In addition to being one of the biggest economies in the world, Japan is also the second biggest export market for swedish products and services in Asia. With 1500 Swedish companies active in this cultural and technology leading country it is an interesting place to learn from and crate relationship with.
According to a study made by Business of Sweden the majority of Swedish companies operating in Japan view positive results both in terms results and market shares. It would therefore be educational to get a first hand sight how the combination of swedish values combines with the japanese business culture and why this has been successful.
Japan has huge focus on future global problems such as energy efficiency, environmental technology and an increased portion of aging and retired population. Most countries sooner or later need to face this and Japan sees Sweden as a role model in especially the health care issues and therefore a visit to Tokyo could lead to a greater understanding of these problems.
Purpose and goals with trip based on own interests and Operations Plan. We hope our visit will give us first-hand experience of Japan’s business culture and how it differs from Sweden’s. Japanese manufacturing processes and R&D are world famous and we think it would be a great opportunity to see it with our own eyes.
Electrolux is a global company with offices all over the world. The company is one off the biggest makers in appliance good and is divided into three fields, small appliances, major appliances and professional appliances.
Electrolux Japan follow the organizational structure from the head office in Stockholm and reports upwards in the respective functionality fields that the company is divided into, small, professional and major. This means that the daily operations in Japan are operating completely independent. The autonomy is necessary since Japan is a unique market. Only KPI goals and bigger decisions such as budget delegated through HQ. Previous successful strategies that proved successful in Europe and America does not work to the same extent in Japan since the competition with domestic brands such as Hitachi are fierce.
One of many examples that was described by Mr.Asai was a food mixer Electrolux introduced a few years ago in South Korea and Japan. In South Korea it became an instant success but at the same time the sales numbers for Japan were disappointing. The explanation would later be derived to the fact that all brands in South Korea where foreign while the Japanese market had numerous domestic brands. This is recurrent on the Japanese market, not only for Electrolux. Domestic brands produce high quality products that combined with the nationalistic culture is hard to compete with. Japan is a world top class volume market so the business strategy in Japan needs to adapt to other strategies. Currently this strategy is to go into fields/products where the competition have not caught up yet. Another successful approach is also to collaborate with domestic companies like hitachi.
In response to the competition, Electrolux Japan’s different strategy has resulted in a different sale chart compared to the rest of Electrolux’s regions. In general Electrolux gets the majority of their sales from major appliance. In Japan, the chart is reversed as to the small appliance is 41%, professional 54% and major appliance only 5%. The fact that Japan also uses two different kinds of electrical power voltage since the adoption of both the German and American standard has led to higher R&D/adoption costs. Which is difficult for Electrolux Japan to control since Electrolux Japan do not have their own R&D department. In the future though, there are thoughts about combining their R&D budget with the American region as to lower the adoption costs.
The lack of a local R&D department is also the reason to why Electrolux is currently not in need for a lot of junior engineer and the reason they do not have any collaboration with universities in Japan. In the future though, this might change if the R&D situation develops further. Continuing looking at the future, Japan is in the lead in sanitary products. This will increase with an growing population and there is major market to grab. But once again there is a problem that they do not have their own R&D which is needed to face the innovation challenge.
ABB is one of the oldest swedish companies in Japan, established here 1907, and has 750 employees in 21 different sites. The classical picture of them as solely being a robotics and power distributing company is now shifting. As all the products around us is shifting to be connected, ABB is moving all of their core business and knowledge towards and IoT and digital implementations of their portfolio of products.
Since there is some reluctance against foreign companies in general in Japan they have been trying especially over the last 20 years to indulge in more joint ventures to pass this threshold and still make their technology available in the market by cooperating with already established and accepted Japanese companies. An example of this occurred after the earthquake in 2011 when Japan had to adapt a new approach to the countries power supply. Before the production and distribution was strictly controlled by individual players in each region of Japan and the power grid was a mix between German and American standard. The market was liberated in order to fix the damage the natural disaster had done. ABB shook hands with Hitachi, a giant player in Japan, to widely introduce their technology and knowledge in the power grid market and to unite the different power grid solutions.
