JapanStrategy-Blog

Sanrio licenses "Hello Kitty" to Diseno Textil SA (ZARA)

2009-04-19T04:56:00.004+09:00

Diseno Textile SA (ZARA) entered Japan's market earlier than H&M and can now collect some fruits from timing advantage: Diseno succeeded to obtain a license for Sanrio's Hello Kitty character, and plans to market Hello Kitty branded goods.

Will be interesting to see if H&M will do quid-pro-quo and seek to license other famous Japanese characters?

Investor Club: What crisis? Meet some booming Japanese companies

2009-03-28T21:36:00.001+09:00

It's not all doom and gloom here in Japan. Nintendo's sales and operating profits are rising 8.8% year-on-year. KDDI saw its net profits increasing 59% year on year. Yahoo Japan increases dividends by 22%-25% for 2008. Who are today's winners in Japan's IT industry? Gerhard Fasol will show us how and why some great Japanese companies excel in today's crisis.

The talk reviews today's status of Japan's electrical companies, the telecommunications sector and the internet sector, and introduces seven different companies, which show rapid growth of revenues, operating income and net income despite the crisis. These seven companies we introduce turn the crisis into an opportunity.

The PowerPoints of this presentation are available as the April-2009 issue of the (paid) Eurotechnology-Japan newsletter series. Subscribers receive one newsletter each month - the April issue is an augmented and expanded version of the PowerPoints of the presentation above.

To subscribe to the newsletters and to download the presentation click here (April 2009 issue of our Eurotechnology-Japan newsletter, requires subscription)

Mr Fasol is one of the best specialists of Japan's IT industry. After 12 years in Japan working for the most prestigious Japanese institutions and companies (the University of Tokyo, NTT, Hitachi...), he founded the strategy and M&A firm Eurotechnology Japan KK in 1996. Mr Fasol has advised some of the greatest companies, including NTT, SIEMENS, Deutsche Telekom, Cubic, Unaxis and about 100 fund managers on strategy for Japan, as well as the President of Germany. He helped a French pharmaceutical company acquire a factory in Japan.
He comments regularly on CNBC on Japan's tech sector.

Schedule: March 24th, 2009 (Tuesday) from 18:30
The conference will be followed by a light cocktail.
Place: French Chamber of Commerce and Industry in Japan, meeting room
Iida bldg 1F, 5-5 Rokubancho, Chiyoda-ku, Tokyo 102-0085
Tel.: 03-3288-9624
Access map: www.ccifj.or.jp
Language: English
Fees: 5.000 yens (to pay in cash at the door)
Payment will be required for cancellations or no-show after this deadline.
Announcement on the website of the French Chamber of Commerce

Background reading: our J-ELECTRIC report about Japan's electric companies

and our Eurotechnology Japan Blog

eurotechnology.japan.blog: Mobile marketing with QR-code

2009-01-02T05:06:00.000+09:00

If your business requires interacting with lots of people in Japan, if you are offering services to consumers, or just as a convenience offered on your business cards - think about QR codes:

eurotechnology.japan.blog: Mobile marketing with QR-code

Mergers and Acquisitions in Japan

2008-12-18T12:39:00.003+09:00

Interview with Arthur Mitchell

Many see the current financial crisis as a period of unique opportunities. Several foreign companies are currently entering or seeking to expand business in Japan. At the same time, there is a wave of Japanese acquisitions abroad. Arthur Mitchell is a lawyer who has worked on a very large number of M&A deals and financial transactions involving Japan, and shares some of his 40 years of experience with Japan below.

Arthur Mitchell is Senior Counselor at the law firm White & Case in Tokyo, and registered as foreign lawyer in Japan.
Arthur has worked on a large number of private equity investments and many other joint ventures and financial transactions involving Japan.
He was General Counsel of the Asian Development Bank (ADB) where he managed 42 attorneys from 18 countries. Previously he headed the Japan practice for Coudert Brothers and the Pacific Practice Group for Chadbourne & Parke.
Arthur also was founder and CEO of a New York based consulting firm, which launched the first ever hedge fund offered in Japan!
Arthur was educated at the Harvard Law School (JD), UC Berkeley (BS) and Kyoto University, Faculty of Law.

