Project for global business environment

Table of Contents 1 Executive Summary 2 Porter’s Five Forces Analysis 2 Buyer Power 2 Supplier Power 3 Industry Rival 4 SWOT Analysis 5 Opportunities 5 Threats 6 Mode of Entry 7 Franchising 7 E-commerce 8 Decision Matrix 9 Recommendation 11 Bibliography 13

Using the PESTEL model it was determined that Japan is the best suited country for Xxxxxxxx to consider market entry. This report is meant to aid executives at Xxxxxxxx in the decisions regarding timing and scale of market entry into Japan. As well as the appropriate strategies or modes of entry that Xxxxxxxx may consider. An analysis of potential modes of entry was completed using several analytical models such as Porter’s Five Forces and a SWOT analysis. The analysis includes a description of the power from buyers and suppliers in the Japanese digital marketing industry, as well as industry rivals. The opportunities and threats of entering the Japanese market are also analyzed.

Decision criteria was used in a decision matrix to aid in identifying the best suited option for market entry for Xxxxxxxx. The decision criteria are selected to highlight the most important factors associated with each mode of entry. The criteria included government and international laws and regulations, facilitation of language and cultural barriers, protection of intellectual property, and control of foreign affairs. Upon completion of the analysis and decision matrix it is recommended that e-commerce is the mode of entry implemented by Xxxxxxxx.

Porter’s Five Forces is a business analytical tool which is used as a framework for identifying a company’s competitive environment in a given industry. Power of buyers, power of suppliers, industry rivals, potential new entrants into the market, and product substitutions are the factors used to identify a company’s competitive advantage in an industry (Scott, 2020). For Xxxxxxxx an industry analysis will be done using power of buyers, power of supplier, and industry rivals in the Japanese digital marketing industry.

The nature of the digital marketing industry in Japan is many buyers and few suppliers so the power lies with the suppliers, in other words the power lies with Xxxxxxxx to tap into this market. The Japanese spending for advertising in the digital marketing sector is expected to reach approximately CAD $21.6 billion by 2021 which is a growth rate of 6.5% (Statista, 2021). The market for digital advertising in Japan is so successful because many Japanese companies have poor website design and in turn have poor digital marketing and consumer engagement levels. Many Japanese websites use sliders which cycle images every few seconds which has been proven to distract consumers as opposed to engaging them with content (Neely, 2018). The services that Xxxxxxxx offers along with the content experience platform could provide massive improvements in online engagement for many Japanese businesses in a variety of industries. The Japanese digital marketing industry is typically a business-to-business industry and the current successful industry practices include video advertisements, advertisements displayed through search engines and social media platforms, as well as advertisements which are compatible to be displayed on mobile devices (Statista, 2021). Typical transactions between businesses and digital marketing companies are on a monthly subscription basis and can range in price depending on size of the buyer and length of the subscription. The typical buyer in this market is small to medium sized businesses.

The Japanese digital advertising market has taken longer to develop relative to other Asian countries however this appears to be changing at a rapid rate. The main suppliers for this market are local digital marketing firms as well as social media influencers, making the suppliers for the Japanese market primarily domestic (Digital Marketing for Asia, 2021). This may be a challenge for Xxxxxxxx as language barriers as well as familiarity with Japanese software and culture may prove to be an issue. A potential solution to this issue is adopting a polycentric strategy for entry into Japan in which a representative from Japan is recruited to manage Xxxxxxxx’s subsidiaries.

With the growth rate and demand being very high in the Japanese digital marketing industry there is a high demand for Xxxxxxxx’s services. Since this is a relatively new industry there are not many suppliers however this will likely begin to change so now is the ideal time for Xxxxxxxx to make their entry not the Japanese market. The majority of suppliers in this industry are still relatively new organizations therefore are generally small to medium sized businesses with typically less than 100 employees and in the case of social media influencers it is just one individual.

Understanding competition is a pivotal part of Xxxxxxxx’s decision making process when discussing entering a foreign market. The top three rivals for Xxxxxxxx in the Japanese digital marketing industry are Bruce Clay Inc., Principle Co. LTD, and Tamlo (Manifest, 2021). Bruce Clay is a multinational corporation (MNC) that is headquartered out of California, USA however they also have offices in Switzerland, India, and Japan. Bruce Clay has roughly 85 employees with expertise in social media marketing, pay-per-click, and search engine optimization advertising (Manifest, 2021). Bruce Clay enters foreign markets through franchising their services and having one main headquarters in Simi Valley, CA and then smaller franchisee offices in several different countries. Although Bruce Clay is not a publicly traded company and therefore do not disclose earnings, they were ranked number one on The Manifests list of top Japanese online marketing agencies and show extreme competence in customer loyalty and retention with a 96% client retention rate (Clay, 2019).

