Market Trend

Why Korean startup founders should start a business in Japan now 

March 15, 2024

In this series of articles, we will summarize the current state of the Japanese market, practicalities of establishing a local subsidiary in Japan.

For Korean startups considering expanding into the Japanese market, we will also cover matters that will be necessary after the startup has entered the Japanese market.

1) TIP for Korean startups entering the Japanese market

In this first installment, let's start with "Advantages for Korean Startups to Expand into Japan!"

Two keywords that are cited as advantages for Korean startups to expand into Japan are "Korean boom" and "delayed digital transformation".

(Picture of BTS, Source : HYBE)

▼ The "Korean Boom" in Japan

First, let us explain the Korean boom in Japan, which has a history spanning more than 20 years.

The Korean (Hallyu) boom can be divided into four categories. Japan is currently in the midst of the fourth Korean boom.

*The 1st Korean boom (2003~2005)

The first Korean boom began with the Korean drama "Winter Sonata" broadcast in Japan in 2003. Actor Bae Yong-jun was a symbolic figure of the first Korean boom with high popularity among middle-aged and older ladies.

*The 2nd Korean boom (~around 2010)

The second K-POP boom is said to have started with the debut in Japan of such artists as Tohoshinki, Girls' Generation, BIGBANG, and KARA. The number of appearances on Japanese music programs and concerts in Japan increased.

(Source : DSP Media)

*Third Korean boom (~around 2020)

The third boom, considered to be from 2016 to 2017, saw a resurgence in K-POP popularity with the rise of new idol groups such as TWICE and BTS.

The difference from the second boom is "SNS". Compared to the second generation, which was mainly based on media exposure, the Korean boom has been accelerated by the availability of real-time information through Instagram, etc. 

The third generation is characterized by the diversification of content shared on SNS, not only KPOP, but also food, fashion, language, and more. 

*Fourth Korean Boom (to present)

In the fourth Korean boom, which began around the time of the pandemic, "Korean content" in all genres, including food, fashion, and interior design, as well as K-POP, dramas, and other content, took root and became popularized. 

(Source : Netflix)

In addition, Covid-19 has led to a rapid increase in the number of people using Netflix and other video distribution services. As a result, the Korean boom, which was centered on young people in the 2nd and 3rd boom, has been embraced by people of all ages and both genders.

Today, Japanese members have almost always joined idol groups. Collaboration between Japan and Korea will probably accelerate in various fields in the future, such as the production of Japanese-Korean co-produced TV dramas.

Thus, over the past 20 years, the Korean boom in Japan has gone beyond a boom and become firmly anchored. The current situation in the Japanese market can be regarded as an open situation for companies in the content and lifestyle fields, such as K-POP and fashion.

▼ Delayed Digital Transformation

In Japan today, there is a demand for accelerated "Digital Transformation"(DX) in a wide variety of industries.

According to the IMD World Competitiveness Center's "IMD World Digital Competitiveness Ranking" research report*, the United States ranked first. 2nd was the Netherlands, and 3rd was Singapore. South Korea ranked 6th, up from 8th the previous year. Japan, on the other hand, was ranked 32nd, down three places from the previous year.

These results show that Japan is lagging behind in the use of digital technology worldwide.

*The report measures and compares the ability and readiness of countries and regions to use digital technology as a key driver of change in business, government, and society.

(Source : IMD World Competitiveness Center)

Factors cited for Japan's slow progress in DX include "reliance on legacy systems," "lack of IT human resources," and "management's lack of understanding of DX".

Legacy systems refer to systems built with past technologies. These systems have been in use for many years. Due to their complex structures, they are difficult to maintain. Furthermore, there is a lack of human resources with knowledge of the technologies used in the past.

However, it is even more challenging to change the existing system all at once. It is claimed that there are cases in which companies have lost their way or lost track of what to do first.

Moreover, "management's lack of understanding of DX" means that there is a little awareness that DX is lagging behind in Japan and globally. At the same time, some companies are not aware of the need to improve operations owing to a lack of human resources. 

(Source : Unsplash)

Under such circumstances, even companies that have set a goal of "DX promotion" are actually leaving DX to the frontlines. Management team that actually makes the decisions does not have a real sense of what is needed to improve operations.

There is an opinion that one potential solution to the delay in DX in Japan caused by these various factors is to start with a small DX initiative. It is important to start from where you can and let the company and executives realize the benefits and methods of DX.

There are various other factors that may contribute to the success of Korean startups in Japan, such as the geographical proximity of Japan and Korea, real-time local communication due to time zones, and the proactive utilization of the Japanese characteristic of "one service for a long time. I believe that there are various factors that help global startups including Korean ones succeed in Japan.

Next Post| Tips for startups entering the Japanese market : How to establish a corporation in Japan

Written by Starsia (Link)

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Starsia is an accounting firm and consulting firm that specializes in supporting exchanges between Japan and Korea, with peace of mind for the development of Korean-Japanese business since its establishment in 2007.