Corporate governance reforms in Japan – talk given at the Embassy of Sweden in Tokyo on 6 October 2016

Gerhard Fasol

Corporate governance reforms in Japan

Changing the way Japanese corporations are managed: Can it make Japanese iconic corporations great again?

A talk by Gerhard Fasol at the Embassy of Sweden organized by the Embassy of Sweden, The Swedish Chamber of Commerce in Japan (SCCJ), and the Stockholm School of Economics

Abstract: Changing the way Japanese corporations are managed

The Executive Management Board and the Supervisory Board are normally independent and composed of different people – except in Japan. In Japan traditionally Executive Management Board and the Supervisory Board are one and the same, ie the Executives of traditional Japanese companies supervise themselves – no surprise that the CEO seldom fires himself!

It is obvious that such self-supervision has big disadvantages, and may be one of the major reasons for Japan’s weak economic growth, and several recent corporate scandals. Companies in basically all other countries are managed by an Executive Management Board, which is supervised by a Supervisory Board, which approves or vetoes all major decisions of the company, and evaluates the performance of the Executive Manager, including the Chief Executive/CEO, and if necessary fires executives including the CEO, and selects and approves the new CEO.

To remedy this problem with the governance of Japanese corporations, Japan’s Government, the Tokyo Stock Exchange, and the Financial Services Agency have been changing the rules to improve the supervision of Japanese companies.

Speaker profile

Dr. Gerhard Fasol is one of a microscopic number of foreigners who is an independent Director on the Management and Supervisory Board, and also a Member of the Audit Board of a stock market listed Japanese corporation, and he will talk from several years of first-hand experience of how Japanese companies are supervised, which changes are on the way, and which further improvements are necessary to improve the management and supervision of Japanese corporations.

Date: Thursday October 6th, 2016, 18:30

Place: Alfred Nobel Auditorium, Embassy of Sweden, 10-3-400 Roppongi 1-chome, Minato-ku, Tokyo 106-0032

Details and registration

Further details here.

To register please contact the Swedish Chamber of Commerce in Japan.

Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016
Gerhard Fasol "Corporate governance reforms in Japan" Embassy of Sweden on 6 October 2016
Gerhard Fasol “Corporate governance reforms in Japan” Embassy of Sweden on 6 October 2016

Copyright·©2016 ·Eurotechnology Japan KK·All Rights Reserved·

Japan’s globalization paradox: is Japan global? or struggling to globalize?

fasol.com

Japan’s globalization puzzle: intriguing questions by one of my great European friends, a great European banking sector leader

How do you explain Japan’s lack of internationalization with so many big Japanese holdings managing successfully businesses abroad (e.g. Toyota, Toshiba, Mitsubishi, etc.)

Japan’s globalization paradox – a closer look

Its not so simple: Japan is a huge country, third globally, and there are 3500 Japanese companies listed on the Stock Exchanges – they are all different. Some Japanese companies are very excellent and successful and global leaders or even No. 1 in their fields – e.g. you mention Toyota and there are many more.

On the other hand, Japan is the only major country who’s economy has not grown for 20 years, and for example, Japan’s electronics sector dominated the world 20 years ago, but since then there is no growth and essentially no profits, see: http://www.eurotechnology.com/2015/06/18/japanese-electronics/

There are two main factors limiting Japan’s growth

  • decreasing and aging population. few babies and no immigration.
  • structural reasons (slow growth by traditional established corporations, and too few new high-growth industries), corporate governance issues, addressed by Prime-Minister Abe’s “third arrow”, however most people agree that Prime Minister Abe’s “third arrow” reforms have been more words than action. Maybe the most or only successful “third arrow” reform are Japan’s corporate governance reforms

I’ll give a talk on 6 October 2016 for the Swedish Chamber of Commerce in Japan, Stockholm School of Economics, at the Swedish Embassy in Tokyo:
“Changing the way Japanese corporations are managed”

