Stoke Advances at Fast Clip in Japan, Sets up Subsidiary through JETRO

 
Market Entry
Stoke broke into the market quite successfully. The company's technology meets the data traffic demands of Japan's 3G networks, which, according to industry reports, carry a much higher percentage of data traffic than their counter parts in Europe or in the U.S. "That kind of data traffic requires a different breed of equipment or technology solutions, for 3G networks and LTE networks," said Mr. Prabhala. "The traditional players did not offer any better solution, and Stoke was formed." In 2008, Stoke engaged a large distributor in Japan called Net One Systems, who works closely with Japan's major telecoms and mobile carriers. Through Net One later that year, Stoke was chosen to provide its solutions to NTT DoCoMo. Other clients Stoke serves in Japan through Net One include Softbank, KDDI, e Mobile, NEC, Fujitsu and Panasonic. Then in late 2009, Stoke won its largest project yet in Japan when its solutions were selected through Net One for the deployment of NTT DoCoMo's LTE (Long Term Evolution) service, which launched Dec. 24, 2010. After the NTT DoCoMo LTE win, Stoke decided to establish a Japan subsidiary. "We wanted to create that local presence for the carrier and for the partner, so that they're not doing business with some foreign entity with no local presence," said Mr. Prabhala. Stoke also wanted to show its commitment to the Japanese market, Mr. Hill added.
 

Working with JETRO to Set up the Subsidiary
To set up the subsidiary, Mr. Prabhala contacted JETRO upon the suggestion of a contact at one of Stoke's investors who said, "These people are good, and they can help you better than any one other organization from all aspects,' Mr. Prabhala recalled. "And I am more than happy to say, that is so true." From JETRO, Mr. Prabhala received an outline of the necessary steps for establishing a subsidiary in Japan. He also took advantage of JETRO's free temporary office space and received introductions to consultants, including those for legal, accounting and tax, and real estate. "To make sure we were doing our due diligence," Mr. Prabhala said, he also evaluated one firm not introduced by JETRO for each category. After meeting with all firms, "to my surprise, I found out that (1) JETRO-connected consultants are all more knowledgeable than the other ones I got to talk to, and (2) they gave us much more competitive proposals for what we needed to do," Mr. Prabhala said.

'JETRO-connected consultants are all more knowledgeable and gave us much more competitive proposals.'

Results and Outlook
Saying that Stoke has made significant progress over its two years in the Japanese market would certainly be an understatement. During this time, the company was able to create a partnership with the "prestigious" channel partner in Japan, Net One, said Mr. Prabhala, to whom Stoke has become a significant vendor. Through this partnership, Stoke has gained a long list of clients and a major role in NTT DoCoMo's LTE rollout, which has a $4 billion spend over the next three years. In addition, Stoke garnered as Resident Director of its Japan subsidiary Ikuo Nishioka, the former Chairman of Intel Japan.

Looking forward, Stoke will focus on continuing to "deliver and extend our LTE and femtocell business, to engage with some key Japan based telecom equipment manufacturers and service providers with our technology," said Mr. Prabhala. Japan is "a step ahead of the rest of the world in terms of deployment in architecture, and the rest of the world is looking at what they're doing and how they're doing it," said Mr. Hill. Having a Japan subsidiary enables Stoke to be "a key part of that."

Insight and Advice
From their experience working in Japan, Mr. Prabhala and Mr. Hill provided some insight and advice into conducting business there.

Describing some key factors that have helped Stoke in its success in Japan, Mr. Hill offered the following:

• "You have to be mature and sensitive about cultural differences," just as in any other country, he said. One cultural difference he noted was that in Japan, "how they do business is very detailed, very specific, as we say 'dot every 'i' and cross every 't'', making sure that engineering-wise we do what we say we will do, which is a fantastic process and discipline for any company to go through," said Mr. Hill. "To be honest, it's not easy, but if you're going to play in this infrastructure you have to be good. And Japan is the best of the best in terms of forcing their partners and providers to be world class." He mentions another cultural aspect, saying, "There may be a slightly different appreciation for seniority in Japan. I would say there is a different level of respect for rank."
   
• For Stoke, Mr. Hill sees that it is "fundamental" to represent itself in Japan with representatives who are from the company, rather than external agents.
   
• It is important "to have a channel partner who understands the market and understands the relationships--who is culturally Japanese--and who understands intimately the way to get to market for your products."
   

Regarding marketing, Mr. Hill observes that while companies in North America and Western Europe can be more aggressive with announcements, oftentimes "announcing things ahead of the game," companies in Japan are "very sensitive to what information is released, when they announce and what they announce."

For companies establishing a presence in Japan, Mr. Prabhala offered, "If everybody goes through JETRO, I think it would be perfect. Everything went so smoothly compared to other legal entities I've established over my career. This is probably, I would say, the best."

Japan Company Profile

*Note: The opinions contained in this article are based on the experiences of the interviewee. They are not representative of all experiences in Japan or working with Japanese companies, and do not reflect the opinions of JETRO.