A short review of the history of our company’s lessons and successes in Japan in the past 40 years should be in order before we make our recommendations for our future directions. The Japanese market is still considered to be our most demanding and competitive market such that it continues to be our test market from which we form our future business strategies for the rest of the world.
In the 1970’s we entered the Japan market by the acquisition of the Nippon Sunhome Company. The momentum in product development and marketing that we built since World War II and its subsequent successes in international markets led us to try the convenient home replication strategy. Countries were still rebuilding from the war while the US remained untouched. From the deprivations, customers then were happy that products are even available in the market while companies were still rebuilding to become worthy competitors later on. We led the world during the war and also in commerce thereafter; the world was open for access to resources supply. Without competition yet in Japan, our business was product-oriented and our marketing was US- standard. Whatever strategies and methods that succeeded in the home market, we simply repeated in other countries it worked. Without having to modify products or marketing content, it created large cost savings for us. But Japan was the exception.
Right after the war up to the 1970’s, Japan steadily rebuilt its industrial power up to the point that our Japanese competitors became strong enough to introduce better products. Compared with other countries, we struggled in Japan from the onset into the 1980’s because we stuck to our home replication strategy and Japan has kept demanding more custom-fit products for its needs and wants.
The demanding nature of the Japanese customer revealed itself when our Japanese competitors achieved parity with us. The Japanese customer quickly shifted when superior products arrive in the market. It disclosed its dissatisfactions in our products when there are already superior alternatives as demonstrated in our battle with Kao in the disposable diapers market. We were forced to analyze, rethink and innovate for Japan and we also developed our own trim-fit diapers which also proved a hit in the home market. We are now sure that a US competitor would have beaten us to it but thanks to Japan, we prevented that. It showed us that any successful innovation in any of our markets worldwide would benefit the rest.
The second bitter lesson which finally forced us to change directions was our Cheers campaign. We again applied a successful US marketing approach which again did not investigate the Japanese customer conditions. Our product did not work as advertised because we missed the local product condition of using cold water which Cheers worked poorly with. Again, we were forced to modify our product and marketing to successfully penetrate the market. This second debacle finally convinced us that home replication will never work in Japan, and in the world eventually.
Success came already with this new approach when we reacted to the Pampers and Cheers cases but this was convincingly affirmed for our dishwashing product Joy. Even before introducing Joy to the market in 1995, our research uncovered critical facts on Japanese food trends and dishwashing requirements which made us modify the product for Japan. Studies were also made on competing in product packaging and distribution. Our ensuing innovations proved to be a resounding success affirming the efficacy of the multi-domestic strategy. By 1998, Joy was the best-selling dishwashing soap in Japan capturing 40% of the market.
Multi-domestic strategy was thought to be a much more expensive approach than home replication. Products, processes and organization had to be modified at any moment to suit changes in the local market. Establishment of a global brand for the product was also feared to be compromised when consumers notice differences in feature across countries. The investment needed to hurdle these challenges were proven to be more than justified when the market is as large and lucrative as that of Japan. Japan remains to be the largest consumer market in the world. The nature also of the Japanese consumer was a factor. Because of Japan’s history of manufacturing success, quality and value-for-money is already embedded in the psyche of the Japanese and it manifests itself in its consumer behavior. We responded to this situation by adopting customization and innovation and the Japanese consumer richly rewarded us.
Changes in P&G Japan were necessary in the mid-1980’s to have achieved our recovery in Japan starting in the 1990’s. This was embodied in the plan ‘Ichidai Hiyaku’ meaning ‘The Great Flying Leap’. Jager immediately introduced the practice of transparency in communications and culture by a public announcement of the dire situation of the company. An independent and strong R&D group was established can set its own pace with the unequivocal support of the US R&D group. Advertising practices were localized based on Japanese tastes and temperaments. We gave more power to wholesalers by reducing their number and removing limitations in geography or trade channels. Factory management was streamlined by reducing management staff. Local sourcing of materials was practiced that reduced production time. The performance and promotion system was transformed to a merit-based one which resulted in a more motivated, productive and innovative workforce. We recruited aggressively for talent by conducting marketing events in the top US universities. We upgraded our public relations program and most importantly, we listed in the Japanese stock exchange sending a powerful signal of our commitment to stay and serve in the Japanese economy. (Proctor & Gamble Japan (C), n.d)
There is a statement “consumer tastes and preference across nations are converging and global markets are becoming more homogenous” which we can use as a guide post in our future direction. The internet and air travel have proved to be the powerful agents which are influencing and converging tastes and preferences across nations. Shared experiences in this manner can widen consumer viewpoints. Many countries and cultures can benefit by these influences but there will also be nations with strong and proud cultures like Japan which would not easily be influenced even by stronger countries like the US. Product choices are determined not only by technical features but also by cultural influences. We should assess first the strength of a country’s culture and decide how much independence we should give to local operations. Based on this initial assessment, we can choose the mix of standardization and customization that is suitable for the country.
We still retain the view that Japan is best suited for customized product development and marketing and we would like to recommend adding the following to our management practice.
Most of our top management be comprised of US-educated Japanese nationals or US nationals who have lived and worked in Japan for at least 20 years.
There should be research group, internal or outsourced, who would focus on contemporary social and cultural trends. This would closely interact with the marketing group to integrate the description of the present Japanese consumer.
Upgrading of the performance evaluation of distributors, retailers and suppliers to maintain the quality of our partners
Consolidate and disseminate all information location initiatives in all countries for shared learning.
For your consideration and approval.
John Doe
Consultant
References
Proctor & Gamble Japan (C). (n.d.). Retrieved February 26, 2016 from http://marriottschool.net/teacher/BM499/Dyer/Procter_GambleC.Word.doc
