Invest Japan Symposium

Washington D.C. Event Summary  |  Miami Event Summary

First Invest Japan Symposium in Florida; Four U.S. Companies Share Why and How They Took Their Business to Japan

Held on Oct. 25, the Miami symposium highlighted strategies U.S. companies have used to successfully enter the Japanese market in their efforts to globalize their products. Titled “Creating Value Through Innovation,” the conference was attended by the region’s top corporate and international trade leaders.

The began with a welcome message by Senior Official for APEC at the U.S. Department of State, Ambassador Patricia M. Haslach, who highlighted that Japan is enjoying the longest period of continuous economic expansion in its post-war history.  JETRO President Tadashi Izawa then showed how this expansion was fueled by robust capital spending, expanding exports, and new laws to improve Japan’s business environment.  But the key to Japan’s future economic growth, he said, is innovation, making R&D a top priority for the government, whose promotion of science and technology since 1995 has helped Japan have one of the highest levels of R&D investment among industrialized nations.

The Appeal of the Japanese Market and an Essential Condition for Entering Japan

Ken Hisamoto, vice president of U.S. International Sales for FedEx Services, shared what makes Japan such an important market for his company.  He began with the fact that Japan is the second largest market in the world in terms of GDP, which presents huge buying power, provides a giant market and maintains stable economic growth. Hisamoto explained that the growing number of M&A transactions and overseas direct investments, the accelerating trend of deregulation and the increased knowledge of the Internet and computing among the public were all creating opportunities for overseas companies to invest directly in Japan.

When looking at Japan, overseas companies often worry that the high cost of living, expensive land and high entry cost will require a long time before they can generate a profit. However, Hisamoto countered that this was mostly a myth. For example, the rate of increase in land prices since around 1980 shows that, while in the bubble era around 1990 the real estate prices in large Japanese cities had climbed to five to six times their 1980 levels, they subsequently fell and are currently hovering at levels not so different from the prices in around 1980. On the other hand, housing prices have continued to rise in the U.S. and the current home prices are four to five times the levels of around 1980.

Many companies know that when looking to enter Japan, they must conduct thorough market research, develop new services and ensure high quality. But Hisamoto underscored a rarely known fact: quality is not an advantage but an essential condition for achieving success in Japan.

Panel Discussion

The panel discussion featured David Zalewski, Vice President & Corporate Controller of Citrix Systems, Inc.; Sterling Lapinski, President of Genscape, Inc.; and Dale M. Timmons, R.G., President of ARI Technologies, Inc., who all shared from their experiences establishing a physical presence in Japan.

Citrix Expands Business in Asia-Pacific Markets

Citrix Systems, Inc. has grown rapidly since its establishment in 1989. Headquartered in Fort Lauderdale, Florida, the company designs, develops and markets application-based IT infrastructure solutions.

Citrix Systems Japan Co., Ltd. (Meguro-ku, Tokyo) was established in 1997 as a Japanese subsidiary of Citrix. Citrix Systems Japan has steadily expanded its business in the country, and in April 2007 announced the establishment of Citrix Systems Japan R&D Co., Ltd. as a spin-off of the R&D operations of Citrix in Japan, doing so in order to support multiple languages through Unicode, ensure quicker and more effective decision-making, and drive the active exchange of information among R&D teams. The Citrix Group is spinning off its R&D operations around the world, in keeping with the accelerating trend of business globalization, and the new R&D hub in Japan was created as part of this global policy.

Citrix currently operates 15 offices in nine countries across the Asia-Pacific, including China, Japan, Singapore, India, Thailand, Malaysia and Australia. Particularly, the company is rapidly expanding its business in China, having opened representative offices in Shanghai and Beijing in 2003 and 2004, respectively. In 2004, Citrix moved its regional headquarters from Sydney, Australia to Hong Kong.

Citrix serves 28,000 customers in the Asia-Pacific region, of which 6,000 are new clients the company landed in 2006. Sales in the region in 2006 amounted to US$95 million, equivalent to 9% of the total sales generated by Citrix that year. Sales for 2006 were up 22% from the previous year, and sales in the first half of 2007 have been up 21% compared to the first half of 2006. These numbers clearly show the rapid growth the company is enjoying throughout the region. Looking at the company’s customers by industry, many are medium- to large-size companies in the finance, communications or manufacturing sectors, but Citrix’s customer list also includes government agencies.

In the Asia-Pacific region, Japan, Australia and New Zealand are now considered particularly important. According to Vice President & Corporate Controller David Zalewski, the company expects China, India and Japan to record the fastest growth in the Asia-Pacific over the next five years.

Citrix Systems Japan currently employs 100 people, while Citrix Systems Japan R&D has 32 employees. Between them, the two companies serve 14,375 companies. The entire management team in Japan consists of Japanese executives, because Citrix believes its Japanese arm must be operated by individuals who understand the culture and business practices of Japan. Citrix’s key customers in Japan span various industries and include large electrical and electronics manufacturers, auto manufacturers, large financial groups, transportation/communications companies and government agencies.

Zalewski cited several reasons the company will continue to invest in Japan: [1] Japan will remain a stable, attractive investment market where continuous, stable economic growth is expected; [2] key financial institutions and large companies have extra funds to invest in IT systems; and [3] the revised Corporation Law and Japanese-version SOX Law are fueling further IT systems investment among Japanese companies.

