Japan–Western Cultural Differences Ver14.“Cultural Differences in Contract Interpretation and Power Dynamics in International Joint Development”

shigenoritanaka3
1 日前
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May 25, 2026

Thank you for reading.

In this series, I discuss cultural differences between Japan and Western countries. This time, however, I would like to share my experience of how the exclusive distribution rights through a joint development project with a Korean company were eventually overturned when a US company entered the market later.

🔵 Joint Development with a Korean Partner and the Exclusive Rights We Secured in Japan

When I was serving as an executive overseeing a corporate group and as president of its semiconductor trading/EMS subsidiary, I launched a new business to develop industrial handheld terminals.

We proceeded with joint development with a Korean partner. Under our agreement, the Korean side would bear two-thirds of the development cost, and we would bear one-third. In return, we secured exclusive distribution rights in the Japanese market, selling the product under our own brand.

At that time, the Korean manufacturer had no other customers, so they were very pleased when I proposed the partnership.

Starting from zero, I made cold, door‑to‑door visits to potential distributors, secured new partners, and built solid first‑year sales.

🔵 Everything Changed the Moment a US Company Appeared

In the second year—when we were expecting further growth toward ROI recovery—I suddenly received a call from the Korean partner’s CEO.

“Please come to New York. We need a three‑party meeting with our US partner company.”

When I asked why, he said:

“That US company is claiming the distribution rights for Japan.”

I was stunned.

🔵 The Three‑Party Meeting in the US: The US Company’s Position

When I arrived, the US company clearly stated its position: “Japan cannot be treated as an exception.”

They said:

“We understand that you are selling the product under your own brand in Japan. But this product is sold worldwide under our brand. We cannot allow Japan to be the only exception.”

What is critical here is that this US company was not part of the joint development and did not contribute a single dollar to the development cost.

I asked the Korean partner’s CEO in front of them:

“We paid one‑third of the development cost in exchange for exclusive rights in Japan. Are you saying you will break that agreement?”

His answer was vague:

“Your exclusive rights for your own brand will be secured. This US company will simply sell the product under its brand.”

🔵 The Same Product Appearing in Japan Under Two Different Brands

As a result, the same product we jointly developed began appearing in the Japanese market under:

our own brand, and
the US company’s global brand

This created an unusual situation where two versions of the same product were competing in the same market.

🔵 The Most Complicated Part: One of Our Japanese Distributors Was the US Company’s Own Subsidiary

The most complicated part was this:

One of our distributors was the Japanese subsidiary of this US company (the very company that entered the market later).

This subsidiary understood our position well and genuinely wanted to continue sourcing from us.

However, the moment the US headquarters issued its directive, the Japanese subsidiary had no choice but to comply:

sourcing from us was terminated, and
they were instructed to sell the US headquarters’ branded product instead.

🔵 Closing the Business and My Decision

Our revenue declined significantly, and the impact on the company was severe.

We considered legal action, but realistically, we were up against not only the Korean partner but also a major US corporation behind them. There was no viable path to victory.

In the end, I decided to:

treat the development cost as a sunk investment, and
require the Korean partner to buy out all remaining inventory,
then close the business.

I took responsibility for the outcome and resigned from the company. It was one of the most painful moments of my career.

🔵 What This Experience Taught Me About Cultural Differences

This was not simply a case of betrayal. It was a moment when fundamental differences in business values across countries surfaced all at once.

■ Korean Company

Prioritizes speed and opportunity
Interpretation shifts when power dynamics shift
Tends to defer to larger partners

■ US Company (Global Headquarters)

Prioritizes global brand consistency
Extremely cautious about market‑specific exceptions
Holds strong influence over partner companies

■ Japanese Company (My Perspective)

A contract is a contract
Values fairness and reciprocity
“Changing the interpretation later” is unthinkable

🔵 Conclusion: Contract Interpretation Varies by Country

What I learned is this:

In international business, contract interpretation can change when circumstances or power dynamics change.

Especially in projects involving significant investment, the following must be clarified thoroughly at the outset:

Scope of exclusivity
Brand usage
Exception conditions
How to handle intervention by large third‑party companies
Remedies for breach of contract

Good faith alone cannot protect a business. Understanding cultural differences, recognizing the other party’s assumptions, and anticipating risks in advance are essential.

🔵 Contact

In international joint development or cross‑border business, unexpected issues can arise due to differences in contract interpretation, culture, and power dynamics.

I can support you with: