Under the current slow economy, company needs to conduct its business extremely effectively and efficiently within the planned budget. As a result, many U.S. companies, particularly Fortune 500 companies, are moving toward one of the following three directions in terms of cost reduction purpose.
1. Give up the Japanese market and close their Japanese offices.
2. Cut down the budget on market development activities in Japan.
3. Relocate the Japanese office to other Asian countries.
While we understand their decision under the current worldwide economic situation, it looks like “penny-wise and pound-foolish” in a sense. So, we would like to do Japan reality check-up.
1. Is the characteristic of the current Japan’s slow economy same as that of the U.S., Europe and other countries?
2. Do most major U.S. companies make right approach to the Japanese market under the slow economy?
Let’s first discuss Japanese economy:
It is true that the Japanese economy is also slow as many U.S. newspapers, magazines and trade journals write. So, many U.S. major companies with the few exceptions concluded that it was not wise to spend money to aggressively develop the Japanese business. As frequently pointed out, however, Japan is different from the rest of the world in many areas. The biggest difference is its
unique economy. If you have ability to analyze the overall Japanese economy that involves market situation, industry trend, banking, government new policy and consumers’ attitude, you will see that Japanese economy is different from that of the U.S. and it is the right time to take an aggressive attitude toward the development of business in the Japanese market.
Then, how Japanese economy is different from that of the U.S.
The definition of “bad economy” that we say here in the U.S. is summarized as follows.
1) Bad mood surrounding stock market and real estate.
2) Consumers’ bad appetite for purchase.
3) Low disposable income.
However, the Japanese situation is a little different from the rest of the world.
1) Bad mood surrounding stock market and real estate (same as U.S.).
2) Consumers have appetite for purchase.
3) Very high disposable income and highest cash savings in banks.
The Japanese purchasing power is really amazing, but unless you actually live in the Japanese community, you cannot see it with your own eyes. The survey results released in March 2006 reveals that the total amount of cash held by the Japanese people in Japan including bank savings is U.S. $7.8 trillion. The total population of Japan at present is 130 million people. This means the average amount of cash that one Japanese is holding, whether an adult or a baby, is US$60,000.
The following are some of the examples showing the current Japanese high purchasing power.
1) The women in their fifties spend about US$250 – US$300 from time to time without asking their husbands.
2) Many young Japanese office ladies keep buying expensive Gucci and Louis Vuitton bags. Louis Vuitton is the most popular brand bags that the Japanese high school girls have.
3) Many Japanese women in their forties and fifties go to the U.S. Europe and Korea on vacation.
4) Many of those who have retired from their companies at the age of 50 to 55 began going to professional schools, paying US$1,500 to US$2,000 tuition a year to get education of new fields instead of looking for a new job.
5) Sonicare sonic toothbrush is the most popular power toothbrush in Japan. It is retailed for US$160 to $190 in Japan.
It is true that when the economy is bad, people do not want to spend money for fear that they might lose their jobs. However, it is the art of business to motivate the Japanese consumers to open their wallets by implementing well-crafted, integrated, innovative, relationship-building marketing strategy and sales tactics working with the Japanese distributors, retail stores and consumers.
Many U.S. companies have been successfully doing business in Japan under the current slow economy. They have studied Japanese consumers’ mentality and mind-set, and implemented unique sales and marketing strategy in Japan. The company that makes Sonicare sonic toothbrush mentioned above had a real Asia-Pacific business professional who made Japan the largest and the most profitable market outside of the U.S. for Sonicare manufacturer. The US$190 Sonicare toothbrush was one of the best selling products in many high-end department stores in Japan. His basic strategy is how to convince the money-rich Japanese people to open their wallets.
When consumers do not have money, you cannot sell the product to them no matter how excellent your marketing program may be. The fact is many Japanese consumers DO have money and it all depends upon your marketing ability how you can convince the tight-fisted Japanese consumers to spend money to buy your products.
