Osaka - Sunday, February 26, 2012
As briefly explained in the previous article Shift in Japan Economy Drivers – from Global Manufacturers to Domestic Non-Manufacturers many, Japanese global electronic companies have been under-performing, while there have been some others that have been performing reasonably well.
In this article, the author would like to explain why there are such winners and losers among Japanese global electronic companies under the same tough business environment including historic high yen, the Japan Disaster and the flood in Thailand, based on an article of Nikkei, Japan’s leading newspaper specialized in business and economy, that was issued on February 25.
1. Why are there losers?
1) Who are the losers?
The losers are Panasonic, Sony and Sharp that heavily rely on non-profitable flat panel TV business, as explained in the previous article Shift in Japan Economy Drivers – from Global Manufacturers to Domestic Non-Manufacturers. Now Nikkei reports that the total loss of Panasonic and Sony for the fiscal year ending March 2012 is to reach as much as 1 trillion yen.
2) Why is the flat panel TV business unprofitable?
The main reason is the accelerated speed of digital technologies becoming obsolete combined with market entry by Chinese players. The price of flat panel TV sets has drastically dropped and also the demand of LCD panels has become excessive. This has completely changed “the rule of winning in the market = the market player that continued proactive investment until the competitors drop out is to become the market leader is to obtain profit”.
Today, the market leader with #1 market share in digital technology (e.g. flat panel TV business) can necessarily be profitable. In the case of LCD panel market for flat panel TVs with market size of 6 trillion yen per year, #1 and #2 global players Samsung and LG Display went in red for the fiscal year ending December 2011. The total market share of the two companies is above 50% but the total operating loss of the two companies for the business is as much as 120 billion yen.
2. Why are there winners?
1) Who are the winners?
The winners are Mitsubishi Electric and Hitachi that have managed to withdraw from unprofitable businesses to focus on their strengths, leading to successful recovery to mark net profit of more than 100 billion yen.
Mitsubishi Electric made withdrawal one after the after from PC, DRAM, system LSI and mobile phone businesses that had been unprofitable to shift their business to more profitable ones such as factory automation equipments although such businesses might be less known and popular to the general public.
Hitachi separated fluctuating businesses of semiconductor and flat panel businesses to focus on social infrastructure businesses that the company is strong in. As a result, their total net profit for 2011 and 2012 is estimated to reach 438.8 billion when the company had been in red from 2000 to 2010.
2) Why NEC that also withdrew from unprofitable businesses not a winner?
It is all about timing and speed.
It is true that NEC avoided fluctuating businesses such as plasma and LCD panels, semiconductors and PCs and their decisions and actions seem to be quite similar to those of Hitachi. However their revenue for this year is to decrease by 40% from its peak and they are estimated to be in the red for 2 consecutive years.
What NEC is different from Hitachi is the speed and timing of their decision and actions. Their withdrawal from semiconductor which had been their burden with much investment was slow. As a result, the company could not strengthen their telecommunication and IT services in a timely manner. For this reason, the company currently lack in businesses that could drive their growth.
3. How are losers trying to recover and grow their business again?
They are trying to do so by leveraging external opportunities and players and for this reason they have been proactive in M&A and/or collaboration with other companies to create business growth.
Sony is eager to invest in Olympus because they are very much interested in the medical equipment business of Olympus. Sony aims to make it as one of their pillar of their future growth.
Panasonic acquired Sanyo last year even if the company needs to go through brand cost depreciation that requires approximately 250 billion yen in order to acquire technologies inevitable for development of green, environmentally-friendly cities green cars that Panasonic was desperate. Panasonic plans to make environment related business as their growth driver. For this reason, they have recently been discussing collaboration possibilities with trading companies in promising businesses in new energy.
4. What are the author’s final thoughts?
Careful selection and focus on businesses based on their mission leveraging on core competencies is the basics of strategy; however in reality, successful strategy development and execution in a timely manner in today’s drastically changing environment is not easy.
Such successful strategy execution usually requires timely withdrawal from unprofitable and/or obsolete businesses and shifting to promising businesses leveraging their core competencies. This is inevitable for business portfolio optimization which is a challenge.
One main reason of difficulty in withdrawing from a business is the extreme difficulty to “abandon” past success. In the case of Panasonic and Sony, TV business had long been the core and driver of their business, symbolizing their company.
It must be so difficult for them to shift their focus from TV business to others similarly to what GE managed to do so withdrawing from consumer electronics to financial services, medical and infrastructure businesses. However, they would need to change their mindset and their business portfolio immediately for sustainability and growth.
Resources:-
What determines winners and losers of Japanese global electronic companies is whether they can withdraw from unprofitable business and shift to promising businesses based on their mission leveraging their core competencies in a timely manner or not. Careful selection and focus on businesses usually requires abandoning successful past which is a challenge. But companies need to change their mindset to do so to optimize their business portfolio adapting to today’s changing business environment is necessary for survival and sustainable growth.
2010年9月5日日曜日
Automobile Companies Compete to Win Promising India Market
Osaka – Sunday, September 5, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported today that Suzuki Motor, a Japanese automobile company strong in small cars, has made a policy of investing approximately 30 billion yen in India to construct new car plant, with the annual production capacity of 250,000 cars. The plant may start its operation as early as 2013, and the annual production capacity is expected to expand to 1.7 million cars at the maximum, which is far greater than that of Japan.
Suzuki is the leader in India with market share of nearly 50%. Other automobile giants such as Toyota and Nissan are also aggressive in entering India market. Therefore, Suzuki aims to make the most of “first mover advantage” strategy and to establish a system for stable supply in the rapidly growing promising market before the competition gets tough.
1. What is Suzuki’s strategy to remain leading India Market?
Suzuki was the first foreign affiliate company in India to start production in 1983. The company plans to expand its annual production capacity to 1.45 million cars in 2012. With the construction of the new plant, the annual production capacity in India will be the largest in the world, which is much more than the total annual production capacity of 3 plants in Japan combined (1.4 million cars).
The new plant is to be constructed in Manesar in Haryana, the suburb of New Deli. In this area, Suzuki has already constructed the first plant with the annual production capacity of 300,000 cars (to be increased to 350,000 cars by the end of this year) that started its operation in 2007. Suzuki also is constructing the second plant with annual production capacity of 250,000 cars, to start its operation in 2012. Suzuki is to start construction of the third plant simultaneously and to install equipments depending on the demand trend. The types of cars to be produced are assumed to be primarily the best selling line products in the local market.
One main reason for consecutive construction of the plants in Manesar in Haryana is that the plant in Gurgaon in Haryana is getting old, although its annual production capacity is to be increased to 850,000 cars by the end of this year. Mr. Suzuki, the Chairman and President of Suzuki group, says that the company would like to preserve available production capacity in Manesar to establish a network that is capable of stable production and supply even when the Gurgaon plant needs to be renovated.
Suzuki, the pioneer of passenger car market in India, still enjoys market share of almost 50%. Two thirds of Suzuki’s consolidated operating profit is regarded as from business in India. Suzuki would like to make haste in establishing its leading position and improve its profitability in India business when the competition is expected to get tough, and leverage the know how from India business in strengthening businesses in other markets in Asia and Europe.
2. How are other automobile companies doing business in India?
Other global and local automobile companies have recently been entering India market, with their own respective strategy.
1) Toyota (Japan)
Toyota is to start local production and sales of small, strategic cars from the end of 2010.
2) Honda (Japan)
Honda is to start business of small cars with the price range below 500,000 rupee (approximately 900,000 yen) in 2011.
3) Nissan (Japan)
Nissan has started business of small cars with the price range below 400,000 rupee in July this year.
4) Volkswagen (Germany)
Volkswagen started its operation of its new plant with annual production capacity of 110,000 cars in March 2009, and started its business of small cars.
5) General Motors (the U.S.)
GM started its business of small cars with the price of approximately 300,000 rupee in January this year.
6) Tata Motors (India)
Tata Motors started operation of its plant that exclusively produces Tata Nano, its low price range car, in June this year.
3. Why worldwide automobile companies are aggressive in starting and expanding business in India?
The reasons are the fact that India is a promising market and that success in India business will a requisite for global companies to expand their business in other emerging markets.
1) India is a promising market
With its economy growing, India’s automobile market is expected to grow. From statistics, it is generally said that popularization of automobiles start when GDP surpasses 1,000 USD and India is currently at that stage. It is estimated that 4 million cars will be used in India in 2015, when 40% of China’s automobile production capacity is to be excess in 2015, according to the estimation of China government. The pace of automobile market expansion in India is expected to accelerate when middle-income group gets big.
2) Success in India business determines success in other emerging market
In India, approximately 80% of new cars are passenger cars, and over 60% of passenger cars are small cars with engine size below 1200cc. Volume price range in India is 300,000 – 450,000 rupee (approximately 550,000 – 800,000 yen), and is regarded as the most competitive market in the world for cars with low price range.
With this background, India business is the core of their global strategy of small cars, and success of India business is likely to determine their business success in worldwide emerging markets. This is because automobile companies are to accumulate know how of development, production and marketing of low price range cars through their business in India then expand their business in other emerging markets.
Nikkei, Japanese newspaper specialized in business and economy, reported today that Suzuki Motor, a Japanese automobile company strong in small cars, has made a policy of investing approximately 30 billion yen in India to construct new car plant, with the annual production capacity of 250,000 cars. The plant may start its operation as early as 2013, and the annual production capacity is expected to expand to 1.7 million cars at the maximum, which is far greater than that of Japan.
Suzuki is the leader in India with market share of nearly 50%. Other automobile giants such as Toyota and Nissan are also aggressive in entering India market. Therefore, Suzuki aims to make the most of “first mover advantage” strategy and to establish a system for stable supply in the rapidly growing promising market before the competition gets tough.
1. What is Suzuki’s strategy to remain leading India Market?
Suzuki was the first foreign affiliate company in India to start production in 1983. The company plans to expand its annual production capacity to 1.45 million cars in 2012. With the construction of the new plant, the annual production capacity in India will be the largest in the world, which is much more than the total annual production capacity of 3 plants in Japan combined (1.4 million cars).
The new plant is to be constructed in Manesar in Haryana, the suburb of New Deli. In this area, Suzuki has already constructed the first plant with the annual production capacity of 300,000 cars (to be increased to 350,000 cars by the end of this year) that started its operation in 2007. Suzuki also is constructing the second plant with annual production capacity of 250,000 cars, to start its operation in 2012. Suzuki is to start construction of the third plant simultaneously and to install equipments depending on the demand trend. The types of cars to be produced are assumed to be primarily the best selling line products in the local market.
One main reason for consecutive construction of the plants in Manesar in Haryana is that the plant in Gurgaon in Haryana is getting old, although its annual production capacity is to be increased to 850,000 cars by the end of this year. Mr. Suzuki, the Chairman and President of Suzuki group, says that the company would like to preserve available production capacity in Manesar to establish a network that is capable of stable production and supply even when the Gurgaon plant needs to be renovated.
Suzuki, the pioneer of passenger car market in India, still enjoys market share of almost 50%. Two thirds of Suzuki’s consolidated operating profit is regarded as from business in India. Suzuki would like to make haste in establishing its leading position and improve its profitability in India business when the competition is expected to get tough, and leverage the know how from India business in strengthening businesses in other markets in Asia and Europe.
2. How are other automobile companies doing business in India?
Other global and local automobile companies have recently been entering India market, with their own respective strategy.
1) Toyota (Japan)
Toyota is to start local production and sales of small, strategic cars from the end of 2010.