M&A Megatrends:

1 Question (Fasol): Arthur, you have been involved with Japan for 40 years now. What are the mega-trends you see for M&A over these years? What has changed over these years?

Arthur Mitchell: Of course, the biggest change during that period was the mind-set of Japanese management. In the 70's and early 80's, M&A was virtually a dirty word. That was because of what we might call the "village-mentality" of managers. The idea was that you look after your group and minimize outside influences on business decisions. More recently, certain types of M&A have come to be seen as a practical way of achieving corporate objectives. For a period of time following the bursting of the economic bubble, the cross-shareholding levels of listed companies went down but in recent years, the trend has reversed and these holdings are on the rise again. While friendly acquisitions are now readily accepted among the Japanese themselves as well as with foreigners, hostile acquisitions are still less well received in Japan.

2 Question (Fasol): I think one of the most interesting manifestations of this change in thinking is the potential acquisition of Sanyo by Panasonic, but there are many more.- What is your take on the current crisis? Doesn't our crisis now create opportunities as well?

Arthur Mitchell: The current crisis is not a natural disaster. It's a man-made debacle that originated with the sub-prime loan and securitization process in the United States and is properly understood as a major market, policy and regulatory failure. Japan suffered a long recession due to the failure of its "bank-centric" financial system and the U.S. has now aptly demonstrated that capital-market-centric frameworks can produce unacceptable systematic risk. As recently as a few months ago, it looked like Japan would not suffer too much because Japanese companies and banks were on the sidelines when it came to investment in sub-prime and exotic securitized products. Now it is apparent that Japan can not remain as a tranquil island in a sea of financial trouble. The Japanese stock and commercial real estate markets were heavily dependent on foreign investors who are either hesitant about investing in Japan at this time or have too many problems back home, which prevents them from focusing on Japan. On the other hand, Japanese companies are relatively cash-rich and are keenly interested in making overseas acquisitions in order to make up for the time lost during the last 15 years. Depressed asset prices in other countries, as well as a strong yen, make these acquisitions particularly attractive. The question is whether Japanese managers will be able to transform these opportunities into a strategic advantage.

Preparations, finding deals:

3 Question (Fasol): As long as I have been working with Japan - on one ear I hear foreign fund managers complaining (in English) "that there are no deals", but on my other ear, when I talk with my Japanese business friends (in Japanese) I hear about so many deals happening all the time - one of my friends, a Japanese private equity investment manager, has done tens of deals up to US$ 1.5 billion in size within Japan. What advice do you have for these fund managers complaining that there are "no deals in Japan"?

Arthur Mitchell: As I just mentioned, the number of M&A deals among Japanese parties has increased dramatically in the last 10 years. Acquisitions in Japan by non-Japanese have also increased over that period but over-all foreign direct investment in Japan by comparison with international standards is still relatively small. FDI in Japan has been consistently between 2-3% of GDP, far below the level for other OECD countries. As a general rule, Japanese managers are still rather reluctant to sell divisions or the company itself unless there is a compelling strategic logic to the combination or the firm is under financial stress. The chief motivation for doing these deals is rarely related to purely financial concerns as more focus is placed on market share and company standing in the marketplace. The key to accessing deals is to have the relationships with important decision-makers at companies that are likely to be interested in M&A for strategic reasons. This is why it is important for funds to be represented in Japan by senior Japanese executives and advisors with long-standing ties.

4 Question (Fasol): Same with companies - I know some foreign companies who have to tried to make acquisitions in Japan for 10 years without success. What's your advice? Look harder? Put more resources into searching and preparing?

Arthur Mitchell: As just mentioned, relationships are of paramount importance even today. Among the Japanese themselves, these relationships originated with school, social or company ties. Given this reality, it is very hard for foreigners to duplicate this process. Some foreign private equity funds have tried to address this by hiring rather young Japanese bankers who literally and figuratively "speak their language" but the unfortunate reality is that many of these individuals do not have credibility with the decision-makers. Some years ago, foreign firms also had difficulty hiring senior Japanese to work in these firms. That is less of a problem these days but finding the right ones still presents challenges. For example, if they have a background in the financial services industry, they may not know the business of the manufacturers. If they come from a manufacturing background, they may have contacts only in a narrow industry. One way to bridge this gap is to form an advisory board of senior people-both Japanese and foreigners-who can serve as the bridge.

