Making It In Japan

Tom Peters

Did you know that 7-Eleven has 2,000 stores in Japan doing more than $250 million in sales, that McDonald’s sells $400 million of fast food in Japan, enough to worry the Japanese that its next generation might lose their skill with chopsticks? Tupperware, Kentucky Fried Chicken, Coca-Cola, Schick, and Johnson & Johnson also star on the Japanese scene.

In the high-tech arena, IBM makes and sells more than $3 billion in Japan. Hewlett-Packard’s Japanese sales top $400 million, with a 27 percent compound annual growth from 1980 through 1984. Xerox, NCR, and Texas Instruments are also high-tech giants on Japanese soil.

In between the high- and the low-tech, Weyerhaeuser sold $500 million in newsprint and other forest products to Japan in 1984.

So much for the household names. American Family Life Assurance of Columbus, Georgia, did $350 million in business in Japan last year, more than it did in the U.S. And Materials Research Corporation of Orangeburg, New York, just completed its second plant in Oita, Japan to make machines that coat and etch semiconductors for the Japanese.

Estimates vary about the totals. The Japanese Ministry of International Trade and Industry (MITI) estimated that 1,000 solely or substantially owned U.S. subsidiaries’ revenues in Japan were $55 billion in 1981; a more recent estimate pegs 1984 sales from the top 200 U.S. subsidiaries there at $44 billion.

All of this information and much more appears in Robert Christopher’s new book, Second to None: American Companies in Japan. Christopher is a former top hand at Newsweek and Time, with extensive field experience in Japan. He does a brilliant job at a vital and sensitive time, of telling the other side of the story—of American firms that have made it big in Japan. With numerous examples he destroys myth after simplistic myth. Christopher also unsparingly criticizes those who have not seriously tried to penetrate the Japanese market.

The only surprise here is that it can be done, is being done and has been done for decades—even when almost insuperable barriers to Japanese market penetration did exist. Christopher emphasizes that success requires patience and consistency above all. American Hospital Supply worked for five years to land its first small order. Disney spent five years negotiating its Tokyo theme-park licensing agreement. General Foods invested heavily in capital and training for ten years before it turned a profit.

The obstacles are daunting. Choosing a partner in Japan and the form of partnership are critical decisions. Xerox teamed up with Fuji, and Kentucky Fried Chicken is 50 percent owned by Mitsubishi. Each gained instant credibility through the partnership. IBM, though, has gone it alone in Japan since the 1920s. Christopher discusses the pros and cons of the options from licensing to partnership to going it alone, with lots of hybrid alternatives. He concludes that deep study and thoughtfulness are required—and that the American lack of patience is completely unacceptable. Numerous hastily formed partnerships, yielding high short-term financial returns, bombed in the long run, because long-term relationship-building was ignored.

Likewise, Christopher analyzes the unique, “bloated and complex,” “byzantine,” and “nightmarish” Japanese distribution system, where several more middle-persons handle goods than in the U.S. Schick’s success (80 percent of the Japanese stainless steel razor-blade market) resulted from a consistent distribution strategy focused on one powerful partner; while Gillette’s losing strategy in the same market involved more than 150 distributors who dissipated Gillette’s clout with retailers. Apple Computer committed the cardinal sin—making a deal with a powerful distributor, then going behind its back through other channels. Apple’s penalty was a one-percent share of the 1.2 million-unit personal-computer market in 1984, despite its early start.

Christopher assiduously avoids simplistic generalizations, especially in his discussion of product development. Tailor, tailor, tailor is his message—with a caveat or two. IBM and Apple were both hurt by being slow to use Kanji (Japanese written symbols) information processing logic. Coca-Cola took the lime taste out of Sprite to cater to Japanese tastes. Kodak changed its film to adapt to Japanese notions of attractive skin tones. It also altered its graphic arts products, because most space-starved Japanese professionals don’t have dark rooms and thus must work in different light environments.

On the other hand, Tupperware was told that Japanese women don’t throw home parties, but it persisted and found that the party formula was uniquely suited to Japanese social intercourse. Analogously, Disney was successful even though it insisted upon maintaining its squeaky-clean image and thus ignored the Japanese recreation-park convention of selling sake. Coca-Cola also bucked convention with advertisements that featured U.S.-style drinking out of the bottle, and it inadvertently started a craze labeled “drinking bugle style” (from the billboard picture of people drinking from an inverted Coke bottle).

Christopher cautions that you can overdo “Japanizing,” just as you can too rigidly adhere to a U.S. success formula. On net, though, he strongly comes down on the side of modification.

Christopher provides more lessons that underpin the unexpectedly high number of American business success stories on Japanese soil. I will continue this topic in next week’s column, in tribute to its importance.

Meanwhile, reflect on the observations so far. Maybe it’s time for you—small business or large, low tech or high, product or service—to consider the huge Japanese market!

(c) 1986 TPG Communications.

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