, and technology).

· New opportunities such as new markets or a greater distribution reach.

· Shared liability for any risks undertaken.

Some negatives include:

· May be difficult to agree on objectives that are clear and aligned to a common goal.

· Many joint ventures fail due to differing cultures, management practices, and work-related relationships.

· If the roles of each company are not defined clearly then poor tactical decisions can be made.

In summary, joint ventures with Japanese partners require time, commitment, and effort to be contributed equally from both sides which can make this route difficult. The objectives of the collaboration should be crystal clear and discussed ahead of time. SureShade should take proper due diligence if this method is chosen. Obtaining an experienced Japanese legal advisor is highly recommended because navigating Japanese law and legal documentation pertaining to joint ventures is very risky if you are not familiar with the language. (All information in this section obtained from "Joint Ventures in Japan: Benefits and Risks | Export to Japan", 2017)

2.B.4 Conclusion

After considering all four possible modes of entry our team believes that SureShade should maintain its preferred method of direct exporting to distributors and manufacturers. We think this because it will protect its patents and our client has significant experience with this mode. Our client is also adamant about their products remaining strictly United States of America made; this could be a source of conflict if a franchisee or a licensee wants to cut costs by moving manufacturing to Japan. Direct Exporting would eliminate this risk while potentially increasing profits by eliminating intermediaries. It will also allow SureShade to maintain control over all aspects of the transactions as it sees fit. With that being said, no matter what method SureShade chooses it could benefit from using the US Export Assistance Center as a resource. Contact information for the Philadelphia office is included in the Appendix.

3.A Marketing Strategy

3.A.1 Market Segmentation

Throughout our research we have identified three specific target market segments for SureShade products: consumers, dealers, and manufacturers. In narrowing down the consumer market, we recommend a focus on three sectors. First, the “Parasite Singles” because they are a “consumer rich” segment which means they are the most open to spending their money on luxury products. Second, the “Fuyu-so” because they are considered to be the most educated sector with the most disposable income. Lastly, the “Cluster” generation, because they are an older segment with years of accumulated wealth at their disposal. A more detailed description of these segments is included in the “Consumer Sectors” section of the market analysis above. Targeting these three sectors would result in a market of between 18.9 and 22 million consumers for SureShade.

We have outlined a strategy for each of the three target market segments covering pricing, distribution, and promotion. Since there are overarching considerations for each market, common promotion, distribution, and product policy is covered afterwards.

3.A.2 Consumer Market

Price Policy

Our client has expressed that despite economic differences in other countries where they have expanded their business to, they have not had to lower prices. If SureShade chooses to follow our recommendation and focuses on the “Parasite Singles”, “Fuyu-so”, and “Cluster” segments we believe they will be able to maintain their current prices. SureShade’s products are already priced at a minimum of six times higher than the most expensive competing products that we found. For example, SureShade’s RTX Pull Out shade is $1,800 per unit and the most expensive competing product we found was $300. More comparisons can be seen in the “Products” section of the market analysis. SureShade would have a price skimming strategy if they kept current prices and this would entice those who are interested in luxury products and like to show off. Capturing these high-end segments who are seen as trendsetters may have a ripple effect which will make SureShade’s products more attractive to the rest of the market. This will result in free advertising and an increase in allure; SureShade’s products could become a status symbol in the Japanese boating industry. Typically, this strategy could backfire if there are close competitors that can introduce identical products at lower prices. However, we have not identified any close competitors that have the ability to do so.

We do not recommend that our client chooses to target the bulk of the consumer market, which includes the “mass retail segment” and the “baby boomer juniors”, because they will need to lower their prices by more than 80% to compete. This would be unrealistic and unprofitable for SureShade.

All information in this section retrieved from ("Penetration Pricing", 2017)

Place (Distribution) Policy

The young consumer sectors that we recommend targeting have declining marriage rates and spend an increasingly large amount of their free time on the internet. Therefore, we recommend that SureShade creates a Japanese website. However, the Japanese website should not just be a translation of the English website. SureShade will want to engage its audience by being more expansive with its text such as including a comparatively long “About Us” section to list the company’s achievements and build trust with the Japanese consumer market. Japanese consumers are much more tolerant of big chunks of text than Americans are and Japanese characters allow a lot of information to be condensed into a small amount of space. It is important to hire a good professional translator to help you figure out which set of Japanese characters is best for SureShade’s site since each set has different implications.