Principle Co. LTD is a data analytics firm based out of Chiyoda-ku, Japan with approximately 250 employees in Japan. Principle specializes in offering technological infrastructure to aid in a firm’s decision making process regarding operational efficiency (Principle, 2021). Principle is run by Founder and CEO Ken Kusuyama who began Principle Japan in 2011 as a digital marketing agency. Principle Co. again is a privately held company which does not disclose earnings or market share. However, when Principle Co. began in 2011 it was only a domestic company to Japan with less than 100 employees and has since expanded to the North American market and has grown in size to nearly 250 employees (Principle, 2021).

Tamlo is a small content marketing agency with less than 10 employees and is headquartered in Chiyoda-ku, Japan (Manifest, 2021). The managing director of Tamlo is Yuichi Ishno and Tamlo was founded in 2017. Tamlo specializes in marketing services for international companies entering the Japanese market which includes content creation, advertisement management, and social media campaigns (Tamlo, 2021). Tamlo was founded in Japan however they now have offices in Tokyo as well as London; their mission statement from managing director Yuichi Ishno is to create “happy encounters between people and content all over the world” so Tamlo is striving to increase their international reach (Tamlo, 2021). Tamlo primarily serves mid-sized companies due to a limited number of employees and focuses on serving companies in the manufacturing, education, government, and telecommunications sectors (Manifest, 2021).

A SWOT Analysis is a blueprint for determining a company’s strengths, weaknesses, opportunities and threats before moving on with a new strategy. The aim is to examine the things a company excels at and areas where they are lacking. Opportunities look at possible situations they can take advantage of to gain an edge in the marketplace. Knowing what threats a company could face helps lower the chances of failure.

Xxxxxxxx can benefit from companies needing data management tools that are highly effective. Japan is seeing a rise in digital advertising; different forms of content marketing usage will be unavoidable. Huge amount of investment is needed due to the size of Japan, which also means huge risks. Xxxxxxxx will be able to reach a larger audience because they can leverage digital marketing to do so. Traditional direct marketing is not as engaging as useful, valuable content which Uber flip can provide. There are various companies that do not have the resources or knowledge to have a digital marketing strategy implemented successfully. These companies are potential clients Xxxxxxxx can serve. “Whether it’s new teams being formed, partnerships with digital marketing agencies arranged, or budgets being redistributed, major undertakings have been made by Japanese organizations to adapt to the times.” (Kersey, 2020). Xxxxxxxx can capitalize on the trend of companies increasing needs for digitization. Consumers in Japan already expect to receive emails/notifications on mobile about deals from companies they follow, it is easier for Xxxxxxxx to market to potential customers this way, especially when Japanese people are known to be friendly. A lot of brands and advertising agencies in Japan depend on traditional advertising aided by a spokesperson who is a celebrity to promote an ad. This could shift towards content marketing as Japanese people are making more use of social media. Xxxxxxxx can use the platforms to drive results to clients.

Xxxxxxxx can implement digital marketing initiatives for younger companies over more established names in the markets. Younger companies may see the opportunities to have more presence with collaboration with Xxxxxxxx and it may be easier to implement the new initiative as needed. Brands must invest heavily in social media marketing to see huge returns and reach their target audience in Japan. “If you’ve ever spent any significant time in Japan, you’ll know how serious the dedication to providing quality customer service is. If you are looking to keep up with your Japanese competitors, you’ll need to embrace this trend and pay a great deal of attention to the various touch points customers encounter in their purchasing journey, right through from brand awareness and consideration to conversion — it’s all part of an integrated customer experience.” (Kersey, 2020).

Language barrier may be an issue because the number of Japanese people who speak English are very few. Business partners in Japan tend not to reveal everything they know, what they think or their future plans. Aside from losing market share to competitors in the space, Xxxxxxxx will have to worry about gaining and keeping audience attention. “The biggest barriers towards adopting digital marketing strategies exist in large Japanese corporations who have long relied on traditional advertising processes to achieve their goals” (Kersey, 2020).

Xxxxxxxx will be competing with influencer marketing so they must stay creative in how they approach things. Also, consumers may not have as much disposable income to spend on products due to the uncertainty of the pandemic. Xxxxxxxx will have to consider how much they want to spend on marketing their product and if the returns will be worth it knowing consumers are likely not wanting to spend a lot during a pandemic. Consumers are likely to stick to companies they are already familiar with and trust rather than a newcomer like Xxxxxxxx. This is because consumers are not sure yet that their personal information will be protected if they make an online purchase with Xxxxxxxx.