The M&A Transaction:

5 Question (Fasol): When a foreign company acquires a Japanese company, which are the points critical for a successful transaction?

Arthur Mitchell: From a legal perspective, the initial question is always whether there are any governmental regulations that would restrict or prevent the investment. Prior to 1980, investment in numerous industries was highly regulated but following reforms in that year, with the exception of a very short negative list, legal barriers were relaxed. Until recently, no foreign acquisition was blocked on "national security" grounds. For the first time this year, the Japanese government blocked an increase in the shareholding by the Children's Fund, a U.K. private equity fund, in J-Power, an electric power company, on the dubious grounds that foreign ownership above 20% would be harmful to "social order". The Japanese legislature is now debating whether Japan will restrict ownership of a single shareholder to 20% in Narita and Kansai airports when they are privatized in the near future. In the context of Macquarie's ownership of 19.9% of the facilities at Haneda airport, this move has obvious anti-foreign overtones. As economies around the world deteriorate, it would not be usual to see even more protectionist measures in Japan as well but, for the moment, I do not think that we can say that there is a discernable trend. Therefore, overall, adequate planning is the most critical step that needs to be taken to ensure a successful transaction.

6 Question (Fasol): I have discussed both the Children's fund and the Macquarie issues with senior Japanese leaders, and found that their opinion is quite devided, some are for, some are against. So I guess its a question of doing enough ground work and preparations, and finding the right allies. Can you tell us some points to watch out for, which could become a problem down the road?

Arthur Mitchell: As just mentioned, planning is key. Understanding the Japanese counterparties and what motivates them and the lay of the land is imperative. Foreign investors should not assume that their usual company practices can be imported on a wholesale basis to Japan. Many aspects of law and regulation are very similar to those of other countries but labor relations is one area that can be quite different. For example, most Japanese employees, including senior managers, do not have written contracts but virtually all companies have company policies and rules that govern the employment relationship. Problems can arise if the foreign investor seeks to impose employment contracts which are at variance from the existing rules or practices. The law provides that employees generally cannot be dismissed except for cause. In the case of tech-companies, it is normal in many foreign countries to expect that any intellectual property created by the employee on the job belongs to the company. In Japan, the employee has the rights to an invention made on company time but the company will have non-exclusive license. If the company considers that the invention is critical or important for its business, the company should purchase the intellectual property for a fair price. Accordingly, it is important to observe local practices in these areas.

7 Question (Fasol): What is your experience with joint-ventures to enter Japan's markets? Lots of people will advise to avoid joint-ventures at all cost. What is your advice?

Arthur Mitchell: Foreign companies seeking to enter the Japanese market have a number of options now. In almost every industry I can think of, it is now legally possible for a foreign firm to set up "greenfield" operations (Fasol: recent examples of "greenfield" start-ups in Japan are IKEA and H&M, and also GOOGLE). Of course there are costs and risks associated with that method but it should not be automatically dismissed. Short of an acquisition, it is also possible to have joint ventures or strategic alliances with Japanese counterparties that may be mutually beneficial and can reduce costs and risk (Fasol: a dramatically successful case is YAHOO in Japan, however in this case it was not YAHOO Inc seeking a joint-venture entry in Japan, but it was Masayoshi Son with Softbank investing in YAHOO Inc and building YAHOO-Japan, which is now arguably far more successful than the original company). If this is coupled with the introduction of off-shore business opportunities, this may lead to a mutually beneficial working relationship that might mature into an acquisition in the future. In order to be successful, foreign companies need to nurture relationships with Japanese companies in their industry and think of ways in which they can "add value" to each other. An interesting example of this is what the Kirin Beer Company is doing with the San Miguel Corporation of the Philippines. Kirin owns about 20% of San Miguel. In the future, they plan to make a number of joint ventures for beverage production in Asian countries. This is a strategic relationship where the parties add value through exchanges of technology, marketing and manufacturing techniques and finance. This model can be used in Japan and can lead to even closer business integration.

