A study on the

possible expansion
of ‘’MDO Inc.’’ to
International
markets.

‘EAST’ MDO INC.

 Page |1

NORTH SOUTH UNIVERSITY

BUS251 TERM PAPER
SUBMITTED TO:

Rifat Iqbal

Lecturer, Department of Management

School of Business and Economics
North South University.

GROUP: MAVERICK

Name Contribution
Rakshanda Samin Suhaa Problem & Purpose Statement, PESTEL, Recommendations, grammar
check, format

Tasmi Amin Khan Industry Analysis, Labor force, Terms of Trade, Masculinity, Indulgence
Alifyea Alddin Malik Business Etiquettes, Cultural Differences, Individualism, Uncertainty
Avoidance

Israt Jahan People & Culture, Global Market, Product Components, Power Distance
Faiyaz Fahmi Rahee Letter of Approval, History, Geography, Format
Risal Karim Chowdhury Introduction, Executive Summary, Research Methodology, Conclusion
 Page |2

LETTER OF TRANSMITTAL

Date: 14th September, 2020.

Rifat Iqbal
Lecturer, Department of Management
School of Business and Economics
North South University.
Subject: Letter regarding submission of Group Project

Dear Madam,

I take immense pride in presenting this project paper on “MDO Inc.” which is a green
energy business and is to be expanded in Japan according to your instructions. I want to thank
you for giving us the chance to work on this report. This has helped us learn many new things
about green energy as well the do’s and don’ts of renewable power.

We have done our best to make diligent efforts to prepare this report and we hope that the
objective will be served by our efforts. To make the report as informative and accurate as
possible, we have provided the most important and relevant information. The practical
information and experience gained in preparing the report will definitely support us in our
professional life of the future. We would be sincerely grateful if you would enlighten us with
your thoughts and opinions on the study. We hope you would be generous enough to grant our
paper and thereby oblige.

Regards,

1831813630 Rakshanda Samin Suhaa

1831774630 Tasmi Amin Khan
1731879630 Alifyea Alddin Malik
1510581030 Israt Jahan
1411368030 Faiyaz Fahmi Rahee
1321124030 Risal Karim Chowdhury
 Page |3

EXECUTIVE SUMMARY

MDO Inc. is a renowned Renewable energy company that has been operating in the USA
for many years now with a great satisfaction rate from their clients. Due to the changes in the
industry and new practices adopted by the competition, the company plans to diversify and enter
into markets to avail the opportunities which globalization and new markets bring for new
entrants. As consultants, our team has been tasked with recommending an English-speaking
country that would be the optimum location to expand to for a well-reputed company such as
MDO Inc. Given the company’s core operations, the country best fit for them is Japan. Japan is
considered one of the world’s strongest economies in the world with a key focus on technology.
Furthermore, the country’s rich culture and traditions make it a very hospitable market as well
for new entrants. The country is widely known for the value they place on being ethical and
socially responsible. Apart from that, the country appreciates and has the drive to produce
modern and revolutionary technologies unlike any other country in the world. They are also the
world’s largest producer of Photovoltaics which is a key component for creating electricity from
sunlight. This would allow for MDO Inc. to easy procure the best materials while driving down
their costs of production. Japan also has an exponentially growing industry for renewable energy
with a target to increase by 22-24% by 2030 along with a predicted investment of over US$ 100
billion. Additionally, 19% of the country’s total energy needs are met using renewable energy
making it a very attractive market for any new renewable energy company to expand to.

The goal of this report is to provide the CEO of MDO Inc. with a detailed study of why
Japan would be the perfect fit for the company to expand to. The hospitable and stable political,
legal, and environmental factors along with the introductory stage of the industry and market
make it the perfect time for MDO Inc. to expand. This report covers all key areas that must be
thoroughly assessed by the company and hopes to convince the CEO to pick Japan as their next
global market to expand into.
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PAGE# TABLE OF CONTENTS

5 INTRODUCTION

6 PROBLEM STATEMENT

6 PURPOSE STATEMENT

6 RESEARCH METHODOLOGY

7 RENEWABLE RESOURCES MARKET – JAPAN

10 GLOBAL MARKET

11 COUNTRY ANALYSIS – JAPAN

16 TERMS OF TRADE BETWEEN JAPAN & USA

17 FOREIGN DIRECT INVESTMENT IN JAPAN

18 PEOPLE AND CULTURE OF JAPAN

19 BUSINESS ETIQUETTE IN JAPAN

21 CULTURAL DIFFERENCES BETWEEN JAPAN & USA

25 RECOMMENDATIONS

26 CONCLUSION

27 REFERENCES
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INTRODUCTION
MDO Inc. is a Renewable Energy company that offers a wide range of alternative energy
solutions with their core objective aimed towards protecting the environment and reducing the
strain put on Earth’s natural resources for a greener and sustainable tomorrow. The company
originated from Grand Rapids, Michigan, and produces premium-grade solar panels that offer
efficient and cost-effective electrical solutions at their local market in the USA. However, the
industry and the competitors are changing the framework of the business by expanding globally
into foreign markets to avail the numerous opportunities which globalization brings. This shift in
dynamics has influenced the CEO of MDO Inc. Mr. Mark Orr to follow the competitors into new
global markets.

