How to win in the global market – solving problems even ramen shop owners don’t know about, based on 17 years of accumulation since the establishment of the Yamato Ramen School: chapter 5

This report analyses the Japanese market.

Chapter 4: The Essence of a Winning Ramen Restaurant continued.
The current situation in Japan is one of a declining population combined with a falling birthrate and an ageing population, which means that the various business markets are becoming smaller and smaller.
Therefore, it is a major challenge for the Japanese food service industry to expand overseas, where there is a large market, if it wants to expand its business further than it is now.

Many people mistakenly believe that if they take Japanese ramen overseas, they will be successful, as ramen, which has recently become increasingly popular and spread around the world, all originated in Japan.
Food customs in Japan and overseas are completely different, and there is no end to the number of people who fail because they do not understand overseas food customs.

Below is a summary of the issues that Japanese people tend to fail when expanding overseas.

1.Ramen is a fast food in Japan, but in other countries it is a dining or café

Japanese people eat ramen for lunch in ramen restaurants in 10 to 20 minutes, and the average turnover of customers is three in an hour.

Overseas, however, people eat slowly, taking about an hour even for lunch, so the turnover rate is very low and there is no custom of eating meals quickly.

In other countries, the noodle culture is not as developed as in Japan, so there is no sense of noodle stretching, and the noodles are eaten slowly, first by drinking the soup slowly with a spoon, then by eating the noodles with a fork and spoon, wrapping the soup around the fork.
Therefore, if you build a small restaurant with 20-30 seats like in Japan, the result is that sales do not go up at all and the business is not viable.
This is the most common problem for Japanese people who only know about Japanese ramen restaurants and have only lived in Japan.

In Japan, ramen is a typical fast food that is eaten quickly, but overseas, ramen shops are more like cafés or diners.
Therefore, many restaurants abroad are a fusion of ramen and izakaya or sushi and ramen restaurants.

2. tastes vary widely from country to country

Our neighbouring country, South Korea, has a very low salt content in its food and does not like salty food.

There are a great many countries around the world that do not like salty food, and the popularity of Hakata tonkotsu ramen around the world is also due to the creamy soup and high soup consistency, which in turn makes Hakata tonkotsu ramen very low in salt content.
As an extension of Hakata tonkotsu ramen, the popularity of the equally creamy chicken shiratsu ramen has recently increased.

Conversely, some Eastern European countries with cooler temperatures prefer highly salted food.
The tastes favoured in South-East Asian countries also vary from country to country, for example, in the Philippines, sweet and salty tastes are favoured, while in Singapore, sweet and spicy tastes are favoured.
This is not only true abroad, but also within Japan, where there are significant regional differences: in Hokkaido, where temperatures are cooler, salty tastes are preferred, while in Kyushu, sweeter tastes are favoured.

If you open a shop without understanding these regional differences, it is difficult to be accepted.
In addition to these taste preferences, there are also religious restrictions, and Muslims cannot eat Halal meals unless they are Halal-compliant.

3. if you go abroad, you will always fail

When you go abroad, it is normal to make mistakes, and it is important to experience many non-fatal mistakes quickly and accumulate know-how.
First of all, different countries have different laws, different systems, different food habits, different tastes, different religious issues, different education systems, different levels of education, etc. You will encounter so many different problems that there is no end to them.
This makes it a wonder that they succeed, and it is impossible to suddenly succeed without making mistakes.

In the past, no company has ever expanded overseas and not failed, so it is a matter of accumulating lots of experience of failure and how well you can connect your failures to the next step.
It is also important to discard successful experiences in Japan.

Take time to make the first shop successful, build a successful business model, and once the business model is complete, attack it in one fell swoop.

The most efficient way to do this is to open multiple shops in a small area where the same business model can work.

4. the probability of success varies considerably depending on where you start your attack

It is also essential to understand the local political situation, national character, food and drink situation and taste preferences to find the right country for you.
In most cases, a local partner will be a key factor, and it is important not to make the mistake of choosing the wrong partner, as who you choose as your partner can make a big difference to the success or failure of your business.
Also, depending on where you start in the same country, there are different growth steps, so you need to build on your successes and increase your learning rate.

Most countries have a higher status in the food service industry than Japan, and in many countries the food service industry is seen as a promising business with a high growth rate.
In many countries outside the developed world, the food service industry is in a state similar to that of Japan 30-40 years ago.
Even in developed countries, the food service industry has much higher growth potential than in Japan.

The biggest challenge for the food service industry in Japan is that prices are too low, and these prices come at the expense of low labour costs, so it is envisaged that there will be a major turnaround in the food service industry in Japan in the near future.
If this does not happen, there will be many shops and companies that cannot survive due to labour shortages, and a natural shakeout will begin.

5. to manage the business without relying on Japanese staff

If you look at successful overseas businesses, you will notice management that does not rely on Japanese staff.

Japanese food has recently become a theme in the Fine Dining world, and many upscale Japanese restaurants have achieved success around the world, but without the intervention of Japanese staff.
ROKA and ZUMA, both headquartered in London, continue to serve food that continues to attract large numbers of customers, even though they have very few Japanese staff.

On the other hand, there are companies that are trying to expand their ramen restaurants globally and are particular about their Japanese staff.
Today, it is very difficult to find Japanese staff who can work abroad.