8 Question (Fasol): The devil is in the detail.... which details should you watch out for in an M&A transaction?

Arthur Mitchell: Yes, the devil is in the details---and there are thousands of devils that have to be dealt with. But in this regard, there is nothing unusual about Japan. I think that the most important thing is to build a common understanding about how the venture will be managed and what the goals are going to be post-acquisition. I do think that the Japanese generally have a somewhat longer term perspective on business. When foreign investors acquire an interest in a Japanese company, they tend to expect better financial performance over a shorter period of time. This can cause tensions in the relationship. For example, if the foreign investor intends to make staff reductions or spin-off divisions after the acquisition in order to improve over-all performance, these matters should be thoroughly discussed and agreed upon well in advance of the closing.

Post-merger phase, integration

9 Question (Fasol): In my experience, the M&A transaction is the easy part - the really difficult part is to make it work post-merger. There are plenty of gigantic ship wrecks lining the M&A road into Japan. What are the most critical mistakes to avoid to crash into one of the many cultural and other rocks and icebergs? What is your advice?

Arthur Mitchell: While failures certainly make the headlines, there are numerous foreign companies that have been very successful in Japan over a long period of time (Fasol: and numerous successful acquisitions as well, the prime example is Renault's investment in Nissan). These include IBM, Coca Cola and Microsoft and many others. To my mind, successful ones have a long-term perspective, good Japanese managers and a home office that truly understands the local environment. As there have not been a tremendous amount of large-scale foreign M&A deals yet, it is hard to say at this time if this will prove to be the most successful way to enter the market. What we can say is that, with the exception of hostile deals, M&A is a viable route that has yet to be tested in larger deals. As the Japanese market for most products is fairly saturated, and the population is shrinking, Japanese companies (both large and medium-sized) are now looking for major opportunities abroad. With the exception of those who can introduce new products and technologies in Japan, it probably makes sense for foreign strategic investors to look at their Japanese counterparts as partners who can help them pursue global strategies. Financial investors are likely to find more opportunities in Japan as the economy weakens in the next few quarters.

Avoiding blunders

10 Question (Fasol): In my work I often see that foreign managers make huge mistakes in Japan which they would never make at home. An outstanding example is the fraud case, where Lehman Brothers seems to have been defrauded of US$ 350 million by someone who seems to have pretended to be an employee of a huge trading company which he was not (its unclear what really happened, and we might never know).

Arthur Mitchell: No, I am not sure that I agree. I think that fraud happens everywhere. You may have read recently about the former Chairman of NASDAQ who perpetrated a $50 billion fraud on his fund investors. I think that what happened to Lehman Brothers in the case you mentioned is that someone forgot to do the normal due diligence that accompanies transactions of that nature. Actually, it's emblematic of the new "Gilded Age" which has just ended with the collapse of many of the pillars of the U.S. financial system, including Lehman Brothers. In some very serious ways, America has gone off the rails and has taken most of the world with it. I think that in the aftermath of the financial debacle, we will see a return to basics-less leverage, fewer complex financial products and lower appetites for risk. This is now a global trend which will affect deals in the U.S. Japan and throughout the world.

11 Question (Fasol): What is your advice to foreign companies in Japan to avoid such dramatic traps.

Arthur Mitchell: I do not think that there is anything particular or peculiar about Japan even though some things may be done differently. What is important is to understand attitudes and why people think the way they do. As an example, Japanese shareholders do not always vote in favor of things that many Westerners might think are in their economic interest. We might call that irrational behavior. An example might be the vote that the Sapporo Beer shareholders took when they voted down a generous offer by Steel Partners, an American activist fund. I think it shows that values other than "pure economics" are at work. But this is not unique to the Japanese. German shareholders have similar views. For that matter, I don't think that "Joe the Plumber" in the recent American election really voted in accordance with his own economic interest. What is important to understand is that people often have multiple motives which are influenced by history, culture and their views of the world. It's imperative to understand the context in which they are making decisions. That is the only thing that will help a foreign investor avoid "local traps".