Mr. Mark has consulted our team to provide a detailed analysis and report on the new
country in which the company should expand to. MDO Inc. is currently at a financially stable
position allowing them to expand to any country. Our report will showcase the most suitable
country for MDO Inc. to expand into, along with the compatibility of cultural backgrounds, the
opportunities which the new market offers, and the feasibility of such an expansion. Given the
aforementioned, the most optimum country for MDO Inc. to expand to is Japan.

As the general purpose of this research paper is to find the most suitable country for
MDO Inc. to expand to; in the process understand the importance of adopting multi-cultures and
globalization practices in the modern world. Globalization is strongly linked to being a major
driving factor behind the success of many renowned organizations in the world. This research
will showcase to Mr. Mark the importance of global expansion and diversification through
communication for success in international markets.
 Page |6

Problem Statement
MDO Inc. is concerned about not being on par with its competitors, who are growing on
a global scale. Hence, the company is looking to expand and establish business into a foreign –
non-English speaking, preferably an Asian country as a Renewable Resources company.

Purpose Statement
The primary objective of this report is to assess and conclude whether Japan is a suitable
country of choice for MDO Inc. to expand and establish business into, as a Renewable Resources
company. To come to this conclusion, various components of the country have been thoroughly
analyzed.

RESEARCH METHODOLOGY
Our team was dependent primarily on secondary data for our study, as it was not possible
for us to perform a survey or collect primary data by visiting Japan. We collected secondary data
by gathering and searching for information and ideas from various web sites such as newspapers,
different articles & blogs, etc.

Limitations:

All research papers are subjected to certain limitations that could have taken place due to
various shortcomings and other factors such as faulty methodology, lack of resources and many
others. These factors play a significant role in the outcome and the interpretation of the study.
While conducting this study, the following limitations were faced:

a) Global Pandemic: The Coronavirus (COVID-19) pandemic outbreak has had the most
significant impact on the study. The pandemic has limited us from gathering primary and
first-hand data. Rather, we had to rely on secondary data for our study, which may not
accurately depict the scenario.
b) Time Constraints: The study conducted for MDO Inc. was a cross-sectional study which
only lasted for a single semester (3 months). The time limitations have hindered the
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ability to collect further data. This could have impacted the data collected and ultimately
the outcome of the study.

Due to the aforementioned limitations, we were unable to obtain data which could have
provided a more realistic perspective on the study. Furthermore, being unable to gather primary
data has also impacted the quality of the research conducted herewith.

RENEWABLE RESOURCES MARKET IN JAPAN

Japan is the 4th largest consumer of electricity in the world, out of which 85% comes
from fossil fuels. This means use of renewable energy is quite scarce. However, the country also
lacks the amount of fossil fuels and mineral energy resources required to meet energy
consumption, which means it relies heavily on fossil fuel imports. Japan is currently the world's
largest importer of coal and liquefied natural gas, and the second-largest importer of oil (CIA,
2020).

As it stands, the government has been keen to increase the use of renewable resources, of
which hydroelectric energy accounts for the largest proportion. Solar power, biomass and wind
power are also available resources that the country possesses. The main challenge it faces is that
the geographical location of these resources is not easily suitable to produce widespread energy
for the entire population.

In 2018, a plan to increase renewable energy consumption and usage by 22-24% by 2030,
called the Fourth Strategic Energy Plan, was released, along with a predicted investment of over
$100 billion in solar and wind power over the next decade, which is likely to take Japan beyond
the renewable target of sharing 27% of the country’s energy mix. Hence, the government, along
with investors will be willing to invest in this sector of the economy and expand on it.
Renewables accounted for 19% of Japan’s power generation in 2019, which included around 8%
of wind and solar (Hill, 2020). Although space of land is limited, Japan has made an advanced
form of floating solar panel alond with 73 of the world’s 100 largest solar panels.
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The energy mix for the country was 65% for fossil fuels, 25% for nuclear power, and
10% for renewables before the earthquake. In 2016, these ratios changed significantly to 83% for
thermal power, 2% for nuclear power, and 15% for renewables. The government and industry
sector are working together to balance this by making it 56% for thermal power, 20-22% for
atomic power, and 22-24% for renewable power in 2030, and renewable energy will greatly
devour the share of thermal power compared to before the earthquake. By approximately 40%,
renewable energy will rise up in 2030 compared to 2017. When we glance at the status of every
power generation facility, solar plans are to extend by approximately 25 GW from 39.1 GW of
2017 to 64 GW of 2030, and further expanding the market size is expected. The growth rate is
about 200% for Wind and about 130% for Biomass, and renewable energy is predicted to expand
in various fields. Biomass power generation is crucial for promotion in conjunction with
agriculture and forestry within the region. Japan must find creative ways to lessen fuel costs
which account for 70% of generation cost, ways to handle situations that require facilities based
on the imported fuels and stably obtain the biomass (Tomita, 2020).