There are various methods of entering into a foreign market. Each method entails certain competitive advantages and disadvantages however the unique circumstances surrounding a certain company or industry can impact the decision of which mode of entry is best suited. Common modes of entry adopted by Canadian companies include exporting, licensing, franchising, joint ventures, wholly owned subsidiaries, and ecommerce. The two best suited modes of entry for Xxxxxxxx entering the Japanese digital marketing industry have been narrowed down to franchising and ecommerce.

If the franchising mode of entry were selected then Xxxxxxxx would license their intangible property, likely a trademark of unique software for content engagement, to a franchisee in Japan. This would have several pros and cons for Xxxxxxxx. Certain pros include gaining local personnel in Japan to facilitate the transition into the foreign market. This includes aiding in issues such as language barriers and knowledge of domestic culture and industry practices. This can be done while maintaining Xxxxxxxx’s core values and competencies as the franchisee will be required to follow strict rules set out by Xxxxxxxx to gain the trademark and use of intellectual property. Another pro to using franchising as the mode of entry is that economic risk will be reduced for Xxxxxxxx as they will not have to invest a lot of their own capital into this venture, the franchisee will be paying Xxxxxxxx to use their intangible property (Export to Japan). The primary con for franchising to Japan is that Xxxxxxxx would have to relinquish a certain amount of power and control to the franchisee in Japan. Although the franchisee must follow rules set in place by Xxxxxxxx they have the rights to operate and manage the franchised office to their liking provided it follows the rules of the initial franchise contract. Using a polycentric strategy and having an extensive research and interview process when selecting a franchisee is a very important part of this mode of entry to have a successful and profitable franchise. The next steps to entering the Japanese digital marketing industry via a franchise would be registering Xxxxxxxx’s representatives in Japan, only once they are registered can they begin to carry out business in the host country of Japan. Xxxxxxxx will also be required to acquire technical licenses for foreign franchisors in Japan under the Foreign Exchange and Foreign Trade Act (FEFTA) (Piper et al., 1992).

After the United States, United Kingdom and China, Japan is the fourth largest market for e-commerce, so this is an easy way to gain entry into the market. Japanese consumers welcome brands and products from overseas. Xxxxxxxx must make sure their software is well optimized for mobile. Xxxxxxxx should provide images, videos, a return policy and deliver customer service in Japanese for peak success. What is important to the Japanese consumer are reviews about the products, recommendations by word of mouth, quality, strength of brand. They are also very price conscious, so Xxxxxxxx may miss out on opportunities/capturing market share if their pricing exceeds competitors already established in the area. “The Japanese e-commerce market is broken into 3 categories: 51.7% retail, 37.0% services, and 11.3% digital content” (Ball, 2019).

Before Xxxxxxxx can launch in Japan, they should consider working with Japanese speaking people who will advise on the type of keywords (there are three different writing systems in the japanese language) and images to use to improve their chances of success. A store would have to be set up using a Japanese domain along with a local payment gateway and customer service. “Businesses located outside of the US or Japan currently cannot join the marketplaces directly and must work with Japan-based subsidiaries.” (Dooley, 2020).

E-commerce will allow Xxxxxxxx to gauge whether their product has an appeal at a low cost. Comments online will provide feedback on how well the product is performing for customers. Xxxxxxxx gets to maintain control with this mode of entry and keep more of their profits. “In Japan, 45% of products are cheaper online, 48% of products are the same price as brick and mortar stores, and 7% of products are cheaper at brick and mortar stores.” (Ball, 2019)

The decision matrix is a tool used to determine which possible outcome will be most beneficial. There will be certain decision criteria which are factors that will determine which mode of entry is best suited for Xxxxxxxx. Each factor will be given an associated weight percentage and then both modes of entry will be given a rating from 1-10 for each criterion where 1 is the least desirable ranking and 10 is the most desirable ranking.

Based on the research performed for the two modes of entry, the best option for entering the Japanese market according to the decision matrix is e-commerce. E- commerce is a small scale of entry to minimize risks. Now is a good time for entry because the industry is booming due to covid. Japan is welcoming e commerce businesses and Xxxxxxxx can capitalize on this opportunity. Xxxxxxxx will be competing with already established names in Japan so they must brand themselves in a way that captures attention and makes them memorable because Japanese consumers tend to be very demanding, seek quality and are price sensitive.  Having partners locally they can trust helps with navigating in this new environment. Some staff members can be flown out to Japan to reduce cost. It is also wise to hire some Japanese speaking people especially for customer service. Having someone who speaks their language means issues can easily and quickly be addressed in terms of customer service. The content marketing space in Japan is not as mature as other parts of the world. Japan is a respecting culture and by taking this into account, it will increase the chances of success for Xxxxxxxx.