We do not think SureShade will be successful if it does not purchase translation. If this is too much of a cost, cost savings can be derived from creating a landing page instead of a complete website.

We believe the market would support the expenditure because it is a very large market that would be reached through this method. 

All information in this section retrieved from (Loayza, 2017)

When targeting the older “Cluster” generation, print still matters. Japanese seniors are avid paper readers and customer loyalty to newspapers is very high (Loayza, 2017). About 93% of those over the age of 60 are newspaper subscribers ("Newspaper Circulation in Japan", 2014). The top two daily newspapers are Yomiuri Shimbun and Asahi Shimbun with 9,240,000 and 7,210,000 papers in circulation as of 2014 respectively ("Newspaper Circulation in Japan", 2014). These two newspapers should be utilized for SureShade’s advertising. “It is estimated that 95% of Japanese papers are delivered locally and this local distribution network is extremely important to their continued success” (Loayza, 2017). While 68% of those between the ages of 60 and 69 and 62.3% of those 70 and over are magazine subscribers, we recommend SureShade focuses solely on newspapers for cost savings ("Newspaper Circulation in Japan", 2014).

Promotion Policy The most effective channel for SureShade to promote its products to individual consumers in Japan would be to use the Internet. Online marketplaces are a great way to get products noticed and e-commerce is a stabilized industry within Japan. Japan currently ranks 4th in the world in overall e-commerce sales, with expected sales to reach over $106 billion by 2018. With an advanced e-commerce market, the best way for SureShade to promote its product online is through popular Japanese e-commerce sites. In the table listed below are the top ranking e-commerce shopping sites in Japan that SureShade should use to reach the largest mass of consumers in the marketplace.

(Table Information retrieved from Export.gov and Japan 2016 E-commerce Report)

Other techniques SureShade has used on the Internet, such as paying to be the top advertised google search, are also suitable to use when entering the Japanese market. By being the top ranked search, SureShade will be able to capture the attention of consumers who are looking for boating products. Prices for this vary based on a multitude of factors, including the varying price of each keyword, the total number of advertisers bidding, the price each advertiser is bidding at, the click through rate compared to other advertisers, and the ad quality score compared to other advertisers. For best estimate, SureShade should refer to their prior costs using this advertising technique and estimate that it would be a similar cost in Japan. In addition, if SureShade were to create its own Japanese website or add landing pages, it would be a great way to garner the trust of Japanese consumers. Japanese shoppers require a high degree of assurance and trust plays an essential role when buying new products. A SureShade website, filled with information on product assembly and design quality, will help to assure Japanese consumers that SureShade offers quality products. According to Executionists, building a mid-size ecommerce website costs an estimated $8,000-$15,000 and an extra $2,000 for multi-language features (2016). Another promotional option for SureShade is to design a landing page to increase online traffic to their original website. With the right design and advertising, a landing page can help to increase traffic for SureShade and potentially lead to more sales. According to WebpageFX, a fully optimized landing page would require a $3,200 investment with a 10-week time estimate for complete design (2017). Both promotional options are viable for promoting SureShade and will help to increase online traffic and sales in the Japanese consumer market.

All other information in this section retrieved from (LyonsCG, 2015)

3.A.3 Boat Dealer Market

Price Policy

Per SureShade’s website, for aftermarket/refit installations, boat dealers receive a dealer discount price on all shade sales. They also receive 100% of the service revenue generated from installations. We recommend that SureShade implements this when doing business with dealers in Japan because SureShade views dealers as the key to its success. We believe the current prices with the discount will be successful in the Japanese boat dealer market. Moreover, boat dealers would also have the option to markup their prices in order to turn even higher profits from retrofitting SureShade’s products onto their boats.