The total consumption of 943.70 billion kWh of electric energy per year is the most crucial measure in the energy
balance of Japan. Per capita, this is an average of 7,474 kWh (Worlddata.info).
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MDO Inc’s renewable energy production revolves around innovation and technology. It
is the pillar for the company as innovative thought, resources, and machines will be needed to
create a greener country and sustainable production of renewable energy. MDO Inc will need the
technology to find green means of production and development of energy.

One of the most important renewable energy sources would be coming from wind energy,
and Japan has showed high advancement in technology as they are creating wind lenses that
work like magnifying glasses that increase sunlight intensity. Verification experiments show that
wind lens turbines produce three times more electricity than those without a hoop (Schmidt,
Watanabe, 2020).

PRODUCT COMPONENTS AND AVAILABLE RESOURCES

Solar manufacturing industries:

Japan is the main manufacturer of photovoltaics which is used as a semiconductor to

create electricity from the sunlight. Japan is the first country that has installed a Gigawatt of PV
(Sandia National Laboratories, 2009).

From a research from Sandia National Laboratories (2009) we got to know that, the
government of Japan is creating solar power to gain 10% electricity production from PV by
2030. They want to reduce renewable resources prices to get on par with conventionally
generated electricity. Moreover, there are already many other solar companies like Mitsubishi
Electric, Kyocera, Sanyo, Sharp Solar, Solar Frontier, Mitsubishi Heavy Industries and Toshiba
in Japan.

Biomass pellet market:

Japanese wood pellet mills use a variety of raw materials. Japan has 111 wood pellet
mills. These pellet mills have the capacity is about 209 kilotons per year. Since the use of co-
fired biomass has increased, they imported 40000 tons of wood pellets in 2009 and 60000 tons in
2010 (Japan Sees the Emerging and Booming Biomass Pellet Market, n.d.).

Biomass boilers and stoves:

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Biomass boilers are the same as regular gas boilers that we know. They give us space
warming and high temp water, however as opposed to using gas (or oil) to deliver the heat, they
use sustainably sourced wood pellets. One of the joint ventures of Japan, between Toyo
Engineering Corporation and Nippon Steel Engineering Co. Ltd, has ordered Andritz, which is
an Austrian plant engineering company, to supply PowerFluid boiler, which will help to reduce
the emissions by giving high efficiency and high fuel flexibility (ANDRITZ to Supply a Highly
Efficient Fluidized Bed Boiler for a Biomass Power Plant in Japan, 2017).

An environmental nonprofit organization named NPO has launched a pellet stove which
can be bought by paying rental payment of 30000 yen or 48000 yen every year. They are
encouraging tree planting activities and to solve environmental problems by teaching people the
use of biomass (Japanese NPO Launches Pellet Stove Rental Business to Encourage Biomass
Use, 2013).

The company called Fuji Kogyo co. ltd is basically a pellet mill providing pellets which
can be used for both biomass stoves and biomass boilers. These are made of forest thinning and
pruning and also sawdust from the sawmill and its size is 5mm (approx.) (Wood Biomass Fuel
Pellet Production Facility, n.d.).

Nuclear power:

Japan was getting 30% electrical power from nuclear reactors before 2011 and wanted to
increase it by 40%. But only 9 reactors in 5 power plants are operating from 42 operable reactors
because of the Tohoko earthquake and tsunami. The government of Japan has revised its energy
plan by restarting the nuclear energy reactors to 20-22% to decrease the CO2 emissions by 26%
(“Nuclear Power in Japan,” 2020).

GLOBAL MARKET
North America: North America is among the main countries for having the best technologies
and infrastructure. The United States is concentrating on expanding its commitment to the
worldwide sustainable power source market by up to 30% by 2025. The North America
sustainable power source market is supporting the development of the global sustainable energy
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market. Internationally, about 2455 gigawatts of renewable energy was installed in 2019. The
global establishments are expected to develop at a Compound annual growth rate of 7.6% from
2020 to 2025. So, the rate will arrive at 3812 gigawatts by 2025 (Market Outlook, n.d.).

Asia Pacific: The Asia Pacific records for an incredible 60 percent of the worldwide population
and has the world’s quickest rising regional energy demand. Sustainable energy source in the
Asia Pacific has generally outpaced that of Europe and the U.S. lately, generally because of
significant development of activities in China, India and Australia. In 2017, China said it would
put $360 billion in renewable power source by 2020.

The nation represented a record 45 percent of the segment's worldwide investment, up 10

percent from 2016, as per a Renewable Energy Policy Network of the 21st Century (REN21)
report. Asia pacific has 27% of the market share. Inside the Asia Pacific, China and India
together structure the main renewable power source markets having practically 75% of the
introduced capacity of renewable power source (ANDRITZ to Supply a Highly Efficient
Fluidized Bed Boiler for a Biomass Power Plant in Japan, 2017).

