How MNCs can win the next five years in Japan

If Tokyo real estate agents are to be believed, the world’s multinational companies are beating a path to Japan’s door.

Clients have been disappointed by the slowing growth of markets like China and Brazil, and mildly comforted by some (albeit slow) signs of change in the Japanese economy. Most of all, the Olympics have been a trigger to re-evaluate the obvious fact that Japan is a very large economy, with a high number of very wealthy people in it.

So what will it take to succeed?

Anybody who claims it will be easy is deceiving themselves. The mainstream market in almost every category is dominated by local giants like Toyota, Kao, or for that matter Dentsu. They have deep pockets and home town advantage, and even they are focusing strongly on overseas markets today, expecting to see low if not zero growth domestically.

It is possible, however, for a Western company to build a strong Japanese business.

Coca-Cola has been the leader in soft drinks for decades, and more recently, companies like Apple, Mini, Mercedes-Benz, Starbucks and Airbnb have shown excellent levels of growth in categories where (at first sight) Japanese brands might be expected to be utterly dominant.

What are the conditions for winning?

Firstly, pick a category which is growing. Just because Japan overall is not growing does not mean that no sectors are growing. With the polarization of wealth and the ageing society, imported luxury cars, premium travel, healthcare and insurance are growing fast. Equally, some categories have a strong catch-up effect. Credit cards, real estate and software can expect to see significant structural support as we move towards the Olympics.

Second, if you decide to invest, then commit. Global companies today treat the US and China as strategic markets. These are seen as so important that they call for competitive media investment levels, locally developed copy and an ongoing commitment to investment year on year. On the other hand, too many companies treat Japan as ‘just another market’. This is a half-hearted approach to the third largest economy in the world, and one where the ad market is as big as France and Germany put together. It leads to a series of mistakes that compound each other:

• Entering the market with an uncompetitive level of media investment (sometimes in the mistaken belief that using social or digital, or making up with partners investment can compensate for low spends)
• Using copy that was generated for overseas markets, in order to limit production investment. Japan is one of the most difficult markets to do this successfully. Japanese consumers have a high comfort level with local brands, which they perceive as outperforming on safety and quality, and an emotional closeness with local brands because they are able to accurately reflect local cultural norms and the sense of belonging that dominates Japanese society. According to our 2016 ‘Truth about Global Brands’ survey, Japanese consumers are among the most loyal to local brands. And yet, companies like Mercedes-Benz have been very successful. Their series of ads using Super-Mario was a raging success here, because people like to see global icons showing respect to their country and their culture. Universal Studios Japan, likewise, has successfully partnered with Cool Japan to bring a local flavor. Another great example of this phenomenon is the film industry. Japan has a huge and very locally driven film and TV industry. And yet, the two leading films in Japan in 2015 were both imports – imports that had relevance and interest to Japanese people. The biggest family film of 2015 was a Hollywood epic about a small boy building robots (Big Hero 6) and the biggest film felt the Force.
• Lastly, companies suffer from a failure to plan for the long haul. Having approached the market with an opportunistic mindset, there is a strong tendency to cut investment if return is slow to come, or due to changes at CEO or CMO level. While nobody advocates throwing good money after bad, if you pull the plug too quickly, you clearly sacrifice not only the money invested so far, but also the trust you may depend on from consumers, trade and local partners if you ever decide to re-enter again.

Foreign brands are, in essence, guests in someone else’s house. And as everyone knows, visiting a Japanese person’s home is a very particular thing.

So, don’t come in, keep your shoes on and talk about what interests you. If you do, your hosts will politely listen as they wait for you to leave.

Instead, perhaps it would be a good idea to come bringing gifts. Take the trouble to learn a little about your hosts. Express your commitment for their future, through good times and bad.
You will be accepted for the long haul.

The Globalist in Japan is a regular column discussing Japanese marketing from an international point of view. John Woodward is chief strategy officer of McCann Worldgroup Japan. He has lived and worked on global brands in the UK, France, Italy, Australia and Hong Kong.

This column first appeared on Campaignjapan.com