Wrap-up

12 Question (Fasol): Which is your greatest success story working with Japan or Asia over all these years and why?

Arthur Mitchell: I have been a lawyer for over 35 years so I have seen a lot of deals. What I like most is finding a unique solution to a problem, creating a new financial product or adding value by helping a client to visualize a new business opportunity. Perhaps one of the most unique things I have done was to help create a strategic alliance between a major Japanese bank and a U.S. real estate firm to assist Japanese investors crack the U.S. market. This led to a front page feature article in the Wall Street Journal. But that was a long time ago. More recently, when I was General Counsel of the Asian Development Bank, I played a significant role in the response to the tsunami that affected a number of Asian countries. We had to deal with a new situation, when there was no road map and very little time. I had to conceptualize the framework that led to the final response and negotiate with numerous stakeholders both within and outside of the bank. And real lives were at stake. I think that that is what lawyers should do and I was glad to have the opportunity to help.

13 Question (Fasol): Lots of EU-Japan and US-Japan complain that Japan is still closed today, and they make recommendations for changes in Japan to encourage more inward investments into Japan. Which changes in Japan would help most to increase foreign investments in Japan?

Arthur Mitchell: I think that there are very few formal barriers, other than some tax disadvantages, which might discourage foreigners from acquiring Japanese companies. The real issue is one of mind-set. It's fair to say that the attitudes of Japanese managers have changed over time. For example, attitudes toward shareholder value have evolved. Japanese managers are not just giving "lip service" to the idea that they need to balance the interests of customers, employees and shareholders because key players among the bureaucracy and politicians as well as leaders in the press and academia are calling for focus on shareholder value as a means of making Japanese companies more global and more competitive. But in order to be competitive, companies need to properly motivate and compensate their employees to create the desired results. It's unclear that Japanese managers will be able to manage non-Japanese employees or will recruit senior foreign managers to work within their companies. The recent take-over of Lehman's operations in Asia by Nomura will be an interesting test case.

14 Question (Fasol): In your view, what is the greatest challenge faced by Japan?

Arthur Mitchell: Japan faces a major demographic problem in its low birth rate and rapidly aging population. Despite the obvious risk to its standard of living, there is really very little public debate concerning what to do about this problem. Japanese companies have tremendous technologies and manufacturing experience. Clean tech is a notable advantage. But Japan's technological edge probably will not be a sufficient engine of growth. And it seems unlikely that the birth rate will increase dramatically. This means that Japan will have to find creative ways to use women and seniors more productively in the economy. Immigration will present another challenge and an opportunity. If Japan can make the social accommodations that are required by this demographic situation-and companies open the doors to the best managers they can attract from all parts of the world, Japan can become a leading country in the 21st century.

Thank you - and Merry Christmas!

NOKIA quits Japan - for now...

2008-12-10T17:20:00.000+09:00

NOKIA's Japan subsidiary was founded on April 3, 1989 - almost 20 years ago. On November 27, 2008 NOKIA announced to terminate selling mobile phones to Japan's mobile operators, effectively withdrawing from Japan (except for purchasing, R&D and VERTU).

NOKIA's sales figures in Japan were a well kept secret until last week when several Japanese newspapers wrote that NOKIA sold 200,000 phones during FY 2007: thus NOKIA's market share was 0.39% - after 20 years of market entry efforts.

Considering the disastrous collapse of mobile phone handset sales in Japan, NOKIA's move to quit sales in Japan actually makes a lot of sense. Nothing prevents NOKIA from re-entering Japan again in the future.

The Opaquenes of Japan's social network systems (SNS)

2008-11-23T05:16:00.002+09:00

Opaqueness of Japan's SNS was a point of discussion at the Next Context Conference. When you use Japan's social network systems, instead of portrait photographs and real names in Western SNS, in Japan you'll find that most people use phantasy names and pictures of churches, cats, airplanes, clowns and cartoons instead of passport photographs. Japanese people prefer to keep there privacy intact in this and several other ways. For example mostly you cannot join Japan's SNS unless you are invited in by a friend, and you can't join unless you live in Japan (verified by your Japanese mobile email address).

