Entering Japan - A qualitative literary study on potential barriers to market entry for Swedish retail companies in Japan.

Abstract: Background and problem: There are strong incentives for Swedish retail companies to establish their business in Japan. With its 128 million inhabitants the country accounts for 40 percent of the total world consumption of luxury goods and is the world’s largest importer of foreign fashion. Moreover, Japan is the second largest retail market in the world. However, as a company in a foreign market there are many obstacles to overcome. A Swedish retail company aiming to enter the Japanese market does not have the same insight and knowledge into the formal and informal institutions in the country as a domestic company might have. Furthermore, Japan is experiencing complaints from both business organisations and foreign politicians regarding the trade practices in the country arguing that the Japanese market is not receptive enough to Western products. A company that moreover aims to enter markets where both the cultural and actual distance is far away from the business’ home country shall preferably realize the complexity of such a decision and be as prepared as possible. Purpose: The purpose of the study is that “through a literary study identify and provide a deeper understanding of the major entry barriers a Swedish retail company may encounter when entering the Japanese market”. The following research questions were developed in order to reach the purpose: “What are the main industry and institution-based barriers a Swedish retail company may encounter when establishing its business in Japan?” and “What are the main cultural barriers a Swedish retail company may encounter when establishing its business in Japan?”Methodology: When conducting the study, a descriptive research approach has been used. The study is of a qualitative nature and the design of the study is a descriptive literary study. Performing a literary study involves the collection of data from already published scientific articles, journals and dissertations. The data used for this study consist of eight scientific articles and journals and one dissertation. Conclusions: The analysis was based on the theories, which explains a company’s decisions of where, when and how to enter a foreign market as well as theories that explains a nation’s cultural impact on an organisation. Based on the findings the results were divided into two sections. The study reached the conclusion that among the industry and institution-based barriers the high level of rivalry among firms, the high level of bargaining power of suppliers, the high standards regarding quality and service, regulatory risks, trade barriers and institutional norms were the most important barriers to market entry for foreign companies in Japan. The most important cultural barriers to market entry in Japan were the high level of collectivism, power distance, uncertainty avoidance and masculinity in the country.