2) Honda (Japan)
Honda is to start business of small cars with the price range below 500,000 rupee (approximately 900,000 yen) in 2011.
3) Nissan (Japan)
Nissan has started business of small cars with the price range below 400,000 rupee in July this year.
4) Volkswagen (Germany)
Volkswagen started its operation of its new plant with annual production capacity of 110,000 cars in March 2009, and started its business of small cars.
5) General Motors (the U.S.)
GM started its business of small cars with the price of approximately 300,000 rupee in January this year.
6) Tata Motors (India)
Tata Motors started operation of its plant that exclusively produces Tata Nano, its low price range car, in June this year.
3. Why worldwide automobile companies are aggressive in starting and expanding business in India?
The reasons are the fact that India is a promising market and that success in India business will a requisite for global companies to expand their business in other emerging markets.
1) India is a promising market
With its economy growing, India’s automobile market is expected to grow. From statistics, it is generally said that popularization of automobiles start when GDP surpasses 1,000 USD and India is currently at that stage. It is estimated that 4 million cars will be used in India in 2015, when 40% of China’s automobile production capacity is to be excess in 2015, according to the estimation of China government. The pace of automobile market expansion in India is expected to accelerate when middle-income group gets big.
2) Success in India business determines success in other emerging market
In India, approximately 80% of new cars are passenger cars, and over 60% of passenger cars are small cars with engine size below 1200cc. Volume price range in India is 300,000 – 450,000 rupee (approximately 550,000 – 800,000 yen), and is regarded as the most competitive market in the world for cars with low price range.
With this background, India business is the core of their global strategy of small cars, and success of India business is likely to determine their business success in worldwide emerging markets. This is because automobile companies are to accumulate know how of development, production and marketing of low price range cars through their business in India then expand their business in other emerging markets.
2010年8月12日木曜日
R&D / Patent Trend - Emerging Countries Enhance Presence When Japan Stagnates
Osaka – Thursday, August 12, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on August 11 that emerging countries such as China and India are enhancing their presence in R&D. Patents of emerging countries in fields such as life science and energy are drastically increasing in particular. The number of patents applied and released by China in environment field is more than that of western countries and Japan, indicating that China is enhancing its presence in R&D.
On the other hand, Japan seems to be stagnating. This is because companies have been narrowing down the technologies to be applied in line with their patent strategy. Also, patent application by Japanese companies to growing emerging markets tends to be less aggressive compared to western counterparts. Some experts give warning to such situation.
1. How the number of patent application and release by China and India has been increasing?
1) China
According to WIPO (World Intellectual Property Organization), Chinese companies have applied 203,257 patents in 2008, domestically and abroad, which is 14 times as much as 10 years ago. Japanese companied applied the most with 500,034 patents followed by the U.S. companies with 389,073 patents, then Chinese companies. The number of patents applied by Chinese business owners and small businesses increased eightfold from 2000 to 2008. The increase is prominent not only of patents of technologies that support high economic growth such as water pollution but also of advanced technologies such as LED (light-emitting diode) illumination.
One reason for the drastic increase in patent applied by Chinese companies and business owners is the policy of China government. When the government gives subsidy or reduces tax, one of the requirements is the number of patents held by the company or business owners. Also, whether it leads to patent is taken into account when giving financial R&D support to universities.
According to NISTP (National Institute of Science and Technology Policy), as many as 104,164 scientific articles by Chinese scientists were introduced in worldwide major journals in 2008, which is only behind the articles by the U.S. scientists In addition, they are often cited, implying that quality as well as quantity of articles by Chinese scientists has been dramatically improving.
2) India
Companies of India made application of 4,537 patents domestically and abroad in 2008, which is increase by over 60% from 2005. More than half of them were made in the U.S., mostly in such industries of IT and pharmaceuticals.
2. How Japanese companies have been increasing patent applications in China
1) Overall trend
In order to validate patents abroad, patents need to be applied and acquired in that particular country/region abroad; therefore, Japanese companies have been increasing their application in China when China market is growing. Approximately 20,000 applications were made in Japan and the U.S. n 1998 but as many as 58,000 applications were made in 2008. Today, application made from Japan to China is greater than those made to Europe. In fact, it is only behind 80,000 applications made to the U.S.
2) Some examples of companies that are increasing applications in China
For Hitachi, the ratio of patents applied for Japan domestic vs overseas was 53% vs 47% in 2009, and would like to make overseas percentage more than 50% in 2010. The R&D executive of Hitachi says that until today patents applied abroad were mostly in western countries, but would like increase applications made in emerging countries in order to establish IPR (intellectual property right) in such countries where their businesses are expanding.
Panasonic is also increasing its application abroad, in China in particular because more R&D of home appliances and AV products are performed in such countries than ever. Similarly, Toshiba is increasing their application made in China in PC and digital consumer electronics, and semiconductors and electronic components.
3) Applications made in other emerging countries
Japan is behind western countries in increasing applications in other emerging countries such as India and Brazil. Among applications made to India, the U.S. covers 36% but Japan is only 10%. Similarly for applications made to Brazil, the U.S. covers 41% when Japan is only 6%.
3. Why Japan’s patent application is stagnating and what does it mean?
1) How patent applications by Japanese companies have been stagnating
The number of patent released by Japan in 8 growth areas (including environment, life science and energy) that Japan has been focusing on was 149,842 in 2009, which was only 0.5% increase from 2008. This is less than the U.S. and China is catching up with more than 120,000. Japan is said to be applying patents mostly in advanced technologies such as energy saving technologies, but some experts assume that by simple comparison of the number of patents applied, China may well overtake Japan within few years.
The result of the recent survey on R&D executed by Nikkei supports this assumption. 45% companies responded that the number of patents applied domestically decreased in 2009 from 2008, when only 23% responded that it increased.
2) Reasons / background for stagnating patent applications by Japanese companies
Primary reason is that Japanese companies have been focusing more on quality rather than quantity (number) of patents in order to improve R&D ROI, including patents of the 8 growth areas mentioned above.
Companies have been extremely selective in choosing which technologies to apply and acquire patents, to minimize patent related cost. Also, more companies are making application not in Japan but overseas where they do business (manufacture, market and/or sell).
3) Meaning of stagnating patent application by Japanese companies
Stagnating patent application by Japanese companies is not aligned with policy management of the Japanese government that has been trying to strengthen R&D with the slogan of “world leader in science and technology”. It is with this policy that 16 billion yen in accumulation from 2001 to 2009 was spent on R&D in the 8 growth areas. However, whether the global competitiveness of Japan’s industrial technology has improved is a question.
Moreover, an expert warns about the “quality over quantity” patent strategy of Japanese companies. The expert says that patents are deeply related to future of technology, and reduction of patent application is a sign of decrease in promising technologies.
Nikkei, Japanese newspaper specialized in business and economy, reported on August 11 that emerging countries such as China and India are enhancing their presence in R&D. Patents of emerging countries in fields such as life science and energy are drastically increasing in particular. The number of patents applied and released by China in environment field is more than that of western countries and Japan, indicating that China is enhancing its presence in R&D.
On the other hand, Japan seems to be stagnating. This is because companies have been narrowing down the technologies to be applied in line with their patent strategy. Also, patent application by Japanese companies to growing emerging markets tends to be less aggressive compared to western counterparts. Some experts give warning to such situation.
1. How the number of patent application and release by China and India has been increasing?
1) China
According to WIPO (World Intellectual Property Organization), Chinese companies have applied 203,257 patents in 2008, domestically and abroad, which is 14 times as much as 10 years ago. Japanese companied applied the most with 500,034 patents followed by the U.S. companies with 389,073 patents, then Chinese companies. The number of patents applied by Chinese business owners and small businesses increased eightfold from 2000 to 2008. The increase is prominent not only of patents of technologies that support high economic growth such as water pollution but also of advanced technologies such as LED (light-emitting diode) illumination.
One reason for the drastic increase in patent applied by Chinese companies and business owners is the policy of China government. When the government gives subsidy or reduces tax, one of the requirements is the number of patents held by the company or business owners. Also, whether it leads to patent is taken into account when giving financial R&D support to universities.
According to NISTP (National Institute of Science and Technology Policy), as many as 104,164 scientific articles by Chinese scientists were introduced in worldwide major journals in 2008, which is only behind the articles by the U.S. scientists In addition, they are often cited, implying that quality as well as quantity of articles by Chinese scientists has been dramatically improving.
2) India
Companies of India made application of 4,537 patents domestically and abroad in 2008, which is increase by over 60% from 2005. More than half of them were made in the U.S., mostly in such industries of IT and pharmaceuticals.
2. How Japanese companies have been increasing patent applications in China
1) Overall trend
In order to validate patents abroad, patents need to be applied and acquired in that particular country/region abroad; therefore, Japanese companies have been increasing their application in China when China market is growing. Approximately 20,000 applications were made in Japan and the U.S. n 1998 but as many as 58,000 applications were made in 2008. Today, application made from Japan to China is greater than those made to Europe. In fact, it is only behind 80,000 applications made to the U.S.
2) Some examples of companies that are increasing applications in China
For Hitachi, the ratio of patents applied for Japan domestic vs overseas was 53% vs 47% in 2009, and would like to make overseas percentage more than 50% in 2010. The R&D executive of Hitachi says that until today patents applied abroad were mostly in western countries, but would like increase applications made in emerging countries in order to establish IPR (intellectual property right) in such countries where their businesses are expanding.
Panasonic is also increasing its application abroad, in China in particular because more R&D of home appliances and AV products are performed in such countries than ever. Similarly, Toshiba is increasing their application made in China in PC and digital consumer electronics, and semiconductors and electronic components.
3) Applications made in other emerging countries
Japan is behind western countries in increasing applications in other emerging countries such as India and Brazil. Among applications made to India, the U.S. covers 36% but Japan is only 10%. Similarly for applications made to Brazil, the U.S. covers 41% when Japan is only 6%.
3. Why Japan’s patent application is stagnating and what does it mean?
1) How patent applications by Japanese companies have been stagnating
The number of patent released by Japan in 8 growth areas (including environment, life science and energy) that Japan has been focusing on was 149,842 in 2009, which was only 0.5% increase from 2008. This is less than the U.S. and China is catching up with more than 120,000. Japan is said to be applying patents mostly in advanced technologies such as energy saving technologies, but some experts assume that by simple comparison of the number of patents applied, China may well overtake Japan within few years.
The result of the recent survey on R&D executed by Nikkei supports this assumption. 45% companies responded that the number of patents applied domestically decreased in 2009 from 2008, when only 23% responded that it increased.
2) Reasons / background for stagnating patent applications by Japanese companies
Primary reason is that Japanese companies have been focusing more on quality rather than quantity (number) of patents in order to improve R&D ROI, including patents of the 8 growth areas mentioned above.
Companies have been extremely selective in choosing which technologies to apply and acquire patents, to minimize patent related cost. Also, more companies are making application not in Japan but overseas where they do business (manufacture, market and/or sell).
3) Meaning of stagnating patent application by Japanese companies
Stagnating patent application by Japanese companies is not aligned with policy management of the Japanese government that has been trying to strengthen R&D with the slogan of “world leader in science and technology”. It is with this policy that 16 billion yen in accumulation from 2001 to 2009 was spent on R&D in the 8 growth areas. However, whether the global competitiveness of Japan’s industrial technology has improved is a question.
Moreover, an expert warns about the “quality over quantity” patent strategy of Japanese companies. The expert says that patents are deeply related to future of technology, and reduction of patent application is a sign of decrease in promising technologies.
