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This result was not simply a quirk of the BusinessWeek study. Earlier that year, when Corporate Branding International listed its own top 50 Japanese brands, almost all were doing business in the same industries. As Dr. Cheong Kun Pui, Secretary-General, Asia-Pacific Marketing Federation, said at a forum in Singapore in April 2002, "Even where Japanese brand names are concerned, it is only cars and electronic products that have achieved a strong presence in the West. Cosmetic and fashion products are not quite there."
But why? Japanese fashions tend to be as attractive as those marketed by Ferragamo, Kao or Shiseido cosmetics are as appealing as products marketed by Western firms, and there's no question that some Japanese fast food makes a far tastier lunch than a hamburger from McDonald's.
According to Professor Paul Herbig, dean of the Ketner School of Business at Indiana's Tri-State University and author of Marketing Japanese Style (Quorum, 1995), the Japanese have developed three basic international marketing strategies. In the first, Japanese companies move to developing countries in order to build up the home market, and then later move to developed countries where they attempt to capture market share. This has been the strategy used by the automobile and consumer electronics industries.
A second strategy has been to enter the market with a low-priced, improved product; capture a large market share; bring down manufacturing costs; and then expand into other developed countries as demand grows. This approach has worked most effectively with computers and semiconductors.
A third approach has been to sell products in developed countries that the home market is not prepared to absorb, for example, VCRs, television sets and sewing machines. Presumably each of these three strategies could be modified in some way for less technology-driven exports.
Given that all three strategies require efficient overseas distribution systems, could lack of distributors be the missing link for the under-represented industries? Professor Johny Johansson of Georgetown University says, "In my judgment, the distribution problems are still a major factor. The problems seem to come from the fact that distribution in Japan is so idiosyncratic that the requisite managerial skills for other markets do not get developed. This also affects autos and electronics but I think in these cases the companies involved have really sent their best people abroad to learn from scratch, and given them lots of support. When it comes to packaged goods, for example, this does not happen, possibly because those companies in Japan do not attract the best people, and also because the competition abroad is tougher, so anticipated sales might not cover extended learning presence."
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In his book, Relentless: The Japanese Way of Marketing (HarperBusiness, 1996), Johansson notes, by way of example, that Sony botched its first attempt to enter the US market by partnering with a distributor that was not prepared to market its new transistor radio. In another example, after Bell & Howell failed to support Canon cameras in the 1950s, Canon developed its own chain of distributors only to find its market share take off. Similarly, the Japanese soap and cosmetics manufacturer Kao had no leverage with the independent retail chains in the United States because the leading brands in Japan were unknown, so it decided to buy Jergens to gain distribution access.
Shiseido had comparable problems. After initially entering the US market through drugstores, the cosmetics manufacturer discovered that its strategy of selling directly to American drugstore chains was flawed because it did not take into account the need to first penetrate key metropolitan markets. Wrote Johansson in Relentless, "Only after hiring an American executive from Helena Rubinstein did the company realize that the buyers for drugstore chains bought what they saw in the upscale department stores in New York. The door to the drugstores in the Midwest was at Saks 5th Avenue."
But distribution was not the only limiting factor for Shiseido. According to Professor France Leclerc of the University of Chicago, "Shiseido had a hard time initially in the US because they were selling a seven-step skin care regimen which most Western women did not want to be bothered with. Those types of products are much more of a challenge and firms that are successful...globally typically have spent a lot of time learning the needs of the new markets."
This idea is seconded by CoreBrand's managing director Timothy Robinson: "The fact that [Shiseido's] formulas are fundamentally different continues to be a stumbling block… Time and again, they have tried to 'push' formulas that simply didn't test well with Western consumers, but did well in Japan."
Leclerc adds, "[The] Japanese have been particularly successful with products that serve 'universal needs,' i.e., needs that do not vary greatly across cultures (electronics) or that serve so-called global segments (teenagers). Fashions, food and cosmetics have historically been considered more culturally influenced...which means you have to adapt your product somewhat to the country targeted."
Herbig seems to agree, "The Japanese consumer products produced in Japan for the Japanese are extremely culturally grounded and specific for the Japanese market. Due to the uniqueness of the Japanese consumer, they are not readily transferable to the rest of the world."
Of course, to many in the West, the label "Made in Japan" may not exactly conjure up images of haute couture. According to Robinson at CoreBrand, "Japan was busy focusing its national reputation on technology, not fashion. 'Made in Japan' means technology (with style), not fashion or fragrance. The French and the Italians have absorbed fashion sensibilities as a core element of their national identity over centuries. The Japanese set out to perfect how the car works, the Italians set out to create the car as a work of art. They are not concerned with selling several million of them to support the Italian economy. It is a fundamental difference in mindset. Fashion and fragrance are two leading image drivers of French culture, and have been for centuries."
