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Land of the rising market share.

A dazzling turnaround: How Apple Computer lost, then won, in the Japanese personal computer market.

To become a truly global company, Apple Computer knew it had to make it big in the world's second-largest economy -- Japan. A decade ago, breaking into this lucrative market looked deceptively easy: Cash-rich Japan had a huge, untapped personal computer market and a population of high-tech, friendly consumers.

While Apple eyed the enormous potential of the Japanese market, the young company, so successful in the West, was blind to the pitfalls and traps. What Apple has learned about doing business in Japan in the past 15 years it learned the hard way. Other companies contemplating distributing its products there may find our experiences instructive.

When Apple first began selling its products in Japan in 1977, we had such little presence in the market and suffered such poor overall coordination that our distributions, knowing little about us besides our name, met our first shipment of "Apples" with a refrigerated truck. Misunderstandings aside, Apple soon grabbed a large share of the then very tiny Japanese PC market.

But success was fleeting. When NEC Corp. launched its PC in 1979, the Japanese electronics giant quickly grew to dominate the market, as it continues to do today. Our products quickly became marginalized, reaching mainly young hobbyists.

By 1980, Apple chose Toray as its exclusive distributor. Unfortunately, as a Japanese textile trading firm, Toray had no computer experience and no contacts in the computer industry. Two years later, Apple moved to ESD Labs, another problematic choice, since its employees didn't understand Apple's products. In 1983, Apple switched to Canon Sales Corp., a choice many had questioned since the company was having trouble selling its own computers.

Apple's failures didn't stop at distribution. Our products weren't fully localized for the Japanese language, the product line was incomplete, prices were too high (about double U.S. prices), product quality was inconsistent, and Apple didn't work quickly to stem an influx of illegal Macintosh clones from Asia. Not only was Apple trying to sell an English-language product to a Japanese-speaking market, the company ignored local customs and tastes by imposing American-style marketing campaigns on Japan customers. Not surprisingly, the business community saw us as unstable (poison to a reputation in Japan), and by 1988 Apple was called by a U.S. State Department official an example of "how not to succeed in Japan."

The turmoil began at the top: Apple Japan burned through four general managers -- none of whom was able to speak Japanese -- in five years. In all that time, Apple had not made a cent in Japan.

Now, compare our less-than-glorious past to our fortunes today. From 1988 to 1990, Apple Japan doubled its installed base year over year. We have captured almost 6% of Japan's personal computer market share, double that of a year ago. And though PC sales in Japan wee down significantly for the last three moths of 1991, Apple's unit sales were up by 43%. In all, Japan now accounts for a full 15% of Apple's international sales. And our momentum continues. We look to capture 10% of the Japanese PC market by 1994.

How did Apple achieve this dazzling turnaround? We had to completely redefine how we did business, how we made our products, and how we sold them.

Offer a Superior Product

We have a very good product, and something the competition can't touch. The Macintosh computer features the original graphical user interface -- and Japan, of course, has a graphical language that does not map neatly onto most text-based PCs.

But our intrinsic advantage was meaningless while we lacked fully localized Kanji system software for our computers. (We only sold English-language computer systems in Japan during our first several years there.) But the Macintosh KanjiTalk system software, introduced in 1986 and enhanced in subsequent years, enables a user to use a standard keyboard, yet be able to type in the more than 7,000 Kanji characters. And after we introduced the Kanji-capable LaserWriter|R~ II NTX-J in 1989, demand soared.

Localization efforts don't stop with Apple's own products. We cooperate with application vendors around the world to localize their software and hardware products for the Japanese market. The number of software applications for the Japanese market has jumped from 50 three years ago to more than 450 today.

To increase the breadth and sophistication of our Japanese product line, while ensuring faster localization of products, we set up a Japan R&D operation in Tokyo staffed by locals and engineers who have worked for Apple in the U.S. Conversely, with a strong base in Japan, Apple is not caught off guard when it comes to Japanese technological developments. We are able to make product and technology decisions faster than if we were just sitting in the U.S. waiting for products to land here.

Increase Brand Awareness And Generate Demand

Japanese competition is fierce, so you have to yell loudly to get your message across. And it helps to be innovative. After we sponsored singer Janet Jackson's 1990 Japan concert tour, we found that Apple's brand awareness had skyrocketed to become second only to NEC's among PC's in Japan. Apple also scored a hole in one with a successful sponsorship of the recent and highly visible Japan Ladies Professional Golf Association Tournament. Our heavy advertising, which reinforces Apple's image as a trendy, American icon while communicating our key advantages, has created an aura around Apple that fuels tremendous demand for our products.

Apple Japan also breaks from Apple's usual strategies with heavy billboard advertising. You can even find Apple's first electronic billboard in Tokyo.

In all, our campaigns had the effect of making Apple a "hot" company to do business with. Japanese businesses, that earlier saw us as a fly-by-night company, now see us as more permanent, and a force to be reckoned with. Companies now flock to Apple to develop on our platform and distribute our products.

Don't Underestimate the Importance of Quality

Japan is a very different marketplace than the U.S. But a lot of business people are surprised when they are not as successful here, even when they approach it the same way as they do in the U.S.

What they often overlook is that the Japanese consumer demands very high quality and very high levels of service. The companies that don't recognize that simply won't be successful. In our early days in Japan, our quality control was lax, and our reputation suffered. After we launched a special quality program that involved inspecting and testing every Apple computer entering Japan, we grew to be accepted.

We also take customer service requirements very seriously. We equip our resellers -- we have about 2,000 across the country -- to service our hardware by giving them intensive training and tools, such as a comprehensive "cookbook" for products. And when customers run into a problem with, for example, system software or connectivity, they can simply phone Apple Japan's direct customer service line for instant help.

Another key ingredient is watching what you charge. American companies often make a mistake by overpricing their product. They see revenues in Japan as incremental, and charge a higher price. Of course, doing business costs more in Japan -- real estate and salaries are more expensive, among other things -- but companies do not need to price up high and skim the cream off the top. This is a lesson we learned the hard way.

Respect Local Business Customs

In retrospect, we were misguided to have assumed that non-Japanese executives could have had the experience and expertise necessary to understand the Japanese market. In 1988, just before I joined the company, Apple installed a strong Japanese team led by a national as president who understands the local market better than any non-native manager would. At the same time, we made a commitment to become part of the fabric of the Japanese business community by taking such actions as holding board meetings in Tokyo and becoming members of prestigious Japanese business associations.

In 1990, we received the Japanese business community's official stamp of approval and were the first NASDAQ stock listed on the Tokyo Stock Exchange.

Japanese customers put tremendous demands on manufacturers. You can use that to your advantage. Learn the tough lessons of doing business in Japan, and you'll be able to use what you learn as a blueprint for how to do business in other parts of the world.

Ian Diery is Executive Vice President, Worldwide Sales and Marketing, of Apple Computer Inc., Cupertino, Calif. He joined Apple in 1989, following an 11-year career with Wang Laboratories, and had been responsible for Apple's marketing, sales, and support efforts in Australia, Canada, Japan, the Far East, and Latin America, as President of Apple's Pacific division, before being named to his current position in July 1992.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Accessing the Japanese Market; Apple Computer Inc.'s foray into the Japanese market
Author:Diery, Ian
Publication:Directors & Boards
Date:Sep 22, 1992
Previous Article:Lessons learned in Japan.
Next Article:In the land of rising quality.

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