Environmental factors influencing business decisions in japanese markets case study


It is essential for management to consider the environmental forces that have affect business performance. The management has the role to identify the legal, political, socio-cultural, economic and technological factors that influence business in a particular market. These helps the management to make decisions on marketing strategies used in a given market, trace the economic trends to understand the economic condition in a given market, adapt the products to the market and comply with the legal requirements in that particular market. The management makes decisions that best suits the business in the context of the various environmental factors. A successful business in Japanese markets has to take into considerations the environmental forces affecting business performance. Managers respond to these changes by redefining the company market entry, pricing, promotion, changing employment terms and relations, changing ways of administration and focusing on the market needs.


The study uses only secondary data to collect information on the Japanese markets. It involves scrutinizing content within websites, books and journals articles. Information on the economic status, demographic characteristics, political situation and technological development level of Japan has been collected.

Japanese markets

Any business venture in Japan has to consider the environmental factors for it to succeed. This is because Japan has unique environmental factors that affect business than in any other part of the world. Firstly, the Japanese culture, behaviors and lifestyle is different from other nation and this determines consumer behavior. For a company to do business in Japan it has to follow the legal procedure. This require the company to have a company seal, registered with legal affairs bureau, to be approved for tax payment, to have received a notification of the rules of doing business, to meet insurance and employment policies, fulfilling the demands of the social insurance office on matters of health insurance and pension, as well as liaise with the public employment office for employment insurance confirmations. (International Finance Corporation, 2011)

Secondly, Japan is among the world developed countries with a strong economy. The economy reveals a gross domestic product of 3. 7% and with a low and stable inflation rates. The economy of Japan is strong and stable; therefore it can support business with minimum economic risks. Thirdly, the demographic characteristics in Japan reveal middle aged population with 44. 8years as the median age. This has the implications on the target population which must be of middle age to create enough demand for products. It has a total population 126, 475, 664 adequate to provide demand for products. However, its population growth rate is negative 0. 278% raising concerns for business expansion in future. (The world fact book, 2011).

Fourthly, Japanese market is a large market that requires proper strategies for doing business. However, competition from Japanese local companies makes it difficult for foreign firms to do business in Japan. This forces both local and foreign firms to form of groups to penetrate the huge markets, this include forming alliances with competitors. (woronoff, 2000). Fifthly, Japan has remained politically stable since the second war II and with a democratic government. This provides a favorable climate for doing business with minimum political risk. lastly, technology is highly applied in Japan both for industrial and home consumption. This is made possible by the high literacy rate of 99%. This makes use of technology for business very easy, therefore companies can rely on the digital marketing and the internet, a relatively cheaper way to reach consumers. Firms can also use the internet to collect market statistic on consumer needs. (U S department of state, 2011).

The CLS limited is a large bio- pharmaceutical company in Australia. The company relies more on the global economies as it has significant foreign markets. This makes the firm to withstand poor economic conditions in Australia. The firm was established in 1916 when the supply of traditional vaccines and medicine was threatened. The harsh political climate was not favorable to outsource medicine form western countries as most of its soldiers were participating in the World War I in Europe and required supply of pharmaceutical products. Around this period about 5% of the total population in the world died from Flu making the company more relevant to the market to produce to produce vaccines and serums for the Australian.

The political decisions could not let the company import some medical products until 1994 when it was privatized. This stagnated the company’s growth and profit realization. It began to expand its markets offshore. Its rising share value place the company at a position to acquire blood plasma of the Swiss Red Cross. This had the implications of increasing its supplies and thereby increasing its profit Margins.

The company depend on foreign economies, as most of its markets are offshore. This enables the company to stabilize in harsh economic conditions. For example, in 2008 the Australian dollar declined, but, the company was not much affected since most of its profits are from foreign markets. The company produces a variety of vaccines and pharmaceutical products, thereby, diversifying its product range and reaching many consumers. It has also formed alliance with Merck. In this case the company benefits Merck’s distribution and manufacturing systems around the world making it easy to reach foreign markets. (Rice & Martin, 2010).


The CLS Company’s managerial decision to have a successful business in Japanese markets would be highly dependent on the environmental forces. The management should respond uniquely to environmental factors in Japan, rather than replicate decisions made for other places.

The management responds by adapting its marketing strategies, administrative and planning policies to fit the Japanese context.

It would be beneficial for the management of CSL ltd to enter into alliances to avoid cases of being alienated as a foreign company in Japan.

The decision to form groups with local Japanese companies would be appropriate. The company can only benefit from such alliances as dictated by the business culture in Japan in order for the company to benefit.

The population of Japan is mostly composed of middle aged persons. This requires the company to evaluate the target population; this should be medium aged population. A decision to manufacture pharmaceutical products that are for the majority middle aged people would be appropriate. The management of CLS ltd would consider producing small quantities of vaccines for young children as the birth rate is very low as indicated by the negative population growth rate. Overproduction in this industry can result to big lose.

The management of CSL ltd has to consider and adhere to all legal requirements of doing business in Japan as would avoid confiscation of the company’s property. The management should informed of the legal processes of awarding tenders in Japan as it is a democratic country where most of the tenders awarded through set procedures. Although most of tenders are awarded to local companies, SCL Company would highly benefit from a decision to form alliances with local companies. This managerial response the corporate environment would be of great benefit.


The management should be aware of the influence of environmental factors on the performance of the business. These factors should be the particular factors within a given context as they are always different for different parts of the world. The environmental factors influencing business in Japan are different from those of other parts of the world. Understanding these forces would help the management in making sound managerial decisions that make the business prosper.


International Finance Corporation (2011). Doing business: Japan. [internet] available from 5 April 2011
The world fact book (2011). East and Southeast Asia: Japan. [online].
5 April 2011
Woronoff, J. (2000). The “ no nonsense” guide to doing business in Japan. New York: St. Martin’s press
US department of state (2011). Background note: Japan [internet] available from
Rice J. & Martin N. (2009). Australia’s CSL ltd-a global quet achiever. Management concepts: managing from a global environment. Pearson publishing.