Why U.S. Companies Fail in Japan – Your Own Boss IS Your Enemy –

Posted by Administrator on November 25, 2009

Many U.S. companies are successfully doing business in Japan while many others have failed in Japan. There are both large companies and also small companies among the failures. Lots of factors are considered to be the cause of failure but it is said over 80% is controllable factors and uncontrollable factors are only less than 20%.

Uncontrollable factors include regulatory, economic, labor, political, competition and currency variables. Many U.S. companies as well as Japanese companies failed in Japan because of these uncontrollable factors. However, there are also some U.S. companies that had implemented risk management that quickly changed their directions and strategies of the companies and overcame the problems.

Based on our experiences, we have listed the five most common variables that are considered the cause failure in Japan.

Easy thinking

Language barrier

Misrepresentation

Lack of common sense

Your own boss is your enemy

The item 5 seems a quiz but is not. It is one of the most serious common reasons why U.S. companies fail in Japan. Only recently, one U.S. start-up company has failed in Japan due to this reason. So, we decided to take up this case so you will not make the same mistake.

This happens often in a certain business model and under the unique situation.  Please visualize the following developments.

A start-up company successfully developed a high-tech consumer product. The CEO was the inventor of the product and, as the budget is extremely important for a start-up as always, he appointed a financial expert as COO of the company. The COO wanted to know, under his micro-management,   everything that his people were doing. He held the management meeting monthly, staff meeting weekly, one-on-one meeting daily and he came to the desk of each manager, director and VP three or four times a day to discuss what they were working on and sometimes even went to the extent of modifying their email contents. Because of his involvement in practically every inch of the company’s work, he came to work at 6:00 AM and left the office at 7:00 PM from Monday to Friday, and came to work at 6:00 AM and went home 5:00 PM on Saturdays.

Due to his micro-management and what the CEO called “his leadership and initiative”, everybody worked extremely hard although under tense and stress. Their marketing and sales strategies were well implemented and the product began to pick up sales momentum about four months after the rollout. A year after the product launch, this entire new product was on its way to the household brand. It was obvious that this company will own the U.S. market for this product soon and the management began to think about the Japanese market, the second largest market in the world.

Here came a Japanese business development expert at the perfect timing. His family came from both Japanese leading retail group and one of Japan’s largest conglomerates, and he is well trusted in the Japanese business society. He could easily move the Japanese retail stores and consumer businesses to distribute the first-in-market U.S. product in Japan. He made the Virtual Vision Sunglass TV and the Virtual i-O large screen head-mounted display very popular in Japan. In fact, Japan became the largest market for these products.

He also introduced Sonicare sonic toothbrush in Japan and developed the Japanese market from the scratch. As you can see, Sonicare toothbrush is about three times bigger and much heavier than the products of the Japanese  competitors. When he first introduced Sonicare to potential distributors in Japan, the trend of the electric toothbrush in Japan was heading for pencil type size. The Japanese pencil type electric toothbrushes were practically five time slimmer than Sonicare, so all the potential distributors in Japan did not like this “baseball bat type” Sonicare. However, he found the way and got the professional, consumer and retail markets all laid down and got business off the ground in six months. Now, Sonicare is a household brand in Japan.

He is an English/Japanese bilingual with an excellent track record and has  tremendous amount of good contacts and connections in Japan, so the COO hired him as the General Manager (GM), Asia-Pacific Operations. The COO wanted him to focus on Japan before he would expand the business to other Asian countries as he knew it would take about three times longer to develop the Japanese market than the U.S. market. However, he brought Japan’s largest conglomerate to the table as the candidate for the exclusive distributor in Japan, got all retail, TV infomercial, catalog and e-commerce business channels laid down in only three months during which he made three trips to Japan.

The Japanese market was ready to sell the product but the Japanese Exclusive Distributor with US$150 billion annual sales could not catch up with the speed of the market development. The Japanese distributor must go through the internal product approval process, securing the budget for sales and marketing expenses, product localization, Japanese manuals, brochures and other prints, Japanese press release and so forth. These are the responsibilities of the Japanese distributor and unless these are ready, the product cannot be delivered to the retail stores. There was a long list of action items but the GM was putting Japan’s largest conglomerate under control and was managing them very well.

The COO was really puzzled how the GM could do everything so fast working with R&D, marketing, sales and production departments in the U.S. head office. The COO had no chance to conduct micro-management to the GM, so began asking him how he did it and also began giving suggestions which were totally irrelevant to the Japanese business.

As the COO really wanted to get involved in the Japanese business and wanted to make Japan success his own achievement, he began telling the GM to update him on the Japanese business on a daily basis. The COO still could not understand why the GM could convince the Japanese retailers and consumer businesses to sell the entirely new U.S. product only in three months. The COO now told the GM that the Japan business must not start until he blesses it. The COO began to contact the Japanese distributor’s U.S. office where there were American people who the COO could communicate in English about the product the GM was selling in Japan.

In order to eliminate the mess caused by the COO and to help COO understand Japan business, the GM decided to take the COO to Japan so he could meet and discuss with the distributor and major customers face-to-face. Unfortunately, this was the beginning of the tragedy……a failure in the Japanese business due to the ego of COO.

The following is what happened in Japan and after COO and GM came back to the U.S.

