Asia is a huge market with four billion consumers. As the fourth largest market in the world (following the US, China, and Japan), there are high expectations for dramatic future growth. What should Japanese companies do to succeed in the Asian market? In June 2017, Fujitsu held FUJITSU Asia Management Forum 2017 in Tokyo with the theme of "globalization and growth strategies of businesses in the Asian market." In there, corporate business strategy experts and speakers from Japanese companies who have been taking on the challenges of overseas business expansion gave a detailed introduction to issues and methods for entering the Asian market.
[FUJITSU Asia Management Forum 2017 Event Report]
Fujitsu on Global Business
The first speaker, Fujitsu's Hirohisa Yamaguchi, noted the Asian market's potential: "The Asian market includes China, India, Indonesia, and many other countries, and there is still a lot of room for us to enter." He commented that Fujitsu was allocating substantial resources to the Asian market in its global operations. According to Yamaguchi, Fujitsu has thus far expanded to over 100 countries, and approximately 17,000 personnel are working outside Japan in Asia, which is the third largest number of workers after Japan and Europe.
Referencing the phrase 'One Asia' to integrate the Asian and Japanese markets, he told the audience: "We will provide the same standard of services to Japan and other Asian countries to continue to support your global business expansion."
The Key to Create Winning Formulas for Emerging Markets
Professor Uchida of Waseda Business School gave a keynote speech entitled "Global Advantage--How to Create and Maintain a Winning Formula Viable in Emerging Markets." He introduced the concept of corporate originality, a major competitive advantage in emerging markets.
As the key for Japanese companies to succeed in the global market, he shared these words: "In terms of creating a winning formula, there is no correct answer waiting for you. You must repeatedly carry out trial and error and learn from your own experience, even though this may include painful lessons. Successful Japanese companies make the most of their established strengths in the international market in some form or another. It is important to rely on the strengths you have developed in Japan if these are also viable in the international market, and to localize them as necessary." He then elaborated his explanation by giving many specific case examples of companies that expanded their business into Asian countries.
Follow the link below for a detailed report on this speech.
The Strategy of FamilyMart That Keeps Localizing Its Convenience Store Business Based on a Japanese Model
The next speaker, FamilyMart's Katsura Kobayashi, gave a speech entitled "FamilyMart's International Business Strategy" in which he introduced the company's know-how acquired from approximately 28 years of experience in international business.
The company's first overseas expansion was to Taiwan in 1988; the FamilyMart brand has since been introduced to seven regions in Asia thus far. Mr. Kobayashi remarked: "Among the growing Asian countries, FamilyMart focused on those in East and Southeast Asia, which were attractive for the convenience store business."
Mr. Kobayashi then reflected that "it wasn't easy" and listed five issues when doing business in Asia: mechanisms and frameworks; systems and regulations; the macro environment, such as the economic environment and political risks; people and culture; and the competitive environment, including market share and business partner relationships.
Building an Infrastructure
Among these five issues, Mr. Kobayashi first focused on mechanisms and frameworks to talk about how FamilyMart built a business infrastructure. In Japan, convenience stores procure the products that meet customer needs and then manage the stock of such products. The convenience store headquarters can obtain any necessary information. In ASEAN countries, however, the fact that wholesalers sit between the headquarters and convenience stores makes it difficult for the company to obtain information. Also, since suppliers purchase the shelves to place products, the company is unable to organize the shelves to meet customer needs.
Another example issue was that, while Ready-to-Eat products such as rice balls and sandwiches are produced at specialized factories in Japan, there was no such business model in the Asian countries FamilyMart expanded to. Mr. Kobayashi explained that the concepts of quality and hygiene were not understood at the same level in the market territories: "Our solution was to implement a business model in which we first built a business infrastructure when we entered the market and then increased the number of stores after started to make a profit."
Mr. Kobayashi also identified regional sales discrepancies. In large cities, stores can expect significant sales from European, American, and affluent residents. In suburbs, however, many small shops sell products to local residents. Product procurement routes differ between large cities and suburbs, resulting in products being sold at lower prices in suburbs. He commented: "We learned that we needed different store strategies for urban and suburban stores."
Productivity and Differences in People and Cultures
In Asian countries, the productivity per worker is low because of a single-task orientation. Attempting to force people to learn to multi-task, however, widens the psychological distance with local people. Using his experience tackling this hard-to-resolve problem as an example, Mr. Kobayashi touched upon differences in people and cultures.
Building on his experience with Japanese operations, Mr. Kobayashi said this problem could be addressed by "carrying out business operations while allowing workers to focus on a single task at first, and searching for a potential leader in the process." He planned to implement the productivity improvement gradually by first educating the leader on how to multi-task and then having the leader teach other personnel. As a result, convenience stores where personnel have learned how to multi-task need fewer personnel to operate.
Selecting Business Partners and Use of common language
Mr. Kobayashi continued his explanation: "Business partner selection is extremely important for doing business in the Asian market." When FamilyMart expanded into Taiwan in 1988, despite repeatedly making many errors, the company localized its Japanese business style while actively incorporating Taiwanese business practices.
Mr. Kobayashi stressed that use of common language for communicating business concepts was the key to success. "We must use language to define, communicate, and clearly separate the aspects of the Japanese business style that must not be changed from those that must be localized. We need to use it to 'visualize' business concepts like our philosophy of the convenience store business, customer interactions, and the relationship between business and the value chain. These shared concepts provide a foundation for mutual understanding of our business model and the standard industry concept."