Looks like Western SNS will have difficulties to thrive in Japan's SNS unless they make some adaptations of their Western functionality for Japan - or unless Japanese people change their preferences.

Japan's two worlds: Old Japan vs New Japan

2008-11-23T05:12:00.002+09:00

A few days ago the New Context Conference was held here in Tokyo, mainly about social network systems (SNS), top executives including CEO of LinkedIn, Facebook, and some exciting new photo, video conference and e-learning companies discussed market entry to Japan.

Takeshi Natsuno, one of the three key DoCoMo managers who together started i-Mode and arguably started the world's mobile internet revolution launching i-Mode back in February 1999 gave the keynote discussion. Natsuno shared his very interesting observation, that Japan consists of two markets:

new Japan = people below 50 years age and

old Japan = above 50 years age

...and having managed i-Mode (today: 48 million paying subscribers) for almost 10 years Natsuno-san is certainly one of the best to know. (Natsuno-san's main job today is to make Japan's very cute equivalent of YouTube profitable - read more about this in a future issue of our newsletters).

Actually, you'll find a similar observation about old Japan and new Japan in my presentation entitled "New opportunities versus old mistakes: foreign companies in Japan's high-tech markets" which I gave some years ago at Stanford University to faculty, students, alumni and silicon valley managers.- (You can view and download the slides of the presentation below.)

Foreign companies in Japan's high-tech markets (Stanford University lecture)

View SlideShare presentation or Upload your own. (tags: japan business)

Natsuno-san talking at the New Context conference in Tokyo about old Japan, new Japan, the future of the mobile internet, and the mobile industry. Natsuno-san is one of the three inventors of i-Mode:

Iscar Ltd of Israel acquired Japanese tungsten carbide tool maker Tungaloy for US$ 1 billion

2008-09-22T03:51:00.009+09:00

The Israeli company Iscar has completed the acquisition of Japanese competitor Tungaloy Corporation. Iscar acquired more than 90% of outstanding shares for around US$ 1 billion from Nomura Principal Finance Co.

Iscar is the world's second largest maker of tungsten carbide cutting tools, and competitor Tungaloy is the world's fifth largest. Iscar is controlled by Warren Buffet's Berkshire Hathaway Inc. - Berkshire Hathaway acquired 80% of Iscar for US$ 4 billion in 2006.

The merged Iscar and Tungaloy will be better positioned to compete with global leader Sandvik AB, which has sales on the order of US$ 4 Billion.

Tungaloy Corporation emerged via a management buyout from Toshiba Tungaloy, with Nomura Principal Finance Co. as the largest share holder. Tungaloy has sales of YEN 50 Billion (approx. US$ 500 million), was founded in 1934, and has 2618 employees. Tungaloy is the fifth largest maker of Tungsten Carbide cutting tools in the world.

Iscar entered Japan's market by opening a 100% owned subsidiary company in 1994, about 14 years ago.

To my knowledge this acquisition is also far larger than any acquisition in Japan by any European Union (EU) company this year (last year, in 2007 Permira announced the acquisition of Arysta LifeScience Corporation for US$ 2.2 Billion and completed the deal during 2008). The three largest acquisitions ever of Japanese companies by EU companies have been Vodafone's acquisition of J-Phone (transaction value: about US$ 20 Billion), Daimler's acquisition of Mitsubishi Motors (transaction value: about US$ 2-3 Billion), and Renault's investment in Nissan (initial transaction value: about US$ 3 Billion) - of these three, only the Renault investment in Nissan was successful, the other two failed.

H&M: green field market entry to Japan

2008-09-22T03:45:00.002+09:00

H&M entered Japan's fashion market initially using a green field strategy, opening stores. On September 13, 2008, H&M opened the first store in Japan in Ginza, and is planning two more stores in Shibuya (see picture below) and in Harajuku.

H&M adapted it's global way of doing things to Japan's market needs - for example, H&M introduced "Quality Managers& in it's Japan store, in order to match Japan's consumers high expectations for quality (and I guess also to avoid problems with Japan's recently introduced product liability laws).