2010年6月20日日曜日
Japan’s New Growth Strategy Approved – What Is It?
Osaka – Sunday, June 20, 2010
Nikkei, Japanese newspaper specialized in economy/business and politics, reported through June 17 to 19 about the New Growth Strategy of Japan under the new leadership of the Kan Administration, which was announced on June 17 and was approved in a Cabinet meeting on June 18.
The objective of the strategy is to realize “strong Japanese economy” advocated by the new Prime Minister Naoto Kan by creating new demand in 4 sectors of environment, healthcare, tourism and Asia to create total of 5 million jobs by 2010. The target economy growth is to mark real GDP (taking inflation into account) growth at 2% and GDP growth not taking inflation into account at 3% in average over the next 11 years. And the policy is to turn rate of increase in consumer price index from negative to positive in 2011 and get out from deflation.
1. Summary of the New Growth Strategy
Chapter 1: Objectives of the New Growth Strategy
Realize strong economy, finance and social security
Chapter 2: Policy of the New Growth Strategy
Consolidated reorganization of economy, finance and social security
Chapter 3: Policy of the 7 strategic fields/focuses and target outcome
Details explained later in the article.
1) Target 2020
(1) Growth to achieve at least GDP of 2% (taking inflation into account) and of 3% (not taking inflation into account).
(2) Turn rate of increase in consumer price index from negative to positive by the end of 2011 (to terminate deflation)
(3) Decrease unemployment rate below 4% at an early stage.
2) Measures to achieve Target 2020
The Government Strategy Projects consist from 7 fields. The 7 fields are the 6 major fields (focuses) from the growth strategy announce in December 2009 as mentioned in the previous article How Japan's Growth Strategy Should Be? including environment/energy, healthcare, Asia, tourism/local community activation, science/technology, employment/human resources, plus newly added “finance”.
(1) Gradually lower corporate tax (effective tax rate) to the level of other major countries.
(2) Establish medical stay visa.
(3) Promote infrastructure export targeting mainly Asia by collaboration between public and private.
(4) Decentralization of people having holidays (execution from 2012 if possible).
(5) Create “Integrated Exchange” by 2013 that trades deals bonds & securities, finances and products.
3) Targets to achieve
Create new demand and jobs
Sector / Demand (trillion yen) / Jobs (million)
Environment / 5 / 14
Healthcare / 5 / 28.4
Asia / 1.2 / 0.19
Tourism / 1.1 / 0.56
Total / 12.3 / 4.99
2. Summary of the Government Strategy Projects consisting from 7 fields
1) Environment / Energy
(1) Accelerate expansion of regenerable energy: to expand the market size to 10 trillion yen
Implement a system purchasing all regenerable energy such as wind & water power and biomass, implement smart grid (next generation transmission network); promote construction of wind power and geothermal generation.
(2) Create “Environmental Future City”: to expand environment/energy market to more than 50 trillion yen and create 1.4 million new jobs
Establish new law necessary for deregulation and tax measures; export know-how of urban development to overseas such as China.
(3) Revitalize forest / forestry: to establish foundation competitive against imported timber within 10 years, and make self-sufficiency ratio of timber over 50%.
Implement new “Forestry Management Plan” and support management strengthening attributing to upsizing; strategically allocate budget for woods and fiends management, and implement a system directly supporting forest management / environmental preservation.
2) Healthcare (Medical, Nursing etc.)
(1) Expand proliferation of advanced medical: to expand new medical equipments/pharmaceuticals and regeneration medicine, to generate positive economic effect of 700 billion yen/year.
Build consortium including medical organizations and administrations in the fields of cancer and dementia, and invest strategically research cost and talent; simplify evaluation procedure of advanced medical; abolish “drug lag” (new drugs launched in Japan after approved in western countries).
(2) International medical exchange: to have 500,000 people equivalent to 10% of Asia demand visit Japan, to generate positive economic effect of 1 trillion yen/year.
Accept more patients from abroad; implement new “medical stay visa”; enable medical treatment by non-Japanese doctors and nurses in Japan.
3) Leveraging economic growth of Asia
(1) Expand overseas business of infrastructure industry: to sign orders for overseas plant of 7000 billion USD to create 19.7 trillion yen market.
Establish Government Strategy Project Committee and strengthen top sales; expand function of public finance such as JBIC (Japan Bank for International Cooperation)
(2) Lower effective corporate tax rate and promote Japan as hub of Asia: to double interaction of resources between Japan and other Asian countries.
Lower effective corporate tax rate to the level of major countries; pay attention to obtaining tax revenue source including increasing/expanding taxation base; develop tax measures etc. as incentives in attracting foreign capitals; all to be implemented from 2011.
(3) Promote and increase development of global talent and acceptance of advanced talents: to accept 300,000 foreign students.
Implement “Point System” covering western and Asian countries; treat immigration control favourably depending on work history and achievements; support so that more Japanese students would have international experience.
(4) Develop and execute intellectual property strategy / Cool Japan overseas roll out: to acquire content revenue of 1 trillion yen from Asia.
Establish a strategic organization of science, technology and innovation to drive standardization of Japanese technology; strengthen digital distribution of Japanese software; prevent proliferation of pirated copy in overseas market.
(5) Establish Free Trade Zone for Asia Pacific: to double interaction of resources between Japan and other Asian countries.
Develop basic policy regarding comprehensive economic alliance/collaboration such as EPA (Economic Partnership Agreement) by the autumn of 2010; promote accepting talents in medical and nursing fields by embedding system of accepting nurse and care worker candidates to Japan from abroad based on EPA.
4) Tourism oriented country / Activating community
(1) Create “General Special Zone System” and promote Open Sky: to increase foreigners in Japan to 25 million, to generate positive economic effect or 10 trillion yen and create 560,000 new jobs.
Create International Strategic General Special Zone targeting urban development of certain cities that will be the economic growth engine; special treatment in deregulation and tax in improving infrastructure; make Haneda Airport “International Airport that operates 24 hours”.
(2) Increase foreigners staying in Japan and decentralize people having holidays: to achieve target of 2.5 million foreigners staying in Japan and then increase to 30 million.
Speed up procedures to issue visa for foreign tourists; study to revise law related to public holidays such as decentralizing holidays by region; all to be implemented from 2012.
(3) Expand used housing and reform market: to double to 20 trillion yen.
Establish synthetic plan including construction inspection/assurance, proliferation of housing history information; set new energy saving standard for housing.
(4) Open public facilities to private: to expand business size of disposal business management right by PFI to 10 trillion yen.
Open to private construction management by public sector; dispose of business management right by PFI (Private Finance Initiative) system leveraging private capital.
5) Science / Technology
(1) Strengthen global competitiveness and develop talent: to increase to over 100 research centres ranked top 50 globally in each fields.
Improve “leading post graduate schools” responsible for advanced researches; leverage talents such as post doctorates.
(2) Leverage information communication technologies: to realize “FTTH (Fibre To The Home” that makes all households able to benefit from broad band services.
Improve electronic administration enabling one stop use of information communication technologies at any time; utilize information communication in medical, nursing and education.
(3) Expand R&D (Research & Development): by expanding total R&D cost of public and private to over 4% of GDP.
Strategic organization responsible for science, technology and innovation will develop cross functional execution plan.
6) Employment / Human resource
(1) Unify kindergarten and nursing schools etc.: to eradicate by 2017 children waiting to enter nursing schools regardless of how their parents work.
Abolish requirements to enter nursing schools; establish service supply system such as users being able to freely choose facilities and business owners freely can set prices.
(2) Implement “Career Rank” system and support work-force etc.: to optimize employment rate to 80% and decrease part-time jobber to 1.24 million which is minus 40% from the peak.
Create system of evaluating vocational capability in growth fields of nursing and environment; strengthen support to people who have been unemployed for a long time.
(3) “New Public”: to make 50% of the citizen to participate in “new public” such s volunteer of their community and workplace.
Design tax system from which citizens benefit from public policy; review financial system for small organizations that support NPOs.
7) Finance
Create Integrated Exchange: to assure presence of Japan market in Asia.
Create Integrated Exchange that can trade bonds & securities, finances and products altogether by 2013.
3. Comments and evaluations from experts
There are so my challenges to overcome. Roadmap to achieve over 300 policies by 2020 has not yet been clarified. Many issues/obstacles remain such as breaking barriers among ministries, filling insufficient measures for deregulation, acquiring financial resources etc. Concrete processes are set only for 2010 – 2013 and no specific targets are set at milestones. Processes to achieve the targets are left to each ministry; therefore, many experts point out it is quite possible that policies that truly need to be executed will remain unexecuted. It is not easy to realize GDP growth of 3% (not taking inflation into consideration) while increasing consumption tax that Prime Minister Mr. Kan clearly implied to study to implement on June 17.
Comments and evaluation from 5 experts are as below.
1) First commentator / evaluator (Economist)
Focusing on environment and healthcare is good. Making Haneda Airport international that operates 24 hours is something that could not have been challenged when LDP was the ruling party.
2) Second commentator / evaluator (Economist)
Productivity improvement is vital for an economy when population is decreasing. Deregulation in healthcare and nursing is insufficient.
3) Third commentator / evaluator (Economist)
Stance of overcoming deflation by collaboration with the BOJ (Bank of Japan) is good. Policy from the supply side such as deregulation is desirable from the perspective of achieving both growth and sound financial status.
4) Forth commentator / evaluator (Professor)
Balancing of the policies has been improved but feasibility is a question. Blueprint for restructuring finance and social security is necessary.
5) Fifth commentator / evaluator (Professor)
Target of overcoming deflation by collaboration of the government and BOJ can be evaluated but lacks detail or specifics excluding lowering corporate tax. GDP growth of 3% (not taking inflation into consideration) is insufficient.
4. The author’s thought
Comments and evaluations from the 5 experts are all valid. The DPJ, the current ruling party, would need time to restructure and reorganize to realize strong economy, finance and social security, after LDP had ruled for 50 years making Japan as it is today. Although it might lack in details or specifics, roadmap and milestone targets, the new Kan administration did announced clearly the policy. Having said that, the situation is extremely urgent and if it should take too much time Japan would end up like Greece, as many experts point out, and therefore it is highly more concrete roadmap, milestone targets etc. are expected to follow soon.
Breaking various barriers and financial resources are the two major challenges.
The former is about game/power change and change in culture. Prime Minister Mr. Kan is from a family of non-politician (unlike many other politicians in Japan who become prime ministers) and has made an apology statement against bureaucrats when he was the Minister of Health and Welfare, so if he cannot achieve, it is probably that no one else can achieve.
The latter can only be achieved by increasing revenue (i.e. tax) and/or decreasing annual expenditure (i.e. cost). On June 17 Prime Minister Kan clearly implied that he is thinking of increasing (doubling) the consumption tax. It is understandable but other measures should be taken before increasing consumption tax such as eradicating practice of high-level government officials taking jobs in the private sector, slashing number / salary etc. of people in the Congress, and initiate further screening process that started last year. Otherwise, Japanese citizens would not be convinced.
We all hope strong leadership from Prime Minister Kan, and support from public and private sectors, with minimum resistance.
Nikkei, Japanese newspaper specialized in economy/business and politics, reported through June 17 to 19 about the New Growth Strategy of Japan under the new leadership of the Kan Administration, which was announced on June 17 and was approved in a Cabinet meeting on June 18.
