Challenges and Market Entry Strategies : a Study of Scandinavian Companies in Japan

Abstract: Japan, being the third largest market in the world with a population that is well educated and has a high buying power, is one of the most interesting markets for internationally active companies. However, old and recent studies show the same result; the Japanese market is also one of the most difficult to enter. This empirical study is made on small and large Scandinavian companies with business operations in Japan. It sets out to answer what the most important challenges on the Japanese market are as well as which market entry strategies that lead to superior performance. Findings are that the most important barriers to entry in Japan are non-institutional and relate to consumers, competitors and business people. There are differences in perceived intensity and importance of entry barriers between entry modes, industry types and market experience. Examining both financial and non-financial performance this study also investigates how market entry mode and degree of adaptation and standardization of the marketing mix can be selected to achieve superior performance. An important theoretical reference in this analysis is the OLI framework, which is a model extended from the transaction cost view. It proposes that ownership- , location- , and internalization advantages can explain entry mode choice. This study found that entry modes selected based on the OLI parameters do not tend to perform better than others. However, companies that in the study report higher degrees of ownership advantages and location advantages, irrespective of entry mode, seems to have achieved superior performance in Japan. This implies that managers of Scandinavian companies entering the Japanese market should strive to create ownership advantages and better utilize location advantages in order to reach a better performance. Analysis of the result also suggests that in general adaptation of the brand, promotion/communication and price result in better performance in Japan. In particular, adaptation to create a fit between the marketing strategy and stage of the product life cycle, degree of cultural differences and level of competition has the potential to lead to better performance. The Scandinavian companies on the market perceive that the most important entry barrier in Japan is competitive intensity. Encouraging to managers is the fact that companies reporting this perception also have achieved superior performance.