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Japan's other maverick.

Kazuo Inamori, founder and chairman of Kyocera, thinks Japan should not only revise its commercial relationship with the U.S., but should restructure its internal political institutions as well. As an admired entrepreneur, he is getting people's attention.

After Sony's Akio Morita, Kazuo Inamori, 61, is one of the more respected business figures in Japan. Like Morita, he launched his firm in true Japanese entrepreneurial style by building a technology-based enterprise pursuing new markets without benefit of Keiretsu. In 1959, four years out of Kagoshima University with a degree in chemical engineering, he founded Kyoto Ceramic Co. Ltd.--Kyocera--with 28 people and $10,000 in capital. The company produced fine ceramic components and packages, circuit boards, and semiconductor components. Today Kyocera is a $3.4 billion technology group with 14,473 employees making electronics components and packages, semiconductor parts, optical devices, and telecommunications equipment. Operating in Asia, Europe, and North and South America, Kyocera expanded further in the U.S. with the acquisition of San Diego-based ELCO in 1989 and New York-based AVX in 1990.

To many of his countrymen Morita seems less "Japanese," owing to his worldly outlook and reputation. (However, since he quietly withdrew his name as co-author along with politician Shintara Ishihara of the controversial book, "The Japan That Can Say No," Morita has become less outspoken in public.) Inamori is less well-known outside Japan, but no less cosmopolitan or outspoken about U.S.-Japan relations. As he relates in the following conversation with CE editor J.P. Donlon in Kyocera's Tokyo branch office, Japan is too inward-looking and needs administrative reform. Many Japanese leaders privately admit the political scandals hurt the country's standing abroad. New Japan Times estimates that some 70 percent of the country's professional politicians have been involved in peddling influence for money. As a member of a private group called Provisional Council for the Promotion of Administrative Reform, Inamori chairs its subcouncil on Japan and the World, which in its first report, advocates "pursuing internationalization within" because "Japan needs to build a society more open to the world."

The CEO is something of a Japanese David Packard. He is conversant with the technology issues that confront his industry and mindful of the relationship between this and the politics of trade. (He is similarly well-connected to political leaders.) One of his friends and fellow reformers is Kenichi Ohmae, director of McKinsey & Co. Japan, who argues that the Ishihara/Morita view hinges on the mistaken idea "that it is America vs. Japan and that Japan can't say no in this relationship

After the collapse of the Japanese stock market in 1990, property companies, securities firms, and banks lost up to two-thirds of their market value from their peak. (NTT was off seven-eighths of its peak market value!) Japanese banks are in trouble with their capital adequacy ratios. The cost of capital advantage enjoyed by an industry used to cut-throat competition at home driving overcapacity for export abroad has ceased. A gulf has emerged between Japan's advanced industrial and commercial sectors exposed to sanctions abroad and the country's backward sectors and agricultural interests. Japanese consumers and urban workers are tired of being squeezed economically to support the present arrangement, and foreigners no longer pressure Japan to alter its practices at the border; they want reform from within. If reform doesn't come, can turbulence be far behind?

INITIATING CHANGE

Japanese are understandably upset about "Japan-bashing" in the U.S. On the other hand, legitimate American concerns tend to be automatically dismissed as more of the same. What in your view should be done in Japan to remedy legitimate complaints, which would in turn de-legitimize the gratuitous bashing that impedes relations?

Opinion is divided in Japan over this problem. About half the people agree with the American reasoning on market access. To de-legitimize the bashers, one first must understand that Japan is a country led by well-established bureaucrats who resist external change. The awareness that our government officials are often not up to the task of initiating necessary change is very strong among most Japanese people. Our country must undergo a restoration in which citizens take a more active part, take control of our destiny, if you like, from the professional politicians. The bureaucrats must then support these citizens in their efforts. To make this happen, we need administrative reform, in which I participate. We need new politicians. But electing them is difficult.

In the meantime, the two governments are negotiating over the Structural Impediments Initiative. I feel Japanese leaders must provide full support for SII so that it reaches a successful conclusion.

What should the U.S. do to improve its ability to sell to Japan both at the level of government action and at the level of company-to-company transaction?

From the end of the war until about 10 years ago, there were many government regulations which made it difficult for outsiders to sell in Japan. Most of these restrictions no longer exist, and foreigners can freely market their products here. Americans continue to think the barriers exist, and thus they are unable to sell their products. I can only say they should try harder because their efforts will be rewarded. Japan is becoming more open.

Now why do individual efforts tend to be frustrating? It is very difficult to sell in Japan if one does not speak the language. Obviously, Japanese people need to be hired to do the selling. A communications problem arises. Americans tend to hire Japanese who speak English, but who are often not qualified as businessmen. English speakers are necessary for interpretation, but if you hope to run a business in this competitive climate, you are better off finding a good businessman even if he speaks no English. Many Americans do not understand this way of thinking. Many hire an English-speaking Japanese to be their partner and to render their business activities. Sometimes they are unsatisfied with this arrangement and put an American in charge of their Japan branch. The CEO position in a U.S. subsidiary should be held by a Japanese, English-speaking or not, who has full authority and responsibility.

PHILOSOPHICAL DIFFERENCES

What advice would you offer to those trying to penetrate the Japanese distribution system, which is often said to be the most difficult element to master in Japan?

Yes, people say our distribution system is a barrier, but I don't feel that it's that much of an impediment. You have to understand that Japanese thinking is hierarchical in that famous brands and well-established companies hold special status, whereas nameless or unknown brands are difficult to market. Americans tend to think this stacks the deck against them, but it also affects Japanese products made by smaller or newer Japanese firms. I realize this problem bewilders Americans marketing their products here, but to succeed in the Japanese market, U.S. companies must develop their own distribution networks.