The objective of the strategy is to realize “strong Japanese economy” advocated by the new Prime Minister Naoto Kan by creating new demand in 4 sectors of environment, healthcare, tourism and Asia to create total of 5 million jobs by 2010. The target economy growth is to mark real GDP (taking inflation into account) growth at 2% and GDP growth not taking inflation into account at 3% in average over the next 11 years. And the policy is to turn rate of increase in consumer price index from negative to positive in 2011 and get out from deflation.
1. Summary of the New Growth Strategy
Chapter 1: Objectives of the New Growth Strategy
Realize strong economy, finance and social security
Chapter 2: Policy of the New Growth Strategy
Consolidated reorganization of economy, finance and social security
Chapter 3: Policy of the 7 strategic fields/focuses and target outcome
Details explained later in the article.
1) Target 2020
(1) Growth to achieve at least GDP of 2% (taking inflation into account) and of 3% (not taking inflation into account).
(2) Turn rate of increase in consumer price index from negative to positive by the end of 2011 (to terminate deflation)
(3) Decrease unemployment rate below 4% at an early stage.
2) Measures to achieve Target 2020
The Government Strategy Projects consist from 7 fields. The 7 fields are the 6 major fields (focuses) from the growth strategy announce in December 2009 as mentioned in the previous article How Japan's Growth Strategy Should Be? including environment/energy, healthcare, Asia, tourism/local community activation, science/technology, employment/human resources, plus newly added “finance”.
(1) Gradually lower corporate tax (effective tax rate) to the level of other major countries.
(2) Establish medical stay visa.
(3) Promote infrastructure export targeting mainly Asia by collaboration between public and private.
(4) Decentralization of people having holidays (execution from 2012 if possible).
(5) Create “Integrated Exchange” by 2013 that trades deals bonds & securities, finances and products.
3) Targets to achieve
Create new demand and jobs
Sector / Demand (trillion yen) / Jobs (million)
Environment / 5 / 14
Healthcare / 5 / 28.4
Asia / 1.2 / 0.19
Tourism / 1.1 / 0.56
Total / 12.3 / 4.99
2. Summary of the Government Strategy Projects consisting from 7 fields
1) Environment / Energy
(1) Accelerate expansion of regenerable energy: to expand the market size to 10 trillion yen
Implement a system purchasing all regenerable energy such as wind & water power and biomass, implement smart grid (next generation transmission network); promote construction of wind power and geothermal generation.
(2) Create “Environmental Future City”: to expand environment/energy market to more than 50 trillion yen and create 1.4 million new jobs
Establish new law necessary for deregulation and tax measures; export know-how of urban development to overseas such as China.
(3) Revitalize forest / forestry: to establish foundation competitive against imported timber within 10 years, and make self-sufficiency ratio of timber over 50%.
Implement new “Forestry Management Plan” and support management strengthening attributing to upsizing; strategically allocate budget for woods and fiends management, and implement a system directly supporting forest management / environmental preservation.
2) Healthcare (Medical, Nursing etc.)
(1) Expand proliferation of advanced medical: to expand new medical equipments/pharmaceuticals and regeneration medicine, to generate positive economic effect of 700 billion yen/year.
Build consortium including medical organizations and administrations in the fields of cancer and dementia, and invest strategically research cost and talent; simplify evaluation procedure of advanced medical; abolish “drug lag” (new drugs launched in Japan after approved in western countries).
(2) International medical exchange: to have 500,000 people equivalent to 10% of Asia demand visit Japan, to generate positive economic effect of 1 trillion yen/year.
Accept more patients from abroad; implement new “medical stay visa”; enable medical treatment by non-Japanese doctors and nurses in Japan.
3) Leveraging economic growth of Asia
(1) Expand overseas business of infrastructure industry: to sign orders for overseas plant of 7000 billion USD to create 19.7 trillion yen market.
Establish Government Strategy Project Committee and strengthen top sales; expand function of public finance such as JBIC (Japan Bank for International Cooperation)
(2) Lower effective corporate tax rate and promote Japan as hub of Asia: to double interaction of resources between Japan and other Asian countries.
Lower effective corporate tax rate to the level of major countries; pay attention to obtaining tax revenue source including increasing/expanding taxation base; develop tax measures etc. as incentives in attracting foreign capitals; all to be implemented from 2011.
(3) Promote and increase development of global talent and acceptance of advanced talents: to accept 300,000 foreign students.
Implement “Point System” covering western and Asian countries; treat immigration control favourably depending on work history and achievements; support so that more Japanese students would have international experience.
(4) Develop and execute intellectual property strategy / Cool Japan overseas roll out: to acquire content revenue of 1 trillion yen from Asia.
Establish a strategic organization of science, technology and innovation to drive standardization of Japanese technology; strengthen digital distribution of Japanese software; prevent proliferation of pirated copy in overseas market.
(5) Establish Free Trade Zone for Asia Pacific: to double interaction of resources between Japan and other Asian countries.
Develop basic policy regarding comprehensive economic alliance/collaboration such as EPA (Economic Partnership Agreement) by the autumn of 2010; promote accepting talents in medical and nursing fields by embedding system of accepting nurse and care worker candidates to Japan from abroad based on EPA.
4) Tourism oriented country / Activating community
(1) Create “General Special Zone System” and promote Open Sky: to increase foreigners in Japan to 25 million, to generate positive economic effect or 10 trillion yen and create 560,000 new jobs.
Create International Strategic General Special Zone targeting urban development of certain cities that will be the economic growth engine; special treatment in deregulation and tax in improving infrastructure; make Haneda Airport “International Airport that operates 24 hours”.
(2) Increase foreigners staying in Japan and decentralize people having holidays: to achieve target of 2.5 million foreigners staying in Japan and then increase to 30 million.
Speed up procedures to issue visa for foreign tourists; study to revise law related to public holidays such as decentralizing holidays by region; all to be implemented from 2012.
(3) Expand used housing and reform market: to double to 20 trillion yen.
Establish synthetic plan including construction inspection/assurance, proliferation of housing history information; set new energy saving standard for housing.
(4) Open public facilities to private: to expand business size of disposal business management right by PFI to 10 trillion yen.
Open to private construction management by public sector; dispose of business management right by PFI (Private Finance Initiative) system leveraging private capital.
5) Science / Technology
(1) Strengthen global competitiveness and develop talent: to increase to over 100 research centres ranked top 50 globally in each fields.
Improve “leading post graduate schools” responsible for advanced researches; leverage talents such as post doctorates.
(2) Leverage information communication technologies: to realize “FTTH (Fibre To The Home” that makes all households able to benefit from broad band services.
Improve electronic administration enabling one stop use of information communication technologies at any time; utilize information communication in medical, nursing and education.
(3) Expand R&D (Research & Development): by expanding total R&D cost of public and private to over 4% of GDP.
Strategic organization responsible for science, technology and innovation will develop cross functional execution plan.
6) Employment / Human resource
(1) Unify kindergarten and nursing schools etc.: to eradicate by 2017 children waiting to enter nursing schools regardless of how their parents work.
Abolish requirements to enter nursing schools; establish service supply system such as users being able to freely choose facilities and business owners freely can set prices.
(2) Implement “Career Rank” system and support work-force etc.: to optimize employment rate to 80% and decrease part-time jobber to 1.24 million which is minus 40% from the peak.
Create system of evaluating vocational capability in growth fields of nursing and environment; strengthen support to people who have been unemployed for a long time.
(3) “New Public”: to make 50% of the citizen to participate in “new public” such s volunteer of their community and workplace.
Design tax system from which citizens benefit from public policy; review financial system for small organizations that support NPOs.
7) Finance
Create Integrated Exchange: to assure presence of Japan market in Asia.
Create Integrated Exchange that can trade bonds & securities, finances and products altogether by 2013.
3. Comments and evaluations from experts
There are so my challenges to overcome. Roadmap to achieve over 300 policies by 2020 has not yet been clarified. Many issues/obstacles remain such as breaking barriers among ministries, filling insufficient measures for deregulation, acquiring financial resources etc. Concrete processes are set only for 2010 – 2013 and no specific targets are set at milestones. Processes to achieve the targets are left to each ministry; therefore, many experts point out it is quite possible that policies that truly need to be executed will remain unexecuted. It is not easy to realize GDP growth of 3% (not taking inflation into consideration) while increasing consumption tax that Prime Minister Mr. Kan clearly implied to study to implement on June 17.
Comments and evaluation from 5 experts are as below.
1) First commentator / evaluator (Economist)
Focusing on environment and healthcare is good. Making Haneda Airport international that operates 24 hours is something that could not have been challenged when LDP was the ruling party.
2) Second commentator / evaluator (Economist)
Productivity improvement is vital for an economy when population is decreasing. Deregulation in healthcare and nursing is insufficient.
3) Third commentator / evaluator (Economist)
Stance of overcoming deflation by collaboration with the BOJ (Bank of Japan) is good. Policy from the supply side such as deregulation is desirable from the perspective of achieving both growth and sound financial status.
4) Forth commentator / evaluator (Professor)
Balancing of the policies has been improved but feasibility is a question. Blueprint for restructuring finance and social security is necessary.
5) Fifth commentator / evaluator (Professor)
Target of overcoming deflation by collaboration of the government and BOJ can be evaluated but lacks detail or specifics excluding lowering corporate tax. GDP growth of 3% (not taking inflation into consideration) is insufficient.
4. The author’s thought
Comments and evaluations from the 5 experts are all valid. The DPJ, the current ruling party, would need time to restructure and reorganize to realize strong economy, finance and social security, after LDP had ruled for 50 years making Japan as it is today. Although it might lack in details or specifics, roadmap and milestone targets, the new Kan administration did announced clearly the policy. Having said that, the situation is extremely urgent and if it should take too much time Japan would end up like Greece, as many experts point out, and therefore it is highly more concrete roadmap, milestone targets etc. are expected to follow soon.
Breaking various barriers and financial resources are the two major challenges.
The former is about game/power change and change in culture. Prime Minister Mr. Kan is from a family of non-politician (unlike many other politicians in Japan who become prime ministers) and has made an apology statement against bureaucrats when he was the Minister of Health and Welfare, so if he cannot achieve, it is probably that no one else can achieve.
The latter can only be achieved by increasing revenue (i.e. tax) and/or decreasing annual expenditure (i.e. cost). On June 17 Prime Minister Kan clearly implied that he is thinking of increasing (doubling) the consumption tax. It is understandable but other measures should be taken before increasing consumption tax such as eradicating practice of high-level government officials taking jobs in the private sector, slashing number / salary etc. of people in the Congress, and initiate further screening process that started last year. Otherwise, Japanese citizens would not be convinced.
We all hope strong leadership from Prime Minister Kan, and support from public and private sectors, with minimum resistance.
2010年3月12日金曜日
What is Japanese Valentine’s Day and White Day?
Osaka – Friday, March 12, 2010
March 14 is White Day in Japan. This event is a twin celebration of Valentine’s Day that is unique to Japan. Taking the opportunity of celebrating this event in Japan, the author would like to introduce Japanese style Valentine’s Day and White Day, that are closely associated with business and marketing strategy of confectionery makers in Japan.
1. Let’s recap on Valentine’s Day. What is Valentine’s Day?
Valentine’s Day, celebrated on February 14, is a day when people express affinity and love. In Western countries, both men and women exchange presents on Valentine's Day. Valentine's gifts are not limited to chocolate - red roses are another popular present. Cards are popular as well, in which quite often people write “From Your Valentine” and “Be My Valentine”.
