In the pursuit of international expansion, using distributors to penetrate foreign markets is a well-established strategy. This model allows companies to benefit from local expertise, streamline market entry, and avoid the substantial costs of setting up direct operations. In many Western countries, this approach works seamlessly, with distributors acting as an extension of a company’s sales force—promoting, selling, and distributing products to new customers.

When it comes to Japan, however, this distributor model can present significant challenges. What works in Western markets becomes lost in translation, literally and figuratively, due to fundamental differences in how distributors operate, their relationships with manufacturers, and their responsibilities toward their customers.

This white paper explores these differences and explains why the conventional Western approach to business development rarely reveals positive results in Japan. Additionally, we will explain the various strategies that are commonly used in attempts to develop business

in the Japanese market. Lastly, we will propose our recommended strategy for successful market entry and sustainable growth—an approach that works especially well for small and midsized enterprises (SMEs).

​A Whole New World:How Disributors Work in Japan

Operating in a complex business culture with a strong emphasis on long-term relationships, Japanese distributors play a starkly different role in the market. Here, distributors aligh themseleves more closely with the needs of the buyers they serve than with the ambitions of the manufacturers whose products they sell. Japanese distributors typically view themseleves as extensions of their customers' purchasing departments, not as sales representatives for manufacturers. This cultural and operational distinction has profound implications for companies trying to enter the Japanese market.

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Local distributors prioritiza serving their existing buyers, many of whom have been customers for decades, rather than actively seeking new markets. This conservatism stems from a broader cultural and historical aversion to risk and a focus on maintaining harmony within well-established groups. As a reasult, Japanese distributors can seem passive, if not reluctant, in their sales efforts. They seldom promote new products or venture into uncharted markets, oftentimes even when wxplictily requested to do so.

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"We asked our local distributor to promote and sell into other maerkets. However, they politely declined, advising us that different distributors would be necessary dor entering new markers."

ーDennis Benkmann, CRO, SABEU GmbH & Co. KG

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This emphasis on long-standing relationships is rooted in Japan's economic history, particularly the keiretsu and zaibatsu structures that have shaped the country's business environment. Keiretsu refers to networks of interrelated businesses that dominated the Japanese economy between the 1950s and 2000s. Characterized by cross-shareholding and long-term business agreements, keiretsu are a web of economic relationships linking banks, manufacturers, suppliers, and—most relevant to market entrants—distributors.' These alliances foster stability and mutual trust among member companies, but they also limit market fluidity and discourage external partnerships. 

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Zaibatsu, loosely translated as "wealthy clique," refers to the large capitalist enterprises that developed between the start of the Meiji Restoration (1868) and 1946. Similar to keiretsu, zaibatsu are often compared to cartels or trusts. However, zaibatsu were typically organized around a single family? While they were dissolved after World War II, their influence persists in modern corporate culture.