One issue is that the number of Japanese who are attracted to and want to go abroad is much smaller than it used to be.
This is well illustrated by the number of Japanese students studying at prestigious universities in North America.
Young Japanese people these days are no longer outward-looking, but inward-looking.
Therefore, I believe that the time has come when it is essential to recruit foreigners with spirit, rather than Japanese, for the development of shops abroad.
And I think it is essential for globalising companies in the future to turn such people into a powerful asset for the company and localise them.

The second challenge is that it is becoming increasingly difficult for foreigners to obtain visas and work in most developed countries.
So there is no other way but to employ people with nationality or permanent residency.

6. labour costs for local people are higher in many countries than in Japan

This may be difficult to understand in Japan because of the low status of the food service industry and the very low wages in Japan, but countries with a higher GDP per capita than Japan also pay their employees very high salaries.

For example, Japan has a GDP per capita of USD 38 000 (approximately 4.2 million yen), ranking it 25th in the world, but most developed countries have a higher GDP per capita than Japan, the highest being Switzerland and Norway, where the GDP per capita is approximately three times higher than in Japan and the hourly wage for part-time workers is also approximately 3 000 yen.

Therefore, in these countries, productivity must be increased and the business must be profitable enough to pay high labour costs.
In this respect, Japanese food has an advantage because it has a high status around the world and is easily accepted even at high prices.
However, if you do not offer high value for money, you will lose the trust of your customers.
Here, it is only the high value perceived by local people, which is slightly different from the value we experience with our Japanese customers.
In North America today, the minimum hourly wage is almost 2,000 yen, and in Switzerland and Norway it is about 3,000 yen.

7. choose an easy-to-win blue ocean area where there is no competition, even abroad

Today, in large cities in North America and in large cities in Europe, ramen shops are everywhere you go, and competition is becoming more and more intense by the day.
Choosing such locations makes it more difficult to open a shop, the investment costs are higher and the level of competition is very high.
Therefore, the fact is that you have to have a very high level to win.

Conversely, when we look at our overseas students, the more they choose a place where no one else has entered the market, the easier it is to succeed and the more they are able to acquire large profits.
More specifically, if you want to compete abroad with Japanese noodle dishes such as ramen, udon and soba, the further away you are from the home market, the easier it is to make money because there is no competition.

In the case of Sanuki udon, if you open a shop in Kagawa Prefecture, the home of udon, the competition is the fiercest and it is difficult to make a profit.

8. do not develop shops in enclaves

I have seen the rise and fall of the noodle business in Japan over the past 40-odd years, and I have also seen the rise and fall of the noodle business abroad.

I can say from that experience that I have realised that the key to winning this business is to open as many shops as possible in as small an area as possible and to be so completely at the top that no one else can enter the market in that area.

I believe that the most successful example of the Japanese food service industry expanding overseas is Hachiban Ramen in Thailand.

The advantages of opening multiple outlets in a small area are numerous, as follows.

・Multiple shop development in a small area makes it easier to be flexible with manpower (and easier to secure it).
・Know-how can be accumulated quickly.
・You become the best in the area, which increases customer trust and raises your visibility enormously.
・No other rivals can enter the market and you are in a position to win alone.
・You become a big fish in a small pond (market) and can easily make a profit.

This strategy is similar to Suzuki’s highly successful foray into India in the automobile industry. When Suzuki entered India, it was a poor country and the car market was not big enough, so none of the other major manufacturers wanted to compete with it.

So Suzuki, which was not as strong as the big players that could not compete in other countries, bet on India, and now that the Indian market has grown, Suzuki is the sole winner in India, so much so that other companies cannot enter the market.

9. international expansion is also determined by people

When I look at examples of successful overseas businesses, the first challenge is choosing a local partner, and in many countries around the world, it is not possible to do business without a joint venture.
In such cases, who you choose as your partner seems to determine whether your business will be successful or not.

The most important thing is whether your partner and your values are the same as yours or whether you can share them properly.
If, in the worst case scenario, the relationship between the two partners breaks down, it is the Japanese company that has been sent from here that suffers the most damage, and we have seen many cases of Japanese companies returning to their home countries completely naked.

Secondly, who to choose as the local person in charge, whether Japanese or local, it is important to choose someone who shares the same values, is not financially loose and has a sense of responsibility.
There are many people who are great human beings but not business-like, so it has to be someone who is great human beings, financially sound, responsible and has leadership skills.
These people are not easy to find, so it is important to take the time to select the right person, but without compromise.

10. factors determining which countries to enter

The following factors can be identified as key personnel in deciding which country to enter if you are going to expand in the future

・the degree to which the country is friendly to Japan
・the level of competition in the food and beverage business (the competitive situation in the food and beverage business varies from country to country, with South Korea being the most competitive in the world, about twice as competitive as ・Japan, followed by Spain and Japan in third place)
・Wealth of the country (GDP per capita)
・Maturity of the food service industry
・Where in the country’s economic 80-year cycle it is located
(The four seasons in a society are spring, summer, autumn and winter on a 20-year cycle, Japan’s country is currently in the middle of winter, each country has a different season, some countries are currently in spring, some in summer (high growth) and some in autumn (high growth has ended and the country is heading towards winter).

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