It's also important to remember that in Japan the dominant philosophy is "The customer is king." This phrase is familiar to Americans, but the meaning in Japan is quite different. In Japan, the customer/client is an absolutist king, and the seller is a servant who is forced to adopt a self-deprecating attitude in order to do his best to sell or serve. At times the customer is irrational or arrogant toward the seller, but since the seller is the servant, he must tolerate the humiliation regardless of how irrational the buyer might be.

In the U.S., respect for human rights puts the seller and customer on an equal basis. The purchaser is not so strong or arrogant, and the seller does not have to tolerate humiliation in order to sell or serve. In Japan, we are more accustomed to trying hard to please the customer regardless of how irrational the demands may be, while in the U.S., dispute may lead to litigation. The degree of litigiousness in America is virtually unknown in Japan, reflecting, I think, a different philosophy and relationship in business.

Today Japan commands respect or fear in the U.S., but do you think Japanese attitudes toward the U.S. are in perspective? If their view isn't correct, what, if anything, should Japan do to change them?

I have always felt the reason for Japan's economic success--the fact that it ranks second in world GNP--is due to the material and spiritual support the Americans generously provided after the war. Many Japanese will always remember that our country could not have prospered without this support. As an economic power, Japan should work with the U.S. to foster world peace and to help set the new world order. If the U.S. is experiencing economic difficulty, it's Japan's turn to provide support. By doing this, American attitudes toward Japan, if they are not accurate, will undergo change.

As a result of "Japan-bashing" in the U.S., some Japanese have become haughty or arrogant toward the U.S. There are people who complain, but I don't think this is the right attitude. In meetings with colleagues and government leaders, I emphasize the fact that because Japan received so much support from the U.S., we should be willing to help it. This attitude is gaining favor in the conferences I attend.

Does the apparent success that DDI, of which Kyocera controls 25 percent, enjoys in penetrating Japan's partially deregulated telecom industry suggest that "outsiders" have more opportunity to capture previously secure markets?

This is a good example of how outsiders who aren't as adept at overcoming bureaucratic restrictions can solve problems by linking up with a partner who has a thorough knowledge of Japan. DDI is in the cellular telephone business. Although it wasn't permitted to serve Tokyo and Nagoya, the largest market areas, it was permitted to serve other areas outside those two cities using Motorola's cellular system. I am happy to say it has achieved great success. In just three years, the number of subscribers has surpassed that of NTT, which has been in that business for 10 years. The system employed, including the ground-based system, are made by Motorola, which attributes its success in Japan, in part, to my support.

COST IS KING

How seriously has the Japanese banking crisis affected Kyocera? Have you had to reorient your priorities?

It's a big problem for most companies in Japan. Land and share prices have lost much of their paper value from the aftereffects of the so-called bubble economy. However, Kyocera is basically a manufacturer, one that didn't speculate in stocks or land, so we were not as affected. In fact, we carry little debt for a company of our size. (Sometimes we only borrow money for the purpose of establishing an important business relationship.)

Our priorities haven't changed since I founded the company. Cost efficiency is our top priority, and market share is second. (Most traditional Japanese companies place first priority on market share, but I don't.)

As one of the leaders of the Provisional Council for the Promotion of Administrative Reform, which internal reforms do you most strongly urge the government to adopt?

Democratic reform will encourage Japanese integration in the world economic system. But I am embarrassed to admit that true democracy is not yet rooted in Japan; it's still in an immature stage. The true voice of the public is not well-reflected in the Japanese government even 50 years after the war. We must enlighten society, politicians, and bureaucrats, so they will realize what each should be doing. My commission tries to convey to everyone the meaning of true democracy. Soon Kenichi Ohmae, a close friend, will declare the formation of a new group called the Reform of Heisei.

This grassroots group seeks "Seikatsusha," or citizens/people sovereignty, which advocates land and tax reform, deregulation, and decentralization of government. It offers an alternative to the Liberal Democratic and Socialist Parties that favor large central government. Heisei board members, advisers, ombudsmen, and trust members are respected individuals from the business, political, academic, and labor communities. They will support politicians who embrace policies formulated for the "Seikatsusha." I have been backing Mr. Ohmae behind the scenes. Recently, Mr. Hosokawa, a former governor of Kumamoto declared the formation of a Japan New Party, which objects, as we do, to the endless scandals that mar our democracy, and shares our urgency to revolutionize the system and push true democracy in Japan. This means I will push for reform inside the Japanese governmental structures by means of these committees. Mr. Ohmae and Mr. Hosokawa are trying to do the same from outside. We hope we can achieve true reform in Japan from within before the U.S. loses patience and bashes Japan from outside.
THE NEW IDEOLOGY
Reform of Heisei Liberal Democratic Party
People sovereignty National sovereignty
"Seikatsusha" (citizens' Providers of goods and
interest first) services
Small government Large government
Decentralized regional Central government
government
Deregulation and open Regulation and protection
market (choice for the ("gyosei-shido")
best and the cheapest)
Autonomy and self-governance Central control through
(community budget distribution
and regional taxation) (national taxation)
New Constitution with "Taboo" to discuss the
global responsibilities Constitution
Asia/Pacific emphasis U.S.-only diplomacy
Emphasis on family and Emphasis on individual
community and nation
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Title Annotation:Kyocera Corp.'s founder and chairman Kazuo Inamori
Publication:Chief Executive (U.S.)
Article Type:Cover Story
Date:Jan 1, 1993
Words:2202
Previous Article:Technology on the factory floor.
Next Article:Welcome to cold war II.
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