Mr. Kobayashi concluded his speech with this remark: "Both local companies and FamilyMart must become more adaptable while developing a mutual understanding. We plan to expand our business as we explore how to shift to local business styles without forcing locals to do things the Japanese way. This should lead us to establish community-based convenience stores. We must develop the ability to translate and communicate FamilyMart's business know-how as well as local companies' information and ideas."
Solving Invisible Problems with ICT Visualization
Fujitsu's Shuichi Fukuda took the stage next. In a speech entitled "Issues and Implementation Examples of Business Development in ASEAN Member Nations," he spoke of Fujitsu's business in Asia.
Based on his experience spending five years in Thailand as an expat, Fukuda listed business issues: politics, legal systems, and compliance; communication difficulties due to cultural and linguistic differences; and training of local personnel. He also introduced examples of actual clients.
For example, the Acecook Vietnam Joint Stock Company had logistics problems: they could not deliver products on time due to Vietnam's long north-south geographical configuration. Moreover, local business practices and transportation conditions made it difficult for the company to accurately know where trucks were driving and how much each truck carried. Fujitsu visualized the routes and loads of trucks as well as the logistics process to enable appropriate truck dispatch planning, which led to efficient transport. Fujitsu will continue to contribute to improving delivery timing and reducing delivery mistakes by creating a joint logistics system that can be shared with other Japanese companies.
Fukuda then introduced an example of field innovation at Bangkok Tokyu Department Store to highlight how Fujitsu solved a non-IT (non-system-related) issue. Field innovation consists of visualizing the facts and continuing to make improvements by harnessing the wisdom of onsite workers. The department store had a problem of the personalization of workflow; each task had been continued to be performed by same workers, then each task became too dependent on the specific worker to perform it, and as a result what should be improved became difficult to find out. Fujitsu took photos to record how and for how long store personnel interacted with each customer and also interviewed local personnel to visualize business operations and propose the ideas for improvement.
Fukuda concluded with these words: "Fujitsu has been working not only on ICT but also business site visualization. We aggressively tackle difficult challenges, which is our company's strength. Please let us help you if you have problems when doing business in Asia."
Ajinomoto's Idea of Three Abilities to Be Competitive in the International Food Business
The forum's final speaker was Ajinomoto's Hiroyuki Teramoto. In a speech entitled "Ajinomoto Group's International Food Business Strategy," he talked about the company's market strategy to defeat its competitors.
Ajinomoto, a global provider of food, amino acids, and pharmaceuticals, has been focusing on the food and amino acid businesses as its foundation for generating not only economic value (such as sales and profits) but also social value (such as securing food resources and contributing to healthy living). The company established its first overseas office in 1917, making 2017 the 100th anniversary of its overseas business expansion. At present, the company has 30 business bases primarily in Asia for product sales in over 130 countries and regions.
Mr. Teramoto commented: "Because we sell food, we enter the markets of highly populated countries and regions. Upon expanding our business into Pakistan in 2016, we covered all countries with a population of over 100 million. However, International business is never easy. There are certainly some difficulties." According to Mr. Teramoto, in its international business, Ajinomoto perfected its specialization and demonstrated competitiveness by developing three abilities: the ability to find and create; the ability to deliver; and the ability to communicate and respond.
Ability to Discover and Create
Mr. Teramoto explained that the ability to discover and create referred to the ability to analyze a target country's food culture using a unique method to create the "best taste" for that country. He continued: "We conduct fundamental research in Japan, but we also carry out R&D in each country. We entrust taste development completely to the local members."
Ajinomoto employees develop products that match locals' tastes. Employees study local diets by asking locals how they prepare home meals and what kind of food they like. Using such study results, Ajinomoto localizes its business by, for example, selling products under different brand names in different countries and regions.
Ability to Deliver
The ability to deliver focuses on making products "affordable priced, versatile, and available everywhere." More specifically, Ajinomoto sales representatives directly deliver products to local retailers and receive cash on delivery. Even seasonings are sold at different prices and volumes in different countries. For example, to sell a seasoning at a price that matches each country's standard of living, a given seasoning is sold in a 50-g package (price: 4,000 VND = approximately 20 JPY) in Vietnam and a 0.7-g package (50 IDR = approximately 0.5 JPY) in Indonesia. Mr. Teramoto remarked: "We strengthen our ability to deliver by localizing not only taste but also product volume and pricing."
Mr. Teramoto added that the fact that consumers choose stores but Ajinomoto does not was another important component of the ability to deliver, concluding: "We work to deliver our products anytime, anywhere, and to everyone.."
Ability to Communicate
The ability to communicate is related to brand strategy. Ajinomoto places importance on creating product names that have a sound and intonation that is likable and easy to remember for local consumers as well as product packaging that conveys palatability at maximum efficiency. For example, the name of a seasoning marketed in Indonesia, Masako®, was inspired by the local phrase "Mari Masak" (Let's cook).
However, Mr. Teramoto noted that this strategy has caused brands to be marketed under different names in different countries, and even though consumers may remember the name of a product, they may not remember the company name. Ajinomoto therefore has been raising the profile of AJINOMOTO®, the corporate brand that supports the individual product brands.
Mr. Teramoto concluded his speech by touching upon the company's future vision: "Ajinomoto will actively engage in M&A to further develop businesses appropriate for each target region without becoming trapped by traditional models of success. We will effectively use third party business platforms to achieve speedy business expansion." He passionately continued: "Each country has a different market and success model, but the basic business principles are the same. We will be sure to achieve success by following those principles."
Reflecting the recent attention being paid to the Asian market, seats were fully booked at FUJITSU Asia Management Forum 2017. The venue was filled with excitement from those who attentively listened to speeches on detailed issues and methods of entering the Asian market.