1. Translation

The COO wanted the GM to simultaneously translate everything that attendees spoke in the meeting. The GM had no problem with it but the problem was caused by the COO. Every time the GM interpreted what the COO said into Japanese, the COO said to everybody “I did not say that”. It was really humiliating the GM. The COO claimed that the GM added many things that he never said when he interpreted into Japanese. As you may know, the Japanese word is much longer than the U.S. equivalent. For example, “I love you” is phonetically “ai lav ju:”, while in Japanese, I love you is translated into “watashiha anatao aishitemasu”. 8 characters in English vs. 26 characters in Japanese translation. The Japanese translation is usually two to three times longer than the English. The COO did not want to accept it and believed the GM always added something what he never said. Unfortunately, we know quite a few companies that failed in the Japan business due to similar internal distrust problems.

2. E-mails, letters and phone calls

After they came back from Japan, the COO asked the GM to translate into English all Japanese emails that the GM received from the major Japanese customers, and also asked the GM to explain what he talked to the Japanese customers on the phone that day. The GM’s work was substantially interrupted by the translation and explanation for the COO. Besides, the GM became frustrated. The GM took this problem to the CEO, who said could not complain to the COO as he was the one who hired the COO.

3. Personal contact to Japan headquarters

The COO first sent his “thank you” emails to those who he met in Japan and then began to communicate to the distributor’s headquarters in Japan by bypassing the GM. This is what the GM was very concerned about because he had a very strict management over the distributor in order for them to execute the right marketing and sales strategies to meet the needs and wants of the Japanese consumers in a timely manner. Most Japanese distributors do not correctly and accurately convey the Japanese customers’ requests because they want to take easy and cheaper way to sell your product in Japan. So, the U.S. makers need to have capability to work closely with the Japanese retail stores and consumer businesses to constantly encourage the distributor to go beyond their normal effort at much faster pace.

Now, the COO began to receive three different information on the same subject: from the GM, Japanese distributor and its U.S. office. The COO began to believe the information from the Japanese distributor more than the information from the GM (his own people). Just because the COO established a precedence, the Japanese distributor began to communicate to the COO without copying the GM on the communication. Then, the Japanese distributor began to complain about GM’s strictness and aggressiveness of business to the COO. The mistake the COO made was that he listened to all the complaints from the Japanese distributors and asked the GM for clarification. Now, the GM was under complete micro-management of the COO and it seemed everything began to fall apart. As the orders were coming from Japan as the GM still could manage the Japan business even under such mess caused by the COO, the COO began to believe that he was the one managing the Japanese business with such orders.

4. Personal mails

The COO began to directly send his emails to the Japanese distributor over the shoulder of the GM and told him that by so doing he was motivating the Japanese distributor. The COO often said in his emails to the people at the Japanese distributor that they did a very good job. So, they began to send emails directly to the COO saying that the GM and the Japanese retailers joined and gave too much pressure to the Japanese distributor. The COO began to support the Japanese distributor instead of the GM (his own people) and completely spoiled the Japanese distributor. The Japanese distributor even began to delay the rollout in some retail stores by several months. Those retail stores strongly complained to the Japanese distributor and every time they received such complaints from the retail stores, they told the COO that the GM made the retail stores complain to the distributor to make them feel bad. The COO gave the warning to the GM every time the Japanese distributor sent such complaints to him. Now, the Japanese distributor began to do business in an easier way in which they did not provide assistance to support retail promotion. The COO completely spoiled the Japanese distributor.

5. Tragedy

The COO and CEO concluded that the GM had no capability to maintain good relationships with the Japanese distributor because they directly complained to the COO about the GM. So, COO ordered the GM to stop communicating to the Japanese distributor, retail stores and consumer business. The GM tried many times to correct the relations with the COO with no success. The COO could not accept that such a small Japanese executive was able to develop the Japanese market for the product in three months that the COO took over one year to develop the US market.

At the shareholders meeting, the COO showed his big picture taken in front of the office of the Japanese distributor in Tokyo (Mitsui $ Co., one of Japan’s largest conglomerates) and told the meeting that he closed the deal with this company. The COO never mentioned the name of the GM at the shareholders meeting.

Now, the company was in a big problem. The GM left the company and the news spread overnight in Japan as Japan is such a small country, the same size as the state of California. The news was that a U.S. company humiliated the Japanese GM who was one of the most trusted persons in Japan.

Many Japanese retail stores decided to withdraw the product from the shelf or reduced the size of the product display and relocated it to much less traffic location. In order to keep the sales of the product in Japan, the distributor began to sell to heavy discounters and low-end department stores. Only the price war awaited the product and all high-end and the prestige retail stores stopped selling the product. You know what resulted in after all prestige retail stores withdrew the product simultaneously. Their business went down to the tubes in Japan.

Your own boss was your enemy, and then became the company’s enemy, too. It is really hard to believe that such a thing happened and destroyed the growing business that the top notch Japanese business development expert had developed, but we know it happens occasionally.

Based on our experiences, if your boss is a micro-management person and his age is in his mid-forties or early sixties, the chances of his making the same mistake are quite high. Young COO has a big ambition to conquer two largest markets in the world (US and Japan), and the senior top management would like to try his last success chance to make the Japan success his own achievement. It is really hard to believe and sounds foolish but we see such cases occasionally.

How can we prevent such tragedy?

We are looking forward to hearing from you.

JapanBusinessConsultancy.com

Peter H. Sakurai

Editor-In-Chief