Place (Distribution) Policy

We recommend that SureShade proactively reaches out to Japanese boat dealers. SureShade already has a section dedicated to boat dealers on its website and could refer dealers to it via a landing page. There are two criteria that SureShade should consider when choosing potential business partners. First, the dealer should have numerous different models of boats for sale. This is so that there are higher chances that SureShade can sell more products. Second, the Japanese boat dealers’ websites should have an English version. This would show that communication between SureShade and the dealer could go smoothly without spending money on hiring a translator. We found some Japanese boat dealers that match both criteria and they are listed in Appendix A.

Promotion Policy

We recommend that SureShade contacts the local boat dealers in Appendix A and introduce the products to them. If SureShade creates long-term business relationships with Japanese boat dealers, those dealers would purchase the products from SureShade and put SureShade’s information and advertisements on their websites. Ultimately, this will increase SureShade’s competitiveness in Japan.

To expand SureShade’s network, we suggest offering a group discount when a certain number of boat dealers purchase at the same time or offer discounts when they individually purchase large quantities.

Another way to get connected with more Japanese boat dealers is to join boat shows. Every spring, Yokohama City (neighboring Tokyo) holds an annual Japan International Boat Show. SureShade can meet many local boat dealers there and build connections in person.

3.A.4 Boat Manufacturer Market

Price Policy

Japan has a volatile currency due to its interest rate, which creates serious problems for export companies. When it comes to the price policy for boat manufacturers, we need to take advantage of some trading tools to avoid currency risk such as purchase credit insurance or offer payment term when boat manufacturers order large quantities. On the other hand, Sureshade has a unique product and advanced designs; therefore, pricing power with boat manufacturers is high for SureShade. Manufacturers may be willing to pay premium prices for SureShade’s unique products since Japanese companies’ value innovation and quality.

Place (Distribution) Policy

The options for a distribution policy for boat manufacturers are not limited since there are about eight-boat builder companies (Yachtall, 2016) located in Japan including Suzumar, Honda, Shimonoseki Shipyard, Mistubishi, New Japan Yacht Co, Far East Yachts, and Fuji Yacht Builder. (Yachtall, 2016) Before the establishment of the infrastructure, Sureshade should weigh the costs and benefits for each strategy to find the best distribution channel. These include online distribution and local distributers. However, Sureshade already has a mature infrastructure and it is better to use SureShade’s current strategy. Sureshade might need to hire a local distributor to help facilitate the relationships with boat manufacturers and Japanese consumers as a whole.

Promotion Policy

When promoting to manufacturers, attending trade shows in Japan will help to meet potential business partners. One of the biggest exhibitions for recreational boats is the Japan International Boat Show and it takes place annually in Yokohama Japan. The show docks around 50 primarily larger motorboats and sailing cruisers at the Yokohama Bayside Marina http://www.marine-jbia.or.jp/boatshow2017_e/ Japan International Boat Show, 2017). Moreover, the supporting companies, including Kawasaki, Suzuki, Tohatsu, Toyota, Yamaha, and Honda are all well known and the most competitive boat manufactures in Japan. In addition, contacting the Japan Marine Industry Association http://www.marine-jbia.or.jp/english/ and being a member will help to make business connections in Japan. The organization was founded in 1962 and have been involved in various activities such as education of boating, promotion and popularization of boating, improvement of the safety and technology of boating, and organizing boat shows (Japan Marine Industry Association, 2017).

Direct calling and visiting Japan through an appointment is necessary to conclude a contract with manufactures if they are interested in SureShade products. Also, SureShade needs to have a description written in Japanese for all products to provide exact information that Japanese manufacturers will want to know. However, as it needs a cost, we recommend choosing representative goods and start to translate those first. Adding a landing page address could also help to reduce the costs.

3.A.5 General Market

Product

We recommend that SureShade not make any drastic changes to product design or assembly when exporting to Japan. In prior experience, SureShade kept the same product design and were able to create international relationships with dealers and manufacturers, while also reaching individual consumers. SureShade has a diverse product line and is prideful of its patent protected and American made products. By keeping the same product design, SureShade will not have to risk getting new patents and creating different manufacturing methods that would compromise the quality and characteristics of its products. Relying on past international exporting, SureShade can be confident their diverse product line is suitable across all boating platforms and will sell in various international markets, regardless of the different types of consumers.