Tomoko explained that one of the reasons why people in Japan prefer domestic companies is due to the higher level of reliability especially in a decreasing or troubled market. For the power supply segment which ABB is active in this means that Japan would not want a foreign company to enter the market and then have the risk of them leaving if high and dry if there should be any problem that would cause the foreign companies to pull out which could lead to huge troubles. ABB has been in Japan for over 100 years so they indeed have some leverage and arguments they are a reliable contributor but cooperation is always good and with the help from Hitachi they could use their advantage in sales and supply chains.
ABB is a massive global company that utilise a decentralised operation strategy. As Tomoko explained it, they are not like German firms with a big HQ on their home field that distribute German managers around the world to all their offices and execute in a German way and culture. Since they are so big they instead try no to be centralised and let decision and feedback flow both from a global and local perspective. Their executive committees are really diversified and they try to be as international as possible to get a variety of inputs. ABB think local markets understand themself better than a centralised unit and they try to take advantage of this.
Depending on the needs in the region such as automation in japan, robotics in china. The majority of R&D in a segment is localised in the area where that business is largest. Robotics and automation is for example huge in China and therefore a lot of the development is located there because the knowledge and is also believed to be located there.
In unison with Electrolux and other foreign companies in Japan, ABB sees a challenge in the process of attracting young quality graduates. Students from top universities in in Japan are more familiar with Japanese domestic firms such as Mitsubishi and Hitachi and the number of students are decreasing. So naturally there is a pull towards those firms that is hard to compete with. To tackle this, ABB Japan focus on talking to students personally through student fares and other events. The firm are also actively working on making the company more diverse. Opening up to flextime, more holidays and less overtime that can make life easier for young parents etc.
ABB offers a board area of internships, especially in robotics area and they have previously had joint project with a university in the northern part of Japan. Being able to speak Japanese is not needed unless you are working with sales.
The last visit on our trip was paid to one of Volvos sales office in Tokyo where we met with Masanori Nagase who worked in corporate communications. Mr. Nagase was also joined by Mrs. Shimamoto who acted as a translator when needed.
Volvo does not have any R&D or production in Japan but they provide several sales offices across the country. Japan is a tough market for the car industry in many ways. Apart from the already difficult conditions foreign companies face with the fact that they are foreign, Japan has a long and proud history in the automotive industry. Today only 8% of the cars sold annually are imported. With Toyota as the unthreatened number one player with ownership in almost every other Japanese car brand and a huge portfolio in every segment it requires something special to stand a chance here.
During the last decade Volvo has been trying to transform more into the premium segment of cars. Because of this their competitors has changed a bit and in a way moved away from possible Toyota customers to more target the german brands. Nagase explained that the japanese customers in this segment can be divided into two groups, the ones who want flashy cars and those who do not. Volvo does not market themselves as flashy but instead style and quality. Because of this Volvo is, at least, according to themselves here in Japan almost the go to brand of you are looking for quality and safety. They are highly regarded amongst doctors, teachers and and people with governmental status in Japan. According to Nagase because those are the customers most concerned about safety. The only brand that is really considered a competitor in safety is Subaru.
The office have relatively strict directives from the Swedish HQ in Gothenburg. Required sales numbers. marketing materials and scene set ups for showrooms is an issue for the central management to decide and the international offices to follow. What do differs in Japan is the dealership’s responsibility following a sale. In Sweden they provide service, guarantees etc. The same thing apply in Japan but with even higher requirements. Japan is widely known for their demand for quality and this reflect their ownerships and demands on the product. Nagase said it is not unusual for customers to call in the middle of the night wanting immediate service and help. To compete here is not only about selling the car but to provide the entire experience surrounding the car before and a long time after the actual affair.
In Japan for the past 5-10 years there has been a massive change in how people buy cars. 10 years ago a normal process consisted of the customer visiting a dealership for an average of 7-8 times before making a decision to buy a car. Today that number has decreased to 1.7! Customers today prefer to do the research online the same way they are shopping cloths or home electronics. Because of this Volvo Car Japan will be spending a lot more resources on online marketing to keep and gain their market shares.