Exhibit – Toshiba and its scandal

You mention Toshiba – Toshiba is a famous global brand in many sectors, and Toshiba has developed many important technologies in many areas from medical technology (Toshiba’s medical sector has been sold to Canon as a result of Toshiba’s accounting scandal), semiconductors (especially flash memory), but Toshiba’s profits/income averaged over 20 years is close to zero, ant Toshiba did not grow for 20 years, and went through a series of accounting scandals etc. Now as a consequence of these scandals, Toshiba has to sell off several important growth divisions, e.g. their very valuable medical technology sector to Canon. Read comments on Toshiba here:
http://www.eurotechnology.com/2015/07/21/toshiba-income-restatement/
or read in Wall Street Journal about Toshiba here 2 days ago
http://www.wsj.com/articles/toshibas-turnaround-needs-more-work-1471007429

Toshiba’s accounting issues are the result of a combination of mainly two factors:

  • 20 years no growth and essentially no profits, compounded by financial problems in the nuclear industry segment as a consequence of the Fukushima Dai-Ichi nuclear disaster (Toshiba had acquired the nuclear manufacturer Westinghouse, and thus is a major nuclear industry manufacturer and contractor)
  • corporate governance

Companies such as Toshiba, benefit from their globally famous brand, therefore I am quite optimistic that Toshiba and other Japanese companies in similar situations can recover, if the correct management decisions are taken, and if corporate governance is improved – and this is exactly the reason why the current Japanese government sees corporate governance reforms in Japan as a major priority.

There is no doubt in my mind, that if corporate governance, management and other factors are improved, companies like Toshiba can be transformed into iconic companies, but these will be different companies than today.

As an example, both SONY and HITACHI are quite successful in their revival efforts.

Japan’s electronic sector

Japan’s whole electrical sector is in huge trouble – again caused largely by corporate governance – read: http://www.eurotechnology.com/2015/06/18/japanese-electronics/

Here are some of my interviews on CNBC, BBC etc about these issues, e.g. http://www.bbc.com/news/business-20335272
and
http://www.bbc.co.uk/search?q=gerhard+fasol
http://www.bbc.com/news/world-asia-21992700

Mitsubishi – there is no Mitsubishi Holding Company, but 1000s of companies with Mitsubishi in their name…

As another example you mention is Mitsubishi. There is no single company with the name “Mitsubishi” in Japan. There are 1000s of companies with Mitsubishi in their name, and most are loosely grouped into the Mitsubishi Group – which is not a legal entity, and at their core is Mitsubishi Trading Company, and Tokyo Mitsubishi UFJ Bank etc. In some cases there are cross-shareholdings within the Mitsubishi Group, but these have been reduced much over the recent years. There is no “Mitsubishi Holding Company”. Most companies with Mitsubishi in their name are independent companies, many independently on the stock exchange.

Together the Mitsubishi ‘Group’ is a big part of Japan’s economy – maybe 10-15%, but the ‘Mitsubishi Group’ is not a corporate group in the Western sense. Some of these companies are very successful and very strong – some are very good, but some have difficulties – which can also be overcome. An example is Mitsubishi Motors, an automobile maker, which was acquired around 2001 and then divested again in 2004-2005 by Daimler (then Daimler-Chrysler), and is currently being reformed by Nissan under the guidance of Nissan/Renault CEO Carlos Ghosn.

Read this analysis in Wall Street Journal a few days ago – this is exactly what I will talk about in my talk at the Swedish Embassy
http://www.wsj.com/articles/mitsubishi-motors-probe-finds-weak-governance-at-root-of-scandal-1470141587

The whole picture is quite detailed and differentiated.

“Toyota, Mitsubishi, Toshiba are great companies” … Yes and no. The devil is in the detail. More reading here:

e.g. my talk at the American Chamber of Commerce in Japan: Japan’s Galapagos Effect

My interviews on CNBC, BBC etc about these issues, e.g.:
http://www.bbc.com/news/business-20335272

Read also Masamoto Yashiro talk “Japanese management – why is it not global? asks Masamoto Yashiro at a Tokyo University brainstorming”

(Masamoto Yashiro is my great friend and a legend in Japan’s banking and energy industry. He built Shinsei Bank from the ashes of the bankrupt Long Term Credit Bank of Japan, and served in leadership positions (Chairman, CEO, Board Member) in Esso, Exxon, Citibank, Shinsei Bank, and the China Construction Bank)

Masamoto Yashiro also regularly attends the Ludwig Boltzmann Forum which I am developing into a global leadership platform, which I am organizing, you can see him in the photos here:
8th Ludwig Boltzmann Forum 2016
and here
7th Ludwig Boltzmann Forum Tokyo 2015

Japan’s economy overall and Abenomics

My friend Takeo Hoshi, Professor of Finance at Stanford Graduate School of Business: “Abenomics success probability is 12%, 88% probability of failure”

Download Gerhard Fasol’s Stanford University lecture “New opportunities vs old mistakes – foreign companies in Japan’s high-tech markets”

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Wiener Staatsoper – who is the owner?