Europe: The consumption share of renewable energy resources has increased from 9.6% to
18.9% (2004 to 2008). Solar panels and wind turbines are currently a typical sight over the EU,
which in huge part is because of expanded market activity. The expense of solar power had
decreased by 75% from 2004 to 2008. Moreover, the wind became cheaper than gas, nuclear, or
coal etc. (“In Focus: Renewable Energy in Europe,” 2020).

COUNTRY ANALYSIS – JAPAN

HISTORY OF JAPAN

Japan's imperial history is most studied since the Meiji Restoration for the dramatic social
and economic development of the 1800s. It became the first great non-Western force, and
expanded after WWII, when Japan recovered from disaster to become the second-largest
economy in the world behind the United States, and even behind China from 2010 onwards.
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Within the social science areas of Japan economic history has long occupied a comparatively
large region (Index of Economic Freedom, 2020).

GEOGRAPHY OF JAPAN

The Japanese archipelago is made up of four main islands and more than six thousand
minor islands, comprising about 234,890 square miles and varying climatic conditions. The four
largest islands are Hokkaidō, Honshū, Shikoku, Kyūshū and others. Okinawa 's southern group
of islands also known as the Ryūkyū Islands are geographically, historically and culturally
distinct. Japan faces the entire eastern and southern coasts in the Pacific Ocean. The Sea of
Okhotsk, the Sea of Japan, and the East China Sea are to the north and west (Countries and their
Culture, 2020). Japanese life has always had an inclination towards the ocean.

ECONOMIC ENVIRONMENT

Japan is a thriving free-market economy that boasts a nominal GDP of $5.2 trillion, a
0.7% growth rate since 2018. According to the Central Intelligence Agency (CIA), Japan is the
4th largest economy in the world, with the country’s service sector accounting for most of its
GDP, followed by the industrial sector and then the agricultural sector. Finance is one of the
most profitable sectors of the country, along with the automobile and electronic goods industry.
The CIA (2020) says the country thrives owing to “government-industry cooperation, a strong
work ethic, mastery of high technology, and a comparatively small defense allocation”. The
population of Japan was estimated to be 125.5 million in July 2020, with the urban population
accounting for 91.8% of the total, and 16.1% living below the poverty line.

According to the World Trade Organization, Japan was the fourth largest importer and
fourth largest exporter in 2017, along with having the second largest foreign exchange reserve in
the world, worth $1.3 trillion (World Trade Organization, 2019). Exports in 2017 were at $688.9
billion along with $644.7 billion in imports (CIA, 2020). Furthermore, in 2019, Japan was the 2nd
biggest investor in the world, with estimated FDI stocks of about 222.5 billion USD. After the
laws and changes put in place by former Prime Minister Shinzo Abe, who was the longest
serving Prime Minister of the country since the war, and the current Prime Minister Yoshihide
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Suga who had served under Abe since 2012, Japan is now more open to foreign business and
economic growth than before. Overall, the investment scenario is favorable.

POLITICAL ENVIRONMENT

In recent years, Japan has had a tradition of revolving-door rule, a long time global
economic force and a Western ally. Japan is now a parliamentary constitutional monarchy under
Emperor Naruhito as Chief of State and Prime Minister Yoshihide Suga as the Head of the
Government. Yoshihide Suga served as chief cabinet secretary under former Prime Minister
Shinzo Abe, who had been in office since 2012 and was elected to a landmark in the third term
of 2017, and had offered much-needed political stability and became Japan's longest-serving
prime minister in late 2019. The monarchy in the country is hereditary whereas the Prime
Minister is elected. The monarch has limited power in the political scenario of the country, but
the people still view him as “the Symbol of the State and the unity of the people”.

The general public of the country wants deeper changes to address the chronic economic
problems facing Japan but fears the disruption that such measures will bring. Monetary easing
and fiscal stimulus were introduced by the government's "Abenomics" program, but structural
reforms are still needed to stimulate long-term economic growth. Security issues include the
nuclear and missile threats from North Korea, and the assertions of hegemony from China in the
East and South China Seas. As a post-war pacifist constitution, Japan maintains an overall stable
political environment despite having tension with the aforementioned neighbors including
Russia. The country, however, maintains favorable relationships with the United States and is
strengthening its ties to other countries in the West.

SOCIAL ENVIRONMENT

Japan is the world’s 10th most populated country (The US Census Bureau, 2017), with
Buddhism and Shintoism being the most widely practiced religions and Japanese is the first
language of 99% of the population. The Japanese are tight-knit, polite, well-behaved and socially
responsible people. The country still faces a number of social problems, such as ageing
population and decreasing birthrates. According to a number of sources, the Japanese population
is likely to fall by 100 million by 2048, which will greatly affect the country’s labor force,
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working population and as a resulted, economy. Growing skill gaps are also a problem. Hence,
policies are now being put in place to integrate immigration policies and immigrants into the
working population of the country. While people generally prefer domestic companies and
products, foreign companies have also thrived in Japan if they try to study and understand the
country’s social and cultural intricacies well beforehand.

