Savvy US firms invade the tight Japanese market
American businesses long have argued that the door to the Japanese market has been closed to all but a handful of foreign companies. But under pressure from the US and European governments, the Japanese market is slowly opening up for companies that have savvy foreign sales strategies.Skip to next paragraph
Subscribe Today to the Monitor
''It takes patience and hard work. . . . But there are US companies being successful in Japan,'' says P. Reed Maurer Jr., chairman of the New Jersey-based Merck & Co.'s Japanese operation, MSD (Japan) Company. Among the most successful US participants in the Japanese market are IBM, Warner-Lambert, Procter & Gamble, and Coca-Cola.
Although some US leaders still complain of remaining barriers, Japanese officials say they have corrected many of the trade handicaps.
''By and large, the Japansee market is as open as any market in the world,'' claims Takao Tominaga, executive director of the Japan Trade Center in New York. In April, Japan lowered tariffs on 1,653 items. And since Jan. 1 it has eased 67 nontariff barriers, such as product standards and custom documentation.
''Most of the barriers have been removed except the Japanese language and culture,'' asserts Toshihiko Kobayakawa, senior vice-president of the Bank of Tokyo's New York office.
US business leaders, however, say the Japanese market still presents formidable challenges.
''I haven't seen anything that indicates they have done any great thing in reducing barriers to automobiles,'' says Roger Smith, chairman of the General Motors Corporation. In addition, Mr. Smith sees Detroit making very little progress selling parts to Japanese companies. ''We haven't built any new plants or put on any overtime for making parts for the Japanese,'' he said in a recent interview.
Many other US business leaders are equally skeptical. In a Business Week/Lou Harris & Associates Poll conducted in April, only 19 percent of the top executives at 1,200 companies believed trade between the United States and Japan was fair.
And recent improvements in trading conditions have not brought US-Japanese trade into balance. In March, the latest month for which figures are available, Japanese exports to the US were worth $3.2 billion, up 2.3 percent from last year. Meanwhile, Japanese imports of US goods totaled $2.1 billion, down 10.4 percent from last year. The decline was at least partly caused by the current Japanese economic slump. As a result, in March the US trade deficit with Japan was $1.16 billion, up 38 percent from last year. And that comes after a deficit of $18 billion for all of 1981, up from $12.1 billion in 1980.
The size of last year's deficit set off a push in the US for trade ''reciprocity,'' a policy under which the US would close its markets to nations that shut out American products.
''The basic attitude of the Japanese government is to promote free trade and if possible balanced trade with the US,'' says Takeo Iguchi, Japan's counsel general in Boston.
Still, even some Japanese businesses admit that some nontariff barriers remain as a result of protectionist pressures in Japan. ''Politics comes in. It is something we have to live with and we hope you can live with it, too,'' says Koji Hiroshima, senior vice-president of Marubeni America, a Japanese trading company. Politics has kept high barriers on agricultural items like beef, some shellfish, milk, and oranges.
Nevertheless, most observers agree the barriers to the Japanese market have been lowered. ''There has been progress,'' an official of the First National Bank of Boston says. Thus it will be easier for new entrants to follow the lead of a handful of US companies that have been successful in Japan.
Following their lead will require well-tailored tactics, US experts and Japanese officials say. These methods include:
* Making a major commitment to the Japanese market, especially capital investments. Japanese customers and employees look for ''someone who is committed to export, not someone who discards exports when his domestic market recovers,'' Mr. Hiroshima says.
At present, the US commitment to the Japanese market has been modest. Only 167 US companies have branch offices or subsidiaries in Japan. These offices employ about 1,600 workers. By contrast, 931 Japanese companies have some 21,000 employees stationed in the US, according to Japanese government statistics.
* Tailoring products for Japanese customers. Very discriminating in quality, the Japanese often look down upon American workmanship. ''It stems from a difference in cultures,'' Mr. Hiroshima says. He cites the example of an American furnituremaker who would not alter his products to fit the Japanese physique unless he was guaranteed a major order.
* Forging links with well-informed Japanese citizens. ''A foreigner needs friends in Japan,'' Mr. Maurer says. He recommends seeking advice on operating in Japan from retired government officials or businessmen and from members of the academic community. ''The available pool of these gentlemen is wide.''
A US concern that operates smartly in Japan does have a chance of winning customers, Japanese businessmen say. ''Japanese people are not necessarily patriots when they go shopping,'' Mr. Kobayakawa notes. ''Soon only the . . . Japanese will be wearing Swiss watches.''
How some US companies fare in Japan US company Market Share of Japanese market IBM Large computers 40% Warner-Lambert Razor blades 70% Procter & Gamble Paper diapers 50% Garrett Corp. Turbochargers 64% Coca-cola Soft drinks 50% S. C. Johnson Floor waxes 30% Ford Motor Automatic transmissions 36% Source: Japanese government; US companies