One of my friends asked me who the owner of the Vienna State Opera House is

Wiener Staatsoper organization and ownership, as for Austria’s top 5 Theater Houses, is determined by the “Bundestheaterorganisationsgesetz” (BThOG)

One of my friends asked me the question “Who owns the Wiener Staatsoper these days by the way?”. This is easy to answer. Hold tight and read:

The major Austrian Theater Houses (Wiener Staatsoper, die Wiener Volksoper, das Burg- und das Akademietheater) are considered by law as the representative “Bühnen” (=stages) of the Republic of Austria, and are governed by the “Bundestheaterorganisationsgesetz” (BThOG) <- one word! you know German has long words...

According to this law, the Staatsoper belongs to the company “Bundestheater-Holding Gesellschaft mit beschränkter Haftung”, which belongs 100% to the Federation of Austria (Bund).

To understand the ownership and Governance, you need to read § 3 of the Austrian Federal Law, the Bundestheaterorganisationsgesetz. Essentially it says that the four major Austrian Theater Houses (Bühnen) above including the Wiener Staatsoper belong to a company called: “Bundestheater-Holding Gesellschaft mit beschränkter Haftung” which is founded by the Federal Chancellor, and which belongs 100% to the “Bund”, the Austrian Federation = the Federal Government of the Republic of Austria.

Read the “Bundestheaterorganisationsgesetz” (BThOG) here

You can read the “Bundestheaterorganisationsgesetz” (BThOG) here – by the way, its just being revised: Bundesrecht konsolidiert: Gesamte Rechtsvorschrift für Bundestheaterorganisationsgesetz, Fassung vom 13.07.2015

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Best wishes for 2015 from Tokyo!

www.fasol.com

The photograph shows the Gobelsburg Castle in Austria, you can see the location here on Google maps. A castle of this name is mentioned in 1178, and wine is grown in the region for about the last 1000 years.

Thoughts and analysis for 2015

Abenomics?!

The trick of course is the third arrow, the reforms. Read what Professor Takeo Hoshi has to say about Abenomics, Japanese economist, who has worked his way up US Universities, and has now reached the position of Professor of Economics at Stanford University. By the way, here is my talk at Stanford University – some years ago, but much of it still applies today.

Japan’s energy

Japanese people’s views on nuclear power are polarized, and its unclear and unpredictable when nuclear power stations will be switched on again in Japan. Read what the Governor of Niigata Prefecture has to say, who hosts the world’s largest nuclear power plant with 7 reactors and 8 GigaWatt capacity.

According to the Japanese Energy Fundamental Law, the Government has to publish an official Energy Basic Plan at regular intervals. You can read the 4th Energy Basic Plan published on April 11, 2014, and listen to a commentary on it for The Economist here on YouTube. The 4th Energy Basic Plan starts with the assumption that Japan is poor in natural energy resources, which of course is only true if we restrict “natural energy resources” to fossil resources. Japan is actually potentially very very rich in renewable energy sources, as the scenario plans developed by Japan’s Industry and Economy Ministry (METI) and Japan’s Environmental Ministry show.

Solid state lighting saves energy

GaN LEDs were invented and commercialized in Japan, and Shuji Nakamura, Isamu Akasaki and Hiroshi Amano won the 2014 Nobel Prize in Physics for this work. Read the summary of Shuji Nakamura’s keynote at the 5th Ludwig Boltzmann Forum.

Post-Galapagos and globalization of Japan’s technology groups

To overcome Japan’s Galapagos issues and to acquire technologies and market access, Japanese companies are acquiring overseas: read a list of Japanese acquisitions in Europe here.

