Executive Report on Strategies in Japan

Countries covered: Japan The primary audience for this report is managers involved with the highest levels of the strategic planning process and consultants who help their clients with this task. The user will not only benefit from the hundreds of hours that went into the methodology and its application, but also from its alternative perspective on strategic planning in Japan. This report helps executives evaluate strategic investment and entry alternatives in Japan. As the editor of this report, I am drawing on a methodology developed at INSEAD, an international business school (www.insead.edu). The methodology decomposes a country’s strategic potential along three key dimensions: (1) latent demand, (2) accessibility, and (3) trade indicators. A country may have very high latent demand, yet have low accessibility, making it a less attractive market than many smaller potential countries having higher levels of accessibility. With this perspective, this report provides a strategic profile of Japan. It does so by compiling published information that directly relates to latent demand and accessibility. The reader new to Japan can quickly understand where Japan fits into a firm’s strategic perspective. In what follows, Chapter 2 is a general evaluation of the accessibility of Japan, with particular focus on investment and business conditions. In Chapter 3, I report my findings on the real economic potential, or latent demand, represented by Japan when defined as an area of dominant influence. Chapter 3 is followed by trade indicators for key industries, categories, and products in Japan.

Additional Information

Product's ISBN number 0497357151. How to Strategically Evaluate Japan

Perhaps the most efficient way of evaluating Japan is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries

Demand/Market Potential Driven Firm



















Relative Accessibility





Accessibility/Supply Averse Firm





















Relative Accessibility
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities.

Latent Demand and Accessibility in Japan

This report provides an extremely detailed overview of factors driving latent demand and accessibility in Japan. Latent demand is largely driven by economic fundamentals. But, latent demand only represents half of the picture. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks.

Chapter 2 deals with macro-accessibility. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Japan:
Openness to Trade in Japan
Openness to Direct Investment in Japan
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks

Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are also covered in Chapter 2, which is presented from the perspective of an American firm, though it is equally applicable to most firms entering Japan. This chapter has been authored by local offices of the U.S. Government. I have included a number of edits to clarify the provided information as it relates to the general strategic framework.

In Chapter 3, I summarize the economic potential for Japan over the next five years for hundreds of industries, categories, and products. The goal of this chapter is to report my findings on the real economic potential, or latent demand, represented by Japan when defined as an area of dominant influence. The data presented are the result of various spatial econometric and time-series forecasting models which, for each category presented, are applied to forecast and allocate latent demand across all countries of the world and major distribution centers or centers of dominant influence within each country. This is accomplished knowing that economic fundamentals (e.g. income) generally vary from one country to another within a given country over time. In this chapter, I report the allocation for each category for Japan as an area of dominant influence in Asia and, potentially, the world.

The report concludes with trade indicators for Japan. Often, the amount of trade flowing into and out of a country is a strong indicator of trading partners, trade openness, and related latent demand. Trade indicators are purely statistical in nature. Although international trade is not a direct measure of latent demand, it does provide an indicator of general market conditions with respect to trade flows and trade openness in Japan.

As a whole, this report presents a strategic assessment of Japan by considering an extremely broad set of factors affecting both latent demand and accessibility.

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