2. How is Valentine’s Day in Japan? How did it start and became popular?
Concept of Valentine in Japan is basically the same as in Western countries and has become quite popular also in Japan as well; however, it has developed into something unique to Japan. Valentine was first introduced to Japan by a western person who came to Japan before World War II. Soon after, confectionery makers and retailers tried to make it pervasive to promote their sales, but it was in the latter half of 1970s that it became quite popular in Japan. Valentine’s Day in Japan became something quite unique, with manners and customers unique to Japan; females giving males to express their affinity and love.
3. How is Valentine’s Day unique in Japan?
The following four points are the characteristics of typical Japanese style Valentine’s Day, making it so unique.
1) Chocolate is common as a gift, although recently some people started to give other things such as cookies and candies.
2) Gift is given usually one-way, from females to males, not vice-versa.
3) Valentine’s Day is regarded as an opportunity for females to express their affinity and love to males.
4) Gift-giving or chocolate from females to males (bosses and colleagues) at work is also quite common. This is called “giri-choko”, which is literally “obligatory chocolate” in English. This is not accompanied by romantic feeling.
4. How confectionery makers started to promote Valentine’s Day to boost their business?
How and when confectionery makers first started to make the most of Valentine’s Day in order to boost their sales is not clear. There are many as five different theories, ranging from a theory that a Kobe confectionery maker started in 1936 to a theory that was started in Sony Plaza in 1968, but none is ascertained.
What is ascertained is that department stores exerted much effort to make Valentine’s Day pervasive in Japan with chocolate promotion but in vain, and therefore many people viewed that Valentine’s Day would not become popular in Japan around 1968. However, from 1970s, chocolate sales for Valentine’s Day increased drastically. This was because teenagers started to give chocolates on Valentine’s Day at first, and this manner spread to adults in 1990s. Thus, although it is often said that popularity of giving chocolates on Valentine’s Day in Japan attributes to hidden strategy of chocolate makers, it also attributes to the fact that some factors of Valentine’s Day were well accepted to Japanese society and some others were not, and to the option selected by consumers.
5. What is White Day? What is the relationship with Valentine’s Day?
When Japanese unique Valentine’s Day of females giving chocolates to males to express affinity and love has taken root in 1980, another manners and customers unique to Japan formed, which is White Day, celebrated on March 14. The custom of White Day is quite unique to Japan. On this day, men have the opportunity to give gifts to women in return for the chocolate they received on Valentine's Day.
The custom of White Day started in 1978 in Fukuoka City when a sweet maker came up with the idea as a way to promote sales,. Then White Day campaign was planned and approved by nationwide association of candy industry and the first campaign was held in 1980. The fifth campaign in 1984 has become such a huge success that they were short of products, and 1984 was named as the year that in which White Day has taken root.
White Day has slowly become an annual custom among many men, although Japanese men were not accustomed to giving gifts like this to women, and then the custom eventually spread throughout the country. At first, the gifts given to women were often something white, like marshmallows or white chocolate, hence the name White Day. Recently however, various gifts are given, regardless of the color, and currently, companies from many different fields are developing products for the day.
6. How Valentine’s Day evolved to support confectionery business in Japan by strategic marketing of confectionery makers?
Valentine’s Day has become a truly national event, and since 2000 it has been evolving and diversifying. Indeed, it is said that as much as 20% of yearly chocolate consumption in Japan is of this day. Besides the primary concept/objective of females giving chocolate to males to express their affinity and love, other concept and forms have emerged. Females started to give to their lovers and husband. People started to give to males/females they admire. And small children started to take part in Valentine’s Day as well.
“Giri-choco” or obligation chocolate mentioned earlier that had taken root much earlier has been declining since latter 1990s, but other types of chocolates have emerged. One is “tomo-choco”, literally “friend chocolate” in English, which started to spread from around 2000. It now supports Valentine business in Japan and its market has been growing steadily since latter 2000s.
Another type of chocolate that has emerged is “gyaku-choco”, literally “reverse chocolate” in English. This is chocolate given to females from males, which is reverse of the traditional Japanese style Valentine’s Day. This has been promoted aggressively by Morinaga in particular by various campaigns from latter 2000s. Some people also started to buy “jibun-choco”, literally “self chocolate” in English, as a gift to oneself from around 2000.
7. Is success and popularity of Valentine’s Day and White Day (business) the result of marketing effort of confectionery makers?
The author would answer “yes”. It is no doubt that marketing campaign and promotion by confectionery makers was successful in activating chocolate (and other confectionery) consumption. Confectionery makers have been making much effort in marketing valentine specific products and other novelty products such as imported product, accompanied by huge campaigns, for business of Valentine’s Day and White Day. With their effort, they have to execute marketing strategy meeting (potential) needs of Japanese consumers understanding their psychology and behaviour well, to create a new market, to build and establish business of Valentine’s Day and White Day, when in general, consumer consumption and spending is in the low level after Christmas, the business/sales peak of the year.
March 14 is White Day in Japan. This event is a twin celebration of Valentine’s Day that is unique to Japan. Taking the opportunity of celebrating this event in Japan, the author would like to introduce Japanese style Valentine’s Day and White Day, that are closely associated with business and marketing strategy of confectionery makers in Japan.
1. Let’s recap on Valentine’s Day. What is Valentine’s Day?
Valentine’s Day, celebrated on February 14, is a day when people express affinity and love. In Western countries, both men and women exchange presents on Valentine's Day. Valentine's gifts are not limited to chocolate - red roses are another popular present. Cards are popular as well, in which quite often people write “From Your Valentine” and “Be My Valentine”.
2. How is Valentine’s Day in Japan? How did it start and became popular?
Concept of Valentine in Japan is basically the same as in Western countries and has become quite popular also in Japan as well; however, it has developed into something unique to Japan. Valentine was first introduced to Japan by a western person who came to Japan before World War II. Soon after, confectionery makers and retailers tried to make it pervasive to promote their sales, but it was in the latter half of 1970s that it became quite popular in Japan. Valentine’s Day in Japan became something quite unique, with manners and customers unique to Japan; females giving males to express their affinity and love.
3. How is Valentine’s Day unique in Japan?
The following four points are the characteristics of typical Japanese style Valentine’s Day, making it so unique.
1) Chocolate is common as a gift, although recently some people started to give other things such as cookies and candies.
2) Gift is given usually one-way, from females to males, not vice-versa.
3) Valentine’s Day is regarded as an opportunity for females to express their affinity and love to males.
4) Gift-giving or chocolate from females to males (bosses and colleagues) at work is also quite common. This is called “giri-choko”, which is literally “obligatory chocolate” in English. This is not accompanied by romantic feeling.
4. How confectionery makers started to promote Valentine’s Day to boost their business?
How and when confectionery makers first started to make the most of Valentine’s Day in order to boost their sales is not clear. There are many as five different theories, ranging from a theory that a Kobe confectionery maker started in 1936 to a theory that was started in Sony Plaza in 1968, but none is ascertained.
What is ascertained is that department stores exerted much effort to make Valentine’s Day pervasive in Japan with chocolate promotion but in vain, and therefore many people viewed that Valentine’s Day would not become popular in Japan around 1968. However, from 1970s, chocolate sales for Valentine’s Day increased drastically. This was because teenagers started to give chocolates on Valentine’s Day at first, and this manner spread to adults in 1990s. Thus, although it is often said that popularity of giving chocolates on Valentine’s Day in Japan attributes to hidden strategy of chocolate makers, it also attributes to the fact that some factors of Valentine’s Day were well accepted to Japanese society and some others were not, and to the option selected by consumers.
5. What is White Day? What is the relationship with Valentine’s Day?
When Japanese unique Valentine’s Day of females giving chocolates to males to express affinity and love has taken root in 1980, another manners and customers unique to Japan formed, which is White Day, celebrated on March 14. The custom of White Day is quite unique to Japan. On this day, men have the opportunity to give gifts to women in return for the chocolate they received on Valentine's Day.
The custom of White Day started in 1978 in Fukuoka City when a sweet maker came up with the idea as a way to promote sales,. Then White Day campaign was planned and approved by nationwide association of candy industry and the first campaign was held in 1980. The fifth campaign in 1984 has become such a huge success that they were short of products, and 1984 was named as the year that in which White Day has taken root.
White Day has slowly become an annual custom among many men, although Japanese men were not accustomed to giving gifts like this to women, and then the custom eventually spread throughout the country. At first, the gifts given to women were often something white, like marshmallows or white chocolate, hence the name White Day. Recently however, various gifts are given, regardless of the color, and currently, companies from many different fields are developing products for the day.
6. How Valentine’s Day evolved to support confectionery business in Japan by strategic marketing of confectionery makers?
Valentine’s Day has become a truly national event, and since 2000 it has been evolving and diversifying. Indeed, it is said that as much as 20% of yearly chocolate consumption in Japan is of this day. Besides the primary concept/objective of females giving chocolate to males to express their affinity and love, other concept and forms have emerged. Females started to give to their lovers and husband. People started to give to males/females they admire. And small children started to take part in Valentine’s Day as well.
“Giri-choco” or obligation chocolate mentioned earlier that had taken root much earlier has been declining since latter 1990s, but other types of chocolates have emerged. One is “tomo-choco”, literally “friend chocolate” in English, which started to spread from around 2000. It now supports Valentine business in Japan and its market has been growing steadily since latter 2000s.
Another type of chocolate that has emerged is “gyaku-choco”, literally “reverse chocolate” in English. This is chocolate given to females from males, which is reverse of the traditional Japanese style Valentine’s Day. This has been promoted aggressively by Morinaga in particular by various campaigns from latter 2000s. Some people also started to buy “jibun-choco”, literally “self chocolate” in English, as a gift to oneself from around 2000.
7. Is success and popularity of Valentine’s Day and White Day (business) the result of marketing effort of confectionery makers?
The author would answer “yes”. It is no doubt that marketing campaign and promotion by confectionery makers was successful in activating chocolate (and other confectionery) consumption. Confectionery makers have been making much effort in marketing valentine specific products and other novelty products such as imported product, accompanied by huge campaigns, for business of Valentine’s Day and White Day. With their effort, they have to execute marketing strategy meeting (potential) needs of Japanese consumers understanding their psychology and behaviour well, to create a new market, to build and establish business of Valentine’s Day and White Day, when in general, consumer consumption and spending is in the low level after Christmas, the business/sales peak of the year.
2010年1月3日日曜日
How Japan’s Growth Strategy Should Be?
Sunday, January 3, 2010 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on December 31 2009 that on December 30 the Japanese government defined basic policy new growth strategy for sustainable economic growth. “Economic management is to be performed, positioning achievement of nominal growth rate* as the most important challenge” is specified. Targets including “By 2010 average nominal growth rate of 3% and bigger growth than actual growth rate of 2%” with engines of industries including environment, healthcare and tourism, and “nominal GDP (Gross Domestic Product) of 650 trillion yen for 2020” were specified. However, according to an article reported today by Nikkei, approximately 60% of 17 economy experts are dissatisfied with the government’s economic policy and estimate that it takes a few years for the economy to recover.
1. Why “nominal“ instead of “actual” is used to define growth target?
It is unusual for the government to define growth target in “nominal” instead of “actual” excluding effects of price fluctuation. “Nominal“ is used from the sense of urgency of the current economic situation; deflation mentioned in the previous article "How Japan Can Get Out From 10 Year Deflation?" and its negative effect on family budget and company business.
2. How has Japan’s nominal GDP been until today? What are the upcoming plans?
For nearly 20 years since 1990, Japan’s nominal GDP has been hovering at the low level of 500 trillion yen, and therefore 650 trillion yen level is increase by +30% vs. 2008. Growth of nominal growth rate of +3% has not been achieved since 1991.