Foreign companies in Japan, and Japanese companies overseas face a dilemma: expensive expatriates with limited local know-how, or local management? Japanese companies seem to have finally reached the conclusion that Japanese managers eg sent to Germany are in most cases not the best choice to lead a German-based multinational company – here are some great recent examples:

  • Docomo acquires a majority stake in net mobile AG, however net mobile AG remains a publicly listed company. Read details here.
  • NTT DATA acquires SAP solution provider itelligence AG, however itelligence AG remains an independently managed company under the founder’s management, and grows aggressively via acquisitions all over the globe. Read details here.
  • NTT Communications acquires a majority of Integralis, Integralis is renamed NTT Com Security AG, however NTT Com Security AG remains traded on the m:access market of the Munich Stock Exchange. Read details here.

Carlos Ghosn is very well aware of such multi-cultural management issues and how to solve them, however too many EU companies in Japan are not. If they were, EU investments in Japan could be at least 50% higheras you can read here.

Best wishes, and much success in 2015!

Copyright·©2015 ·Eurotechnology Japan KK·All Rights Reserved·

Keep fit and save electricity: climb the stairs the geeky way

Keep fit and save electricity: geeky way to encourage people to climb stairs, seen in Tokyo at Tokyu Hands Shibuya store

Keep fit and save electricity

Geeky way to persuade people climb the stairs – see in in Tokyo/Shibuya

Its not easy to persuade people to climb the stairs instead of taking the elevator.

Tokyu Hands store in Shibuya found a geeky way to persuade people to Keep fit and save electricity at the same time:

Show the calories your body burns walking up the stairs, which should help you loose weight – and save on the store’s electricity bill at the same time.

After the Fukushima nuclear disaster and the closure of all of Japan’s nuclear power stations, saving electricity has become a top priority. In Tokyo’s subway and trains fluorescent lighting has been replaced by LED lighting, some fluorescent tubes have been removed, and some elevators were at least temporarily shut down to save electricity – in Japanese: 節電. The Tokyu Hands Store in Shibuya found a geeky way to encourage customers to keep fit, burn calories, climb the stairs, and save electricity all at the same time.

Keep fit and save electricity: geeky way to encourage people to climb stairs and save electricity, seen in Tokyo at Tokyu Hands Shibuya store
Keep fit and save electricity: geeky way to encourage people to climb stairs and save electricity, seen in Tokyo at Tokyu Hands Shibuya store

Copyright·©2014 ·Eurotechnology Japan KK·All Rights Reserved·

Corporate governance in Japan – views of an Independent Board Director of a listed Japanese Company

Corporate governance in Japan: views of a Board Director of a Japanese listed Corporation. Directors should be seen for their steady contributions

Prime Minister Abe urges reform of corporate governance

Slow but steady change…

Reuters reports that Japan’s Prime Minister Abe urges company boards to reform corporate governance to include independent directors. I added the following comment.

Corporate governance in Japan: exercise of shareholder power and emergency situations

The question of independent Board Directors is often framed in terms of exercising shareholder power over the company, as is the main message of the article above. Another focus of discussions on the role of outside independent directors, is during emergencies, and here the Olympus case is often cited.

Corporate governance Japan: steady state contributions of independent directors

However, in my experience in Japan, including my work as a non-Japanese independent Board Director of a public Japanese company, enlightened companies will welcome independent Board Directors for their know-how and contributions to the company – in the end the market decides.

Docomo vs SoftBank

As an example, lets compare NTT-Docomo and SoftBank. NTT-Docomo has a homogeneous pure Japanese Board, while SoftBank has independent Directors from many different countries and from many different walks of life. SoftBank recently overtook NTT-Docomo in terms of market cap, revenues, operating income and net income.

In the end regulations have limitations, regulations influence behavior of course, but regulations do not produce business results or grow new business (with the exception of the compliance industry), and the realities of the market decide, as is the case of SoftBank.

SoftBank and SPRINT

As another example, SoftBank appointed Marcelo Claure, CEO of Brightstar Corporation and of Bolivian origin, to the Board. Masayoshi Son announced the appointment with the following words: “Marcelo’s experience as an entrepreneur and businessman who created and successfully grew a global telecommunications company will bring an invaluable perspective to Sprint’s board.” Note that Masayoshi Son clearly states that Marcelo Claure is appointed to bring invaluable know-how and experience to SPRINT, Masayoshi Son does not seem to be motivated by “increasing the power of the shareholders over Sprint”.