4.A Practical Implications and Conclusions/Recommendations

When exporting products into a new foreign market there are always going to be practical implications. SureShade has to take into consideration the new labor costs that will come with the increase in product sales. Also, new distribution models will have to be implemented, as SureShade has never exported to Japan before. SureShade must have projections and analysis while entering the new market so it can properly forecast how much they will need to sell and how reactive the Japanese market is to their product. Overall, SureShade must be mindful of the export process to minimize the challenges involved when entering a new foreign market.

We found that Japan was the most optimal market for SureShade to enter. We recommend that SureShade targets three specific markets: consumers, boat dealers, and boat manufacturers. We also recommend that the focus within the consumer sector is narrowed down to the following segments: The “Parasite Singles”, the “Fuyu-so”, and the “Cluster Generation” because they are the markets with the most disposable income and willingness to purchase luxury products. The most optimal distribution channel for all markets is online by creating a Japanese website or landing page. Manufacturers will be best reached at international boat shows whereas, it would be beneficial to contact dealers directly. We believe that SureShade should maintain current prices in the consumer and manufacturer markets while providing substantial discounts to dealers that buy in groups or large quantities. We also recommend that SureShade maintains its preferred mode of entry: direct exporting. This will protect SureShade’s patents, increase profits by eliminating intermediaries, and allow SureShade to maintain tight control. With that being said, SureShade could benefit from hiring a local representative to help with the legal requirements as well as, the US Export Assistance Center.

References

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Appendix

Figure 1: Contact Information for the US Export Assistance Center- Philadelphia Office

Figure 2: Boat Dealer Contact Information

Thank you to everyone for helping to complete this report:

Bertrand Guillotin [Fox] Darlene Atta [SBDC]

SingaporeMalaysiaJapanIndonesiaSouth Korea

Data

Market Size

Boat Users: Merchants

1599

(Ranked 6th in the

world)

315

(Ranked 31st in

the world)

684

(Ranked 16th in

the world)

1340

(Ranked 8th in the

world)

786

(Ranked 14th in the

world)

Source(s)^

Pleasure Craft Users

3140 registered

(~4500 overall)~4,000

2.1 million

1500 (and 2000+

commercially used

in marine tourism)

18731 registered

(13422 licenses)

Source(s)^

http://www.mpa.gov.s

g/web/portal/home/sin

http://www.mik

ederrett.com/p

http://www.marinetraffic.com/en/ais/index/ships/all/ship_type:9

http://www.mikederr

ett.com/pdfs/South-

http://ifbso.com/uploads/

public/554/0d7/11d/5540

http://www.mikederret

t.com/pdfs/South-East-

http://ifbso.com/uploads/

public/554/0d7/11d/5540

Market Growth

No data foundNo data foundNo data foundNo data found

15.9% CAGR to 2013

registration

7.2% CAGR to 2013

licenses

Source(s)^

N/AN/AN/AN/A

http://www.ibinews.com

/news/south-korea-

https://www.cia.gov/library/publications/the-world-factbook/

Source(s)

http://data.worldbank.org/indicator/IC.EXP.DURS

Political IssuePolitical Risk IndexFreedom Rating

90/10051/100

Source(s)

https://www.prsgroup.com/category/risk-indexhttps://freedomhouse.org/report-types/freedom-world

Ease of Doing Business

Enforcement of ContractsEnforcing contractTime neededCost(% of claim)Qulity of judical process (0-18)

Ranked 42 in Asia425 days37.312

Source(s)

http://www.doingbusiness.org/data/exploretopics/enforcing-contracts

http://www.doingbusiness.org/rankings

Presence of Trade BarriersPaying taxesTrading across Borders

Ranked 61 in AsiaRanked 60 in Asia

Source(s)

http://www.doingbusiness.org/rankings

https://www.dutycalculator.com/hs-lookup/25854/hs-tariff-code-for-dial-indicator/

Transportation Avg time

11days

Malaysia