LEGAL ENVIRONMENT

Japan is run by a civil law system which is mainly based off of the German model, but
also reflects Anglo-American influence and Japanese Tradition (CIA, 2020). The House of
Councillors (“Sangi-in”) and the House of Representatives (“Shugi-in”) make up the bicameral
Diet (“Kokkai”), which is the legislature of the country. The Judiciary is headed by the Supreme
Court or “Saiko saibansho”, which consists of the chief justice and 14 associate justices.

Employees in Japan all enjoy basic employee rights such as mandatory pension
insurance, health insurance, unemployment insurance, and workers’ accident compensation
insurance. They also enjoy workers’ benefits like maximum work hours, work breaks, holidays,
and maternity leave, regardless of the citizenship of the employee (Ohta, 2015). The country
holds a conviction rate of over 99%.

Foreign companies in Japan are subject to certain laws, despite the need for a minimum
capital requirement. Generally, foreign businesses start as a Japanese Joint Stock company,
called Kabushiki Kaisha or “KK”. Some regulations of a KK are that at least one of the directors
must be a Japanese resident, even if not a national. For a company with a board of directors, at
least 3 of them must hold residency. At least one shareholder must exist within the KK and to set
up a branch office in the country, a Japanese resident must be appointed as the branch manager,
preferably in senior positions. Furthermore, according to Doing Business Guides (2015), for a
company that has a “capitalization above JPY 500 million or total debt of JPY 20 billion, it will
be a ‘large company’ and additional requirements will apply to it.”

TECHNOLOGICAL ENVIRONMENT
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Japan is a very innovative country. There are next generation vending machines
available selling drinks, food and also pizza, for example, with a touch-panel display which
makes it easier for customers. Japan plans to open the world’s first superconducting magnetic
levitation (SCMAGLEV) passenger train line at around 2027 (Japangov, n.d.), and its investment
in science and technology research during 2017 rose 3.4% from the previous year to a record
¥19.05 trillion. Japan ranks third after the US and China in spending on Technology and
research. (Nippon.com, 2020).

There are a few notable innovations done by the country such as the Omron artificial
intelligence (AI) Automatic Transportation Mobile Robot machines, that are designed for factory
usage; Bitescan, which is a bluetooth like device hung from ear which measures chewing strokes
as you eat and the Qoobo, which is like a pet but shaped like a cushion, developed by Japanese
firm Yukai Engineering and funded by a KickStarter campaign (Marsh, 2018). Japan has been
showing high advancement in technology as they are creating wind lenses which work like
magnifying glass increasing sunlight intensity. These wind lenses can concentrate on the flow of
wind. Verification experiments show that wind lens turbines produce three times more electricity
than those without a hoop (Schmidt, Watanabe, 2020). Japan also has floating solar panels and
the largest sits on Yamakura Dam at Ichihara in Chiba Prefecture (Broom, 2019). A unique
microorganism, Euglena, a type of algae, combines the features of plants and animals, grows by
photosynthesis and produces fat in its body that is suited to the production of jet fuel. The oil
extracted from the microorganism as a biofuel will be used to power aircraft in the future
(JapanGov, n.d.). Advancement in radio-frequency identification (RFID) has increased
efficiency and effectiveness as RFID could not be used with metals until recently, so tracking
metallic items is easier now (JapanGov, n.d.). Japan is aiming to bring Artificial Intelligence in
healthcare system by storing medical data in their system and Products such as an Artificial
Intelligence wheelchair, which is able to move autonomously on a pre-selected path; a
convertible bed; and body sensors for bath and bed can all help elderly people live more
independently (Rosmino, 2019).
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LABOR FORCE OF JAPAN

In 2018, the entire labor pool in Japan was composed of roughly 68.3 million people.
Despite Japan’s aging population, the labor pool increased from 2000 to 2018 by
1,000,000 people. In recent years, female participation in the labor force increased, which led to
the service sector increasing. This helped Japan overcome labor shortage caused by demographic
changes in society. There is a growing number of foreign workers and high participation of the
elderly. In 2018 almost nine million people were continuing to participate within
the market beyond the set retirement age of 65 years (Statistia, 2020). Japan consists of the most
innovative workforce and technology that MDO Inc requires; and they are going to be ready
to hire a number of the brightest minds and have a diversified workforce with good equality and
representation. With proper hiring schemes, MDO Inc can attract the best talents and shine in the
market.

TERMS OF TRADE BETWEEN JAPAN & USA

North America was the biggest importer of Japanese products during 2019 and fourth largest
exporter of goods worldwide in 2019, of goods worth $705.7 billion. 19.9% of Japanese exports
make it to the US (Workman, 2020).

Japan and USA have created a trade agreement regarding trade of agricultural and industrial
goods; with hopes of negotiations for a free trade agreement. The agreement was approved by
Japanese Legislature on December 5, 2019. Presidential Proclamation 9974 was issued on
December 2019, and an entry into force date of January 1, 2020 was established. The Agreement
was to be implemented by the Federal Register Notice, on December 30, 2019 (U.S. Customs
and Border Protection, 2020).