In order to achieve both nominal growth rate of 3% and actual growth rate of 2%, first, deflation needs to be overcome then control inflation rate under 1%/year. Mr. Naoto Kan, Vice Prime Minister and Head of National Strategy emphasized in the press conference held on December 30 that “these targets are sufficiently achievable”; however, experts feel that it is difficult to achieve the targets, considering the past Japanese economy performances and financial policies.
Prime Minister Mr. Yukio Hatoyama expressed in the press conference on December 30 his determination to achieve the target, saying that he is fully aware that the effectiveness of his administration really counts. The government is to develop growth strategy action plan (roadmap/timeline) for the time span until 2020 by June.
3. Which fields are to be focused to achieve growth strategy?
The following 6 fields are specified as focuses for growth strategy.
1) Environment and energy
Expand environment related market from 70 trillion yen to 120 trillion yen. Create 1.4 million jobs. Leverage Japan’s technologies to contribute to cutting 1.3 billion ton worldwide GHG, equivalent to Japan’s emission volume. Leverage IT to make next generation transmission network pervasive to control electricity supply. Make pervasive eco-friendly housing and expand natural energy use, and LED and other energy saving lighting.
2) Healthcare
Create healthcare, nursing and medical market of 45 trillion yen and 280 jobs by leveraging technologies to create internal and external demand. Initiate R&D of innovative medical and nursing technologies such as regenerative medicine, telemedicine system, nursing robots etc. and provide healthcare related services to Asian markets expected to experience aging society. Strengthen infrastructure supporting aging society such as medical, nursing and housing to eliminate anxieties for the future to promote consumption by elders.
3) Asia
Create demand together with Asia, “the growth centre of the world”, positioning formulation of EFAAP covering 21 countries and regions that are currently members of APEC as its foundation. Develop infrastructure demand of Asia such as transportation, water and energy.
4) Tourism and revitalizing local community
Achieve in line with 1)-3)
5) Science and technologies
Achieve in line with 1)-3)
6) Employment and human resources
Achieve in line with 1)-3)
4. How effective is the growth strategy?
The author basically agrees with views of majority of experts; measures for achievement are not clear and need to focus more on motivating companies and other private sector to invest in growth sectors such as deregulation, tangible growth strategy development and execution, and develop mid-term financial policy outlook/plan. Focusing on assisting family budget, the biggest anxiety lies in whether the Hatoyama administration can educe vitality of companies, the source/engine of economic growth.
Reasons for such evaluation from experts include lack of explanation of concrete policies, and lack of perspective that main player (source/engine) of economic growth is companies. The latter is more critical.
Drivers and engines of economic growth are R&D of companies and equipment investment. It is unlikely to achieve high growth driven by inefficient public sector, and sufficient financial resource cannot be acquired, neither. In fact, in 2008, value added (personnel cost, profit, corporate tax etc.) generated by companies excluding financial institutes reached 26.4 trillion yen. This means that more than 50% of nominal GDP is generated by companies.
5. What is the ideal scenario for economic recovery and achieving the target?
The government is supposed to buy over companies and market, and give incentives and motivation, creating favourable environment for companies and other private sectors to proactively invest in growth sectors. That is the solution to solve the root cause of the ongoing economic plunge. Also minimizing interference of government is necessary and public institutions not to get in the way of private sectors making decisions.
However, from the growth strategy reported, such message is not sufficiently delivered. It does not remove anxieties mentioned in the previous articles "How Japan Can Get Out From 10 Year Deflation?", "Japanese Companies Refraining from Equipment Investmen", "Service Price Drop in Japan Prominent: The Biggest Among 10 Major Countries" and "Japan's Debt to Drastically Increase - What is the Effect on Economy?"
Mentality of “Economy for human being based on friendship and love” alone is not sufficient to achieve the economic growth. Nikkei introduces varieties of innovative technologies of all sectors and industries (environment and energy, healthcare, IT etc.) in their special reports on January 1 2010. It is with tangible growth strategy, tactics and action plan leveraging such technologies, that create new demand and market in sectors and industries where needs exist in aging society with low birthrate, ubiquitous networking society. And it is with appropriate economic policies mentioned by the economists in Nikkei’s report on January 3 such as deregulation, tangible mid-term financial policy outlook, reduction in corporate tax rate (currently 40%), concluding EPA/FTA with Asian countries/regions, and pension system reform that create favourable environment for the growth strategy to be actually executed.
It is only when companies invest in such growth sectors, (many of them contributing to improving social infrastructure and systems), collaborate with academia and other public sectors in R&D in particular, and operate efficiently with high productivity, that they would be able to generate revenue to improve their financial performance. It is with good financial performance of companies that leads to new job creation, higher salaries for their employees, pensions guarantee etc., which contributes to minimizing anxieties of citizens making their own living and live happily after retirement as well as providing citizens with better lives and society, based on the mentality of “friendship and love”. It is by eliminating their anxieties that citizens utilize allowances for consumer spending instead of setting aside for saving, meaning the government’s economy boosting measures become successful, and as a result Japan will be able to get out of deflation, its economy recovered, and achieve the target.
We would need to wait and see what kind of roadmap and action plan the government will develop and announce in June.
* Nominal Growth Rate (Source: Nikkei, edited and translated by the author)
Nominal growth rate is GDP growth rate including effects of price fluctuation. Almost equals to sum of after-tax pay of workers and profits generated by companies. In general, changes in GDP are measured by actual growth rate (excluding effects of price fluctuation) but nominal growth rate can be said to precisely reflect the actual sensation of business and economy because income and profits are all of nominal value.
Average economic growth rate by decades since 1980
Decades / Nominal Growth Rate (%) / Actual Growth Rate (%)
1980s / 6.1 / 3.8
1990s / 2.0 / 1.4
2000s / -0.5 / 0.7
Rise in nominal growth rate leads to both getting out of deflation and economic growth. In 2000s, actual growth rate was +0.7% but nominal growth rate was -0.5%, which implies that long term economic recovery was achieved but lacked in actual sensation. This was because nominal growth rate was minus.
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on December 31 2009 that on December 30 the Japanese government defined basic policy new growth strategy for sustainable economic growth. “Economic management is to be performed, positioning achievement of nominal growth rate* as the most important challenge” is specified. Targets including “By 2010 average nominal growth rate of 3% and bigger growth than actual growth rate of 2%” with engines of industries including environment, healthcare and tourism, and “nominal GDP (Gross Domestic Product) of 650 trillion yen for 2020” were specified. However, according to an article reported today by Nikkei, approximately 60% of 17 economy experts are dissatisfied with the government’s economic policy and estimate that it takes a few years for the economy to recover.
1. Why “nominal“ instead of “actual” is used to define growth target?
It is unusual for the government to define growth target in “nominal” instead of “actual” excluding effects of price fluctuation. “Nominal“ is used from the sense of urgency of the current economic situation; deflation mentioned in the previous article "How Japan Can Get Out From 10 Year Deflation?" and its negative effect on family budget and company business.
2. How has Japan’s nominal GDP been until today? What are the upcoming plans?
For nearly 20 years since 1990, Japan’s nominal GDP has been hovering at the low level of 500 trillion yen, and therefore 650 trillion yen level is increase by +30% vs. 2008. Growth of nominal growth rate of +3% has not been achieved since 1991.
In order to achieve both nominal growth rate of 3% and actual growth rate of 2%, first, deflation needs to be overcome then control inflation rate under 1%/year. Mr. Naoto Kan, Vice Prime Minister and Head of National Strategy emphasized in the press conference held on December 30 that “these targets are sufficiently achievable”; however, experts feel that it is difficult to achieve the targets, considering the past Japanese economy performances and financial policies.
Prime Minister Mr. Yukio Hatoyama expressed in the press conference on December 30 his determination to achieve the target, saying that he is fully aware that the effectiveness of his administration really counts. The government is to develop growth strategy action plan (roadmap/timeline) for the time span until 2020 by June.
3. Which fields are to be focused to achieve growth strategy?
The following 6 fields are specified as focuses for growth strategy.
1) Environment and energy
Expand environment related market from 70 trillion yen to 120 trillion yen. Create 1.4 million jobs. Leverage Japan’s technologies to contribute to cutting 1.3 billion ton worldwide GHG, equivalent to Japan’s emission volume. Leverage IT to make next generation transmission network pervasive to control electricity supply. Make pervasive eco-friendly housing and expand natural energy use, and LED and other energy saving lighting.
2) Healthcare
Create healthcare, nursing and medical market of 45 trillion yen and 280 jobs by leveraging technologies to create internal and external demand. Initiate R&D of innovative medical and nursing technologies such as regenerative medicine, telemedicine system, nursing robots etc. and provide healthcare related services to Asian markets expected to experience aging society. Strengthen infrastructure supporting aging society such as medical, nursing and housing to eliminate anxieties for the future to promote consumption by elders.
3) Asia
Create demand together with Asia, “the growth centre of the world”, positioning formulation of EFAAP covering 21 countries and regions that are currently members of APEC as its foundation. Develop infrastructure demand of Asia such as transportation, water and energy.
4) Tourism and revitalizing local community
Achieve in line with 1)-3)
5) Science and technologies
Achieve in line with 1)-3)
6) Employment and human resources
Achieve in line with 1)-3)
4. How effective is the growth strategy?
The author basically agrees with views of majority of experts; measures for achievement are not clear and need to focus more on motivating companies and other private sector to invest in growth sectors such as deregulation, tangible growth strategy development and execution, and develop mid-term financial policy outlook/plan. Focusing on assisting family budget, the biggest anxiety lies in whether the Hatoyama administration can educe vitality of companies, the source/engine of economic growth.
Reasons for such evaluation from experts include lack of explanation of concrete policies, and lack of perspective that main player (source/engine) of economic growth is companies. The latter is more critical.
Drivers and engines of economic growth are R&D of companies and equipment investment. It is unlikely to achieve high growth driven by inefficient public sector, and sufficient financial resource cannot be acquired, neither. In fact, in 2008, value added (personnel cost, profit, corporate tax etc.) generated by companies excluding financial institutes reached 26.4 trillion yen. This means that more than 50% of nominal GDP is generated by companies.
5. What is the ideal scenario for economic recovery and achieving the target?
The government is supposed to buy over companies and market, and give incentives and motivation, creating favourable environment for companies and other private sectors to proactively invest in growth sectors. That is the solution to solve the root cause of the ongoing economic plunge. Also minimizing interference of government is necessary and public institutions not to get in the way of private sectors making decisions.
However, from the growth strategy reported, such message is not sufficiently delivered. It does not remove anxieties mentioned in the previous articles "How Japan Can Get Out From 10 Year Deflation?", "Japanese Companies Refraining from Equipment Investmen", "Service Price Drop in Japan Prominent: The Biggest Among 10 Major Countries" and "Japan's Debt to Drastically Increase - What is the Effect on Economy?"
Mentality of “Economy for human being based on friendship and love” alone is not sufficient to achieve the economic growth. Nikkei introduces varieties of innovative technologies of all sectors and industries (environment and energy, healthcare, IT etc.) in their special reports on January 1 2010. It is with tangible growth strategy, tactics and action plan leveraging such technologies, that create new demand and market in sectors and industries where needs exist in aging society with low birthrate, ubiquitous networking society. And it is with appropriate economic policies mentioned by the economists in Nikkei’s report on January 3 such as deregulation, tangible mid-term financial policy outlook, reduction in corporate tax rate (currently 40%), concluding EPA/FTA with Asian countries/regions, and pension system reform that create favourable environment for the growth strategy to be actually executed.