The “power of shareholders” is usually a matter of last resort, when all other methods fail.

Usually, when you have to show your power, its too late.

Corporate Governance reforms in Japan

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Japan’s new energy policy – interview by The Economist

Japan’s new energy policy – Gerhard Fasol interview by The Economist

Japan’s new energy policy: interview for The Economist on YouTube

Japan’s new energy policy – interview outline:

Japan’s new energy policy Question: Is the new energy policy of Japan’s Government an appropriate response to the situation or a missed opportunity

Answer summery:The Government in its new strategy summarizes Japan’s energy situation and proposes a cocktail of different energy sources. Everyone knows that Prime Minister Abe is pro-nuclear energy, but that does not mean that he is against other energy sources, such as renewables. The new energy strategy paper though misses KPIs, Key Performance Indicators. There are no many numerical targets.

Japan’s new energy policy Question: It is often repeated that Japan is poor in energy sources, is this true?

Answer summery:It is often repeated that Japan is poor in energy sources. This is only true as long as we restrict our view to traditional carbon based primary energy sources such as oil, gas, or coal. But if we widen the view to renewables such as wind, water, solar, biomass, and geo-thermal energy sources, then Japan is actually very rich in primary energy sources, and could even aim for energy self-sufficiency. Off-shore wind alone would be sufficient to make Japan energy self-sufficient.
Just by repeating the statement many times, that Japan is poor in energy sources, does not make this statement true.

The new energy policy paper also starts out by saying the Japan is poor in primary energy sources. This is not true if we widen the view to renewable energy sources.

Japan’s new energy policy Question: Re-engineering the electricity grid. Can you explain the concept?

Answer summery:The electricity grid has evolved over many years, maybe 100-150 years. The traditional architecture of the electricity grid is a top-down one-way distribution network from large central power station such as large coal-, gas- or oil-fired power stations or nuclear power stations, to consumers. The traditional electricity grid is similar to the arteries in the human body, where there is the heart in the center, and the arteries distribute the blood to the extremities. This traditional top-down grid has served us very well for a long time, but the time as come now to evolve the grid to the next stage. There will be more distributed power generation, which feed in electricity in the opposite direction from the extremities, and there will be more intelligence in the grid.

Japan’s new energy policy Question: How do you see Japan deal in the future with supply and demand manages, how do you see electricity prices evolve in Japan?

Answer summery:With the liberalization there will be more flexibility in the pricing of electricity and supply and demand management. Prices will not necessarily go down, but will depend much more on the timing of demand, on demand/supply management, or on the value of electricity. For example, mission critical electricity consumers such as data centers or hospitals will need a different type of electricity supply, than washing machines in households. Demand/supply management and smart grid will manage the timing of less critical electricity usage.

Economist briefing “Keeping the lights on – deregulation, new and renewables and Japan’s energy mix” handouts

The interview is based on our reports:

Copyright·©2014 ·Eurotechnology Japan KK·All Rights Reserved·

Professor Frank Kelly, Master of Christ’s College, Cambridge and Professor of the Mathematics of Systems

Professor Frank Kelly, Master of Christ’s College, Cambridge and Professor of the Mathematics of Systems Professor Frank Kelly speaks about the future of Cambridge University and of Christ’s College

Professor Frank Kelly speaks about the future of Cambridge University and of Christ’s College

Frank Kelly, Professor Francis Patrick Kelly FRS, Master of Christ’s College, Cambridge, and Professor of the Mathematics of Systems, gave us his view of Cambridge today at the Cambridge Oxford Society of Japan in Tokyo.

Professor Frank Kelly: In Cambridge the Colleges provide the personal connection, while the University provides the scale

In the past Cambridge competed with Oxford, and Oxford’s saw Cambridge as the only competitor. Today this picture has changed dramatically, both Cambridge and Oxford compete globally, and especially more and more now with Asia, such as China, Korea and Japan. In order to keep ahead in this global competition, Cambridge needs more headroom for research.