One week after opening, customers are queuing in line to enter the store - typical waiting time is about 2 hours, daily number of visitors to the store are estimated ot be about 8000/day.
Closest foreign competitors in Japan include US retailer GAP, and Spanish retailer Inditex (Diseno Textil SA)'s ZARA.
Biggest Japanese competitor is Fast Retailing's UNIQLO.
H&M is preparing to open the second and third stores in Shibuya (photo below) and in Harajuku.

Our comments: H&M has had a very successful start and has created a successful opening "event". To be successful longterm H&M will have to:

sufficiently tune to Japan,

continue to innovate,

compete successfully especially with UNIQLO,

compete successfully with Abercrombie & Fitch, which is planning to enter Japan's market in 2009

Building site for second store in Shibuya.

Microsoft XBOX Japan market entry strategy

2008-09-05T02:21:00.012+09:00

Microsoft introduced the original XBOX game console in the USA on November 15, 2001, in Japan on February 22, 2002, and in Europe on March 14, 2002.

During the period January-June 2005, three years after introduction of the XBOX to Japan's market, SONY sold about 2.4 Million game terminals in Japan, Nintendo sold about 1.9 Million, and Microsoft about 9000 XBOXes, about 0.2% marketshare.

As of August 24, 2008, Nintendo has sold about 6.7 Million Wii, SONY has sold about 2.3 PS3, and Microsoft about 380,000 XBOX-360 in Japan, a 4% share in this segment.

A few days ago, Microsoft announced a price cut of 30% for XBOX-360 in Japan - the video below gives our comments on this price reduction on CNBC.

Here is a short summary of the CNBC-TV interview:

Q: Do you think the price reduction is going to do the trick?
A: No. In other markets maybe, but not in Japan.

Q: Do you think XBOX can be successful in Japan? What will it take before Microsoft will give up and say it just isn't working
A: Of course Microsoft can be successful in Japan with XBOX. There is no law that XBOX cannot be successful in Japan. Microsoft generally is a company that never gives up. But they have to change their strategy for Japan.

Q: So Microsoft isn't doing the right things. What would the right things be?
A: Difficult to say of course, if it was easy Microsoft would already have done this. The situation is that Nintendo has completely changed the business paradigm of the game industry. Microsoft's XBOX is still operating under the old paradigm.

Q: How long do you think Nintendo's sweetspot is going to last?
A: Nintendo have reinvented the game industry, and completely changed the business models. They also make a lot of their own software. All this puts Nintendo into a very good position.

What can we learn about strategy for Japan from Microsoft's XBOX experience:

Global products, not adapted to Japan's market, often do not succeed in Japan. Microsoft's XBOX is a very good example. Microsoft has one of Japan's most famous brands, so its not a problem of the brand. Microsoft faces three problems in Japan:

(1) XBOX is not made for Japanese users in mind
(2) Nintendo changed the paradigm of the game industry, and XBOX is still on the old track
(3) Of three global game console companies (Nintendo, SONY, Nintendo) two are both much stronger than Microsoft in games, and both are on their hometurf in Japan. Microsoft would need to invest more and focus efforts much more on Japan to succeed in Japan with XBOX.

Read more about Japan's game markets in our "Japan's Game Industry" report. (watch for the new edition to be published shortly - we are working on the new totally revised edition day-and-night...)

"Help - my mobile phone does not work!" - Why Japan's mobile phone sector is so different from Europe's

2007-03-16T10:55:00.000+09:00

Presentation at the Lunch meeting of the Finnish Chamber of Commerce in Japan (FCCJ) on March 16, 2007 at the Westin Hotel, Tokyo.

Find the summary and photos of the meeting here

Download the presentation here

From the Announcement:

In his presentation, Dr. Fasol will explain the essentials of Japan's mobile phone market, why and how it is so different to Europe's. He will also talk about some of the reasons why it is so difficult for European companies to succeed and uncover opportunities and the keys to success for European companies in this important market.

New opportunities versus old mistakes: Foreign companies in Japan's high-tech markets

1999-10-28T15:12:00.002+09:00

Foreign companies in Japan's high-tech markets (Stanford University lecture)

View SlideShare presentation or Upload your own. (tags: business globalization)