It is only when companies invest in such growth sectors, (many of them contributing to improving social infrastructure and systems), collaborate with academia and other public sectors in R&D in particular, and operate efficiently with high productivity, that they would be able to generate revenue to improve their financial performance. It is with good financial performance of companies that leads to new job creation, higher salaries for their employees, pensions guarantee etc., which contributes to minimizing anxieties of citizens making their own living and live happily after retirement as well as providing citizens with better lives and society, based on the mentality of “friendship and love”. It is by eliminating their anxieties that citizens utilize allowances for consumer spending instead of setting aside for saving, meaning the government’s economy boosting measures become successful, and as a result Japan will be able to get out of deflation, its economy recovered, and achieve the target.
We would need to wait and see what kind of roadmap and action plan the government will develop and announce in June.
* Nominal Growth Rate (Source: Nikkei, edited and translated by the author)
Nominal growth rate is GDP growth rate including effects of price fluctuation. Almost equals to sum of after-tax pay of workers and profits generated by companies. In general, changes in GDP are measured by actual growth rate (excluding effects of price fluctuation) but nominal growth rate can be said to precisely reflect the actual sensation of business and economy because income and profits are all of nominal value.
Average economic growth rate by decades since 1980
Decades / Nominal Growth Rate (%) / Actual Growth Rate (%)
1980s / 6.1 / 3.8
1990s / 2.0 / 1.4
2000s / -0.5 / 0.7
Rise in nominal growth rate leads to both getting out of deflation and economic growth. In 2000s, actual growth rate was +0.7% but nominal growth rate was -0.5%, which implies that long term economic recovery was achieved but lacked in actual sensation. This was because nominal growth rate was minus.
2009年9月27日日曜日
Made In Japan Digital Consumer-Electronics Becomes More Affordable
September 27, 2009 – Osaka, Japan,
Nikkei, Japan’s leading newspaper specialized in economy and politics, announced today that Japanese consumer-electronics giants including Sony and Fujitsu are to start marketing in earnest low-end digital consumer-electronics. This is because demand of low-end digital consumer-electronics with limited features is expanding even in developing countries worldwide, growing as the “volume zone” of the market. Taiwan makers have been leading in this market segment and Japanese makers aim to take the offensive by leveraging EMS (Electronic Manufacturing Service) of Taiwan that has manufacturing plant in China, where the labour cost is low.
For mobile PC, Sony is to commission designing and production of net book, mobile PC of price zone around 50,000 yen utilizing EMS. Section responsible for interacting with EMS will be located in PC Division and people responsible for EMS will be located in China. With this strategy, Sony intends to increase its worldwide PC sales from original plan of 6.2 million units for 2009 to more than 10 million. Fujitsu that entered net book market April this year plans to double for 2009 EMS production from 2008 which was 600,000 units. Fujitsu plans to achieve total worldwide PC sales of 6.5 million, including approximately 300,000 units for net book PCs.
As for video camera, Victor will launch new model(s) with price range of 20,000-30,000 yen, half of the current models, in October for European market, and plans to launch in Japan and the U.S. as well. They do so by utilizing EMS reducing cost. Sony has already launched product(s) with price range of 10,000-20,000 yen this spring in the U.S. and Europe.
As for car navigation systems, Pioneer was the first Japanese maker to use EMS, to successfully market product with price of approximately 50,000 yen, which is half their previous products.
As for flat panel TVs, Toshiba plans to increase low price range LCD TVs to achieve sales target of 1.3 million units in 2009 and in 2010 to achieve 3 million units in 2010 for emerging countries. Sharp has already launched a model with price around 50,000 yen in China this year.
According to Display Research, a U.S. market research company, global net book sales is estimated to reach 3.5 million units for 2009 which is more than double of 2008. This is about 20% of total mobile PC sales. In addition, some experts expect that 40-50% of the U.S. video camera market will be of low-end products for 2009.
Japanese digital consumer-electronics giants have been focusing on high-end products that is usually said to be impacted by price competition. Their strength is “vertical” network, engaging in from developing backbone parts to assembling. However, such companies as Taiwan competitors such as Asus and low-end video camera maker under the umbrella of Cisco Systems have been increasing their presence in the worldwide market. If this trend proliferates in Japanese market as well, it is quite possible that Japanese makers would need to further outsource their production offshore.
To the author, it is high time for Japanese consumer-electronics giants to review and change their strategy as appropriate, applying concept and mechanism of “The Innovator’s Dilemma” and “The Innovator’s Solution” of Clayton M. Christensen.
Nikkei, Japan’s leading newspaper specialized in economy and politics, announced today that Japanese consumer-electronics giants including Sony and Fujitsu are to start marketing in earnest low-end digital consumer-electronics. This is because demand of low-end digital consumer-electronics with limited features is expanding even in developing countries worldwide, growing as the “volume zone” of the market. Taiwan makers have been leading in this market segment and Japanese makers aim to take the offensive by leveraging EMS (Electronic Manufacturing Service) of Taiwan that has manufacturing plant in China, where the labour cost is low.
For mobile PC, Sony is to commission designing and production of net book, mobile PC of price zone around 50,000 yen utilizing EMS. Section responsible for interacting with EMS will be located in PC Division and people responsible for EMS will be located in China. With this strategy, Sony intends to increase its worldwide PC sales from original plan of 6.2 million units for 2009 to more than 10 million. Fujitsu that entered net book market April this year plans to double for 2009 EMS production from 2008 which was 600,000 units. Fujitsu plans to achieve total worldwide PC sales of 6.5 million, including approximately 300,000 units for net book PCs.
As for video camera, Victor will launch new model(s) with price range of 20,000-30,000 yen, half of the current models, in October for European market, and plans to launch in Japan and the U.S. as well. They do so by utilizing EMS reducing cost. Sony has already launched product(s) with price range of 10,000-20,000 yen this spring in the U.S. and Europe.
As for car navigation systems, Pioneer was the first Japanese maker to use EMS, to successfully market product with price of approximately 50,000 yen, which is half their previous products.
As for flat panel TVs, Toshiba plans to increase low price range LCD TVs to achieve sales target of 1.3 million units in 2009 and in 2010 to achieve 3 million units in 2010 for emerging countries. Sharp has already launched a model with price around 50,000 yen in China this year.
According to Display Research, a U.S. market research company, global net book sales is estimated to reach 3.5 million units for 2009 which is more than double of 2008. This is about 20% of total mobile PC sales. In addition, some experts expect that 40-50% of the U.S. video camera market will be of low-end products for 2009.
Japanese digital consumer-electronics giants have been focusing on high-end products that is usually said to be impacted by price competition. Their strength is “vertical” network, engaging in from developing backbone parts to assembling. However, such companies as Taiwan competitors such as Asus and low-end video camera maker under the umbrella of Cisco Systems have been increasing their presence in the worldwide market. If this trend proliferates in Japanese market as well, it is quite possible that Japanese makers would need to further outsource their production offshore.
To the author, it is high time for Japanese consumer-electronics giants to review and change their strategy as appropriate, applying concept and mechanism of “The Innovator’s Dilemma” and “The Innovator’s Solution” of Clayton M. Christensen.
2009年9月6日日曜日
Japanese Gaming Industry Are Facing “Diversity and Multi-polarity” Evident from CEDEC 2009 – The Same for Other Industries Also?
Sunday, September 6, 2009 – Osaka, Japan
CEDEC 2009, the largest conference in Japan targeting Gaming Developers, was held September 1-3 in Yokohama, which clearly depicted today’s Japanese gaming industry summarized by diversity and multi-polarity, i.e. large vs small projects and global vs local. 2500+ participants and 1000 people to join student version CEDEC “Fair to research and study the industry” started this year gathered to the venue. The size of the conference expanded, expressing the sense of crisis of both the developers and management of gaming industry.
1) World is drastically changing with diversity and multi-polarity
The worldwide game industry trend was briefly explained in the opening session, which can be summarized that the game industry is expanding attributing to 2 key words, “diversity” and “multi-polarity”.
Diversity is expansion of device and community space besides gaming platform such as iPhone and social media including Facebook and Twitter. Thus, it is clear that gaming player population is increasing but majority are games they play are those that can be played free of charge, meaning negative impact on the current game device market from revenue and business aspect. Multi-polarity is about the emerging gaming market in China, India and Latin America. In these regions, market expansion is driven by net café online games and presence of Japanese gaming is extremely low.
These reveal that the business environment of Japanese gaming companies is tough, especially in China. Market size estimation of China for 2008 is 238.8 billon yen, which is almost the size of current Japanese game soft market for family use of 300 billion yen. It is possible that China’s market become bigger than Japan’s in 2009 although sales per person for China is far behind Japan. This means emergence of an enormous market.
2) Japanese gaming companies are suffering from dilemma
With Chinese government’s regulation and so forth, Japanese companies are struggling to enter Chinese market. Chinese companies are steadily improving their competitive advantage and meeting local needs to enhance their business and presence in the Chinese market. The fact that Japanese companies are struggling to adapt to multi-polarity is apparent from their foreign sales radio data. 6 game giants excluding Nintendo for 2008 first half was less than 25%.
Severe market environment in the western countries is a negative factor for Japanese companies although they know they need to expand business abroad, and consequently they are relying on Japan domestic package market. Japanese market size (hardware and software) is 600 billion yen for 2008 in total, which is less than 1/3 of the U.S. (2.1 trillion yen) and Europe (2.3 trillion yen), and is merely 12% of the worldwide market of 5 trillion yen. Therefore Japanese companies want to expand their overseas business but that is not easy because market environment of package soft in the U.S. and Europe is severe due to expansion of cheap and casual social gaming market.
3) Gaming companies face tough rival of “Casual gaming” companies that 1.25 million people enjoy
Social gaming offensive action of Japanese companies has started, such as Gree Inc. that estimated what kind of society it would be in 2010 and then developed corporate strategy. Gree estimated that market with mobile phone and mobile game devices will be created and community service would be the centre of the Internet business, and integrated SNS Usocial media) services, their main business, with game. Their killer content is casual game developed by their own Japanese developers leveraging Flash. 1.25 million members are already benefiting from their services and they aim to increase members to 20-30 million to create the biggest virtual community in Japan.
Gree is performing well financially, too, but has not announced its global strategy. Although they develop in Japan their development expense is low, and much revenue is generated by online advertising and item billing/charge. As a company of 100 employees, sales of 13.9 billion yen and operation profit of 8.3 billion yen for June 2009 is good. Gree is aiming to become No.1 in Japan local mobile market, but is planning to acquire users of home setting game market and therefore is a strong rival for gaming companies.
4) Japanese gaming companies can learn from best practices from other industry to deveop their strategy
Best practices of Capcom Co. Ltd’s case, whose gaming development is said to be functioning most effectively in Japan, may give Japanese gaming companies some clues for them to develop their strategy. Capcom restructured development organization with key words of cheap, agile and challenge to enhance the total power of development team. Cheap means efficiency by integrating game engine system. Agility means review of organization by gradual integration to 1 big development department with 600 developers, which resulted in positive effects such as reduction in developers waiting for next task and veteran staff educating new comers leading to faster learning. Challenge means challenging in the field of game that is not currently hot and/or gaming that is said to be difficult to develop in Japan in order to pursue enjoyment of gaming. This resulted in a successful game development with expense of 2 billion yen and they will invest 120 developers for the consecutive gaming development.
