marketing Issues

Building a successful business in Japan is an attractive proposition, driven largely by the sheer and staggering size of the market.

At 126 million people, Japan's population is just under half that of the United States, with Tokyo-a high-tech metropolis of 28 million consumers-the largest city in the World. With a per capita GDP of over $24,000, Japan is ranked among the top 5 countries in the world.

But markets here are confusing and complex-downright daunting if you're not familiar with the overshadowing and underlying cultural and social mindsets driving them.

There are, however, many ways in which to establish a business presence in Japan, as the team behind the creation of GMO Japan Market Intelligence(JMI) proved. Instrumental in enabling numerous businesses to flourish and thrive in the Japanese market, these entrepreneurs helped companies realize significant value for their shareholders.

The choice of market entry strategy will depend largely on a company's level of commitment of resources. Each approach offers its own set of advantages and disadvantages.

In our experience, mature companies tend to spend about six months researching and gathering data on the Japanese market before entering it, with a view to making a profit within the first two to three years.

Market research is a key part of selecting the correct market entry strategy. JMI can help you with it's broad range of industry experience.

After you've established your business presence in Japan, a clear and detailed understanding of your market and what you're up against is vital to developing and maintaining a sustainable strategic advantage.

In some cases this may be as simple as identifying the players and their relative strengths and weaknesses but in other cases, the competitive landscape for your product may be quite different from what you'd expect.

For example, take a new Internet Service Provider trying to break into the Japanese market. In addition to other ISPS, it will also have to contend with other conventional alternatives to its service such as telecommunications companies providing ISDN and ADSL connections, Cable Television Companies and a variety of dial-up services.

But the greatest threat to ISPs comes from the mobile phone companies. Many Japanese families are yet to be connected to the Internet using their PCs, but have e-mail and surfing capabilities right on their mobile handsets. In addition to this, many mobile phones can now boast digital cameras that allow photographs to be attached to e-mails--creating unwelcome competition for the digital camera companies.

The widespread adoption of this new technology has exceeded all expectations and is unique to the Japanese Market.

In Japan, developing a competitive advantage requires a clear and detailed understanding of what competitors in your industry are doing.

After you've identified your competitive environment, a clear and detailed understanding of consumer needs is vital to the development of strong product positioning; Japan's unique cultural mindset can often result in a set of consumer needs that are quite different from those common in other developed countries.

The instance of body odor and deodorant presents a good example of how Japanese consumers look for different qualities in the products they buy compared to their Western counterparts. In the case of deodorants, the differences are so marked that the leading deodorant manufacturer in the United States has so far decided not to enter the Japanese market at all.

The Japanese attitude towards body smells and the belief that Western style, heavy-duty deodorants are not required for them because they 'don't smell as bad' are the main reasons why deodorants designed for Japanese are different from those designed for foreigners.

Whether or not there are racial variations in body odor emissions is purely of academic concern but what is of greater importance to marketers is the issue of how people deal with their body odor--a distinction based more on cultural differences than biological ones.

Western culture has traditionally been fragrance-based with individuals mixing deodorants, perfumes and their own body odors to create a 'unique smell' while Japanese culture has tended to discourage the showcasing of one's own smell, preferring the non-intrusive and non-smelling to the fragrant and aromatic.

As a result, Japanese deodorants are marketed on the merit of being 'fresh' rather than 'nice-smelling'. The products also tend to come in lighter fragrances such as green apple and lemon. It is also interesting to note that it seems to be a female-dominated market here, with the male deodorant market hardly visible. Because of this shortfall in familiar products, many foreigners living in Japan choose to stock up on deodorant when they go home or arrange to have a supply shipped in from overseas.

The case study of the deodorant market in Japan is a good example of how consumer needs and attitudes can vary greatly from one country to the next, even in the most seemingly basic of categories.

Having a clear and detailed understanding of consumer needs in your market is essential to developing successful products in Japan.

Both you and your competitors will need to determine what important drivers motivate your customers to buy your products but once you know what these drivers are, you must then figure out how to deliver on them better than anybody else.

Doing this successfully is the key to gaining competitive advantage. A strong competitive advantage can provide your business with an important head start in the market place that can force your competitors into an expensive--and often futile--game of catch-up.

