Merits 1. Expansion of sales channels

The most promising way for retailers, service providers and distributors to expand overseas is to expand sales channels. The expansion of overseas markets will make it easier for us to acquire larger markets than we do in Japan.

In Japan, GDP has been flat and consumption has been stagnant due to the declining birthrate and aging population. The domestic market is not optimistic for the future.

However, there are still undeveloped product categories overseas, and there are many markets that still have a lot of room to enter. Accordingly, developing businesses in overseas markets is attracting attention as a way for Japanese companies to survive.

An increasing number of enterprises, including large enterprises, SMEs and venture companies, are expanding their operations overseas.

Merits 2. Lower costs

The second benefit is lower costs. In the past, there were many companies that entered overseas markets, mainly in the manufacturing field, hoping to obtain cheap labor and to procure materials, equipment, and raw materials cheaper than in Japan.

In recent years, there has been an increase in overseas expansion aimed at local markets, particularly among large corporations, but the trend toward cost reduction continues to this day. Especially among small and medium enterprises, there seems to be a certain number of enterprises that expand overseas in the hope of reducing production costs in order to cope with competition with inexpensive products from emerging countries.

As a part of the above, there are cases in which affiliated companies try to survive by advancing overseas together with the main subcontracting company aiming at local procurement of inexpensive parts.

Merits 3. Tax saving effect

In addition to business development, there are other aspects of taxation that Japanese companies should be aware of when expanding overseas. However, if you take measures well, you may be able to enjoy the advantage of tax saving depending on the phase of overseas expansion.

If you make a profit abroad like in Japan, you have to pay tax. The tax rate varies from country to country and may be lower than in Japan. In some countries, tax incentives are given especially to companies seeking to expand overseas.

Countries that host foreign companies may also have a “special economic zone” system, which offers tax benefits to foreign companies.

China, Vietnam, Malaysia, Cambodia and other Southeast Asian countries have special economic zones. It is difficult to expand overseas in terms of legal system such as Vietnam, but it can be said that tax benefits are given.

This aspect can also be considered as one of the factors to be considered in the future.

Disadvantages 1. Higher personnel costs

The rise in labor costs has been marked by the development of emerging countries in recent years. During the period of high economic growth, Japanese companies entered overseas markets one after another in search of cheap labor in emerging countries. However, due to rising labor costs in recent years, some companies were forced to scale down or withdraw from their businesses.

Going forward, it will become difficult to expand overseas, particularly in emerging countries, solely for the purpose of cheap labor as before.

In addition to the manufacturing industry, labor costs are expected to increase due to the improvement of education standards in emerging countries. “Although it can be said that it is advantageous to secure excellent human resources with IT skills, there is also a risk that management itself will deteriorate due to soaring personnel costs.”.

In the future, we will be forced to improve our corporate structure and review our business model as soon as we respond to this situation.

Disadvantages 2. Exchange Rate Fluctuations

Because our overseas business is denominated in foreign currencies, we must pay attention to the risk of fluctuations in foreign exchange rates. Exchange rate fluctuations themselves can be both beneficial and detrimental.

For example, when the yen is strong, you can gain profit by importing goods into Japan, but if you export goods, you will lose profit. If you send money to your home country when the yen is weak, it will be a profit, and when the yen is strong, it is advantageous to acquire overseas companies or open stores overseas. Depending on how you use it, the exchange rate can help you make a profit like this.

However, in terms of volatility, it can be said to be a demerit due to the uncertainty of management and difficulty in planning funds. Even if you make a profit from trading, you may lose money due to fluctuations in foreign exchange rates, and you are always at risk from unpredictable movements in foreign exchange rates. There is a method called exchange contract, but you always need to pay attention to the market price.

Disadvantages 3. Difficulty in managing and developing local human resources

It can be said that the management and training of local human resources are particularly difficult to expand overseas. Local laws and regulations stipulate the employment of local human resources, and Japanese employees may not be able to manage their businesses alone.

It would be ideal if we could make use of the excellent local labor force, but because of the differences in national character, corporate culture, and working styles, there are times when locally hired employees are opposed to the Japanese-style management methods or lose their motivation. Also, in areas with a high turnover rate, even if you hire someone, they will quit before they grow up.

Disadvantages 4. Local legal systems, regulations, and economic conditions

Local laws, regulations, and economic conditions also raise the bar for overseas expansion. In some cases, local legal systems make entry impossible in the worst case.

Depending on the company’s services and products, regulations may limit the country of entry or the way of entry to some extent. In particular, it has become difficult for foreign companies to enter energy, media, and urban infrastructure businesses.

Other than that, there are restrictions on the ratio of foreign capital in the retail industry and the restaurant industry, and it is sometimes difficult to open multiple stores because of strict screening. It is said that the expansion of restaurants and retail stores in Vietnam is particularly difficult.

In addition, in many other countries and regions, the percentage of foreign capital that can be held is restricted except for specific industries such as manufacturing.

There are regulations on human resources, and in some countries, the ratio of foreign employees is fixed. For example, in Thailand, the amount of capital is determined according to the number of foreign workers employed, and a certain number of workers are hired from the host country.


As described above, while there are advantages such as expansion of sales channels, cost reduction, and tax savings, there are also major disadvantages such as exchange rate fluctuations, difficulty in securing appropriate human resources, and risks due to laws and regulations. When expanding overseas, it is necessary to make a decision after weighing the pros and cons.