5) Web 2.0 social media (Twitter) is also playing a role for diversity and multi-polarity
Though their approach is different, both strategy of Gree and Capcom are based on local characteristics of Japan, which had been a hot topic throughout CEDEC. The issue is the optimum degree of applying local characteristics to the corporate strategy, but no one could estimate nor come to a conclusion because of the drastic change the global market is currently going through. However, some speakers estimated that diversity of new “input” such as motion controller, touch screen and sound recognition, and of new “output” such as hi-vision, BV (binocular vision) and AR (augmented reality) leads to “new interactive experience” and activate the market.
Diversity and multi-polarity seemed to have been occurring also among congress participants. Many of them had iPhone and were twittering by Twitter. There were some who did not know Twitter but such people also started twittering by leaning how to use word of mouth.
Japanese companies in other industry of high tech, electronics and automobile may also be experiencing dilemma of Japanese companies and diversity and multi-polarity mentioned above, and their future depends on how they adapt to changing business environment, create and/or position in the new market, and leverage diversity and multi-polarity to develop and execute their unique corporate strategy. Leveraging and benefitting from Web 2.0 would also be vital for companies to be competitive.
* Information about CEDEC is from a Japanese online article posted in Nikkei web site on September 4.
CEDEC 2009, the largest conference in Japan targeting Gaming Developers, was held September 1-3 in Yokohama, which clearly depicted today’s Japanese gaming industry summarized by diversity and multi-polarity, i.e. large vs small projects and global vs local. 2500+ participants and 1000 people to join student version CEDEC “Fair to research and study the industry” started this year gathered to the venue. The size of the conference expanded, expressing the sense of crisis of both the developers and management of gaming industry.
1) World is drastically changing with diversity and multi-polarity
The worldwide game industry trend was briefly explained in the opening session, which can be summarized that the game industry is expanding attributing to 2 key words, “diversity” and “multi-polarity”.
Diversity is expansion of device and community space besides gaming platform such as iPhone and social media including Facebook and Twitter. Thus, it is clear that gaming player population is increasing but majority are games they play are those that can be played free of charge, meaning negative impact on the current game device market from revenue and business aspect. Multi-polarity is about the emerging gaming market in China, India and Latin America. In these regions, market expansion is driven by net café online games and presence of Japanese gaming is extremely low.
These reveal that the business environment of Japanese gaming companies is tough, especially in China. Market size estimation of China for 2008 is 238.8 billon yen, which is almost the size of current Japanese game soft market for family use of 300 billion yen. It is possible that China’s market become bigger than Japan’s in 2009 although sales per person for China is far behind Japan. This means emergence of an enormous market.
2) Japanese gaming companies are suffering from dilemma
With Chinese government’s regulation and so forth, Japanese companies are struggling to enter Chinese market. Chinese companies are steadily improving their competitive advantage and meeting local needs to enhance their business and presence in the Chinese market. The fact that Japanese companies are struggling to adapt to multi-polarity is apparent from their foreign sales radio data. 6 game giants excluding Nintendo for 2008 first half was less than 25%.
Severe market environment in the western countries is a negative factor for Japanese companies although they know they need to expand business abroad, and consequently they are relying on Japan domestic package market. Japanese market size (hardware and software) is 600 billion yen for 2008 in total, which is less than 1/3 of the U.S. (2.1 trillion yen) and Europe (2.3 trillion yen), and is merely 12% of the worldwide market of 5 trillion yen. Therefore Japanese companies want to expand their overseas business but that is not easy because market environment of package soft in the U.S. and Europe is severe due to expansion of cheap and casual social gaming market.
3) Gaming companies face tough rival of “Casual gaming” companies that 1.25 million people enjoy
Social gaming offensive action of Japanese companies has started, such as Gree Inc. that estimated what kind of society it would be in 2010 and then developed corporate strategy. Gree estimated that market with mobile phone and mobile game devices will be created and community service would be the centre of the Internet business, and integrated SNS Usocial media) services, their main business, with game. Their killer content is casual game developed by their own Japanese developers leveraging Flash. 1.25 million members are already benefiting from their services and they aim to increase members to 20-30 million to create the biggest virtual community in Japan.
Gree is performing well financially, too, but has not announced its global strategy. Although they develop in Japan their development expense is low, and much revenue is generated by online advertising and item billing/charge. As a company of 100 employees, sales of 13.9 billion yen and operation profit of 8.3 billion yen for June 2009 is good. Gree is aiming to become No.1 in Japan local mobile market, but is planning to acquire users of home setting game market and therefore is a strong rival for gaming companies.
4) Japanese gaming companies can learn from best practices from other industry to deveop their strategy
Best practices of Capcom Co. Ltd’s case, whose gaming development is said to be functioning most effectively in Japan, may give Japanese gaming companies some clues for them to develop their strategy. Capcom restructured development organization with key words of cheap, agile and challenge to enhance the total power of development team. Cheap means efficiency by integrating game engine system. Agility means review of organization by gradual integration to 1 big development department with 600 developers, which resulted in positive effects such as reduction in developers waiting for next task and veteran staff educating new comers leading to faster learning. Challenge means challenging in the field of game that is not currently hot and/or gaming that is said to be difficult to develop in Japan in order to pursue enjoyment of gaming. This resulted in a successful game development with expense of 2 billion yen and they will invest 120 developers for the consecutive gaming development.
5) Web 2.0 social media (Twitter) is also playing a role for diversity and multi-polarity
Though their approach is different, both strategy of Gree and Capcom are based on local characteristics of Japan, which had been a hot topic throughout CEDEC. The issue is the optimum degree of applying local characteristics to the corporate strategy, but no one could estimate nor come to a conclusion because of the drastic change the global market is currently going through. However, some speakers estimated that diversity of new “input” such as motion controller, touch screen and sound recognition, and of new “output” such as hi-vision, BV (binocular vision) and AR (augmented reality) leads to “new interactive experience” and activate the market.
Diversity and multi-polarity seemed to have been occurring also among congress participants. Many of them had iPhone and were twittering by Twitter. There were some who did not know Twitter but such people also started twittering by leaning how to use word of mouth.
Japanese companies in other industry of high tech, electronics and automobile may also be experiencing dilemma of Japanese companies and diversity and multi-polarity mentioned above, and their future depends on how they adapt to changing business environment, create and/or position in the new market, and leverage diversity and multi-polarity to develop and execute their unique corporate strategy. Leveraging and benefitting from Web 2.0 would also be vital for companies to be competitive.
* Information about CEDEC is from a Japanese online article posted in Nikkei web site on September 4.
The DPJ Expected to Lead Japan to Change Similarly to Turnaround of Ailing Companies but with More Dynamism and Complexity
Sunday, September 6, 2009 – Osaka, Japan
Japanese governors evaluate social security policies the DPJ’s manifest, Nikkei, the Japan’s leading newspaper specialized in economy and politics, reported yesterday as the survey result Nikkei implemented lately. The result is in line with what Japanese citizens are requesting to the new Japanese government for them to lead better lives.
According to Nikkei, the survey was implemented to 46 governors excluding Aichi prefecture governor who was on a business trip. The question was which policies of the DPJ’s manifest do they evaluate and think is/are the first priority to be implemented. Multiple answers were accepted.
From the survey result, it is apparent that healthcare and social security are the vital items the governors highly evaluate. Top of the list was increase in developing doctors with 19 people, followed by withdrawal of policy of restraining social security expense growth with 11 people. Others such as a certain amount of financial incentives per child and 25% reduction in CO2 emission followed with only 4 people. Making motorway free similarly to the U.K. which has been a hot debate was evaluated by only 3 governors but on the contrary 16 answered that they do not evaluate this policy.
These results overlap with the voices of Japanese citizens interviewed and broadcasted in TV news to make comments on what they expect to the new leading party to improve their lives. Many said that healthcare including increase in doctors and other healthcare experts plus hospitals is vital, and that social welfare including pension issues needs to be solved. Regarding measures to increase children to solve the aging society problem, many said that more “fundamental and systematic” measures to change the society and infrastructure are required.
Japanese citizens also request to the new leading party to stimulate business to improve the economy and employment situation, which is quite natural because they are all directly affected financially by the bad economy. This is a requirement to stimulate the consumer spending and expand domestic market demand. However, domestic market demand expansion alone is limited and something else to stimulate the business and economy is required such as reconstructing the total social infrastructure and fostering to develop new promising industries especially in the area of energy and environment, agriculture, healthcare and IT, and as incentives to attract direct (and indirect) investment to Japan. The reason this kind of issue was not mentioned in the survey to governors could be that there are so many other issues that are more critical, and that it is the companies that are the main players for this issues.
Free comments in the survey as “request and expectation” included clear vision and strategy for growth at an early stage from Mr. Hashimoto of Osaka, and freeing Japanese politics from bureaucratic-oriented style from Mr. Ishihara of Tokyo. Both are “must” of many turnarounds of ailing companies.
The DPJ are expected to lead change the “Japan Corporation” in very much the same way as many turnaround of companies that achieved V-shared recovery leveraging change management. With its size and complexity, this is indeed a big challenge but must be fulfilled for the country and its citizens of today and tomorrow.
Japanese governors evaluate social security policies the DPJ’s manifest, Nikkei, the Japan’s leading newspaper specialized in economy and politics, reported yesterday as the survey result Nikkei implemented lately. The result is in line with what Japanese citizens are requesting to the new Japanese government for them to lead better lives.
According to Nikkei, the survey was implemented to 46 governors excluding Aichi prefecture governor who was on a business trip. The question was which policies of the DPJ’s manifest do they evaluate and think is/are the first priority to be implemented. Multiple answers were accepted.
From the survey result, it is apparent that healthcare and social security are the vital items the governors highly evaluate. Top of the list was increase in developing doctors with 19 people, followed by withdrawal of policy of restraining social security expense growth with 11 people. Others such as a certain amount of financial incentives per child and 25% reduction in CO2 emission followed with only 4 people. Making motorway free similarly to the U.K. which has been a hot debate was evaluated by only 3 governors but on the contrary 16 answered that they do not evaluate this policy.
These results overlap with the voices of Japanese citizens interviewed and broadcasted in TV news to make comments on what they expect to the new leading party to improve their lives. Many said that healthcare including increase in doctors and other healthcare experts plus hospitals is vital, and that social welfare including pension issues needs to be solved. Regarding measures to increase children to solve the aging society problem, many said that more “fundamental and systematic” measures to change the society and infrastructure are required.
Japanese citizens also request to the new leading party to stimulate business to improve the economy and employment situation, which is quite natural because they are all directly affected financially by the bad economy. This is a requirement to stimulate the consumer spending and expand domestic market demand. However, domestic market demand expansion alone is limited and something else to stimulate the business and economy is required such as reconstructing the total social infrastructure and fostering to develop new promising industries especially in the area of energy and environment, agriculture, healthcare and IT, and as incentives to attract direct (and indirect) investment to Japan. The reason this kind of issue was not mentioned in the survey to governors could be that there are so many other issues that are more critical, and that it is the companies that are the main players for this issues.
Free comments in the survey as “request and expectation” included clear vision and strategy for growth at an early stage from Mr. Hashimoto of Osaka, and freeing Japanese politics from bureaucratic-oriented style from Mr. Ishihara of Tokyo. Both are “must” of many turnarounds of ailing companies.
The DPJ are expected to lead change the “Japan Corporation” in very much the same way as many turnaround of companies that achieved V-shared recovery leveraging change management. With its size and complexity, this is indeed a big challenge but must be fulfilled for the country and its citizens of today and tomorrow.
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