The US are to provide tariff elimination or reduction on 241 tariff lines. The US also will reduce
or eliminate tariffs on certain industrial goods (U.S. Customs and Border Protection, 2020). The
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limited agreement does not include trade agreements on motor vehicles which creates a tension
between both parties (Congressional Research Service, 2019)

Month Exports Imports Balance

6,385.2 11,517.8 -5,132.6

January 2019

February 2019 5,420.4 11,423.8 -6,003.5

November 2019 5,967.7 11,445.8 -5,478.1

December 2019 6,783.8 11,531.1 -4,747.3

TOTAL 2019 74,376.5 143,565.5 -69,189.1

(The Census Bureau, 2009)

FOREIGN DIRECT INVESTMENT IN JAPAN

Compared to the rest of the world, Japan’s economy has low influx of Foreign Direct
Investment (FDI). According to the World Investment Report conducted by UNCTAD in 2020,
Japan invested US$ 9.8 billion in 2018 and US$ 222.5 billion in 2019 in International markets
making it one of the largest investors globally. This took place due to the significant rise in
cross-border acquisitions and mergers (Nordea, Foreign direct investment in Japan 2020).

Despite being an investor, Japan’s economy does not obtain enough FDI compared to
other developed countries around the world. According to a study conducted by the Word Bank
 P a g e | 18

in 2020, Japan ranked 39th in terms of FDI into the country and 29th in 2020 out of 190 counties
around the world. While it is not a low standing, given Japan’s position in the world economy it
definitely leaves room for further development. Due to the aforementioned, Japan’s Prime
Minister Shinzo Abe is robustly pushing his pro-global business policy aimed towards attracting
and opening doors for foreign investment along with forming a hospitable environment for
foreign businesses. Apart from that, Japan’s strong technological advancements along with
strong Research & Development (R&D) sector, their strong purchasing power as an economy,
stable political conditions and geographic location makes it an attractive and lucrative economy
for any business to expand to. The Prime Minister of Japan also aims to double the FDI inflow
into the country by 2020.

Foreign Direct Investment 2017 2018 2019

FDI Inflow (million US$) 10,977 9,858 14,552

FDI Stock (million US$) 202,441 204,780 222,527

No. of Greenfield Investments 246 253 242

Value of Greenfield Investments 6,612 10,983 8,427

(million US$)

Fig.1: Foreign Direct Investment (FDI) table of Japan from 2017 to 2019 from UNCTAD

PEOPLE & CULTURE OF JAPAN

Japanese regard themselves as a single ethnic group. But there are still some exceptions, such as
Koreans, Japanese citizens of Aino, Okinawan origin, and also a small population of Chinese
family (Sakamoto, n.d.). The Japanese account for 98.1% of the total population. Then there the
Chinese that make up 0.5%, the Koreans at 0.4% and others at 1% of the population (Ethnic
Groups, 2009). The current population of Japan is 126,409,529. The population density in Japan
is 348 people per Km2, calculated on a total land area of 364,555 Km2 (Japan Demographics,
2020).
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LANGUAGE
The main language of Japan is Japanese (Nihongo) which belongs to the Japonic language
family. It’s used as a first language by 122 million and as a second language by more than 1
million people in Japan. It’s also spoken in many other foreign countries (Japanese, n.d.).

Religion:
The Japanese follow a variety of religions like Shintosim, Buddhism, Christianity and others.
Majority of the people follow Shintonism and Buddhism. The rates of religion are Shintoism at
70.4%, Buddhism at 69.8%, Christianity at 1.5% and other 6.9% (2015 estimated). The total
percentage exceeds 100% ,since many people practice both Shintoism and Buddhism (The World
Factbook, 2007).

CURRENCY
The official currency of Japan is Yen. Japanese yen acquires a position of being 3 rd most traded
currency in the foreign exchange market. 1 Japanese Yen equals to 0.0095 US Dollar ("Japanese
yen", 2020).

BUSINESS EQTIQUETTE IN JAPAN

COMMUNICATION

Verbal Communication: In Japan, it is not obligatory to be fluent in Japanese but introducing

oneself in Japanese creates a great impression. Japanese officials address each other by their last
names, followed by the suffix “San”. It is only acceptable to call someone by their first names
when they have personally asked for it. (“Business Etiquette in Japan”, 2020)

Non Verbal Communication: Japanese people greet each other with a light handshake and bow
down at an angle of 45 degrees, stating their names and official positions. While bowing down,
men must keep their hands on the sides whilst women need to join them in the front below their
stomach. (“Beginners guide to Japanese etiquette “, 2018). For connection, LinkedIn is popular
for business networking globally, however, it is not much used in Japan; they prefer to connect
through Facebook instead. (“Business Etiquette in Japan”, 2020)
 P a g e | 20

Business Card: Business cards are a must-have. They play an important role in business culture
in Japan and have their own etiquette. It needs to be held by both hands while presenting, making
sure that the information is facing the person one is handing it over to. Placing one’s card
underneath the counterparts’ is a form of showing humbleness. What is most important is giving
the counterpart’s card a read & storing it somewhere it would not get damaged. Rushing the card
without a read or putting it inside the wallet is considered disrespectful. (“Beginners guide to
Japanese etiquette “, 2018), (“Business Etiquette in Japan”, 2020), (“Secrets of Japanese business
etiquette”, 2020).

