Comparing Three Go-to-Market Channels for Entering the Japanese Market

Subsidiary Establishment, Manufacturer Partnerships, and Distributor Partnerships: Pros and Cons

When overseas companies enter the Japanese market, one of the first and most critical questions they face is:
“How should we sell? (How should we build our distribution channels?)”

Japan is a large and attractive market, but it also has unique characteristics—such as distinctive business customs, complex decision-making processes, strict quality standards, and high expectations for after-sales service. 

As a result, choosing the wrong go-to-market channel can easily lead to a situation where “the product is good, but it doesn’t sell.” 

The three most common options are:

• Establishing a local subsidiary or branch office
• Partnering with a Japanese manufacturer (joint development, OEM, sales partnership, etc.)
• Partnering with Japan-specific distributors or agents (primary distributors, specialized trading companies, industry wholesalers, etc.)

Below, we organize the characteristics of each option and explain what types of companies each approach is best suited for. 

① Establishing a Local Subsidiary or Branch Office

Advantages

• Full control over brand, pricing, and customer data
   Sales strategy, pricing changes, promotions, and customer data accumulation can all be managed directly. From a mid- to long-term perspective, this option leaves the greatest “assets” within the company. 
• Fast decision-making
   Product improvements and campaigns can be executed without waiting for approvals from agents or partners. This is a major strength for B2B businesses that need to iterate PoCs quickly. 
• Consistent customer experience
  Support quality, onboarding, and contract renewals can be operated according to internal standards. 

Disadvantages

• High initial investment and fixed costs
• Time required to learn Japan’s “unwritten rules”
• Recruitment challenges

Best suited for companies that:

• Can invest in Japan as a strategic mid- to long-term market
• Want to build brand equity and retain customer data internally
• Offer service-based businesses (e.g., SaaS) where recurring revenue and operations are critical

Before committing to establishing a local subsidiary,
many companies choose to test the Japanese market through digital-first approaches.

② Partnering with a Japanese Manufacturer

(Joint Development, OEM, Sales Partnership)

Advantages

• Rapid credibility building
• Easier compliance with quality standards and regulations
• Potential for rapid scaling

Disadvantages

• Loss of control
• Lower margins and stricter contract terms
• “Priority risk”

Best suited for companies that:

• Have little brand recognition or track record in Japan but need fast expansion
• Operate in hardware or manufacturing sectors where standards and quality compliance are critical
• Possess unique technologies that create value through OEM or joint offerings

③ Partnering with Japanese Distributors or Agents

(Primary Distributors, Specialized Trading Companies, Industry Wholesalers)

Advantages

• Rapid expansion of sales channels
• Alignment with Japanese distribution practices
• Access to field-level insights

Disadvantages

• Limited price control
• Difficulty obtaining customer data
• Risk of being “left to the distributor”

Best suited for companies that:

• Sell physical goods, components, or consumables where distribution reach is critical
• Want to avoid the burden of Japan-specific billing, collections, and inventory operations
• Wish to test the market before making a larger investment

Conclusion: A Trade-Off Between Control and Speed

• Control-focused: ① Establishing a subsidiary
• Credibility and localization-focused: ② Manufacturer partnerships
• Speed and distribution alignment-focused: ③ Distributor partnerships

In practice, many companies adopt a phased approach, such as:
“Validate demand through distributors, then build a direct sales model,”
or “Establish credibility through a manufacturer partnership, then transition to a subsidiary.” 

To successfully enter the market in this phase,
it's essential to have an action plan that clearly outlines "what to do, when, and in what order."
The 90-Day Roadmap for Entering the Japanese Market
explains the measures you should take in the initial phase in chronological order.

The key is to align the chosen channel with your market entry objectives (short-term revenue vs. long-term brand building) and internal resources (people, capital, and operational capacity). 

In order to achieve serious results in the Japanese market, we provide digital marketing support,
supporting entry strategies that integrate sales channel design and digital measures.