For decades American firms have complained that a formidable array of government regulations, tariffs and other import barriers in Japan are as difficult to fathom as a formal tea ceremony, effectively blocking business there. Nonetheless, many U.S. companies have flourished in that environment, playing by the rules and somehow still coming out ahead. IBM Japan’s 1985 sales might reach $2.7 billion, up about 20% from last year. Schick claims 70% of the safety-razor market. This year U.S. firms will export $25 billion worth of products to Japan. Proclaims Herbert Hayde, president of the American Chamber of Commerce in Tokyo: “American manufacturers are alive and well in Japan.”
U.S. companies that do business successfully in Japan, including such household names as Coca-Cola and Elizabeth Arden, began with a firm commitment to crack the market, however long it might take. “If the Japanese get the impression that you’re not committed to business for the long term, you’re in trouble,” says Robert J. Sievers, who just completed a three-year stint as president of Du Pont Japan. Echoes James Abegglen, director of the Graduate School of Comparative Culture at Tokyo’s Sophia University: “There must be a conviction that says you are going to be in Japan, by God, whatever it takes.”
Foreign businessmen learn that in Japan profitmaking requires patience. In the U.S., deals may be struck over a single lunch, but Japanese executives feel comfortable only after extended contact. Says Albert Sieg, president of Kodak Japan: “The worst mistake is to tell your prospective business partners that your plane leaves at 2 p.m. Friday, and you have to clinch a deal by then.”
Finding and keeping a good distributor can be crucial. Consider how Schick captured its sizable share of Japan’s $200 million safety-razor market. In the early 1960s, Schick and its rival Gillette began selling their razor blades in Japan. Both faced keen competition from Feather, a Japanese manufacturer. Schick decided to retain a prominent local distributor, Hattori. But Gillette blundered by abandoning its local agent after a few years. Japanese retailers viewed Gillette’s move as arrogant, and the firm was unable to sell its products on its own. Says Jay Gwynne, president of the consumer health-products division of Warner-Lambert, which owns Schick: “To try to eliminate the Japanese middleman is the quickest way to commit suicide.” Schick’s single-blade stainless-steel razor was judged superior to Feather’s double-blade carbon one, and Schick’s razor became the country’s best seller.
Some successes are built on old-fashioned ingenuity. One recent example is Ore-Ida Foods, which makes frozen potatoes, little known in Japan until the firm arrived a year ago. Ore-Ida, a division of H.J. Heinz, had conducted surveys that revealed that busy Japanese working women had a hunger for easily prepared frozen foods. The company also showed a willingness to change its ingredients in order to please its new customers. The frozen fries in Tokyo are made with less salt than those sold in the U.S. Reason: the Japanese prefer to sprinkle the seasoning themselves. After only one year of business, Ore-Ida now claims 11% of the $40 million market.
That kind of attention to detail helped auto-parts maker Borg-Warner, which discovered that the Japanese believe a product must look good even if the customer will never see it. Borg-Warner, a manufacturing conglomerate, makes a five-speed transmission used in Nissan’s popular 280Z and 300ZX sports cars. While the driver sees only the stick shift, Nissan insisted that the whole transmission must shine. “We ran into the Japanese fetish for appearance,” says Thomas Hague, the firm’s Asian area director. “It’s an emotional thing with them.” After Borg-Warner polished up its act, Nissan was happy.
IBM remains the largest and most successful American company in Japan. It controls an estimated 26% of the computer market, which makes it a close second to Fujitsu, whose share is 28%. The reason is IBM’s consistent ability to create computers that appeal to the specific needs of the Japanese consumer.
Success, however, has not come without a struggle. Last month IBM said that it has submitted to arbitration a claim against Fujitsu for copying and selling software that is similar to IBM’s products. The American manufacturer maintains that Fujitsu is violating a 1983 agreement between the two firms. IBM also went through a corporate reorganization in which 200 U.S. employees were transferred to IBM’s Asia/Pacific Group as part of an effort to boost sales.
IBM, AT&T and other high-tech firms are now vying with one another to tap into Japan’s telecommunications market. Last April, Japan’s national telephone system was converted from a staterun monopoly into a private enterprise. While it is too soon to predict how much business will be captured by foreign firms, the winners are likely to be those companies that can adapt to the special demands of the Japanese market. Says Byron Battle, an undersecretary of economic affairs for the Massachusetts Office of International Trade: “In Japan, you have to sell it their way, not the Great American way.” That is a lesson as old as world trade. –By Barbara Rudolph. Reported by Yukinori Ishikawa/Tokyo, with other bureaus