Japanese business Featured

5:33am EDT February 28, 2006

When Toyota and other Japanese manufacturers began establishing facilities in the Midwest in the early 1980s, they were the trailblazers. These early pioneers had to learn the differences between operating a U.S. and Japanese business, often struggling with cultural and language barriers.

Today, Japanese businesses that choose to enter the U.S. marketplace follow the many successes of companies such as Toyota. Japanese products have earned good reputations and are generally well-accepted by the U.S. population, says Mari Yamamoto Regnier, head of the Japanese Practice Group at the law firm of Barnes & Thornburg LLP.

“While the U.S. is a lucrative marketplace for many Japanese businesses, they must still learn some of the fundamental differences between operating a business in the U.S. versus in Japan. Oftentimes this comes down to legal issues that are a reflection of the differences between the Japanese and U.S. cultures,” she says.

Smart Business spoke with Regnier about the benefits for Japanese companies looking to do business in the United States, as well as the legal and cultural challenges Japanese businesses must overcome.

What are the benefits to Japanese companies doing business in the United States?
Japanese businesses need only look to the great success of Toyota to see that the U.S. can be a lucrative marketplace. Toyota recognized that the U.S. auto market was huge, even though no one was really interested in buying a Toyota back in the 1960s, when Toyota first started selling vehicles in the U.S. Yet, it established a good relationship in the U.S. market and is now growing into one of the Big Three auto manufacturers.

What are the business cultural differences Japanese businesses should be aware of?
When Japanese companies first enter the U.S. market, they often don’t understand our legal system and how business works here. A good legal partner can help Japanese companies learn the ropes by walking them through legal issues such as contracts.

In Japan, everything is done through a handshake or gentleman’s agreement. That’s obviously not how things are done in the U.S. business world, so coming to the U.S. can be a wake-up call to the Japanese, as Americans put everything in writing.

What legal concerns do Japanese businesses need to be aware of?
The first thing they’ll often do is set up a corporation and send in a key management team from Japan. But the rest of the staffing positions are generally filled by Americans, so Japanese companies must learn U.S. employment law. Dealing with American employees is a completely new area for most Japanese businesses. As a result, labor and employment law is an area where many Japanese businesses have really struggled when doing work in the U.S.

Litigation is another area of concern for Japanese businesses. Japan is not really a litigious country, so dealing with and preventing litigation can be a huge challenge to a Japanese business.

How can Japanese businesses learn about the U.S. business culture?
A lot of Japanese businesspeople have had the opportunity to live and work in the U.S. and then return home to Japan. I’m seeing a change over the last five years where many people working at the Japanese headquarters have had their own experience working in the U.S., so they have a better understanding of how things are done in the U.S. This helps to ensure that the managers who are running the offices in the U.S. have greater support and understanding from the managers who are running the corporate headquarters.

There’s also starting to be a shift from sending Japanese managers to the U.S. to run the company to using more U.S.-born managers. This has really helped with cultural understanding and has helped to Americanize Japanese companies.

What should a Japanese business consider when opening in the U.S.?
Finding the right American managers that they can trust and work with is an important key. Working with Japanese businesses is different from working with American businesses, and some people are better suited for it than others. If the Japanese businesses don’t choose American managers that they can work comfortably with, it won’t be a productive relationship.

Of course, given all the legal challenges involved in opening a Japanese business in the U.S., it’s also essential that they find the right legal partner. This means not only finding a full-service law firm that can help them with a variety of legal needs but also finding a firm that speaks the Japanese language and understands the cultural nuances.

Mari Yamamoto Regnier is a partner at Barnes & Thornburg LLP. She leads the firm’s Japanese Practice Group. Reach Regnier at (312) 214-8335 or mari.regnier@btlaw.com.