MEETINGS

Punctuality is one aspect of the Japanese people in general that is recognized globally. They are
so devoted to punctuality, that arriving in a meeting on time is considered being late; therefore
they always arrive 10 to 15 minutes beforehand. In Japan when someone visits another’s office,
they need to wait to be seated until the host offers them a seat. In a meeting among a lot of
people, officials are seated according to their rankings. The seating arrangement is such that, the
higher the status (based on experience & age), the more prioritized the seating positions. People
are likely to speak up in a meeting only when they have been addressed. Participants of meetings
plan their roles prior to the meetings & slides need to be in details because whatever the slide
contains is counted as important. Presenters are encouraged to prepare hard copies of their
documents & presentations to hand over to other participants. Presentations never take place in
English; it is always translated into Japanese by foreign counterparts. Japanese officials tend to
have a hectic schedule therefore a meeting has no scope for taking extra minutes. (Planet Depos,
“Japanese Business Etiquette”), (“Secrets of Japanese business etiquette”, 2020), (“10 Japanese
business etiquette rules”, 2017)

DRESSING

In Japan, no matter what business people are affiliated with, everyone tend to dress in business
attire. Men usually wear dark suit, light shirts, a necktie & polished dark shoes. Women tend to
dress conservatively in dark colors too from tip to toe; basically wear suits with knee length
 P a g e | 21

skirts or formal trousers & short heeled shoes. Perfume & heavy makeup is usually avoided. Hair
needs to be tidy & well groomed for both the genders. Black ties are meant for funerals only,
therefore it is discouraged in other occasions. Circumstances may arrive where people are
required to take their shoes off, in that case it is important to wear decent looking socks. It is
highly essential to remove one’s coat or blazer worn above suits prior entering any premises as it
is considered highly unethical & a matter of disturbance to take it off inside. (Planet Depos,
“Japanese Business Etiquette”), (“10 Japanese business etiquette rules”, 2017).

CULTURAL DIFFERENCE BETWEEN JAPAN & USA

Japan USA

Ethnic contrast 98% of Japan’s population is On the other hand, America is

ethnic Japanese and the a diverse nation containing a
substantial minorities are population of multiple races &
Chinese & Korean. More or cultures, mostly being African
less, all of them share the descendants, whites &
same cultural & social values. Hispanics (Aliasis, 2018).
They are highly traditional &
possessive about its
preservation (Aliasis, 2018).
Religious contrast Maximum people in Japan Meanwhile, the population of
follow Shinto-ism or America consists of diverse
Buddhism or both(Aliasis, religious followers with the
2018). majority being
Christians(Aliasis, 2018).
Social nature Japanese people are highly In America, people are usually
formal; they speak very less, welcoming & warm; strangers
 P a g e | 22

are socially reserved, address do not hesitate to approach or

each other with honorary have a chat with each other
titles, physically touching each (Aliasis, 2018).
other is very rare (Aliasis,
2018).
Greetings In Japan, people bow down to Americans shake hands sto
greet one another. People tend greet one another (Aliasis,
to limit physical contact in 2018).
Japan (Aliasis, 2018).
Politics & patriotism Just like USA, Japanese In America, citizens are highly
people are highly celebratory conscious, vocal & active
of their country, history, regarding their political views
language & culture but unlike (Aliasis, 2018).
USA their political
participation is very low. The
voter turnout rate in Japanese
elections is exceptionally low
(Aliasis, 2018).
Tipping In Japan, tipping is unusual In America, tipping is an
and can even be considered essential factor to address
disrespectful to some extents. appreciation of good service &
(Aliasis, 2018) a necessity for the survival of
minimum wage earners
(Aliasis, 2018).
Social Hierarchy In Japan, be it at workplace or Meanwhile in America, these
an educational institute, the role plays do not exist, respect
more experienced colleague is is not differentiated (Aliasis,
considered superior and the 2018)
less experienced is a junior.
The seniors are meant to
mentor the juniors & the
 P a g e | 23

juniors are meant to obey &

help the seniors; this is a rule
in Japan (Aliasis, 2018).
Public transport etiquette Japanese maintain an etiquette Americans are seen eating,
that prohibits any sort of chattering, listening to music
disturbing activities on public etc on the go (Aliasis, 2018).
transport. (Aliasis, 2018)

Monetary exchange While shopping in Japan, In America, money is directly

payments are made by keeping handed over to the sales
the money in a tray. The person and vice versa; keeping
salesperson picks it up and the money in the counter is
places the change over the tray considered disrespectful
similarly (Aliasis, 2018). (Aliasis, 2018)

HOFSETEDE CULTURAL DIMENSION JAPAN VS USA

 P a g e | 24

Power Distance

Japan’s power distance is higher than the USA. Americans do not respect people by their social
status that much compared to Japan. Since the score of Japan is 54 whereas the score of USA is
40. Although Japanese are not as concerned about someone’s position like most of the other
Asian countries, they maintain a strong hierarchical system while doing business. They value
hierarchical position to take a decision which leads them to slow decision making process.
However, there is also an example which proves them to be of not so high power distance
because they value someone’s talent, achievement and effort rather than social status (Hofstede
Insight, n.d.).