Many major U.S. corporations state that Japan is a very expensive place to keep their Asian Headquarters. It is true but how much business they have lost just because their Asian Headquarters are located outside of Japan. Many U.S. companies whose Asian Headquarters are located outside of Japan can not obtain first hand very important, sophisticated market information on Japan.
Let us remind you of how Japanese companies deal with the U.S. business.
Many large Japanese companies such as Mitsui, Mitsubishi, Sumitomo, Hitachi, Panasonic, Sony, Toshiba, NEC, Canon and Sharp have their U.S. Headquarters inside the U.S. with their branch offices in almost all major cities in the U.S., although it is much more economical for them to maintain their offices outside of the U.S. such as in Mexico or Bahamas.
Japanese head offices in Japan send only English-speaking Japanese to their U.S. offices to conduct business because they want to get information first-hand from the market and conduct better communication between the U.S. market and the head offices in Japan.
The U.S. Headquarters of the Japanese companies are located right in the major cities and Japanese people doing business in the U.S. are speaking the same language (English) as spoken in the market, while U.S. companies’ Asian Headquarters are not located in Japan (the largest purchasing power in Asia) and the U.S. business executives doing business in Japan are not speaking the Japanese language. It seems Japanese companies are more logical than the U.S. companies when it comes to approaching the market.
How can American businessmen holding MBA degree use their ability in the Japanese market when they cannot communicate in the Japanese language with his market?
It seems the U.S. top management needs to learn more about the Japanese market, in which they can do lots of business if they really have commitment.
Japan is a very small country (same size as State of California) but has the population of 130 million people. What does this mean? It means you can implement very unique marketing and sales strategies extremely effectively and efficiently if you are in the middle of the Japanese market. Then, why there is no commitment in many U.S. companies regarding the Japanese business? The reason is two-fold:
1) There is nobody in their U.S. headquarters that conveys with confidence to the top management that the Japanese market has huge potential.
2) The U.S. top management stays away from Japan because they cannot understand the unique Japanese culture.
To correct this problem, the U.S. companies need to restructure their organization in such a way that they can conduct Japanese business in an effective way.
The ideal model is as follows.
1) You will have the VP of Asia-Pacific Region in the U.S. home office who is English/Japanese bilingual, multi-cultural Japanese national, having extremely profound knowledge on the Japanese business practice, market and industry and maintains good relationships with the major Japanese companies.
2) This VP of Asia-Pacific Region will visit their subsidiary office in Japan and/or key distributors, dealers and major retail customers in Japan on a regular basis so he can really manage the Japan business.
3) He will keep the U.S. top management updated on the Japanese business, so there is always communication between the Japanese market and the top management of the U.S. home office.
Most Fortune 500 U.S. companies with the few exceptions do not have such executives in their U.S. home offices. Non-Japanese speaking U.S. executives with MBA mean nothing in this rapidly changing market and economy in Japan.
There are many Japanese nationals with such capabilities in the U.S. Unfortunately it is because many U.S. major companies here still do not want to put Japanese nationals in such high executive positions. We have noticed many times that resentment and jealousy by his colleagues is one of the major reasons. That’s why top management must make commitment and give his full support to this VP of International, Asia-Pacific Region. Japan is not only one of the two greatest economic powers in the world but also the second largest market in the world. If the Fortune 500 U.S. companies make real commitment to developing their business in Japan, it will surely increase their revenues and profits, and the trade imbalance existing between the U.S. and Japan will also be greatly improved.
How many own offices does Toyota have in the U.S.? Many.
How many offices does GM have in Japan? None.
Which company makes more effort? Who should make more effort to help improve the US/Japan trade imbalance?
We would like to emphasize the following facts: Japanese market is open and all you need to do is make effort.
Japanese are currently holding US$7.8 trillion cash and savings even under the current slow global economy. Hire Japanese business professional in the executive positions in your U.S. home office because he can do much better job than the non-Japanese speaking U.S. executives who were sent from the U. S. to Japan.
We are looking forward to your comments.
JapanBusinessConsultancy.com
Peter H. Sakurai
Editor-In-Chief
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