Professor Frank Kelly: The North West Cambridge Development

One big venture is the North West Cambridge Development:

  • 150 Hektar
  • 5000 post-docs
  • 2000 graduate students
  • 600 million pounds
  • 11,000 cycling space reflecting Cambridge customs

Professor Frank Kelly: Cambridge University’s first bond

To the financing contributed a 350 million pound bond, which was awarded AAA rating (which according to Professor Frank Kelly is a better bond rating than the Government of the United Kingdom currently achieves).

Professor Frank Kelly: the role of “benefactors”

We have the annual Benefactors’ Dinners at Cambridge and Oxford Colleges. “Benefactors” used to be the people, who founded the Cambridge and Oxford Colleges 100s of years ago, and who we have as oil paintings on the walls. However, this picture has changed in the last 20-30 years. Today, our benefactors are also living people, our alumni, who are living benefactors, role models and inspirations in their professions for our undergraduates.

Professor Frank Kelly: about alumni

Colleges today have several stake holders: undergraduates, graduates, Fellows and alumni, and alumni are by far the largest group by numbers.

We have a good business model, where the cost of each student to the College and the University is partly paid by fees, and part from elsewhere. However, this business model is difficult to scale to larger numbers. So our size in terms of student numbers is likely to remain as today.

Copyright·©2014 ·Eurotechnology Japan KK·All Rights Reserved·

Social media revolutionize how we market brands (Ray Bremner, President & CEO, Unilever Japan)

Ray Bremner, President & CEO of Unilever Japan gave a talk at Waseda University

From Advertising to consumers to mattering to people

My key take-away is that social media have made the top-down “begin told” way of advertising obsolete, and replaced it by finding, sharing and engaging.

About Unilever:

  • Unilever was founded in 1929 by the merger of the British soap maker “Lever Brothers” (founded in 1885 by William Hesketh Lever, The Right Honourable The Viscount of Leverhulme), with the Dutch margarine producer “Naamloze Vennootschap Margarine Uni”, which was formed by the merger of several margarine companies, including those of Antonius Johannes Jurgens and Samuel van den Bergh. Soap brought hygiene to ordinary people, and margarine helped people who could not afford butter. Both companies, Lever and Margarine Uni had in common that they used palm oil as raw material.
  • The merger of Lever and Margarine Uni was decided over dinner in London in 1929, and written down in a 100 word merger agreement – unthinkable today for an M&A agreement.
  • About 50% of Japanese people have Unilever products at home
  • Unilever vision 2010 is: double the business, while reducing the environmental footprint. Execution of this vision is measured by 60 KPIs and the results are published.
  • Unilever vision:
    • We work to create a better future every day.
    • We help people feel good, look good, and get more out of life with brands and services that are good for them and good for others. We will inspire people to take small everyday actions that can add up to a big difference for the world.
    • We will develop new ways of doing business that will allow us to double the size of our company while reducing our environmental impact.
  • Unilever mission: building brands that improve people’s lives.
Social Media is revolutionizing the way we market brands
Ray Bremner, President & CEO of Unilever Japan: Social Media is revolutionizing the way we market brands

Ray Bremner: “social media are revolutionizing the way we market brands, and they are making people like me extinct”.

From 2001 to 2013, the average time Japanese consumers spend watching TV has decreased from about 3 1/2 hours/day to 3 hours/day, while the time spent with PC & mobile has tripled from 1/2 hour/day to 1 1/2 hours per day. Most Japanese age groups use social media, usage peaks at 35% for men in their 20s, and around 45% for women in their 20s, and around 30% in their 30s.

TV reaches about 88% of Japan’s population, and digital media (PC and mobile) reach about 73%.

From 2001 to 2012, advertising expenditure in Japan has decreased from about US$ 27 Billion/year to US$ 23 Billion/year, while expenditure for digital media has increased from zero to US$ 12 Billion/year. For an overview of Japan’s media markets – see “Japan’s Media“.

How to make marketing messages a pleasure rather than annoying?

How do we succeed? Crafting brands for life.

  • Put people first, not just consumers. Real people with real lives.
  • Build brand love.
  • Unlock the magic.

The brand love triangle

How do you create a conversation people want to participate in?