Individualism

In Japan, they have a collectivist culture; prioritizing groups & communities. One is meant to
find satisfaction & gratification within the social group they belong to. Meanwhile, Americans
have a individualistic culture; they find satisfaction based on personal achievements & prefer to
prioritize their own wills. (Aliasis, 2018) In Japan’s business culture, employees are much
inclined to serve in one company throughout their working lifetime, valuing company loyalty.
This influences people’s lifestyles & contribution in the society. Americans tend to focus on
establishing independent careers rather than accomplishing company goals. They change
companies several times throughout their working lifetime. (Aliasis, 2018) Promotion in Japan is
seniority based & merit based in USA. (Aliasis, 2018).

Masculinity

With a high score of 95, masculinity in Japan indicates that Japanese people are very
competitive, they are driven by a sense of winning and achieving. So, people want to be the best
at something rather than enjoying or liking what they are doing. From a young age Japanese boy
are taught to compete in sport and win, as winning is rewarded so they learn to be competitive so
it is sometimes difficult for women to compete in the labor force. On the other hand, USA scores
lower, as a lot of people work towards what they care about and what their dreams are and do not
only focus on winning, so it gives women of America miles to go. (Hofstede Insight, n.d.).
 P a g e | 25

Uncertainty Avoidance

Japan has a score of 92 in this, making it a distinctively high uncertainty avoiding country in the
planet. The constant threat of earthquake, typhoon, volcano eruption & tsunami makes it a major
reason why Japanese have learned to be prompt for any uncertain situation. Everything in Japan
is done with due predictability. There are too many rituals & ceremonies in Japan.

On the other hand, USA scores a low of 35, meaning that American prefer are less worried about
what is to come, they chose to go with the flow based on latest changes (Hofstede Insight, n.d.).

Long term orientation

Japan has a very high long term orientation compared to the USA. The score of Japan is 88 and
the USA is 26. It shows that Japanese believe in the past and respect values and tradition whereas
the USA measures success on a short term basis. The USA wants immediate results so they take
any decision faster. However, Japan believes in persistence. They want steady growth in market
share rather than to a quarterly profit. They always think about serving society for the long term
rather than making money in the short term (Hofstede Insight, n.d.).

Indulgence

Japan’s low score of 42 for indulgence shows they have a very strict and rigid lifestyle; they will
not be very interested in doing something that they desire or spend time on recreation. They do
not stress over leisure time and think indulging themselves is not the right thing to do because of
high social standards. On the other hand, the USA scores higher as they spend more time on
leisure and recreation. They will work hard but also go on vacations, but they also have high
alcohol and drug intakes (Hofstede Insight, n.d.).

RECOMMENDATIONS
To successfully thrive in Japan, it is first and foremost important to respect and adapt to
their language and culture. This means that communication needs to be focused on. It is
important to adhere to their habit if being punctual, which means arriving to meetings and even
planned events on time is absolutely necessary. The rich traditions and culture of the country
 P a g e | 26

bleeds into their workplace etiquette, especially in comparison to the more casual form of
communication of American employees. Using appropriate suffixes and titles where necessary,
bowing and proper methods of greeting should be respected and followed as closely as possible.

CONCLUSION

With the expansion to Japan, MDO Inc. will be entering into a highly lucrative and
feasible market that has endless opportunities for the future as the industry develops more and
more over the years. MDO Inc.’s expansion at this phase would not only provide them with
competitive edge over other competitors as the industry develops but would also provide them
with ample time and opportunity to establish themselves as one of the leading and trusted
Renewable energy companies in Japan. The findings of our research have provided a clear
understanding of why Japan is the perfect fit for MDO Inc.’s objectives which are in line with
the company’s operations as well. MDO Inc. will not only be able to avail new opportunities by
entering into a new market but also be able to establish itself well in the industry as it is a
growing industry which is not as saturated yet.

The study provides further evidence on the influence which a well-established company
such as MDO Inc. could have in the Renewable energy market of Japan. Thus, we can conclude
that Japan is the best fit for MDO Inc. which will be very profitable and lucrative for the
company if it is able to ascertain their positioning by implementing well-structured strategies to
act as a key player in the growing industry. We believe with enough time, dedication and effort
MDO Inc. even has the potential to be the Renewable energy market leader in Japan as well.
 P a g e | 27

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