In 2014, Uber’s representatives for Asia paid a visit to the Japan Association of Travel Agents (JATA) as part of their market entry strategy in Japan. At the meeting, they described their business model and assured JATA’s management that the model would be beneficial for our customers – be they domestic users or foreign visitors.

Listening to the Uber reps talk, everybody in the room saw the brilliance of the new business model. Yet, I wanted to tell them right away what everybody else in the meeting was thinking: it wasn’t going to work here. At least not for the next decade or so. 

In line with good Japanese traditions, the JATA executives were polite and accommodating. Had they shared their thoughts, the Uber reps would have heard the following:

·    Your model is brilliant. BUT you are forcing your way into Japan while breaking the law and without any consideration for the local business practices.

·    You believe that the Japanese market is like any other: it will eventually succumb to the pressure created by customers eager to take advantage of cheaper and more flexible taxi services. BUT the users aren’t going to welcome the uncertainty of unlicensed taxi drivers and choose them over the trusted, clean and safe services that are already available. 

But let’s take a closer look at the reasons for Uber’s struggle in Japan

Market entry

The taxi industry in Japan is well-established. Taxi drivers are unionized. The market has a clear structure that has sustained the industry for decades. In addition, industry leaders have solid, long-lasting relations with policy makers. Through political donations, the industry has erected market entry barriers that can be impenetrable for bullish outsiders trying to break the status quo.

Regulatory barriers 

New technologies may respond better to modern customer needs. Still, you are bound to fail if you try to force change by breaking the law. Japanese law prohibits private individuals from offering paid rides unless they hold a government-issued taxi license. Uber’s peer-to-peer ride-sharing model clashed directly with this.

The cultural misfit

·    In other markets, customers may not think twice before getting into a stranger’s private car. In Japan, a country where trust and reputation are critical, getting into a stranger’s car, especially one not officially licensed, is seen as unsafe and unfamiliar.

·    The cultural values of harmony, peace of mind, and continuity ingrained in the Japanese mindset run deep in the local business culture. The harder you try to create tension and exercise pressure by coming with “alien-to-the-market” business models, the more united and resistant the business community becomes.

·    Japan favours the slow, careful adoption of new business models, providing time for thorough localization. Uber came like a storm, believing that their proposition was so good that it could override the need for localization. They initially launched in Tokyo with minimal adaptation to local consumer preferences, norms, or language. The app and customer service were not fully localized. Unsurprisingly, drivers unfamiliar with Uber’s model were confused or unwilling to participate

·    Successful change in Japan starts from within and top-down. The leaders of this industry had already won the trust of their customers. They didn’t see the need for change to survive. In Uber, they saw a disruptor of the status quo and lobbied against it. They framed Uber as an unsafe and unregulated threat to public transportation.

・  Uber’s casual, gig-economy-style model clashed with the norms for seniority, professionalism, and uniformity in Japanese service culture. Companies that don’t conform with these norms sooner or later leave the market in search for greener pastures.

And there is more

・The Japanese love “Made in Japan”.  New-comers, no matter how much better their products/services might be, are met with distrust.

・Success in Japan is based on partnerships and collaboration, not on disruption, regardless of how genius a solution you bring to the market.

・The Uber reps didn’t recognize the need for a consistent mid- to long-term strategy including building trust with all stakeholders and advocating for regulatory changes the Japanese way. 

Uber’s market entry strategy was built on assumptions that worked in the U.S. but did not translate to Japan’s legal and cultural landscape. Eventually, their ride-sharing services disappeared from Japan’s market before the company could send any ripples out.

So here we are over a decade later: Go and other taxi operators continue rocking the market with the new ride-sharing opportunities that came after some deregulation of the industry. Meanwhile, Uber had to reinvent itself to survive in Japan. It eventually pivoted to focus on: Uber Eats, Uber Black (luxury hire car services with licensed drivers), and partnerships with local taxi firms. 

What can you do?

Although it sounds too familiar to repeat, before you enter the market, do your homework.

Learn about the Japanese regulations, cultural sensitivities, and the strength of the industry you plan to enter in Japan. 

The “When in Rome…” principle is key in Japan. The Japanese even have their own saying:

郷に入っては郷に従え (Gō ni itte wa, gō ni shitagae)

To avoid any hard lessons in cultural mismatch and the limitation of global scalability due to local sensitivity, prepare. Invest in learning, respect the local culture and regulations. Find your way into the market by playing to your strengths. With the right help, you will discover that making adjustments to meet local norms, regulations, and expectations is not counter productive. The opposite. It helps you find a place in the market and stay here long-term.