Genscape Provides Electricity Market Information in Real Time

Genscape, Inc.—headquartered in Louisville, Kentucky—is a private company established in 1999 that provides data on key power-generation plants and power transmission in real time and has a set of unique technologies found nowhere else in the world.

The company’s core business consists of the real-time provision of data relating to power-generation plants and power transmission. Genscape uses its original monitoring and data analysis technologies to provide users with the utilization rates of key power-generation plants, the status of operational startup at new facilities, and maximum power generations. Genscape’s users include investors who employ this information to trade on the electricity and energy markets, as well as power-utility companies, government agencies, manufacturers and other organizations that must control the risks associated with the utilization of power transmission lines in unexpected events, including emergencies due to power outage, earthquake, hurricane, etc. Genscape’s client base currently includes large power-utility companies and electricity trading companies in Europe and the U.S., as well as the U.S. Department of Energy and the U.S. FERC (Federal Energy Regulation Commission).
 
The data provided by Genscape is gathered through a network consisting of remote wireless monitors installed at multiple locations across the power-transmission grids. Users can receive information from this network on the company’s website or through data-transfer arrangements. As mentioned above, key users of this information include large power-utility companies and electricity trading companies in Europe and the U.S., U.S. Department of Energy, and U.S. FERC (Federal Energy Regulation Commission).

Genscape has already set up more than 1,200 remote wireless monitors across the U.S. and more than 700 throughout Europe. Using these monitors, the company collects electricity data from over 300 power-generation plants and transmission-grid points in the U.S., along with more than 100 locations in Europe.

According to President & Chief Development Officer Sterling Lapinski, the company’s business opportunities in Japan have been expanding since the creation of the electricity market (Japan Electric Power Exchange) in 2005. Genscape began researching the Japanese market at the end of 2005, and in 2006 it set up the Japan Project and hired consultants. Genscape Japan Co., Ltd. was established in 2007 as a local subsidiary. When Genscape Japan was established, Genscape became a member of JETRO’s Invest Japan Business Support Center (IBSC). In doing business in Japan, Genscape has faced challenges stemming from a distinct business practice that seeks long-term relationships in addition to a different culture and language.

ARI Entered Japan with a Unique Technology for Asbestos Treatment

ARI Technologies, Inc. is an environmental technology company offering thermochemical conversion technology (TCCT) for the treatment of asbestos. The company has its head office in Kent, Washington, a suburb of greater Seattle. Dale M. Timmons, president of ARI, is a registered geologist with more than 20 years in the management, treatment and recycling of waste materials.  Timmons outlined how ARI expanded into Japan.

ARI established ARI Japan Co., Ltd. in January 2007 as a joint venture with a Japanese company. ARI Japan provides TCCT users with technical service and sales support (licensing agreements, supplies of equipment/chemicals, technical support service). It also conducts consulting and market studies related to TCCT utilization projects, provides TCCT-related engineering service, offers assistance for TCCT business certification, finds providers of used asbestos, and promotes the marketing of recycled products. The company is also a member of a consortium established by six companies (including Japan’s leading steel manufacturer, a large general contractor and an industrial waste treatment company) to conduct field tests for the treatment and recycling of asbestos according to the guidelines established by the Ministry of the Environment.

The treatment of asbestos is an important social issue in Japan today, and it is estimated that a million tons of asbestos must be treated over the next 10 years. Accordingly, ARI sees a business opportunity in this situation and is keen to expand its business in Japan. ARI joined JETRO’s Invest Japan Business Support Center (IBSC) upon the establishment of its Japanese subsidiary.

Traditionally asbestos was treated by landfill in the U.S. and by means of dissolution at high temperature in Japan. ARI’s patented TCCT solution allows asbestos to be melted at less than half the energy normally required, and therefore provides a cost-efficient way to treat asbestos. Treated asbestos can also be recycled as construction gravel. ARI’s technology is also used by the U.S. Army and the Department of Energy.

Resources at Your Disposal

James Frierson, Former Chief of Staff in the Office of the U.S. Trade Representative (USTR), served as moderator for the panel discussion. Frierson noted that the Japanese government/JETRO had changed its import promotion policy more than a decade ago and has been driving direct investment in Japan.  He also described the wide range of services available to potential investors. Throughout the discussion the panel members had lively exchange, explaining their relationships with customers in the Japanese market, the reasons for and timing of choosing/deciding to invest in Japan, their experience hiring local employees in the country, how they viewed Japan as a market and, particularly, why they saw Japan as a business platform for gaining access to the rest of Asia. Moreover, they discussed the JETRO services they used when entering Japan.

Masaaki Kaji, chief representative of the Development Bank of Japan in New York, presented the Banks’ loan programs and M&A advisory services available, especially to small- and medium-sized companies.  He mentioned the Bank would be undergoing privatization but extended an invitation to audience members to contact him for information on attractive programs the Bank has to offer.

What's in it for Japan?

Concluding the event, Toshihisa Takata, deputy director-general for trade policy at the Trade Policy Bureau of METI, reemphasized that the Japanese government welcomes business from foreign countries and that it is actively working to promote foreign direct investment (FDI).  Mr. Takata outlined three positive effects of foreign direct investment into Japan:

1. Economic development through the interaction of new technologies and management know-how
2. Regional development through employment
3. Greater benefit for consumers through a wider variety of goods and services

As a result of the government’s promotion efforts, the FDI stock has nearly doubled over the 5-year period between 2001 and 2006.  Mr. Takata noted that the government would like to accelerate this trend even further to increase FDI stock to 5% of GDP by the year 2010, double the present ratio.