We use the “brand love triangle. “The people we serve” are in the center. The three edges of the brand love triangle are:

  • Purpose (brand point-of-view) <--- brand history dive
  • Product truth <--- product dive
  • Human truth <--- people immersion
Ray Bremner, President & CEO of Unilever Japan: Real people with real lives
Ray Bremner, President & CEO of Unilever Japan: Real people with real lives

“Dove Real Beauty Sketches” by Steve Miles

Brands need a purpose, a point of view. Before 2002 Dove did not have a purpose.

Steve Miles talking about Dove and himself:

93% of women do not think they are beautiful – men are opposite: 93% of men think that they look just great. Dave Miles (and Dove’s) point of view is that everyone is beautiful. This point of view is expressed in “Dove Real Beauty Sketches”, which won the Titanium Grand Prize and 10 Gold Lions at Cannes 2013:

As of today, “Dove Real Beauty Sketches” has 61,767,827 views on YouTube, which is not as much as PSY’s Gangnam Style with 1,888,086,686 views, but still – pretty amazing.

Another example of brand communication is Harley Davidson, which signifies “Freedom of the Road”, independent character. Harley Davidson creates a bond to customers by presenting each customer with the “umbilical cord”, the belt with which the Harley Davidson motor bicycle was tied down during the transport from the factory to the customer.

Focus: In 2000, Unilever had 1600 brands and today 400 brands.

Q&A

Question: How many of your campaigns in Japan are global campaigns? How many are Japan-only?

Answer: practically all campaigns for all international brands of any company are made in Japan for Japan. That is not to say that global ideas do not work. In fact in most cases International Brands have the same brand and advertising positioning in Japan as elsewhere in the world. What does differ for Japan is that often Japanese consumers have different usage habits, have different views about the world and the cues within the advertising can leave different impressions on Japanese minds. The Japanese consumer is highly observant of small details in advertising ; much more so than the average European for example.

That means that we test Global campaigns but very often we have to create Japan only executions so that how we express the idea is done totally with the Japanese consumer in mind. This is more costly and time consuming but essential for success.

Copyright·©2014 ·Eurotechnology Japan KK·All Rights Reserved·

Whats the difference between Apple/IBM vs Sony/Panasonic/NEC?

Gerhard:

Profit and growth. Apple and IBM grow and are highly profitable. Sony, Panosonic and NEC have no growth and no profit for 15 years – read here: http://www.eurotechnology.com/2013/05/20/japans-big-8-electronics-giants-fy2012-results-announced/
for more detailed analysis, read our Report on Japan’s electronics sector

Answer:

Gerhard, we know about the difference in profitability and growth. The question is, what made such a difference in profitability and growth

Gerhard

there are many down-stream issues, e.g. acquisition of cloud startups, execution etc. Much of this is summarized in an excellent talk by Masamoto Yashiro, which I have written up here: http://www.fasol.com/2013/10/19/masamoto-yashiro/

There are:
1. superficial reasons, like YEN-rate, interest rate, global recession etc
2. execution and management issues, the kind of stuff you learn at Business Schools
3. the big underlying issues

the big underlying issues are brains (=hardware) and education (=operating system and software for those brains).

There are many fantastic Japanese companies. In a free market, its no surprise that companies are born and others die. Its called Schumpeter’s creative destruction. In a way its more surprising that companies can survive so long with a long-dead business model.

Have you heard about the German company AEG? AEG built the electricity system for Tokyo a long time ago – thats why Tokyo has 50Hz and Osaka has 60Hz. AEG disappeared about 30-40 years ago. There are still some companies today licensing the AEG brand, which is still famous, however, the traditional AEG company disappeared with bankruptcy in 1980. You can read about this here: http://www.csmonitor.com/1982/0812/081250.html

it says:
“Plagued by bad management throughout the 1970s, West Germany’s 10th largest employer overextended itself and became involved in too many loss-making enterprises. It invested heavily in the wrong kind of nuclear technology and its domestic appliances business fell prey to growing competition in a stagnant market.
In the last four years, it posted operating losses of 4 billion marks ($1.6 billion) and despite massive injections of credit from the banks in 1979 and again last year, it did not recover. Mr. Duerr partly blames the worldwide recession and high interest rates for the failure.”

Sounds familiar? thats AEG in 1980.

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