A good example of strong competitive advantage is the astounding success story of NTT DoCoMo and its i-mode application. At a time when the wireless Internet remained a non-event in much of the rest of the world, DoCoMo was at the forefront of a Japanese wireless market that was about to explode.

While DoCoMo never advertised the i-mode as an Internet protocol--the 'i' stands for information--it still managed to sign up over 25million subscribers who were able to access over 46,000 web pages from their mobile phones. Although good timing allowed Docomo to be the first company to enter the market, there were three other key factors that helped cement DoCoMo's competitive advantage and ultimately, its market dominance.

The first thing that set DoCoMo apart from its competitors was its introduction of an end-to-end solution that included the complete offering that customers needed to get online: the bandwidth, the handset, the ISP, the content and the billing. Its all-in-one business model made it the convenient, hassle-free choice for a record number of subscribers.

The second thing that DoCoMo did differently was to deploy attractive and versatile handsets, cool 'pocket-rockets' with full-color, 8-and 16-voice sound chips and a novel clamshell design. Produced by such homegrown companies as Fujitsu, Sony, Panasonic and NEC, the handsets themselves got a lot of attention and appealed to a wide range of people.

The last thing that separated DoCoMo from its competitors was the fact that it allowed its content providers to make a good profit on their services, splitting revenues with them 91/9 in the other's favor. With this kind of arrangement, increasing numbers of providers were only too happy to continue developing quality content, to the ultimate benefit of the consumer.

Once DoCoMo had established such strong competitive advantage, it was able to charge ahead with the confidence that it had secured an important head start.

A strong competitive advantage can help your business get ahead and stay ahead of the competition in your industry.

Even the best products are open to failure if they are unable to reach their target markets in an efficient and timely manner. Knowing how to deliver your product to your customer is critical to the success of your business. The structure of the Japanese market can often be complex and confusing--frustrating to say the least-- with its distribution systems a maze-like network of channels and detours, hoops and hurdles that must be jumped through and over in order to get your products to market.

The skin care industry alone must have a distribution network that includes convenience stores, supermarkets, drug stores, department stores, franchised chain stores--such as the Shiseido group of stores--and even sports clubs and bath houses. Add to this the newly developed and fast growing online channels and you have a potential distribution nightmare. As a result, it is critical to be well informed, well represented and well organized when dealing with the distribution process in Japan.

Knowing how to deliver your products to your customers in an efficient and timely manner is critical to your business success in Japan's competitive markets.

As a rule, poor quality items and services are generally less expensive than those of higher quality but while the nuts and bolts of pricing are important, an even more important consideration is how to add value to your products.

Some unusual value trends have emerged in the Japanese market during the recent years of recession. Although the yen has weakened significantly, imported goods are still enjoying high demand with a surprising inelasticity of price among strongly branded, high-end products such as those offered by Gucci, Prada and Hermes. Some of these fashion houses have even been able to open specialty boutiques in up-market Tokyo locations.

In sharp contrast to the market for these high-ticket items is the frenzied growth of the 100 yen ($1) and discount shops, offering exceptional value on a wide range of items. Whether buying expensive or inexpensive products, the Japanese consumer is now demanding value.

This turnaround in consumer outlook represents new opportunities for those companies that can establish the right product and pricing mix and capitalize on today's value-driven consumer goods market, so different from the free-spending days of a decade ago.

Understanding what will add value to your product in the mind of the Japanese consumer is a key to your success in Japan, whatever industry you are in.

Successful businesses require motivated, qualified people functioning within an appropriate structure. Maintaining this delicate balance is one of the greatest challenges facing companies operating in Japan.

The company size and industry in which it participates will partially determine which areas require particular focus.

As an example, a pharmaceutical company had numerous drugs in its product portfolio and others in the pipeline. How many people were require in sales, covering which geographic areas, selling which drug(s) to what kind of medical institutions were found to be very important factors to structure the sales force and optimize the company's sales. A customised approach allowed this coverage to be optimised to suit the local Japan situation.

In another example, a sports goods retailer felt that its sale force lacked motivation and that this was being reflected in the protracted inability to grow the business. Analysis of the factors driving the performance of the sales team yielded interesting results, not anticipated by management. Once these were identified, steps were taken to remedy the situation.

Once again, qualified individuals who are allowed to excel due to their work environment and the structure that they are provided are key to success.

JMI has helped many clients improve in this area and works in a broad range of industries.