The jury may still be out on food, however. Several years ago, Yoshinoya, a Japanese fast food giant that markets a beef-and-rice dish called gyudon decided to buck the exporting trend by opening a series of fast-food franchises in the US. By 1998 the company was operating 90 fast-food outlets in California, and had announced plans to establish a network of 700 stores in North America by 2006.
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Says Robinson, "It will be very interesting to see how Yoshinoya proceeds with their brand communications and development. Certainly there is an opportunity for them to succeed, but how they position their business for North America will dictate their success. I don't think a pure exportation of the brand from Japan is the answer. Rather, they will need to focus on how the inherent quality of the Yoshinoya experience benefits the North American consumer. This can be much trickier than it sounds as 'Japanese-ness' carries significant benefit, but also significant baggage."
But there are certainly historical reasons beyond cultural factors for Japan's restricted presence in the overseas marketplace, according to Robinson. Products such as fashion, cosmetics, and health and beauty items did not have the margins or the market scale to support a national economy, rebuild the manufacturing infrastructure or create jobs the way that electronics and automobiles did.
Between 1955 and 1970, the Japanese government promoted economic growth by setting in place the infrastructure needed for industrialization and by providing incentives for developing the industries it felt were best suited to compete on world markets. Notes Professor Herbig, "[The government] has always concentrated on higher-priced, high-margin, industrial products to export, and let's face it, cosmetics don't fit that bill. If you are not prone to export and the government didn't provide incentives to do so, you probably won't be doing much exporting."
Naoyuki Maekawa, a spokesperson for the Japan External Trade Organization (JETRO), agrees that there is more to the story than exports being limited by cultural factors or even by distributors. He for one feels that a company's size and competitiveness are just as important as distribution.
Dr. Eric D. Ramstetter of the International Research Centre for the Study of East Asian Development in Kitakyushu, Japan, meanwhile, notes that while Japanese affiliates are largest in electric and transportation machinery, the number of affiliates is also large for textiles and chemicals, contrary to what one would expect if export success depended solely on distribution centers.
According to Ramstetter, "Multinational companies tend to be relatively large in electronics and autos everywhere. The reason is technological. In these industries the costs of developing firm-specific intangible assets such as patents, other fruits of research and development, and marketing networks are relatively high compared to other industries. These assets are characterized by low transportation costs (e.g., once developed, they are easily used in several locations at little or no additional cost to the firm). They are also precisely the kinds of assets that multinationals in general tend to have in larger amounts than non-multinationals. Correspondingly, multinationals that possess large amounts of these assets are particularly well-suited to operating in these industries."
Ramstetter feels, by analogy, that Japanese pharmaceutical companies might have been expected to draw on some of the same advantages that allowed the automobile and electronics industries to build up their exports. But this hasn't happened.
According to JETRO's Maekawa, the Japanese pharmaceutical industry was too busy focusing on the Japanese market to pay much attention to global markets. This was because the size of the Japanese market was second only to that of the US and also because the domestic market was solid and protected by the internal distribution system. In the meantime, a global pharmaceutical industry emerged following a series of mergers and acquisitions, and Japan was left out of the picture. Adds Maekawa, "I think food and fashion are in the same situation."
As brands become increasingly global, it will be interesting to see if Japan’s presence on the top 100 global brands list increases over time. [11-Nov-2002]
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Randall Frost, Ph.D. is a freelance writer based in Pleasanton, CA. His work has been published by the New England Financial Journal, CBSHealthWatch, Modern Drug Discovery, Outdoor California and Gale.
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Aug 26, 2002
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Commodities: Branding the Basics -- Eric Mirabel
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How do we go about turning a commodity product or production capability into a new brand? We look at the Middle East, a transitioning market where manufacturers are branding commodities.
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Aug 19, 2002
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Brands in Toyland -- Ron Irwin
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Is branding in the toy world just child’s play? We look at how traditional brands like LEGO and Brio stand up to the dazzlingly high-tech competition.
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Aug 12, 2002
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Long Live the King -- John Karolefski
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Young and svelte, bloated and strung out, Elvis had universal appeal throughout his short lifespan. The king may be dead but apparently the brand lives on.
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Aug 5, 2002
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IBM Navigates the Biotech Maze -- Edwin Colyer
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IBM Global Services is expanding to a variety of areas like its recent acquisition of PwC Consulting. We look at how a brand like this penetrates the life sciences market.
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Jul 29, 2002
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Do Nonprofits Have Value? -- Robin Rusch
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As we unveil Interbrand's league tables of the world's most valuable brands for for-profit brands in 2002, we ask, Is there value in a nonprofit brand?
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