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International Business Expansion
Expanding into international markets for businesses has its own set of challenges that are multi-dimensional in nature. Some of the internal challenges include the ability to understand the culture in the target country and being able to extend the corporate culture and values into that society. Other important aspects include being able to understand the political and economic systems in the target country. This paper outlines the political and economic systems and practices for Japan as a target country for expansion.
Japanese economy is the third largest in the world by nominal GDP and fourth by purchasing parity. Japan is also the second largest developed economy in the world. The per capita GDP was reported to be $36,899. This makes it a very attractive market for all global organizations that seek access for sustained growth and development. Japan is also a hotbed of innovation and is known very well for its leadership in electronic products, cars, bullet trains and even its quality systems development.
Japanese employment laws consider the employer-employee relationship in three forms which are listed below. 1. Employment agreement – where an individual renders service for a specific compensation. 2. Independent Contractor – where an individual entity or a person takes on a specific job to its completion for a specific compensation, and 3. A mandate agreement where an entity or an individual person or entity perform on behalf of the company they represent.
Term of contract and its termination: Fixed term contracts are usually for one year, for other contracts they get terminated on reaching the retirement age. En employer is free to fire an employee without a formal notice while an employee is expected to give a two week notice. However if there is no reasonable cause the employer may become subject to a legal suit. An employee undergoing domiciliary hospitalization, maternity leave cannot be fired during that time or within 30 days or re-joining duty
The employer is expected to pay as per the minimum wages prescribed by the government. The government typically fixes minimum wages as per the cost of living and hence varies from region to region. The salaries are to be paid in full cash and directly to the employee. The typical pay cycle is one month. Employees can ask their employers to work for 8 hours per day and 40 hours per week at the most. Overtime pay is paid at 35% for holiday work and 25% for late night work. The compensation includes paid leave and keeps changing. Discrimination based on gender is strictly prohibited. However despite this law there seems to be some form of discriminatory practices happening at Japanese Work place. Other forms of discrimination are also legally prohibited. Trade unions are permitted.
Japanese Trade regulations are governed by the Japan’s Trade Policy Bureau. The Trade Bureau executes all the internal and external policies in a concerted effort to maintain a world free trade system and creating conducive environment for Japanese growth.
Most of the goods into Japan need not have an import license and can be imported freely into Japan. Licenses are needed only for hazardous material, perishables, plants, animals and good of very high value. Imports of certain products like explosives, fire arms, narcotics, pornography, counterfeit currency and all those that violate any form of intellectual property rights are strictly prohibited. Also all the products that have a negative impact on industry, economy, hygiene, and public safety and morals are also prohibited. These products are under the import restrictions. There are also restricted items like ivory, animals, fur and all those prohibited by the international trade laws are also strictly prohibited under the Japanese laws.
Imports on the restricted lists are inspected before shipping at the point of export and are either restricted or cleared. Certain chemicals, cosmetics and food products are inspected from a positive list approach also to ensure there is free trade.
The Japanese tariffs on imports is one among the lowest in the world and average to 2%. Almost all machinery imports are free. Japan is a WTO signatory and complies with it fully.
Import duties on agricultural items continues to head southwards. Many major sectors like automotive, software, computers, industrial machinery, the import duties are already at 0%. Another interesting feature of the system is that, in compliance with WTO agreements, the value taken for imports is the transactional value i.e., the actual value of the transaction and not the book value!
As in any legal process there is a proper and strict documentation required for customs clearance including import declaration, import license (if required), commercial invoice, packing list etc. Japanese follow the metric system and all the labelling must adhere to the metric systems. Name of the origin country is not mandatory for most products.
All imported goods need to be standardised and need to be tested and certified before being put on sale in the Japanese markets. Standards apply to Electrical goods, Consumer goods, Gas, Food sanitation, Pharmaceuticals, automobiles, and building equipment.
Japan is an easy country to penetrate but is very strict on its standards and legal compliance of businesses in the interest of Japanese economy and public health.
